Michael Snyder - IR Leroy M. Ball, Jr. - President and CEO Michael J. Zugay - CFO.

William Hoffmann - RBC Capital Markets Daniel Rizzo - Jefferies & Company Ivan Marcuse - KeyBanc Capital Markets Liam Burke - Wunderlich Securities Michael Henderson-Cohen - Andalusian Capital Partners Chris Shaw - Moness, Crespi & Hardt.

Good day, everyone, and welcome to Koppers Holdings, Inc. Second Quarter 2015 Earnings Conference Call. Today's conference is being recorded. At this time I would like to turn the conference over to Mr. Michael Snyder. Please go ahead, sir..

Thanks, Dana. Good morning, everyone. Welcome to our second quarter earnings conference call. My name is Mike Snyder and I am the Director of Investor Relations for Koppers. 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 Hilinski at 412-227-2444 and we can either fax or email you a copy. I would also like to remind you that as indicated in our earnings release this morning we have posted materials to our investor relations website that will be referenced in today's call.

Before we get started I would 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 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 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.

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. I’m joined on this morning's call by Leroy Ball, President and CEO of Koppers, and Mike Zugay, our Chief Financial Officer.

At this time I would like to turn over the call to Leroy Ball.

Leroy?.

Thank you, Mike, and welcome everyone to our 2015 second-quarter conference call. Before I turn it over to Mike Zugay, I would like to spend a couple of minutes highlighting what I think were a couple of good wins for us as we finish the second quarter and head into the back half of this year.

The first is our cash generation initiatives that has allowed us to pay down debt by $56 million in what has historically been our weaker half of the year for cash flow. Through the first six months this year we generated positive operating cash flow of $78 million compared to negative operating cash flow of $9 million in the first half of last year.

Even excluding the $30 million payment we received as part of the restructuring of our supply agreement with Nippon Steel's subsidiary, C-Chem, we still generated $48 million of operating cash flow through the first six months; $28 million of that coming in this quarter.

The last time that we found ourselves with at least $48 million of operating cash flow through the first six months of the year was after the second quarter of 2009, as we were responding to the global financial crisis and drawing down working capital to fit a pullback in our business at that time.

Strong cash flow plus the receipt of the $30 million payment from Nippon supports my belief that we will likely finish the year at the upper end of our $100 million to $125 million debt reduction target for 2015 which is a great story.

The second area I would like to highlight of course is the stronger financial performance that we realized in the second quarter compared to last year.

As expected, this was driven by strong results for both our Performance Chemicals and Railroad and Utility Products and Services business which generated adjusted EBITDA margins for the quarter of 20% and 13% respectively.

That turned out to be more than enough to offset higher interest costs and the year-over-year decline of profitability from CMC to propel us to adjusted earnings per share of $0.68 for the quarter compared to $0.39 recorded in the second quarter 2014.

While I can't say with absolute certainty because I haven't been able to check the history but my guess is that with sales of $171 million in the quarter, our RUPS segment probably exceeded CMC for the first time in our public company history.

While it might not stay that way consistently over the next year or two if oil prices rebound and CMC recovers its lost pricing on certain products, I would expect us to continue to trend in that direction as we look for more avenues to grow that business while we deemphasize growth in CMC and put an intense focus on restructuring that business.

I will now turn it over to Mike to provide an overview of the results in more detail and after he is finished I will update you further on the progress on some of our initiatives and the outlook for the rest of the year.

Mike?.

Thanks, Leroy. As you can see on slide two, revenues were $432 million, an increase of $75 million or 21% over the prior year. This was driven by $112 million of new revenue from acquisitions, net of divestitures, an $18 million increase in our railroad business, and $13 million from our new joint venture in China.

These increases were partially offset by a $68 million reduction in legacy sales for CMC which was driven by reduced product pricing as a result of lower oil prices.

Moving to slide three, second quarter adjusted EBITDA of $46 million was higher than last year's adjusted EBITDA of $27 million, due to a $23 million benefit from acquisitions net of divestitures, a $7 million increase for legacy RUPS business, as that segment had another record quarter for both sales and adjusted EBITDA, and a $3 million reduction in corporate expenses related to acquisition costs last year.

These increases were partially offset by a reduction in profitability for CMC of $10 million, again driven by lower oil prices and losses from the new JV in China. Now I am going to discuss several items that are not referenced in our slide presentation.

