Quynh McGuire - Director, Investor Relations Leroy Ball - President and Chief Executive Officer Michael Zugay - Chief Financial Officer.

Ivan Marcuse - KeyBanc Capital Markets Inc. Daniel Rizzo - Jefferies & Company Liam Burke - Wunderlich Securities Bill Hoffmann - RBC Capital Markets Jake Kemeny - Prudential Fixed Income.

Good day and welcome to the Koppers Holdings, Inc. Fourth Quarter 2015 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Ms. Quynh McGuire, Investor Relations Director. Please go ahead, ma’am..

Thank you. Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Koppers fourth quarter 2015 earnings conference call. At this time, all participants are in listen-only mode. Following the presentation, instructions will be given for the question-and-answer session. I’ll now turn the call - I’m sorry. Thanks and good morning.

My name is Quynh McGuire and I’m the Director of Investor Relations. Welcome to our fourth quarter earnings conference call. 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’d also like to remind you that as indicated in our earnings release this morning, we’ve posted materials to our Investor Relations website that will be referenced in today’s call.

Before we get started I’d like to remind all of you that certain comments made during this conference call may be characterized as forward-looking under the Private Securities Litigation Reform Act of 1995.

These forward-looking statements may be affected by certain risks and uncertainties including risks described in the cautionary statements 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 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’d like to turn the call over to Leroy Ball..

Thank you, Quynh. Welcome, everyone, to our fourth quarter conference call. Since we last talked, much as happened and I want to bring you up-to-date on what we’ve been working on for the past several months. I also would like to give you some perspective on this past year.

As I reflect on my first 12 months as CEO of Koppers, I feel comfortable in saying that we have taken the difficult but necessary actions in 2015 to meaningfully improve our business moving forward. The journey over these initial 12 month has been both challenging and rewarding.

The challenge of the past year has involved the many decisions I’ve had to make related to closing facilities or idling production in our various operations.

While we understand the unfavorable impact on employees, their families and related communities these measures, still regrettable, remain essential to our recovery plan and to the financial health of our company as a whole. The rewarding aspects are due to the dedicated team of employees that we have at Koppers.

I’ve asked our people to step up their game and embrace my vision of zero harm, zero harm to our employees, the environment and the communities in which we operate.

We’re only in the very early stages of this game-changing initiative, but our people have really accepted the message and have done a wonderful job in taking the initial steps toward making our facilities safer. We have much work ahead. But I envision a day when any incident at Koppers represents a true rarity.

We’ve also asked our people to implement major changes to our CM&C business due to the fundamental shift of the U.S. aluminum industry to other geographies, and to strengthen our enhanced focus on wood treatment technologies. Once again our people have taken the reins and taken ownership of some very sobering decision.

Now, prior to starting as CEO I had the benefit of four years at Koppers, primarily serving as CFO, which gave me important insights about the company.

That’s why I can say that our results for 2015, although below what we originally expected, leaves me confident that we are well on the path of coming back from trough conditions and we have much more earnings power long-term.

As part of our CM&C consolidation strategy that we started implementing in January of 2014, we’ve taken even further aggressive restructuring actions. These actions resulted in $106.9 million of impairment and restructuring charges recorded in the fourth quarter of 2015, of which $80.8 million was non-cash.

If you step back to the beginning of 2014 we were just finishing the construction of our KJCC distillation facility in China, which marked our 10th operating facility or 11th if you count our Scunthorpe facility in the UK, where we made some specialty carbon products.

By the time we get to the end of July of this year, we will be operating only four distillation facilities globally, that represent the staggering 50% reduction in our global capacity, most of which was unused. Now, let me quickly walk you through the changes. In April 2014, we are ceased distillation at our Uithoorn, Netherlands facility.

At year-end 2015, we ceased distillation at our Follansbee, West Virginia facility. In January 2016, we announced that we will be ceasing distillation at Clairton, Pennsylvania facility by mid-July of this year.

Today we are announcing that we are ceasing distillation at our Port Clarence, UK facility and shutting down our specialty carbon products operation in Scunthorpe, UK, effective immediately, and we will be ceasing distillation at our KCCC facility in China by the end of this quarter.

Finally, we are well on our way to selling our 30% interest in our TKK joint venture in China. And we are optimistic that the sale will close by the end of the second quarter.

That will leave four facilities remaining where we hold key competitive advantages Stickney, Illinois; Nyborg, Denmark; Mayfield, Australia; and Jiangsu Province, China to best serve our global coal tar product demand.

Through streamlining our operating footprint, and reducing our reliance and exposure to the carbon pitch markets, we are significantly transforming our business model and reducing our exposure to what is proven to be less profitable end-markets over the past seven years.

