Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Koppers Fourth Quarter and Full Year 2022 Earnings Conference Call and Webcast. Please note that this event is being recorded. I will now turn the call over to Quynh McGuire. Please go ahead.

Thanks, and good morning. I'm Quynh McGuire, Vice President of Investor Relations. Welcome to our fourth quarter and full-year 2022 earnings conference call. We issued our press release earlier today. You may access it 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 May 27, 2023. At this time, I would like to direct your attention to our forward-looking disclosure statement seen on Slide 2. 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 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 Jimmi Sue Smith, Chief Financial Officer. I'll now turn over the discussion to Leroy.

Thank you, Quynh. Good morning, everyone. I'm happy to sit in front of everyone today and report on the conclusion of a very successful year for the Koppers organization. Once again, we delivered record results for 2022, both for the fourth quarter and for the full year in a number of different categories. By adhering to our strategy to expand and optimize our unique vertically integrated business model serving key infrastructure markets, as you will hear today, we are reaffirming our long-range growth plan of delivering $300 million of EBITDA by 2025, which would result in earnings per share of over $6 and significant free cash flow generation over that same time frame. Now let's begin with a closer look at a summary of the key metrics for Q4, on Slide 4. Consolidated sales of $483 million, a quarterly record, increased by $77 million or 19% compared with $405 million in the prior year. Excluding a $15 million unfavorable impact from foreign currency changes, sales increased by $92 million or 23%. In addition, we generated adjusted EBITDA of $52 million, which was a record quarter compared with the prior year quarter of $49 million in EBITDA. Our adjusted EBITDA margin was 10.8%, which is lower than where we'd like it to be, but in a unique way, it actually gives me confidence that we're squarely on our path to $300 million, which I'll explain later in the call. Now, the fourth quarter generated adjusted earnings per share of $1.09, which is a new fourth quarter record compared with $0.77 for the prior year quarter. Operating cash flow was $35 million for the quarter. We deployed capital by spending $25 million in capital expenditures, paid out $1 million in dividends, and spent $5 million in share repurchases. Slide 5 provides an overview of full year 2022 key metrics with consolidated sales of $1.98 billion, representing record sales. Adjusted EBITDA was $228 million, reflecting a record year on profitability exceeding 2021 results of $223.5 million, and marking the eighth straight year-over-year improvement in EBITDA, excluding the since divested KJCC operations. The adjusted EBITDA margin for the year was 11.5%, which again is lower than our target from the last few years' performance, but I actually think it's a good sign of things to come. Adjusted earnings per share were $4.14, just shy of our 2021 record results of $4.21, and we generated operating cash flow of $102 million, the fourth straight year over $100 million and the seventh year out of the last eight. Regarding capital deployment, we spent $105 million in capital expenditures gross and $100 million net. Both numbers are higher than where we planned to be, but indicative of spending that was pulled forward into 2022 that would have instead been spent in '23. But during the year, we also paid out our first dividend since 2014, totaling $4 million throughout the year, while spending $24 million in share repurchases at an average price over 20% lower than where we've traded on average in the early part of 2023. A summary of some of our 2022 accomplishments is shown on Slide 6 with ties back to the six pillars that underpin our strategy to expand and optimize Koppers as we work towards our financial goal of $300 million in EBITDA by 2025. And without getting into every item, I'd like to highlight a few actions to provide greater clarity on our progress. In network optimization, we continued upgrading our North Little Rock facility, modernizing processes and improving environmental performance. Also, we further consolidated our footprint and sold our utility pole treating business in Sweetwater, Tennessee. We strengthened our business model by acquiring Gross & Janes, the largest independent supplier of untreated railroad crossties in North America, reinforcing our vertically integrated business model and improving our supply chain processes. An additional benefit of this acquisition is, we expect to avoid future CapEx on certain