Adjusted net income and adjusted EPS were $14 million and $0.68 per share compared to $8.1 million and $0.39 per share for the second quarter of 2014. The second quarter adjusted net income excludes $5.4 million of pretax charges related to impairment and plant closure costs as well as non-cash LIFO expense.

Our effective tax rate for the quarter was 40% and our normalized tax rate for the year is estimated to be between 30% and 35% as we continue to realize the benefits of the tax restructuring project that became effective at the beginning of this year. Excluding discrete items, our effective tax rate on pretax ordinary income was approximately 30%.

Cash provided by operations for the six months ended June 30 was $78 million compared to a negative $9 million for the same period last year.

This large positive increase was due mainly to our continued focus on our working capital plan, an increase in accounts payable as well as the $30 million cash payment from Nippon that Leroy mentioned earlier which was received on the last day of the quarter.

Capital expenditures for the first six months were $17 million compared to $36 million in the first half of 2014, which were unusually high last year due to construction expenses for the new joint venture in China.

As of June 30, we had approximately $160 million borrowed on our $500 million revolver, $277 million outstanding on our term loan, $300 million in existing bonds and $57 million of loans in China and these collective amounts are $56 million lower than their balances at the end of the year.

As of June 30, the interest rate on our revolver and term loans was 3.75% and our composite borrowing rate was 5.3%. Our leverage ratio for covenant purposes at June 30 improved to 4.76 which was below the required ratio of 5.25. As a reminder, our goal is to reduce our leverage ratio within the next two years to somewhere around three times.

At June 30, our fixed charge ratio also improved and it improved to 1.66 as compared to our covenant of 1.1. In the quarter we amended our bank credit agreement to exclude dividends paid from the calculation of this fixed charge coverage ratio.

We would have been in compliance with this covenant at June 30, regardless of the amendment, and with our continued debt repayment and forecasted earnings results, we expect to remain in compliance with our bank covenants going forward.

Going back to the slide presentation on slide four, it shows that in the first six months of the year we have reduced our total debt outstanding by $56 million from $850 million at year end to $794 million at the end of the second quarter.

So as Leroy mentioned, we are well on our way to achieving our 2015 debt repayment target and we should end the year at the higher end of our debt repayment range. Additionally, we continue to monitor the high-yield bond market to look for an opportunity later this year to refinance our $300 million of 7.675 notes due in 2019.

The call premium on these bonds drops from approximately 104 to 102.6 on December 1 of this year, December 1, 2015, and would represent a savings to us of about $4 million if the bonds are redeemed on or after that date. Now I would like to turn the call back over to Leroy for a further update on our businesses..

Thanks, Mike. Now I would like to take the time to walk through what’s going on in each of the businesses. Starting with Railroad and Utility Products and Services, that business as expected had a very strong quarter. In fact, as I mentioned in my opening comments, it had a record quarter for sales and EBITDA.

If you turn to page six of the slide presentation you will see that we are maintaining our 2015 guidance for this segment exactly as we presented it back in February this year, although there does continue to be some risks due to the continued slowdown in rail traffic and its impact on the railroad industry's operating results.

Adjusted EBITDA for the RUPS segment for the second quarter was $22 million compared to $16.8 million in 2014, which equates to a $5.2 million increase. $3 million of that increase came from the incremental contribution from our 2014 acquisitions combined with our rail joint business and net of our utility divestiture.

Through six months we are approximately 75% toward our full year $7 million target for net acquisitions and overall feel pretty confident in reaching that number.

Sales volumes for untreated cross ties were up by 28% compared to the second quarter of 2014, which contributed significantly to both the top and bottom line organic growth in this business segment in the second quarter. While volumes were up significantly in all procurement regions, growth in the Eastern U.S.

was more pronounced due to the drier spring weather in that region. Overall we are expecting untreated cross type procurement to continue to outpace prior year but it will taper off as the year goes on as the trend of an increase in procurement volumes began around the middle of the third quarter of 2014.

Treated volumes for the quarter were up by approximately 5% as compared to last year and are up by about 2% year to date. Treated volumes are now probably the biggest risk to the RUPS EBITDA projections as we look out over the remainder of the year.

We have already been informed by a few Class I customers about their intention to pull back slightly on their treatment volumes in the second half but as of now, we feel that we can backfill that demand by increasing our supply through a stronger commercial market and still maintain our EBITDA guidance for this segment.