We positioned ourselves to deliver improved results not just in 2016, but well beyond. And I’m proud of our team’s ability to remain focused on managing our business through these trying times.

An outstanding example of this is shown in our strong cash flow generation of $127.7 million in 2015, which was substantially higher than the prior year level of $35.5 million. Consequently, we paid down debt by $115.7 million, which was in line with our goal to reduce debt by $100 million to $125 million in 2015.

We delivered on that promise as a result of the hard work of our employees. This is a remarkable achievement given the ongoing headwinds in this past year.

Our performance also reflects my commitment and the continuing progress that we’ve made deemphasize and streamline our carbon materials and chemicals business to improve the overall profitability of the company. These actions will continue to have ramifications in the near-term on our balance sheet, such as impairment charges and asset write-down.

Much of the cash costs for the closure, however, will be spent over time, which will allow us to utilize the money we would have spent on capital to maintain those facilities and instead spent it on the site closure and cleanup.

As we come out the other side of this massive restructuring, we will be able to better demonstrate the more attractive returns generated by our Performance Chemicals and Railroad and Utility Products and Services businesses, while reconfiguring our CM&C business to be nicely profitable, even in a $30 or sub-$30 crude oil environment.

In short, our mission moving forward will be centered on creating safe and environmentally responsible solutions to solve our customers’ most important challenges through the development and application of technologies to enhance wood. Now, I’d like to turn it over to Mike, to discuss some key highlights from the fourth quarter of 2015.

Mike?.

Thanks, Leroy. As you can see on Slide 2 of our presentation, consolidated revenues for Q4 were $364 million or a decrease of $63 million and 14.8% compared to $427 million in the fourth quarter last year.

The sales decline was primarily related to CM&C, driven by lower sales volumes from carbon pitch and carbon black feedstock combined with lower sale prices for carbon black feedstock, naphthalene and phthalic anhydride.

The sales volumes for CM&C were mainly - the sales volume reductions for CM&C were mainly in North America as a result of aluminum smelter closures.

On Slide 3, consolidated revenue for 2015 were positively impacted by higher sales volume for crossties from the Class I railroad and by a full year revenues from our Osmose acquisition, which occurred in late 2014. These gains were partially offset by a significant decrease in CM&C sales.

This year-over-year decline was due to lower sales volume for carbon pitch and carbon black feedstock, and lower average sales prices for our products tied to oil. Moving to Slide 4, adjusted EBITDA was $29 million in the fourth quarter of 2015 compared to $24 million in the prior year quarter.

This was mainly due to increased profitability from the Performance Chemicals business, which more than offset the reduced earnings in the CM&C segment. Slide 5 shows our EBITDA bridge for the year. The higher profits from our RUPS and PC segments more than offset the lower profitability in CM&C.

And the $9 million savings in the corporate area was primarily due to integration cost for the Osmose acquisition in 2014, which did not reoccur in 2015. Now, I’d like to discuss several items that are not referenced in our slide presentation.

Adjusted net income was $2.8 million for the fourth quarter of 2015, compared to an adjusted net loss of $5.6 million in the fourth quarter of 2014. Adjustments to pre-tax income for the fourth quarter of 2015 amounted to $106.9 million, again which were primarily goodwill impairment charges and restructuring expenses in the CM&C segment.

Adjusted EPS for the fourth quarter was $0.13 per share compared to an adjusted loss per share of $0.27 in the prior year quarter. The adjusted income tax rate excluding the discrete tax items for the fourth quarter was 41% and 37% for the full year. Cash provided from operations in 2015 was $127.7 million compared to only $35.5 million last year.

This large increase was due mainly to lower working capital usage as a result of decreases in accounts receivable and inventories, an increase in accounts payable and also the receipt of a $30 million payment from KJCC due to an amendment of a soft pitch supply agreement last summer.

Capital expenditures for the year were $40.7 million compared to $83.8 million last year. And these were unusually high in 2014 due to construction expenses for the new KJCC plant in China. We expect to spend approximately $40 million to $45 million for CapEx spending in 2016.

At year-end, we had approximately a $130 million borrowed on our $500 million revolver, $263 million on our short-term loan, $300 million in existing bonds and $42 million of loans in China, which adds up to total debt of $735 million. Our leverage ratio at the end of the year was 4.67 times below the covenant of 5 times.

Our long-range goal in this area continues to be a leverage ratio of 3 times. Our fixed charge ratio was 1.44 times compared with the required 1.1 times. And based on our 2016 projections, we’re very confident that we will remain in compliance with these loan covenants throughout the upcoming year. Now, let’s go back to the presentation.

Slide 6 shows that we’ve reduced our total debt by $115 million from $850 million to $735 million. This is closer to the higher-end of our stated goal of paying down $100 million to $125 million in 2015.

