Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Koppers Business Update and Q2 Conference Call. Please also note, today's event is being recorded.

Thanks, and good morning. I'm Quynh McGuire, Vice President of Investor Relations. Welcome to our conference call, where we will provide a business update as well as highlight our second quarter 2020 preliminary results. We issued our press release earlier today. You may access this announcement via our website at www.koppers.com. As indicated in our announcement, we've also posted materials to the Investor Relations page of our website that will be referenced in today's call. Consistent with our practice in prior quarterly conference calls, this is being broadcast live on our website, and a recording of this call will be available on our website for replay through October 27, 2020. Before we get started, I would like to direct your attention to our forward-looking disclosure statement. Certain comments made on 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 website, reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures. Joining me for our call today are Leroy Ball, President and CEO of Koppers; and Mike Zugay, Chief Financial Officer. I'll now turn this discussion over to Leroy.

Thank you, Quynh. Welcome, everyone. Hope all you and your families are healthy and staying safe during these unusual times that we're going through. Health and safety continue to be at the forefront of Koppers as we've continued to use our Zero Harm culture to influence positive behaviors through this pandemic. Through the first half of 2020, I'm happy to report that despite all of the anxiety and distractions that have been brought on by the fear and reality of COVID-19, we finished midyear at a more favorable reportable injury run rate than last year. That's been driven by increased engagement on observations of exposures and visible hazards, which has been demonstrated to have an inverse relationship with injuries. We focus more on identifying and eliminating the hazards that exist, the fewer injuries that occur. Simple. Moving on now to our presentation. As shown on Slide 4, the U.S. Cyber Security and Infrastructure Security Agency, or CISA, an agency of the Department of Homeland Security, continues to classify Koppers as an essential business according to its guidelines. With this designation, we can continue our operations that help to transport critical goods and provide power and connectivity to homes and businesses to keep our infrastructure running reliably. Our employees take pride in doing their part to support the global economy. Moving on to the health and well-being of our employees, an update is provided on Slide 6. We have seen our numbers increase over the past month or so, leading us to reinforce the importance of employees adhering to the guidelines we've put in place. So far, 28 Koppers employees have tested positive, with only 2 locations where it was suspected to be from a spread at a Koppers facility. At this point, about 19% of employees have self-identified as having been exposed to the virus. About 2% remain in self-quarantine. We're fortunate that no employees have had to be hospitalized at this point. In terms of communications, I continue to communicate regularly with our employees worldwide via videos, virtual facility visits, and virtual employee chat to keep everyone updated and to offer encouragement as we all move through this situation together. Moving on now to a review of operations continuity on Slide 8. Here, we see that nearly all worldwide Koppers manufacturing facilities remain operational, except our KJCC plant in China, which is offline due to a scheduled outage at a customer's plant. During the time of the shutdown, our employees there continued working on maintenance projects until that plant restarts. Due to a recent fire at our Stickney facility, which thankfully no one was injured, the tar naphthalene units have been temporarily down and are expected to come back online this week. Also, we've experienced a brief shutdown of the two rough facilities in July, where we had multiple employees potentially exposed to the virus with several testing positive. We took the necessary precautions for sanitizing the facility, and both of those plants have since resumed operations. Currently, employees who were furloughed or laid off due to the virus have returned to work. We're preventing employees from traveling on a very limited basis if it's essential for business reasons, and they must observe appropriate health and hygiene guidelines. We're still continuing to strongly encourage employees to work remotely. And as part of erring on the side of caution, we've temporarily halted plans for employees to voluntarily return to the office. For those very few office employees who feel that they must come into the office, they are required to use safe coverings and practice social distancing. Fortunately, technology has emerged as a key driver in keeping our business operations moving, from relying on Microsoft Teams or Zoom for meetings to using Microsoft HoloLens for virtual facility audits and a variety of solutions for COVID testing, temperature screening, and contact tracing. Moving to Slide 10. I would like to take a moment to recognize our team in Ashcroft, British Columbia, with the Annual Koppers 2019 Zero Harm Presence award. This award goes to the facility reporting the highest level of performance regarding leading activities like employee observations, hazard ID, near-miss reporting, and idea submissions, as well as lagging indicators like total recordables, reportable spills, and air emission exceedances. Both leading and lagging indicators provide an accurate measure of living to Zero Harm safety culture on a consistent basis. Along with our Chief Operating Officer, Jim Sullivan, our Zero Harm VP, Joe Dowd, and other members of the RPS and Zero Harm teams, I was pleased to present this award to our Ashcroft Plant Manager, Patrick Sullivan, and his team during a recent virtual facility visit. Congratulations to the entire team in Ashcroft for exemplifying the Koppers Zero Harm culture, and especially thank you, Richard Smith, one of our Zero Harm professionals, who was a driving force behind the development of this special recognition. Now shown on Slide 12, we were pleased to recently issue our 2019 Koppers corporate sustainability report. The CSR details how, guided by our purposes of protecting what matters and preserving the future, we are taking care of our people and communities, fostering an inclusive and innovative workplace, being a good steward of the environment, and contributing beneficial products to society for generations to come. For the first time, our CSR includes aggregated data on our employee demographics, including at the manager level. We view this as an important step in highlighting where our organization stands relative to diversity, so everyone can see the progress being made as we move forward. I hope that other organizations will do the same in order to transparently measure the progress and help bring about meaningful, long-lasting change. Before I provide comments on our business segments moving forward and the related market segments, I'll turn it over to Mike to discuss results for the quarter and an overview of our debt and liquidity.