As it relates to our margin improvement activities in this segment, the combination of the shutdown and consolidation of our Green Spring, West Virginia plant, the incremental benefits from our operation’s Excellence project completed in mid-2014, and synergies from the Osmose acquisition that should result in reduced overhead allocations, should all contribute to an approximate $7 million boost in EBITDA in 2015 compared to 2014.

We are currently working through the remaining untreated tie inventory at Green Spring and should essentially be finished treating material at that facility by the end of the third quarter.

Through two quarters, our EPS to EBITDA stands at a net improvement over 2014 of $12.8 million which is over halfway towards its full year EBITDA improvement goal.

What is lost in that number however, is that our Australian pole businesses' EBITDA is down by $2.1 million for the first six months compared to last year's, though our North American real business is actually up by almost $15 million year-over-year.

Now the reasons behind the lower Australian results are the translation effect of a stronger US dollar on our Australian earnings and lower volumes.

While we will likely continue to deal with the translation effect on our results for the remainder of the year, volumes are expected to pick up and second half results for that business are expected to be pretty close to the second half of 2014, which will help to take some of the pressure off the rail business to continue making up for the shortfall in the Australian business thus far this year.

One last item of note as it relates to EPS is that we announced on July 13 the sale of our 50% interest in our concrete tie joint venture to Rocla Concrete Tie. As stated in the release, we did not disclose the price but it was not a material number and was reflective of a business that struggled to generate consistent sustainable profitability.

All businesses, even 50% joint ventures take up some level of management time and given our long-term view of the relative health of the wood cross tie market and our weaker position in concrete, we felt it was best to divest the business and focus on other bigger drivers of future profitability.

While I'm on the subject of divestitures we did have two other businesses that we were taking through a potential sales process over the past couple of quarters. At this point, we have had discussions and fielded various offers for both businesses but as of now have elected to retain them.

While we were trying to be opportunistic by monetizing businesses that didn't exactly fit in our portfolio we are not in the business of destroying shareholder value. The offers received were well below what we felt was acceptable and have therefore have taken them off the market.

While it would have been nice to turn those businesses into cash it was not an integral part of being able to meet our two-year minimum debt reduction target of $200 million.

Now moving on to slide seven and Performance Chemicals, as we look at the global markets in which we participate, 2015 is shaping up to be a strong year for that business segment as macro indicators continue to point toward positive trends in home repair and remodeling which tends to drive demand for our products.

In fact, June 2015 represented the ninth consecutive month of year-over-year sales growth of existing home sales in the U.S., with June's annual increase of 10% compared to June 2015. Existing home sales traditionally make up approximately 90% of the housing market and have historically driven repair and remodeling spending.

Now EBITDA for Performance Chemicals in the second quarter was $20.6 million which corresponds to a 20.1% EBITDA margin on $102 million of sales in the quarter. Year-to-date, this segment has generated EBITDA of $32.2 million at a 17.5% margin.

Annualizing that number would put full year results at around $64 million which is consistent with prior guidance. Sales volumes for both the quarter and year-to-date have been above similar 2014 periods which is in line with the positive macro trends that I mentioned earlier.

We have added some new business to our portfolio as expected while maintaining margins thus far which has been a pleasant development. Lower copper pricing during the quarter provided a modest benefit for the smaller portion of our business that is unhedged and other raw material and operating costs were pretty much in line with our expectations.

Offsetting some of the copper benefits is the negative translation impact on our international earnings due to the stronger U.S. dollar. Other than the impact from the stronger dollar, our international business in this segment has performed in line with expectations and we expect that to continue through the balance of the year.

So once again to summarize things, we feel pretty good about meeting our $64 million EBITDA projection for this business this year.

Turning to slide eight, the story for carbon materials and chemicals has actually improved in some areas while other issues have popped up to leave us in a position of holding guidance steady with what had been previously communicated. EBITDA for the second quarter was $4.3 million which was $10 million lower than the second quarter 2014.

The easiest way to break down the second quarter shortfall is by region. North America made up almost $6 million of that difference while China and Australia each made up approximately $2 million each of the remaining $4 million. Europe was essentially flat compared to prior year.