Slide 7 shows our 2016 goal of debt pay down to be between $85 million and $110 million, which when combined with our actual 2015 debt pay down achieved the minimum of our two-year pay down target of between $200 million and $225 million.

This slide also shows that at the low end of our 2016 EBITDA target and at the high-end of our projected capital expenditures we will still achieve an $85 million debt pay-down in 2016. However, in order to achieve the upper end of our debt reduction goal we will have to sell non-core assets and generate additional excess cash.

In summary, we are continuing to reposition Koppers for long-term success through a number of ways, one of which is managing our capital structure sensibly and that translates into a strong focus on lowering our debt. Now, I’d like to turn it over to Leroy for more insight into our business..

Thanks, Mike. Before moving ahead, I want to point out that we’ve included some details in Slide 15, 16 and 17, which are somewhat self-explanatory. These charts represent our best attempt to reconcile our final 2015 results by segment, with what we originally projected for 2015 back in February of last year.

So as an example, when you see a $3 million impact, positive impact from oil excluding China on the CM&C reconciliation, it doesn’t mean that we received an overall $3 million benefit from oil, but instead means that the impact from oil was $3 million better than the negative $30 million midpoint that we projected back in February 2015.

So hopefully, you’ll find that information helpful. Now, let me speak to our business segment starting with Performance Chemicals. So as we look at the global markets in which we participate, we expect 2016 to be another strong year.

While our Performance Chemicals business is global, I will limit my forward-looking comments to the drivers of our product markets in North America, primarily due to the fact that it’s our largest geographic region in terms of sales and profits.

Existing home sales and home repair and remodeling have both continued to trend favorably, which is a great sign for our business because those metrics tend to drive demand for our products.

Recently released data from the National Association of REALTORS shows existing home sales in January 2016 of 5.5 million units, which represents the second highest sales month since 2007.

Existing home sales have generally been trending up since the last major dip in late 2010, which is meant that new homeowners have been spending more on repair and remodeling of their home purchases.

That can be seen from the Leading Indicator of Remodeling Activity or the LIRA, which is tracked by the Remodeling Futures Program at the Joint Center for Housing Studies in Harvard University. Dollars spent on repair and remodeling increased by 5.6% in 2015 versus 2014.

In the first three quarters of 2016 our projected spending levels that are just over 6% above the first three quarters of 2015. Once again that bodes well for the organic growth in this business segment. As shown on Slide 9 for 2016, we expect the Performance Chemicals business to generate EBITDA of approximately $63 million to $65 million in 2016.

Now, driving that increase will be a combination of additional profitability from organic growth that should result from the factors that I just described, as well as some raw material benefit for the amount of our requirements to remain un-hedged for 2016.

Partially offsetting that expected increase is some negative translation effect on our international earnings due to the stronger U.S. dollar.

Other cost benefits associated with the full integration of Performance Chemicals are projected to be offset by increased legal costs, as several cases currently in progress moved towards a more expensive phase of the litigation cycle.

Now, one final note on Performance Chemicals that is worth mentioning are the recent standard changes made by the American Wood Protection Association that affect treated wood used in residential, agricultural and commercial applications. For two years.

The AWPA has been engaged in developing new standards related to the proper use and application of outdoor residential treated wood and aboveground applications. The change in the standard will likely shift the portion of those aboveground treated wood products to higher retention ground contact preservative treatments.

Additionally, this change was designed to better inform and guide builders, specifiers, consumers and code inspectors regarding the proper use of preservative retention levels to avoid potential misuse or misapplication of treated wood products used in residential construction.

The net impact of this change is expected to result in stronger demand for residential preservatives, which means that we will need to make some modest investments in our three Performance Chemicals plants to handle the potential increase in demand.

What this could translate to in terms of additional volume remains to be seen, but we have incorporated approximately $4 million of spending in our capital budget for 2016 to be able to serve this recently announced standard change.

Now, if you turn to Page 10 of the slide presentation, you will see that we expect the Railroad and Utility Products and Services business to deliver EBITDA for 2016 of between $79 million to $84 million, which is flat to slightly down compared to last year.

We’re projecting that, sales volumes for untreated cross ties will increase slightly as the western Class I continue to restock. But I remain concerned that the Class I railroads overall could pull back on treatment volumes in 2016 as they continue to search for additional savings to offset decreased demand in the rail industry.

The net effect on volumes for the company could have anywhere from a negative $1 million to $6 million impact on the RUPS results for 2016. Now, we should realize some net benefit from our Green Spring facility being shut down for the entire year, but some of those gains will likely be offset by an increase in certain other costs, most notably legal.