Thanks, Leroy. In our press release, we provided preliminary results for the second quarter of 2020, and our financial discussion is based on these preliminary results. If you go to Slide 14, you'll see that our consolidated sales were $437 million, a slight decrease from sales of $444 million in the prior year. Sales for RUPS increased to $210 million, up from $199 million for the prior year. PC sales rose to $137 million from $121 million, and CM&C sales fell to $90 million from $124 million. Moving on to Slide 15. Preliminary adjusted EBITDA was $60 million compared with $63 million in the prior year. EBITDA for RUPS increased to $23 million, up from $19 million in the prior year. PC's EBITDA rose to $29 million from $21 million. And CM&C EBITDA fell to $7 million from $23 million. Sales for RUPS, as shown on Slide 16, were a new year-over-year quarterly sales record. The sales increase was due to increased crosstie volumes, favorable pricing for commercial crossties, a record sales quarter for our U.S. utility pole business, as well as improved demand in Australia. EBITDA for RUPS on Slide 17 was a second-quarter record driven by record quarterly EBITDA for our UIP business and record quarterly EBITDA for our maintenance-of-way businesses, as well as increased crosstie production and lower SG&A expenses. Sales for PC on Slide 18 were a record sales quarter and were driven by sales to our top 10 customers. The sales increase reflected strong demand in North America from increased home repair and remodeling activities during this pandemic, and they were partially offset by lower demand in all of our international markets. EBITDA for PC on Slide 19 was also a quarterly record due to higher sales volume, greater absorption on higher production volumes, and lower year-over-year raw material prices, which were partially offset by lower contributions from those international businesses. Sales for CM&C on Slide 20 were lower in every region. However, they were in line with our expectations. Both sales volumes and product pricing were negatively impacted by lower oil prices and a slowdown in its end markets as a result of the pandemic. EBITDA for CM&C, on Slide 21, saw a significant year-over-year decline due to demand weaknesses and pricing pressures associated with sudden end market contraction and lower oil prices. Now I'd like to discuss several items that are not referenced in our slide presentation. Adjusted net income was $27 million compared with $24 million in the prior year quarter. Adjusted earnings per share were $1.27 compared with $1.14 for the prior year period. The effective tax rate for adjusted net income in 2020 is projected to be approximately 25%. Through June 30, 2020, capital expenditures were $27 million compared with $19 million in the prior year. Now let's go back to the presentation. As shown on Slide 23, at the end of June, we had net debt of $874 million with $191 million in available liquidity. Also, we were in compliance with all our debt covenants. Looking at maturities, we do not have any significant debt maturities until 2024 when our revolver matures, and we have a final balloon payment on our term loan, which becomes due then. In 2025, our $500 million in bonds will mature as well. In 2020, we plan to reduce debt by a minimum of $120 million, contingent upon the successful closing of the KJCC divestiture as well as additional sources of cash from working capital reductions, lower cash taxes, and lower interest, lower than originally projected capital expenditures, and some deferred payroll taxes as well. Slide 24 shows our net leverage ratio each quarter in 2019 and as projected through the end of 2020. At June 30, our net leverage ratio was 4.5x, and we are targeting between 3.7x and 4x by this year-end. Before I turn the discussion back over to Leroy, I just want to mention that we expect to issue our final Q2 earnings press release and also file our Form 10-Q next Thursday, August 6. We will not have an earnings conference call on that day, given that we are discussing the in-depth details of the second quarter results today.