North America's results were affected by approximately $6 million due to the lower overall pricing driven primarily by phthalic anhydride. Additionally plant costs were a couple of million higher driven by higher tank repair and cleaning expenses, partially offset by a $3 million benefit of lower average raw material costs.

While oil has continued to have a negative effect on the CMC results for the year, there are some positive signs as we head into the second half of the year and much of it centers around phthalic anhydride.

First of all, I mentioned on our last call that one of the three suppliers in this market was looking to exit and we expected that would have a positive impact on our volumes as we competed for displaced business.

That scenario has continued to progress and we have been in active discussions with several potential customers about the supply of phthalic.

Through the first six months, our phthalic volumes are actually down slightly compared to last year but that should flip during the second half of the year as we book new business which is reflected in our CMC EBITDA bridge.

The second positive to report on in CMC also relates to phthalic, as it appears that orthoxylene has at least temporarily made a break from the trend with oil. The last three months ortho has moved up $0.035, $0.03 and $0.025, most recently settling at $0.485 for July which will affect August pricing.

I mentioned earlier that China's EBITDA was down by $2 million in the second quarter compared to last year. That is due primarily to C-Chem not beginning their needle coke and carbon black operations yet and KJCC having to sell product in the traditional markets with depressed pricing caused to a large degree by lower oil prices.

At this point C-Chem is expected to have their facilities up and running no later than the first quarter of 2016. In the meantime, we have idled production at KJCC until further notice which will help to stem a portion of the losses on an ongoing basis until either end market pricing improves or C-Chem's facilities are operating.

Speaking of our KJCC operation, in June we announced that we have restructured our sales agreement with C-Chem to provide for variable pricing to C-Chem in exchange for a $30 million lump sum payment.

While the revised agreement does call for lower initial pricing, the margins we would recognize under the low end of the revised arrangement still far exceed what we have historically been able to produce from our China operations.

As for the $30 million, it will help to provide a needed cash infusion into the business to allow it to eventually build the working capital needed to support the C-Chem business while paying off outstanding balances to contractors.

Of the $30 million we expect to have between $10 million and $15 million to apply to debt repayment and restructuring of our construction loan which will allow us to reduce our U.S. letter of credit supporting that loan in a like amount.

In the end I believe this actually turned out to be a good answer for both parties that are currently suffering due to depressed end market dynamics. We look forward to C-Chem getting their plant up and running.

The stronger dollar continues to provide a headwind but we have maintained our estimate from May of potential negative impact for the year to be between $5 million and $8 million based upon average exchange rates experienced in 2015 compared to the averages in 2014.

Now as outlined on slide eight, we continue to maintain our expectation of finishing the year somewhere between $17 million and $27 million of EBITDA for CMC.

While there are a number of puts and takes to the bridge, we have not changed any of our expectations on the details as we still believe that it substantively represents the major changes expected year-over-year.

If we turn to slide nine, the one slight revision we do have to guidance relates to sales and the continuing negative impact we are experiencing on our topline for CMC as a result of a stronger US dollar.

Some of that $20 million reduction has already flowed through our first six months sales for CMC while the remainder will flow through the second half assuming rates remain at current levels. The good news is that the EBITDA effect from the stronger dollar has already been fully captured in our previous guidance for CMC and remains unchanged.

Our guidance for EBITDA, as shown on slide 10, continues to include an increase from RUPS of $20 million, an increase from Performance Chemicals of $50 million and a decline of CMC of between $20 million and $30 million, and finally, a reduction of corporate expenses in the amount of around $9 million.

Adding those amounts to our 2014 adjusted EBITDA of $116 million will continue to provide for an EBITDA range for 2015 of between $165 million and $175 million, which remains in line with our previously communicated guidance. To conclude, I'm happy with where we stand at the halfway point of 2015.

We have met many of our early objectives for this year while making great strides to stabilize our base business moving forward. We are meeting interim targets of profitability and maintaining expectations as we look out over the remainder of the year.

There is a lot to feel good about despite little improvements in certain significant drivers of profitability. Here at Koppers we will continue to work diligently on making improvements to the things that we can control in order to put ourselves in the best possible position to accelerate profitability once market conditions improve.

With that, I would now like to open it up for questions..

[Operator Instructions] We will go first to Bill Hoffmann with RBC Capital Markets..

Thanks and good morning. Wondered if you could just spend a little bit more time on the CMC business talking about what you were seeing in the carbon pitch side of the equation and then also on the phthalic side, just given the change in the Ortho prices, I would have thought you would have been a little bit more bullish on that segment..