That being said, we still expect to realize a net savings from cost reduction initiatives of $3 million in 2016. Regarding our Australian pole business, we expect that sales volumes will be relatively similar year over year, which is down from 2014 highs, as utilities in Australia have pulled back on their capital spending in order to conserve cash.

Any sensitivity in our Australian utility business results in 2016 will primarily be the result of the effect of foreign currency changes. And therefore, we have built in an approximate $2 million negative impact from foreign currency into our projection. And that brings me to CM&C.

As outlined on Slide 11, we expect EBITDA in 2016 to be in the range of $18 million and $21 million, which would represent a $9 million to $12 million improvement over 2015.

Right off the top, I will tell you that our CM&C EBITDA estimate would be $10 million to $12 million higher if we were using $50 a barrel as our oil assumption instead of a $30 barrel that our assumption is based upon.

If nothing else, it demonstrates the upside that we have over our estimate if we see even a moderate break upwards in the crude oil markets. Now, I realize there were continuously many moving parts in our CM&C business, but I can tell you that we made considerable progress in reshaping this segment over this past year.

In fact, the groundwork that we were able to lay in 2015 puts us in a great position to being closing out - begin closing out quite a number of larger initiatives in 2016. Probably the easiest way to communicate our progress in CM&C is to go around the world and describe where things are at by region, beginning with China.

I mentioned earlier on this call that we made the decision to close KCCC by the end of this quarter, ending what has been a several year ordeal to bring some finality to this joint-venture. And we’re still working out the details with our partner, but most of the costs associated with the shutdown have already been accrued.

And the overall cash costs for executing the plan are quite modest in comparison with shutting down operations in other parts of the world. We plan to retain our port operations and use those assets to trade products moving forward.

Now, things have progressed with the majority partner for TKK in regards to selling them our 30% interest in that joint-venture, and agreement in principal have been reached and the potential sale is now going through a number of regulatory approvals before it can be finalized. Our partner has already announced the agreement in fact in China.

We however are taking a little more cautious approach in waiting until we close on the transaction before announcing any of the details.

Proceeds would be nominal to reflect the small amount of equity that we have remaining in the JV, but more importantly the agreement does include provisions for the repayment of our $9.5 million outstanding loan to the JV post-closing.

Now, finally with KJCC, we will be reaching the end of our customers’ approval period in May, which will trigger a higher volume commitment from them for the following six-month period. Full volumes under our soft pitch agreement won’t begin to be shipped until the end of November.

All told, for China CM&C, we expect to see an EBITDA improvement in 2016 over 2015, which is incorporated into the net $3 million improvement for China and Australia as shown on Slide 11. 2015 was a particularly strong year for our Australian CMC business.

And while we believe 2016 will also be strong, we do anticipate that between a slightly stronger U.S. dollar and $30 oil, our Australian business will fall short of 2015’s adjusted EBITDA. That reduction is incorporated into both the net China and Australia EBITDA improvement, as well as the EBITDA reduction due to the stronger U.S.

dollar is shown on Slide 11. Now, that leaves our newly combined North America and European regions. We began pulling those regions together as one in 2015 and finally made the big step to put the combined regions under one leader as of 1/1/2016.

Now, I feel that makes good business sense as the two regions are so interrelated as it relates to raw material and finished products moving back and forth.

In November, we announced the idling of one of our stills at Stickney and the shutdown of tar distillation at Follansbee by the end of 2015, which was expected to have an $8 million annualized benefit. Those actions did in fact occur and we still feel good about our savings estimate.

In mid-January, we announced that we will be ceasing distillation at our Clairton, Pennsylvania facility by the middle of July. And the expected annual savings from that action will be approximately $14 million, with $4 million of those savings coming in 2016.

We are continuing with our preparation to bring down that facility within the timeframe originally communicated and stand behind our original savings estimates.

As mentioned earlier, we are announcing today that we are ceasing distillation at our Port Clarence UK facility and stopping production at our Scunthorpe UK facility, both effective immediately. There are about 80 employees in our CM&C business in the UK and consultations with the affected employees will immediately commence.

The Port Clarence facility has been idled since December of 2015, while we have been contemplating the future of those operations. With the continued pullback in UK tar supply resulting in significant uncovered fixed costs, we will pass the time of continuing to be patient.

Those actions should result in an annualized benefit of approximately $5 million, with about $3 million of those savings occurring in 2016.

When you total the savings from the plant shutdowns in North America and Europe that I just reviewed, the number comes to around $15 million, which is around the midpoint of what we show for restructuring benefits for CM&C on Slide 11.

The annualized savings that we should be realizing on those moves in 2017 equals $27 million and doesn’t include any benefit for the ultimate move of our naphthalene operations from Follansbee to Stickney.