Thank you, Mike. Now I'd like to provide some insights related to our business segments as well as customer supplier centers. Slide 26 of our presentation shows our Utility and Industrial Products Group. This business experienced a strong first half, producing the best second quarter and half-year in sales and adjusted EBITDA in the brief time we've owned the business. While we still anticipate a solid second half of 2020, we are hearing that certain utilities are having issues securing line hardware and transformers, which could push some second half project back to later in the year or even out into 2021. Now that said, we're pleased to report that the lines of communication are getting more active about moving on to other treatment solutions as Cabot Microelectronics continues down the path to cease pentachlorophenol production at the end of this year. While we continue to evaluate various options to add copper and arsenate to our preservative portfolio, we are working with a number of utilities that have shown interest in looking at our CCA and creosote for pole treatment as an alternative to the penta preservatives. In terms of current activities, we're seeing utilities in northern states indicating steady demand as pandemic-related restrictions have lessened, while utilities in the southern states are showing a slight pullback in their activities, partially due to fears with the resurgence of the virus. We're seeing increased quoting activity in the piling market after a brief pause as restrictions are lifted on construction projects, but we remain cautious on how much will get done if cases continue to rise. For the pole recovery services, interest appears to be increasing from larger utility customers requesting project proposals, which is an encouraging sign. For now, the availability of raw materials and the supply chain remains strong even with high lumber demand, and we continue to experience a consistent wood flow. Even if we should experience a slowdown in certain parts of our markets, we believe that the UIP business remains on track for its best year since being acquired by Koppers, and our long-term demand fundamentals remain solid. Our railroad product service business, as highlighted on Slide 27, the crosstie business remains solid. Pricing to date has been relatively favorable in the commercial market, although we are starting to see pricing trend lower and bidding activity has slowed. We expect strong first-half volumes, primarily supported by the Class I should continue at least through the third quarter, with the fourth quarter a bit more uncertain at this point. In June, we informed our employees at our Denver crosstie treating facility that we will be ceasing production at that plant by the end of August. As we work to consolidate the trading volume from that plant to another in our network, those benefits should contribute towards offsetting any possible fourth-quarter pullback in volumes. According to the American Association of Railroads, even though rail traffic in 2020 lagged significantly from last year, Class I railroad activities began improving in May and have continued into June. Freight, coal, automotive, and support industry-related loadings all saw either increases or stabilization. Through June 30, 2020, total U.S. carload traffic decreased 15.9% from the same period last year while intermodal units dropped by 10.6%. Combined U.S. traffic for carloads and intermodal units fell by 13.2%. The Railway Tie Association reported that, in general, the railroad industry is managing to offset lower volumes with increased productivity. In fact, certain railroads are taking advantage of reduced track time to increase maintenance on their infrastructure. We have seen that reflected in our numbers. Our maintenance-of-way businesses, we're beginning to see demand pick up as we move into the back half of the year, resulting in improved profitability. Back of the second quarter represented an all-time high in maintenance-of-way profitability after three successive disappointing quarters. We anticipate the second half of 2020 to continue the recent trend of positive maintenance-of-way performance. Regarding the supply, we're reducing crosstie purchases to be more in line with prior year levels over the back half of the year in order to stabilize inventory levels. We're also receiving more dry tie from third parties for certain Class I customers, which should help feed similar treating levels as in the first half of the year. Moving to Performance Chemicals on Slide 28. It's nothing short of unbelievable the demand that we have seen in our waterborne residential chemical business since the pandemic broke. Volumes on average were up by 22%, which has left the industry scrambling for chemical. We sold down our stock and have been running hand to mouth since late June as we work to try to secure more intermediate raw material from our alternate sources to help alleviate the production bottleneck. We anticipate continuing strong demand in North America, primarily in the U.S., for the remainder of 2020 as treaters fill the backlog of demand and retailers restock. I want to commend our Performance Chemicals team on the tremendous job they're doing in the most challenging of times to serve our customer base and fill orders while dealing with the challenges of managing workplace behaviors and safety. Our international markets, on the other hand, remain more challenging, but we are expecting improved demand in the second half of the year. As I mentioned in the U.S., the PC business is experiencing record level demand for residential treated wood, with big-box retailers continuing to report strong demand for home improvement projects. Lumber availability has improved after shortages being experienced in the early days of the pandemic, but unprecedented demand has pushed lumber prices to record levels. As such, traders will be carefully managing the balancing act of maintaining inventory levels to fill demand while also being careful to not be caught with high-priced lumber when the market turns down. That phenomenon could slow demand at some point. However, at this point, we're not seeing any indication of a slowdown. Market forecast for home improvement continues to vary widely. According to the Leading Indicator of Remodeling Activity, or LIRA, expenditures for improvements and repairs to owner-occupied homes are expected to slow by the middle of next year as the COVID-19 pandemic continues to unfold. LIRA projects annual declines in renovation and repair spending of 0.4% by mid-2021. On the other hand, the Houzz Barometer tracking residential renovation market shows that businesses have a more positive outlook for 2020 than they did at the beginning of the pandemic. Also, Principia Consulting is forecasting a 