So carbon pitch, nothing much has changed in regards to what we are seeing from a demand standpoint in carbon pitch. I think in all regions things continue to be pretty much in line with what we had expected coming into the year. So there is no major changes that we are seeing or expecting from a volume standpoint.

On the phthalic side in terms of -- with the positive developments there and whether that should have us be more bullish on the segment, certainly the positives there will help to push us, I think potentially up in that middle to top end of the range of CMC.

The thing that is pulling back from that a little bit is the recent weakening in naphthalene prices globally. China has begun to export naphthalene, which has depressed some pricing in those markets. We are seeing a little bit of it in Europe, certainly we are seeing it in China. We are seeing it in Australia. And so again, these markets are very fluid.

We are in a number of different markets and that is why it can be difficult, sometimes, you get positive bumps on one end and sometimes negatives that go against you in another.

With so much stuff that is moving around despite, I think, the bullish expectations that we do have on the phthalic side of things, we just don't feel appropriate changing our guidance given the fact that there is just other things that could potentially work against us. So for that reason we are maintaining where we originally expected CMC to be..

Thanks. Just one final question, on the rail and utilities business, the untreated ties obviously, it feels like there is some bit of a catch-up this year on untreated ties.

What do you think about in 2016 on the sustainability of the volumetric trends there?.

It is good question. I would say that from our standpoint, inventory levels are still down overall and while again overall untreated tie procurement is up significantly, if you would break it down into an even lower level of detail, a lot of that is coming on the Eastern side of our business.

So when you get into the Midwest and the West, Southwest, tie procurement has not been as strong as we would hope.

It is still up over prior year but we are still trying to catch up significantly over reductions in inventories for our Western based customers and we haven't really been able to make much progress because of where tie procurement has been in those areas due to the really, really wet weather that they have had here in the spring season so far.

So I don't see, they want basically anything they can get our hands on in the West. So I think tie procurement will continue to stay strong there. In the East it is going to moderate. But I still think in 2016 I don't expect that we are going to see a pullback on procurement..

Great. Thank you..

And we will take our next question from Laurence Alexander with Jefferies..

This is Dan Rizzo on for Laurence.

With the phthalic anhydride, the competitor selling out, is that competitor just shutting down or are they just selling to a different firm? I guess what I'm getting at is, is there opportunity for consolidation against you or something you can do yourselves?.

They are not selling. They are not selling, they are just getting out of the production aspect of that..

Okay. And then I think you said the goal was the leverage ratio to get it down to I think below three, within two years..

Not below three, Dan. But around three, yes..

Sorry, to about three within two years.

If you hit your goals and I'm sure you said this before, but if you hit your goals you would strongly consider reinstituting the dividend at that point?.

I think we will assess that as we go. I am not necessarily looking to reinstitute the dividend, if we have other opportunities to grow shareholder value through a deployment of capital in other areas. So it will be a consideration but not a given..

Okay.

Final question, I know you are looking to just divest non-core assets and maybe you've touched on this before but would you ever consider like a bigger move and maybe just selling all of CMC or most of it? Is that something that’s conceivable?.

I think we have gotten that question before. The position I have maintained is that we have come into this -- I have come into this role putting everything on the table. So we are taking a hard look at all of our businesses and seeing what makes the most sense in terms of capturing as much value for our shareholders as possible.

We think there is a lot of low hanging fruit in the CMC business that can improve that business' profitability dramatically.

The one thing I would say about that business from a sales standpoint is the environment that we are in with lower oil and the over capacity, if you would want to sell that business you would be selling it at fire sale prices which we certainly wouldn't be interested in doing.

That has been a business that’s been core and really the identity of Koppers and who we have been historically. I wouldn't necessarily pick on or point to that business on its own. We want to constantly challenge and evaluate all the businesses in our portfolio to meet certain levels of profitability and return, CMC is no different.

But there is a lot of work here in the midterm that we are focusing on that we think can create tremendous value for our shareholders and as we go through that process we will continue to evaluate whether CMC makes sense as a part of the overall portfolio but I don't see anything in the near-term certainly..

All right, thank you..

And we will take our next question from Ivan Marcuse with KeyBanc Capital Markets..