When those savings are added, the total will come to a number comfortably higher than $30 million and once again demonstrates the upside that remains in this business segment. As I’ve referred to a few times already this morning, we were using $30 oil on our forecasted numbers for 2016, which is close to $20 below the average for 2015.

That will have an obvious impact on certain product pricing, but in particular phthalic anhydride, which is based off of benchmark ortho-xylene pricing. However, with the significant reduction in distillation capacity in North America and Europe due to the shrinking pitch market, the raw material pricing dynamic is changed quite a bit.

And we’ve already begun to realize certain cost reductions. When you net our expected raw material cost savings with the price reductions due to oil, we are actually expecting a $5 million benefit in 2016.

That will serve to cut into the approximate $27 million net reduction we saw from pricing in raw materials due to oil in 2015 for all regions other than China. Now for the negative part of the story, I spoke on the November call about the number of aluminum smelters in the U.S.

that it announced either a curtailment of capacity or closure at that point in time. While the bad news only continued to come as the year ended and 2016 began, as the negative fallout on the aluminum markets continued.

The result as we sit here today is that our North American pitch volumes will be anywhere from 40% to 50% below what they were in 2015.

Now, offsetting some of that volume reduction will be an increase in our phthalic anhydride sales volumes as we finalized two nice contracts recently, that will result in at least a 20% increase in year-over-year phthalic sales volume. The net of all the volume impacts on 2016 is expected to be approximately a $10 million reduction to EBITDA.

Finally, we are forecasting about a $3 million impact on year-over-year results due to lower foreign currency translation due to a stronger U.S. dollar. So if you move to Slide 12, I will pull it altogether starting with our sales expectations for 2016.

On a consolidated basis, you will see that we expect sales to decline by anywhere from $75 million to $135 million, driven primarily by CM&C sales reduction. CM&C reductions are primarily due to the effect on certain product pricing, driven by our lower oil assumption, a significant drop in U.S.

carbon pitch demand and negative foreign currency translations. The RUPS business segment is expected to finish the year anywhere from flat to down $25 million, reflecting the risk of lower treating volumes and negative foreign currency translation.

We are expecting an increase in Performance Chemicals sales of approximately $15 million to $25 million, which is reflective of an increase due to organic growth, partially offset by some negative foreign currency translation.

Now, approximately one year ago, I mentioned that as we reshaped our business portfolio our CM&C segment could be reduced to about one-third of our total sales by the end of 2017. 2016 turns out how we are projecting. CM&C will actually finish this year at one-third of our top line approximately one year ahead of schedule.

Now turning to Page 13, you can see the overall summary of how we see EBITDA shaping up in 2016, which includes the $2 million improvement on the corporate side. When you take that $158 million to $168 million EBITDA range and convert it to earnings per share, we are estimating a range of about a $1.80 to $2.10.

I know that our current rang is below where current estimates are for the company, but I’ve been very candid about wanting to make sure that we reestablish credibility with our shareholders. We issued guidance in 2015 for the first time in a long time. And for the first three quarters we are able to beat the contentious analysts’ assessments.

We ultimately fell short in Q4 and for the total year and for many good reasons that I don’t need to rehash again. For 2016, I want to make sure that I’m ratcheting down our enthusiasm a little bit, so that we don’t put ourselves at risk of only making three out of four quarters again.

As I sit here today, I can tell you I feel very confident achieving the range which I believe, currently has more upside than risk associated with it.

Not only are we smarter about our performance chemical business, but we are much further along in our restructuring plans and a much greater visibility about the other things that could possibly go wrong. In short, we want 2016 to be the first year where we quit playing from behind.

There is a lot of earnings power that remains within our company; we are only at the beginning stages. I am confident that for those that remain patient, you’ll be handsomely rewarded over time. I’d now like to open it up for questions..

Thank you. [Operator Instructions] And we will go ahead and take our first question from Ivan Marcuse. Please go ahead. Your line is open..

Great. Thanks for taking my questions.

In terms of all the restructuring that you are doing in CM&C, how much of those plants that you are shutting down is EBITDA and cash flow associated with those or how to think about that? And then, when we get into a more normalized mid-cycle environment, what does this business look like when everything is said and done? So I know it’s going to be a third of sales, but does your EBITDA profitability get to a certain level?.

Yes. So great question, Ivan, and let me try and walk you through that. So we’re saying that this year we believe that that segment, the CM&C segment can reach a range of $18 million to $21 million of EBITDA.

So if I just walk through some of the items that I mentioned actually on this call here and a few others that I haven’t, from the restructuring standpoint for the things that are already announced and in motion, I mentioned $12 million of additional savings that would be captured in 2017 that won’t be in 2016 numbers right.