4.2% growth rate for decking demand through 2022. Homeowners are focusing on the importance of home and work-life environment. And with interest rates at historically low levels, we expect the pace to continue at least through the rest of this year. On the international front for Performance Chemicals, as outlined on Slide 29, we expect demand in the Nordic region, Germany, Ireland, and the U.K. to improve from second quarter lows. In Australia, we're seeing steady demand as the new housing stimulus package aimed at supporting the construction market seems to be helping offset a weaker demand environment. New Zealand businesses are returning with the lifting of the lockdown in early June, which is sooner than planned. Also, Brazil and Chile have begun to generate higher volumes. Overall, our international operations have been severely challenged through the first half of this year, but we're beginning to see the signs of improvement that we hope will lead to results more in line with historical performance by the end of this year. Regarding our supply chain, we continue to evaluate copper hedges for the 2021-2022 timeframe, which, on average, are at lower average cost compared with 2020. For 2020, we do not expect to see any additional benefits related to lower copper prices since we're already fully hedged. In fact, we will see slightly higher costs in the back half of this year as we need to source higher-cost intermediate raw materials to fill the backlog of demand. In addition, as we work to keep customers supplied and their plants running, we're shipping more partial loads, which will contribute to higher transportation costs. Both of these factors will put pressure on margins during the second half, but we still have a realistic chance of finishing the year with adjusted EBITDA for this segment at a new all-time high, even better than the $88 million generated in 2017, well above the $78 million to $80 million we thought we would do this year, pre-pandemic. Moving on to our CM&C business, as shown on Slide 30. We continue to be impacted negatively by significant declines in auto manufacturing capacity and other industrial production markets, which are resulting in lower demand for our products. Pricing is also under pressure due to lower oil prices and the general market slowdown from the pandemic. The second half of the year, we expect to see some improvements relative to the first half. In North America, we're seeing reduced plant throughput due to lower steel production, producing less coal tar and higher raw material costs due to imports, along with lower volumes and pricing across the board with some limited exceptions. CM&C in Europe is experiencing reduced heart production, lower volumes, and prices for carbon pitch and carbon black feedstock and is exporting naphthalene to China due to soft demand. In the Australasia region, lower sales prices for carbon pitch and carbon black feedstock have been occurring. While volume remains at similar levels, carbon pitch pricing is likely to continue trending lower in the second half as Asian benchmark prices continue to decline. In our supply chain, the cost of coal tar is dropping in line with end markets but lagging by approximately a quarter. Pullback in steel production has led to lower domestic coal tar availability and an increase in raw material imports to North America at higher prices, while markets in Europe and Australia remain steady. Despite the doom and gloom, we still believe that the second quarter represents the worst of what we expect in this segment in 2020. At this stage, we still expect a recovery enough during the second half of the year to finish with an adjusted EBITDA margin around 10%. On Slide 32, we've outlined the specific actions we've taken so far to mitigate the impact of the COVID-19 situation. We identified between $15 million and $20 million in SG&A savings and have already achieved $8 million through June year-to-date. We continue to carefully monitor and closely manage costs in areas like compensation and benefits, travel and entertainment, legal and consulting fees, and office-related expenses, as they've been important factors in helping us achieve the success we've enjoyed in the first half of this year thus far. We have a number of measures underway to help Koppers emerge from the pandemic in an even stronger position, as described on Slide 33. We're executing on initiatives to increase market share across our various business segments, pursuing new product processes and markets while working to optimize our network of facilities. Historically, these are all initiatives that should put us in a strong position to push 2021 beyond 2020. Also, we continue to pursue additional opportunities to generate cash, including the sale of non-core businesses, closed properties, and related assets. We've already begun marking our Denver property and have been exploring the opportunity to sell our West Virginia and Granada, Mississippi property. After much consideration, we've decided to reinstitute guidance that we had temporarily suspended due to the sudden uncertainty brought on by COVID-19. As a result of our strong first half and an expectation that most of that solid performance will continue, at least in the near term, we are forecasting 2020 full-year adjusted earnings to be in the range of $3.10 to $3.40 per share, which is slightly above the pre-pandemic EPS that we had forecasted in February of this year. In summary, our wood treatment businesses, both RUPS and PC, performed extremely well during the early period of this pandemic while delivering record-setting results. For Performance Chemicals, the pandemic and the associated effect of more people being present at home has created a stronger home improvement market in North America. RUPS is benefiting from infrastructure maintenance activities being taken by certain railroad customers, efficiencies resulting from our network optimization strategy, and stronger and more profitable utility and maintenance-of-way markets. While CM&C may have challenges related to slowdowns in its end markets, our overall business profile remains attractive and has performed admirably through the worst of times. Essential business serving a variety of end markets centered around wood protection, Koppers' second quarter performance is impressive and demonstrates our resilience, especially considering the ongoing task of managing safely, effectively and profitably through the COVID-19 pandemic. We continue to focus on improving our profit and cash generation, increasing our margin profile, adjusting our business portfolio, and deploying capital wisely while also reducing leverage and risk. I believe that our efforts will be recognized and shareholders rewarded. Now I would like to open it up for questions.