Hi, thanks for taking my questions. With your debt pay down going well, you had a lot of CapEx projects that you were considering over the next -- that you had to sort of kick out.

So do you expect in terms of your footprint sort of invest in those in 2016?.

That’s what we are looking at, Ivan. The decision to invest in some of those projects and how much we might invest in some of those projects is going to be dependent upon how the remainder of the year turns out, where we ultimately stand within our covenants and what our expectations are for 2016.

So obviously the sooner we can get moving on some of that stuff the quicker we can add to value, but we also need to make sure that we again, we don't leave ourselves in a vulnerable position with little room for a market shock that could throw us out of compliance.

So we would love to be able to start spending money on our North American plant consolidation in 2016 and we already are spending a little bit of money on it, on prep work and stuff like that. But we would like to give the signal to go full bore in 2016 but it is going to be dependent on a bunch of different factors..

Thanks..

Ivan, this is Mike. From a standpoint of our confidence level in getting to the higher end of the range in 2015 on the pay down to about $125 million, is based on the following things.

We know we are going to pay somewhere down between $10 million and $15 million down on the China debt based on the $30 million that we received on the last day of the month. So that was not figured into our original $100 million debt pay down, so that helps. We had the sale of our concrete tie business.

As you know, it wasn't a lot of funds but those funds are going to be used to pay down debt as well. The second half of our year, as Leroy mentioned earlier historically is a much more positive cash flow and stronger than the first half of the year.

And in addition just to refresh everybody's memories in the first part -- in the first quarter of 2015, we had this special $16 million cash payment to the IRS for kind of the cost of entry into getting into that tax legal reorganization that we did at the end of the year.

And in addition to that, we have some other miscellaneous cash flow generating projects that really we are not at liberty to discuss at the moment. So from a 2015 standpoint, as we sit here today halfway through the year, we are fairly confident that we are going to hit the high-end of that debt pay down range for ‘15..

Great, thanks for that detail. The second question I have is in terms of the working capital. You have done a nice job in taking that down.

Is this sustainable, I guess sort of holding energy prices and et cetera, in check which is hard to do, but do you see this as sustainable or what is your goal if you looked at net working capital as a percentage of sales? Or I don't know how you look at it right now, where you think you could get and where it would be sustainable or do you expect in 2016 as you get through this sort of rough patch and if things sort of normalize, you would start see -- would you have to build working capital?.

I do believe that in most cases for the things that we have been doing that it is sustainable. We do look at net working capital as a percent of sales. We were intent on bringing that number down by about 2.5% this year. I think we finished last year somewhere about 15.5% or something like that.

There has probably been no bigger rallying point here within the company in terms of people understanding how important this is and everybody has been incredibly dedicated and devoted to finding ways to help on the working capital front. And that message hasn't changed. Everybody was aware it wasn't a one-time thing.

They need to continue to focus on those efforts. I do believe it is sustainable. Of course as a business grows, you do need growth in working capital to help fund that but from a percent of sales standpoint our target is to try and keep things probably in a 12 to 12.5-ish sort of range..

Okay, great. Thanks for taking my questions..

[Operator Instructions]. We will go next to Liam Burke with Wunderlich..

Thank you. Good morning, Leroy, good morning, Mike.

Leroy, on KPC, you mentioned new businesses, are those new products of an existing value stream or new businesses in general, new markets?.

It is more new business, Liam. It is not necessarily -- it depends on how you want to define new products. I guess some of them are related to newer products but it has really been more about gaining a little bit of share..

Okay, thank you.

And on Europe, on CMC, relatively speaking it had a pretty good quarter versus China, Australia and North America, are you getting any lift on additional creosote sales in the KMG acquisition?.

We are. I didn't talk about that much. It wasn't big in the second quarter but it was a contributor. We do expect it to be an even bigger contributor in the second half of the year and maintain our guidance in terms of its overall $5 million contribution to our numbers for that segment this year..

Great. Thank you, Leroy..

And we will go next to Michael Henderson-Cohen with Andalusian Capital Partners..

Hi, good morning. Hi, thanks for taking my question. Just one for you here and just thinking back I guess it sounds like you are now targeting on the higher end of the debt pay down range for 2015.

And just thinking back to how you guys were thinking about the two-year plan at year-end 2014, I believe it was maybe a $200 million to $250 million pay down and it seemed like to get to that higher range maybe additional asset divestitures would have to occur or something to that extent. And I'm just curious….