So I mentioned $15 million of benefit that will come from the cessation of distillation of Follansbee, Clairton, Port Clarence, shutdown of Scunthorpe, all the rest of that. $15 million coming in 2016, $27 million annualized. So an additional $12 million on top of 2016’s numbers that can be expected for 2017.

That does not take into account the benefits that we will receive from shutting down our naphthalene operation at Follansbee and moving it to Stickney.

Now, that won’t likely occur and take effect until you get to the end of 2017, early 2018, but you’re talking about, probably, at least a minimum of $5 million additional from that project with where things are at today. And then, finally you have KJCC reaching full volumes by the end of 2016.

So again in 2017 we would expect at least the minimum of another $5 million coming from that business as we look out into 2017.

So you have $12 million from the restructuring, additional $5 million from KJCC coming in 2017, that’s $17 million, another $5 million at least coming from the movement of naphthalene from Follansbee to Stickney for a total $22 million on top of the $18 million to $21 million that we are projecting for 2016.

So now you’re in the low to mid 40s without any change in oil, without any change in foreign exchange rates. Last year and this year, for what we’re projecting for this year from the foreign exchange standpoint, we will be impacted by about $8 million just from translation on our results into U.S. dollars.

And from an oil standpoint, we talked about the fact that we were hit by $27 million outside of China in 2015, compared to 2014. $5 million of that, we think we can call back this year. So you have another $22 million outside of China of benefit that could come from oil, if it would move back to 2014-ish levels.

So I would say, low to mid 40s without any change in oil, without any change in foreign exchange. And then you have another 30 million that’s on the table if the oil markets and foreign currency gets back to where it was in the 2014 timeframe..

Great. Thanks for that detail.

And then, next more near-term with the restructuring that you announced of, I don’t know where you said, about $106 million, $107 million and $80 million of that’s cash, what’s the timing of the $27 million cash restructuring? Is that going to be all in 2016? And is that sort of included in your cash flow waterfall?.

It is included in our cash flow. These are activities that take several years, right. Unfortunately, I have to sit here and say that we are somewhat of an expert in closing down facilities, because we have a lot of experience in doing it on the railroad side of business as well as with CMC. So we know that these sorts of things take several years.

I would put it over a - strictly over a three to five year timeframe. And you might expect that the amounts would be somewhat radical over that period of time. We have some other things that we are working on that also will help mitigate some of these costs and/or help push them out a little bit as well.

With Port Clarence, I did mentioned in my prepared comments, but actually we are preparing to move that into a terminal status, which again will allow us to extend certain costs that otherwise we might have to incur if we were shutting it down completely.

So there are no near-term big cash issues as it relates to these closures and they are included in our cash flow projections..

Right. Then one more and I’ll get back in to the queue. In terms of your working capital, if my math is right, just I don’t know how you want to look at it, operating working capital or assets versus liability, just sort of a net - I guess, on your operating working capital in the 15% or 16% - sorry 14%, 15%, 16% range in terms of percentage of sales.

What do you think this business looks like running now, where do you get that, it looks like you are looking for working capital that continue to be a source of cash.

So how far do you think your working capital as a percentage of sales to or what’s the goal?.

Yes. So I think we finished this year a little over 11%, maybe something like that. And I’ll let Mike also offer his comments here. The big working capital savings that we see in 2016 really relate to the working capital we will be taking on the business through the shutdown of these facilities. That’s the predominant amount of that, right.

We sucked a lot of working capital out of this business just in this past year. We’re somewhat limited in doing a whole lot more just with the base business. But the fact that we are taking these operations down, it’s going to allow us to skimming working capital as a result of that.

And that’s the big piece of what you see in terms of our projections for 2016. Truthfully, I don’t know that we can get down much further than where we are at. I put it in the - again the 10.5-ish to 11.5-ish percent range, but, Mike, please offer your thoughts on that..

Yes. I think just from a consolidation standpoint, anytime that we shrink or restructure our business and the revenues become smaller, we have improvements in working capital as our inventories are lower, our receivables are lower. And we turn those kinds of assets.

Again, as a business is declining into cash, rather than the opposite, which is a business that’s improving where you have to have additional working capital for higher inventories and higher receivables.

So we feel pretty comfortable on that Page 7, that Slide 7 on the improvements in working capital for 2016, again, primarily because of the consolidation and the shrinkage of our CM&C businesses..

Okay, great.

Tax rate 35% still, look out 2016, 2017?.

Yes. About to 35%, 36%, I think we ended the year somewhere between 36% and 37%. But projecting out to get to our adjusted EPS, we used 36%..

Great, thanks..

Thank you. [Operator Instructions] And we’ll go ahead and take our next question from Laurence Alexander. Please go ahead. Your line is open..

Good morning. This is Dan Rizzo on for Laurence.