And our first question today comes from Chris Howe from Barrington Research.

Congrats on these preliminary results. They're quite outstanding, especially given the uncertain environment that we're still in. So just going through some of the comments, I'm definitely encouraged by the continuing positive signs in RUPS. You mentioned the CM&C segment is nearer at the bottom. PC segment continuing its strong demand levels and you have the positive signs for debt reduction to 3.7 to 4.0x. But digging in more to the PC segment, perhaps you can share a little bit more detail about the international markets. I know it remains weak, down 15% year-over-year. But you mentioned also that you do expect to see some improvement as we move through the back half of the year. Perhaps some insight as to what type of drag does it put on margins and profitability in the second quarter? In other words, in a more normal environment within the international space, what could margins for the segment be as a whole?

Chris, it's okay. It's a good question. I think I'll start by saying that we reflected it in a couple of different places, both in the release as well as in the presentation, the fact that the international operations were down significantly year-over-year in the second quarter, I think, 15% on the top line. Even more significant than that as it relates to its profit generation. Just—without getting into too many specifics, there's no question that the U.S. piece of the business carries the day in the second quarter. We—and produce pretty impressive margins overall as a result. I think if we would have seen results that would have been more in line with typical profits on the international side of things, it would have helped us slightly. And I'd say slightly because even in the best of times, the U.S. piece of our business dominates this business segment. It is 2/3 to a little more than 70% of the overall top line and bottom line. So I think with what we've seen in the second quarter in these other countries, it's been certainly a much more, I'd say, cautious approach to managing through the pandemic. We obviously had an operation in New Zealand that shut down for a period of time, which we did not experience anywhere else. We certainly saw a decline in activity despite the fact that we were considered essential businesses in all other operating locations, and that absolutely had an impact on our operations. But all those areas have been slower too, actively reopening their economies. Even as they have, I think people have been slower to go back to resuming, if you will, normal activity. So while it's been rough to see what's going on in the U.S. as it relates to the spread of the virus, by the same token, some of those behaviors have also contributed a little bit to a more normalized operations in the United States as well. So back half of the year, we do expect that business to return to closer to normalized sales and profit generation. And we expect that, that will help to offset some of the cost impact that we'll see in the U.S. relative to having to buy some of the intermediates on the open market at higher costs as well as some of the higher shipping costs that we'll incur in terms of, again, shipping more partial loads to keep customers running the business. So all in all, we're hoping that we can offset a good piece of that. Second half margins will probably still, I’d say, decline slightly in the second half just as a result of what we're experiencing on the cost side in the U.S. side of the business. But overall, still an extremely strong year, still a very strong possibility. It's actually be the best year we had in PC, and all that with an international business that by the end of the year, maybe finish at half to 2/3 of what it normally...

That's great. Very helpful color. And if I may, just one follow-up on that. You mentioned a 26% increase in volume that you saw in residential decking and that you sold down the stock, and you're working to secure more raw material to meet the influx in demand. How should we think about demand versus supply currently? And how that should impact as we look further out into Q3 and Q4?

Well, we're still playing catch up. So we're running all full out, selling everything that we have. We'll see—because we've been able to draw inventory down, I think we saw a boost from that in the latter part of the second quarter. We won't see that as we move out into the third quarter. So I don't expect that the third quarter sales numbers will necessarily be quite as strong because we don't have inventory to draw upon. But we're producing full out and selling everything we have. Where I think we'll start—we'll see maybe a little more benefit will be heading into the fourth quarter, again, where we typically see a little more of a slowdown. Again, relatively speaking, we're going to probably see—I’m sure we'll see a seasonal decline in the fourth quarter, but it won't be as sharp as it typically would be just as we're continuing to fill the back end of the demand and help the retailers restock.

Our next question comes from Laurence Alexander from Jefferies.