Right..

Okay, and so I don't want to put you on the spot we are now still 18 months away but just in thinking about that range, I guess is that now feasible without additional asset sales to get to the upper end of that two year range would you still think about needing to sell additional businesses? I guess it’s still just in this context of being at the higher end of the range for ‘15 now?.

Fair question, Michael, and here is the way I would describe it. So 200 to 250 was the target; 100 to 125 in each of the two years.

And yes, you are right, we talked about the fact that for us to -- so kind of making up the difference between 200 to 250 certainly divestitures were a good chunk of that and then there were other sorts of things that we unfortunately couldn't talk about but were going on in the background that we knew could develop and ultimately play a part in that.

So one of those things was as an example, the agreement with Nippon Steel. Those discussions have been ongoing for probably nine months or more. So we knew that was going on in the background but we couldn't talk about it.

So that was certainly an element to being able to get to the higher end of the range as well as the divestitures as well as a couple of other things that we still have going on but again we can't really talk about.

So yes, we pulled two of the three divestitures off because we didn't see value coming forth that made sense to sell them and one of the two is the one that would have made up the lion's share of the proceeds that would have come so that certainly will affect getting to the 250, there is no question about it.

But as an example, the Nippon agreement did come through and so -- and that is one of the things that we are really pointing to is driving us probably closer to the upper end this year. So as we think about it moving forward, yes, I would say there is probably $25 million of that $200 million to $250 million that for today is probably off the table.

And so that is the way that I would describe it if that is helpful..

Yes, okay, appreciate it. Thank you..

[Operator Instructions]. We will go next to Chris Shaw with Moness, Crespi..

Yeah, good morning, everyone.

Hi, in railroad, a little concerned about the sort of slowdown from the demand from the Class 1s and I know you can make it up with the commercial side of the business but the old story with rail was that they were fairly consistent in their demand, didn't matter so much what their volumes and traffic was sort of replacement.

Are they cutting back strictly because their business is down and the rail traffic is slowing a bit from the energy side or is there something else? Do you think it is going to be longer-term?.

So here is my take on it, just like us certainly the public ones which are the majority of them, they have earnings targets, shareholders to satisfy and things of that nature. So as they see pressures doing their business they look for ways where they might be able to help offset that and still be able to meet their guidance and expectations.

Again this is a repair and replacement business. They cannot cut back significantly and in some cases I think they've gone on record as saying that while they are looking at things they probably will have little opportunity to really affect anything on the repair and maintenance or capital side for the remainder of this year.

I am sure they will look at it hard for 2016. I think it is all to balance expectations with shareholders but they are going to do the right thing in terms of investing in their network and for safety and growth and things like that.

So I don't see it as a long-term, I view it more as how they are trying to manage through a little bit tougher situation here in the near-term and what we have seen so far it’s been relatively minor and modest. I only point it out because it is out there and so we are keeping a close eye on it.

We are lucky that today there is a strong amount of pent-up commercial demand that we can move production to if necessary but to date we haven't seen anything significant..

Thanks. And then if I could move to phthalic for a second or back to phthalic. I saw that the industry got a $0.03 I think, margin versus the orthoxylene price recently. Can you just talk about how that happened and are you guys benefiting from this one other supplier who you said was exiting the market.

Is that part of the dynamic there?.

It is. I think anytime you have a tightening of supply in the market, it could create potential opportunities for pricing. Yes, our other competitor in this business has gone out with a price increase, we have gone out with a price increase as well.

We think it’s fair and warranted given the environment that we are in but I think that's just kind of natural economics. It’s a depressed market still today even with an improving orthoxylene pricing and as things continue to improve and orthoxylene pricing goes up whether those sorts of spreads will be able to be maintained, it is tough to say.

And just because you go out with a price increase doesn't mean that you necessarily are able to even get it but we are doing everything we can to try and improve the profitability in that business..

Great, thanks..

And with no further questions in the queue I would like to turn the conference back over to Mr. Ball for any additional or closing comments..

Thank you. I hope our shareholders are able to see the positives that have occurred throughout our business in the first half of 2015. I know we are excited about where we believe we can take this company and we remain committed to do so. So we thank you for your participation in today's call and appreciate your continued interest in Koppers.

Thank you..

Again that does conclude today’s presentation. We thank you for your participation..