How are you guys doing?.

Good, Dan..

Hi, Dan..

Hey. So you said that raw material is I think is going to be a $5 million benefit in 2016..

Yes..

Is that just a function of, I mean, because in raw materials, I mean, is there a function of lower oil prices.

Where is that from?.

Well, partly, that is partly for certain contracts that are pegged to that. But it’s just through the whole changing dynamic here in North America. You had the U.S. hedge markets basically move away, which has resulted in much lower demand for our end-products. We don’t have to distill as much. So we’ve taken down operations.

And we have the ability to import product from Europe, which we fully intend to do. So there’s just not as much demand for the raw material. It’s a supply-demand issue really. And so as a result, we are seeing a softening in pricing on that raw material.

And again, the $5 million is a net benefit, right, because it’s partially offset by a reduction in pricing that is coming from the lower oil prices. So $5 million is not the total benefit, it’s the net benefit..

So the scarcity of availability, that was kind of a problem right, say, in like 2013, 2014. That’s not going to be an issue going forward, the world has changed..

The world has changed. Never say never - as it exists today, it’s a different world than it was two years ago absolutely..

Okay, thanks.

And then, just on the cost reductions in RUPS and then Performance Chemicals, I mean, is that just more of like streamlining? I mean, there’s not obviously major moves going there, how are you accomplishing that?.

Well, in the RUPS business we did take a plant out of our system at the end of the third quarter of last year. So we only realized basically a quarter’s worth of those benefits in our numbers. We’ll get a full-year benefit in 2016 on the RUPS side.

On Performance Chemicals side, there is some additional integration savings that we expected to capture in 2016, beyond what we were capturing in 2015. So that’s the biggest piece there..

Okay. All right. Thank you for the color..

You’re welcome..

Thank you. [Operator Instructions] We’ll go ahead and take our next question from Liam Burke. Please go ahead, your line is open..

Thank you. Good morning, Leroy..

Hi, Liam..

Hi, Liam..

Hi, Mike. On the wood, on KPC, you have a compelling differentiation strategy vis-à-vis the wood products or wood treatment products competitors.

Is that division seeing any pushback from some of the wood alternatives that are out there moving into the residential rehab market?.

Well, it’s all - that’s certainly an option for consumers. It remains, I would say, certainly a smaller part of the market today. We’re seeing a little bit of encroachment I think from that. But overall from the projections that we have seen, we don’t expect that to make significant inroad certainly over the next three to five years.

But it remains a competitive alternative. But it is a higher cost product. There is no question about it..

And that market share is held constant over the last couple of years at 6%, 7%, 8% of the market I believe..

That’s about right. Yes, I know it’s in the single-digits. And on the - once you get I mean, it’s been a long path as you pulled your capital out of the business, restructured and resized CMC.

Where do you see the opportunities to, once that’s been done to step up some growth on the revenue line?.

Well, we see opportunities to continue to build around our railroad products business here in North America. We’ve added nicely to it through some small acquisitions on the maintenance of way side. We continue to evaluate opportunities there.

So I know a lot of our focus has been around restructuring CM&C, but that hasn’t taken us from - off of looking at opportunities there. So we still think that there are some opportunities to grow maintenance away within the railroad side of the business. And Performance Chemicals, hey, there’s - truthfully there is other, again, treatment.

There are other preservative options that we don’t play in today, that we think we could - that we could play a role in moving forward. So - and there is opportunities to, we think to further consolidate that market.

So there are some nice opportunities, we think both in the core of what we do as well as going around and getting into some different preservative opportunities. But right now, as you mentioned, I mean, the focus is less on the top line and stabilizing the bottom line and the cash flows.

And once we kind of get through the point where we feel comfortable taking a little more risk, you’ll see some more things happen that will - that should translate into top line growth. But we’re just a little bit away from that right now..

Great. Thanks, Leroy. Thanks, Mike..

Yes..

Thank you [Operator Instructions] We’ll take our next question from Bill Hoffmann. Please go ahead..

Can we just….

Hi, Bill..

Hi, Bill..

Hey, can you talk a little bit more about the standard change in the chemicals business, the wood treating chemicals business? I just want to get a sense of where you think volumetrically how this layers into the business?.

Yes. We’re not really prepared to talk about what the impact could be, because, again, it’s a little early to say at this point in time. The standard was literally just published here a few weeks back. So it is pretty fresh. We are adding some additional production capacity to help give us the ability to serve this higher market.

We are basically tapped out at our scrap copper processing facility up in Hubbell, Michigan. So we are doing some things to help us from that perspective. But, Bill, we purposely are kind of staying away from what this could mean from a volume standpoint just yet until we get a little greater clarity of it moving forward.