Congrats on a good quarter in this environment. I guess, first, can you help us with the cost-cutting that you've done? How much of it do you see as structurally lowering your breakevens? And how much do you expect to feather back in as demand conditions normalize in 2021 and 2022?

So Laurence, I'd say—if I kind of just walk down through the categories that we're talking about, on the compensation and benefits side, we've put a hiring freeze on. So we've not had to let people go. But we've put a hiring freeze on for some positions that we were hoping to add that would be additive to some of the things that we are looking to do in terms of improving various processes as the business continues to grow. We're seeing a little less, if you will, incentive compensation accruals as a result of at least the numbers tracking slightly lower than where we were expecting to be coming into the beginning of the year from an EBITDA standpoint. So I think that once the situation stabilizes and we gain some comfort coming out, we'll look to add some of these positions that we were hoping to fill, some of them being replacement, some of them being new. Again, depending upon how the business performs, we could see those numbers move back up to the levels that they were at before. So I would say that one—at some point in time, we'll likely move back in line with where we were at prior. Travel and entertainment is an interesting one, right? Obviously, not a whole lot you can do, either travel-wise or in terms of congregating in groups and being with customers and things like that. So that one will certainly last through the pandemic. And even coming out, I think that we'll see opportunities to get together differently, and there will absolutely be longer-lasting benefits that come through on the travel and entertainment side of things. We won't end up retaining all of it because there—I still believe— we still believe there is a benefit to being out in front of customers face-to-face and out at sites and things like that. But there are certainly instances where we will be able to and be much more comfortable doing things by video moving forward rather than having to hop on a plane and get somewhere. And same thing from an entertainment standpoint, I think we'll see some changes in behaviors as a result of what we're going through now. So there's a portion of the travel and entertainment expenses that we'll absolutely be able to, I think, retain moving forward. Legal and consulting, again, the court shut down for certainly a period of time, which helped to result in legal costs moving down. Part of that are things that we can't control as it relates to cases that are in process, and we'll ultimately end up going through some sort of settlement negotiations and/or potentially litigation at some point. So some of that will absolutely return on the consulting side of things. Again, there are things that we're not doing today just as a result of trying to purposely pull back on costs. We'll always look hard as to whether we need to spend dollars in terms of getting help on different projects, but there's some of that that could possibly end up being retained. On the office-related side of things, certainly, we're evaluating our office footprint on a go-forward basis and seeing what makes sense in terms of being able to smartly reduce it while providing workplace flexibility to our employees moving forward. So in summary, compensation and benefits, I think that's ultimately going to end up moving back to pre-pandemic levels as we work our way through this. Travel and entertainment, we'll be able to, I think, recoup on an ongoing basis. Some of the savings that we've generated in that area, even after the pandemic. Consulting, small amount, possibly there. Legal, probably not. And office-related, small amount there. So of the $15 million to $20 million, I'd say probably—we could probably realistically be able to hold on to maybe 1/3 of those. Once we get out past, again, the situation we're now, and we see some normalization, if you will, to life moving forward.

And then there's a lot of moving parts and mix effects across the portfolio. How do you think about margins sequentially or just comparing first half to second half? Are—your gross profit EBITDA, whichever you prefer?

Well, I think that I would expect this second half that we should probably see margins that are in line, if not slightly better, than first half margins. And that will primarily be driven by the poorer first quarter that we experienced. So I think we're going to see relative—our second, third quarters are typically our strongest; first and fourth, weakest. And second and third can always flip back and forth in terms of which one's stronger, first and fourth can only flip back and forth in terms of which one is weaker. In this case, I think that our third quarter is one that will be certainly strong and could rival our—could rival our second quarter performance, whereas our fourth quarter performance, at this stage, although there's still a lot of question marks, I feel better about where the fourth quarter should end up compared to what we did in the first quarter. So on balance, I think that margin-wise, we should be able to match if not slightly exceed first half margins.

Great. And then just the last one just on the railroad business, what's the current mix between maintenance-of-way and historical crosstie business?

It's a good question. I'd say that our maintenance-of-way business at this stage is probably somewhere just south of 20%.

Our next question comes from Liam Burke from B. Riley FBR.

Leroy, Mike in his prepared statements mentioned that the utility—U.S. utility pole business had a record year, had a record quarter. What has been driving that? I understand that the utilities are investing, but was there any share gain? Or was it just straight increased demand from your end markets?