But it is - the bottom-line is it’s a positive development for the industry from the standpoint of - also taking risk out of the industry, right, by basically moving certain of these products to above ground contact - from the above ground contact application to ground contact application.

And - there has been a lot of misapplication of this product here in the past, and this can help clear up a lot of those issues moving forward. So overall, we are very pleased about it, but are hesitant at this point to really talk about what it might mean from a volume standpoint..

Great, thank you.

And then, in the CMC business, once you close all these plants, what do you think the mix of your revenues is going to be between pitch and phthalic, et cetera?.

Well, we don’t - we still don’t get to really change the mix of our production. So, again, for every ton of tar that we distill we’re still going to produce somewhere in the neighborhood of half of that being carbon pitch. So from a mix standpoint, it really doesn’t - it doesn’t change much in terms of our overall mix.

But what it does overall is it - again, it reduces, obviously the volume will be processing and intakes a good bit of volume that otherwise would be going into lower value carbon black feedstock markets and allows us instead to redirect that into the creosote market.

So that overall is a very positive development, and we’ll have a pretty nice impact on our operating results. But from a mix standpoint, you’d still be looking at somewhat a same sort of mix in terms of pitch versus distillate products which is again the creosote carbon black feedstock, and then your chemical stream..

Right. No, thank you, that’s fine. It just allows you to high-grade that other part. That was it. Thank you..

Okay. Thanks, Bill..

Thank you. [Operator Instructions] We’ll go ahead and take our next question from Jake Kemeny. Please go ahead. Your line is open..

Hey, guys.

How are you doing?.

Good, Jake..

Hey, Jake..

Just a quick question, in terms of the debt reduction plans for next year, what’s going to be the primary mechanism for that? Is it just simply paying down the revolver that’s outstanding?.

Yes. That’s what will happen..

Okay. And then there is another I think one of the Chinese loans.

Is that something that you guys will also reduce a little bit?.

Yes. That’s built in to our $85 million pay-down. We expect that $9.5 million to $10 million loan to be repaid to us..

Okay. Thanks..

You’re welcome..

Thank you. [Operator Instructions] We’ll pause here to allow questions to queue. And we’ll go ahead and take our next question from George Stein [ph]. Please go ahead. Your line is open..

Hey guys. Just a quick question on the CM&C kind of net tar pricing effect that you guys called out a little bit in 2016.

Do you think there is further runway for that kind of effect to play out in 2017, assuming that tar remains pretty well over supplied in North America?.

I mean, it could, it could. It remains to be seen. Yes, I still think that there are some things going on in the market in terms of tar needing to try and find a home that will ultimately end up finding the bottom for where pricing comes out there. So there is still some runway there.

But depending upon what the alternatives might be, don’t know where it could end up..

Okay. That’s it for me. Thanks..

Okay. Thank you..

Thank you. And it looks like we have a follow-up question from Ivan Marcuse. Please go ahead. Your line is open..

Hey, a quick question on the JV, the newer JV in China..

Yes..

From what I understand, the electric arc industry remains pretty pressured; I guess it would be an understatement.

So what is the - what’s the opportunity for them or the - if they need to see your partner to change the agreement or to shut down or what’s sort of the sensitivity around there as this is sort of a locked-in type of contract when I look in 2016, 2017?.

Well, that’s, Ivan, why we were happy to begin supplying soft pitch last August, was because of the fact that, that once our partner begin taking the soft pitch they’ve potentially triggered the beginning to that agreement. And that was an important milestone.

So they - you’re right that the - that the whole electric arc environment, needle coke environment continues to be very challenged.

If they would want to change that agreement because of where the market is currently, obviously, there is a cost of doing that, no different than what we ended up doing in June of last year, right, where we accepted the $30 million payment to restructure the agreement.

If our partner would feel that they get to the point that there needs to be another restructuring of that agreement, it all comes down to value and terms. So we would have to have that discussion at that point in time. But we feel pretty good about our - the strength of our contract and the ability to force it.

So right now, despite the market conditions we feel pretty good about things..

Great. Thanks..

Yes..

Thank you. And speakers, it does appear we have no further questions at this time. I will now hand it back over to Mr. Ball for any additional or closing remarks..

Thank you, Tanisha. I believe our business in 2016 is poised to outperform what we have put in front of you today. And better yet, we are one year closer to having a business that has a much stronger and more stable earnings profile and capital structure. I knew it wouldn’t be easy when I took the helm on January of 2015.

But today, I feel that we have much more clarity on where we are going at this point in time and what it could look like when we get there. For those that believe in our vision and direction, thank you. I look forward to you being rewarded for your patience..

And that does conclude today’s program. We like to thank you for your participation. Have a wonderful day and you may disconnect at any time..