It's tough to say, Liam. I would say there's always some customers that move back and forth and things like that. I'd say for the most part, it's been higher demand levels. The market, in general, we had expected to see pretty decent demand out of one of the reasons that we elected to get back into the market. And there's some spot and/or possible concern, if you will, that, again, some demand might have been pulled forward into the first half. And that's one of the reasons why we're taking a little bit more cautious approach and look at the second half of the year. But all in all, we still expect to see overall sales numbers and EBITDA numbers at their highest levels that we've seen since we've owned the business. So like I said, the overall fundamentals of the markets remain strong, and our position in that business remains strong.

Great. And Mike, do you anticipate any additional need or increase in CapEx this year? Or can you manage the sales growth with the current budget?

Yes. We're projecting the CapEx, Liam, to be on an annual basis, somewhere between $50 million and $60 million. When we first gave guidance for 2020, we anticipated that to be $60 million to $70 million. So we've knocked about $10 million off of that. We think there's a little bit of possibility of additional expenditures in one of our plants because of the closure of the Denver facility. But as it stands right now, halfway through the year, we're pretty confident that we're going to be in that $50 million to $60 million CapEx range.

Our next question comes from Mike Harrison from Seaport Global Securities.

Congratulations on the strong results here. I was wondering, as we're looking at the Performance Chemicals business, you mentioned the higher costs associated with freight. I think you also mentioned the higher copper intermediates and maybe some third-party spend. Can you give us a little bit more color on how much of copper intermediates you're able to meet internally versus how much you have to purchase externally? And then can you pass any of that through to your customers? Obviously, in a situation where supply and demand dynamics are what they are, one would think that there are some ways to get pricing a little bit higher even though there are contracts in place.

Yes. So touching on the last question first. I think we're obviously always sensitive as it relates to our cost structure and ability to pass that on to customers. This is a strange and unusual time, but we do have agreements in place with our customers that have been extremely dedicated, long-serving customers that have been leaders in the industry in terms of growing and consolidating. It's helped us build our business out as well. So we not only view them as customers. In many ways, we view them as partners. We're very sensitive to how we handle those sorts of instances. Let's just say, we continue to do very well, even with having to go out in the market and pay and increase the price for intermediate raw materials to meet their demand levels. We tend to look at things on more of a go-forward basis in terms of structurally, how are things changing? And what, if anything, does that necessitate in terms of having to pass any cost increases on longer-term? So in the short term, in these sorts of situations, we eat that cost now. In situations where we've seen higher costs as a result of tariffs and things like that, we have been successful in working with our customers to pass those sorts of cost increases on. As it relates to just the general market dynamics and especially one where—if you will, everybody is winning, we're pretty happy with what we have and want to maintain our relationships for the long term. And so that's how we manage that by more or less eating the cost of those increases. In terms of percentage, as it relates to our overall usage requirements, it's moved around quite a bit. Obviously, with the numbers changing so dramatically this year, I can't even—Mike might have a response to that. But I—offhand, off the top of my head, I can't give you a number. Mike, do you know?

Yes. Mike, we had spent over the last three years, about $27 million in CapEx in the PC group to get us back to very close to producing 100% of the two main feedstocks that we use, BCC and copper oxide. I believe we got to the point where we were 90% to 95% producing those two raw material feedstocks on our own. But this increase in volume that we've mentioned in this call in Q2 has dropped that back slightly to the point now where we're out in the market going ahead and buying both of those as well. So maybe from 90% to 95% to maybe 80% to 85% is what we're producing currently. We have plans to import the rest for the rest of 2020.

Yes, that's helpful. And then maybe a related question is, are you able to—is that the main bottleneck? In other words, as long as you're able to access third-party copper intermediate supply, are you able to get customers everything they need? Or are there other places where you're, otherwise, capacity-constrained and maybe have some of your customers on allocation?

No, that's the main constraint. So we can make more—we just need more intermediate.

All right. And then switching over to RUPS, you mentioned that pricing to commercial railroad customers was up in the quarter. Has there been some demand recovery there? Because I believe that in your previous updates, you had said that commercial customers had pulled back on tie purchases.

Yes, in fact, even in this, I think, a commentary, we've talked about the fact that we've seen bidding levels beginning to decline. So volumes, I think, have tapered off a little bit. We're still seeing pretty good year-over-year pricing in the second quarter and first half of this year. But as we're seeing bidding activity soften, we're also seeing pricing soften as well. So that's going to be a little bit of a headwind in the second half of the year for RUPS.

All right. And then over on the CM&C side of the business, two quick questions. One, on the KJCC divestiture, you had said July to mid-August. We're at the end of July. Any updated thoughts on when that divestiture could close?

I wish I could tell you more. What we have in the press release is really all that I'm able to say, which I think it says it's expected to close in the third quarter. We're unfortunately bound by some really strict confidentiality requirements related to the agreements. And as a result, the language that is used is very carefully put together by the attorneys here, and I'm really not allowed to expound on it.

Okay. But this is a different situation than what you were in when there were a lot of moving pieces around negotiations before you announced the sale. Because I recall that those deadlines seemed to keep slipping, and they were slipping by full months at a time, but you feel pretty good about the third quarter?

As we sit here today, we feel good about the third quarter.

Okay. And then last question is on the Stickney plant. I believe there's some Illinois River lock maintenance going on during the third quarter. Do you expect to see any impact on your shipping cost? Do you move a lot of stuff by barge using the Illinois River lock system?

We do move some stock by barge. We—the impacts that we would expect to see are contemplated in our numbers. While we likely will see something, again, materially speaking, as it relates to that business, it shouldn't be that huge and, again, is reflected in what we've put forth in the guidance and commentary we've issued today.

Yes. Mike, from a raw material standpoint, we barge up the river to Stickney a lot of orthoxylene. Of course, we had to make arrangements with the river closure happening; we had to make arrangements. So what we did is we prepurchased a lot of that orthoxylene before the river closure. If everything goes according to plan with the river and it reopens on time, we are not going to miss a beat on orthoxylene feedstock of ours.

And our next question comes from Chris Shaw from Monness, Crespi & Company.

And a great job on the numbers. I actually disconnected for a while by mistake, so I apologize if this has been asked. But I guess my big surprise was RUPS. I could have—the PC has surprised; I could understand more. But RUPS, I guess, was it just a function of a lot of little things, maintenance away, commercial pricing, Class I? I thought commercial was going to be weaker. I thought that was the suggestion, but I know that might have been more of a second-half issue. So maybe just again, round up, if there was one particular thing that surprised you as well? Or just sort of talk about all those things that sort of built up to that?

Yes. As it tends to be, it was a number of factors, certainly. We saw maintenance-of-way strengthening coming into the quarter. We knew it was going to be a better quarter. Maintenance-of-way has been a drag for three successive quarters on that business. So the improvement there, which was expected, certainly contributed. I would say that the contribution was actually better than what we thought. As I mentioned—I think as we mentioned a couple of different times, it was a record level of EBITDA generation for maintenance-of-way in the quarter, which we did not expect it to be that high, but we did expect it to be significantly improved over the first quarter. Utility business, again, also record level EBITDA. So that was a strong contributor. Yes, commercial pricing was up a little bit. And we had started to see some of the softness in the middle of the second quarter. And like I said, we'll probably see that as a headwind as we get to the back half of the year. Year-over-year, again, it was maintenance-of-way. It was utility. Even our Australian utility business was strong. A little bit better in commercial pricing and then volumes on Class Is were pretty strong during the second quarter as well. So a bunch of little pieces that added up to the overall improvement.

I think you mentioned that you were some concern in the maintenance-of-way that there was some pull forward. Is there any concern on the Class I volumes? Or was—I forget, was the Class I volume strength sort of—was there some—just kind of that coming in because there were some—I thought was there issues around the wood and when the wood availability was coming? Was that the issue?

Well, so on the Class Is, we early on, we started to see strong volumes from certain of our Class I customers, and as we got further into it, realize that, again, as certain Class Is tend to do during times of lesser traffic, they amp up their maintenance activities. We have absolutely seen that from a couple of our Class I customers. So in terms of pull-forward, it remains to be seen. If at some point, they complete their program, which they're scheduled to complete with us a couple of customers sometime here in the third quarter, did they—how much do they pull back, if at all, at that point in time? Or do they try and get ahead of 2021 by putting as much work into 2020 as possible? That's a little bit of the wildcard as we head into the back year for RUPS. Now on the other hand, we also have a few customers that we did have some wood availability issues with earlier in the year, and they weren't able to do as much as they had wanted, and we're starting to see some of that free up. So what we're hoping is that some of that improvement helps to balance out any potential pullback on the Class Is who have really taken advantage of the greater track time to amp up their maintenance efforts. So there's some uncertainty in the back half. I'd say more as we get to the end of the third quarter heading into the fourth quarter, on the RUPS business. So we'll know more, obviously, as things move forward.

And ladies and gentlemen, with that, we will conclude today's question-and-answer session. I'd like to turn the conference call back over to President and CEO, Leroy Ball, for closing remarks.

I want to thank everybody for taking the time to participate in today's call. I really appreciate your interest in the company, and thank you for your continued support. Looking forward to talking to you sometime again in August. Thank you.

Ladies and gentlemen, the conference has now concluded. We do thank you for attending today's presentation. You may now disconnect.