projects that were previously in our strategic plan. We enhanced our product portfolio through our latest entry into the industrial oil-borne preservative market with the introduction of our new DCOI products to replace pentachlorophenol for pole treatment. Between our DCOI products and increased market penetration of CCA, our Performance Chemicals segment was able to secure approximately $40 million in new industrial sales. In CM&C, our continued development of petroleum supplemental products across a variety of markets has helped to offset a declining market for raw material and secures our CM&C business well into the future. Regarding wood treatment expansion, Koppers purchased a 105-acre property in Leesville, Louisiana, which will increase our peeling and drying capacity for treating utility poles, reduce our cost of raw material into our Somerville, Texas plant, and make us more competitive in the creosote pole market in that region. Our cradle-to-cradle approach continues to gain traction. Our Recovery Resources business entered into a new five-year $50 million agreement with a Class 1 railroad customer to collect and manage railroad crossties at the end of their useful life, repurposing them into new products and uses. These strategic pillars are critical to opening avenues to new markets for our existing products and developing new products to serve existing and emerging markets, as well as achieving cost savings and efficiencies. We remain highly focused on executing our expand and optimize strategy while carefully assessing and managing risk to achieve our goal of $300 million in EBITDA by 2025. Now, as seen on Slide 8, last week we announced that our Board approved a 20% increase in the planned dividend rate for 2023 from $0.05 to $0.06 per share of Koppers' common stock. A quarterly dividend will be paid on March 27, 2023, to shareholders of record as of the close of trading on March 10. With this quarterly dividend rate subject to the standard quarterly review by the Board of Directors, the annual dividend rate for 2023 would increase to $0.24 per share. Now let's move on to a review of our Zero Harm efforts, as seen on Slide 10. In 2022, we had 19 of our 46 operating facilities working accident-free for the entire year. While we still have much work to do, our total rate of recordable incidents in '22 decreased by 5% compared with the prior year. Zero Harm 2.0 is well underway. We are reenergizing our efforts and further engaging our frontline employees to accelerate our progress to zero. This comprehensive approach includes frontline training, enhancing their career path, and emphasizing the role of our safety, health, and environmental coordinators, improving data usage and sharing through our dedicated SH&E information system platform. Leveraging our Zero Harm councils to align activities with industry and company safety standards, and creating more outreach and impact of communications with our employees globally. We strongly believe that the key to Zero Harm is engaging with employees and leaders on a personal level. We know that as we increase leading activities aimed at health and safety, we can reduce the number of serious incidents. Zero Harm 2.0 focuses on intensifying conversations about safety, making our training more impactful, and creating time to meet our employees in their most receptive place to talk about their health, safety, and well-being. The very foundation of Koppers is in our Zero Harm culture, and my appreciation goes out to our employees worldwide for staying relentlessly focused on safety. Now, I will turn the discussion over to our Chief Financial Officer, Jimmi Sue Smith.

Thanks, Leroy. This morning's press release provided our results for the fourth quarter and year end 2022. My comments here are based on that information. On Slide 12, as Leroy said, our fourth quarter consolidated sales were a record $483 million, up 19% compared to the fourth quarter of 2021. By segment, RUPS sales increased $37 million or 24% from the prior year quarter. PC sales increased $22 million or 18%, and CM&C sales increased $18 million or 14%. As shown on Slide 13, Koppers also delivered record consolidated sales for full year 2022 at $1.98 billion, an increase of $300 million or 18% over the prior year. By segment, RUPS sales increased by $58 million or 8%. Sales for PC increased by $77 million or 15%, and CM&C sales increased by $157 million or 37.5% compared to the prior year. On Slide 14, fourth quarter adjusted EBITDA was a record $52 million or 11%. By segment, in the fourth quarter, RUPS generated EBITDA of $13 million or 7%. PC had EBITDA of $18 million or 12.5%, and CM&C had EBITDA of $21 million or 14%. Slide 15 shows record adjusted EBITDA for full year 2022 of $228 million or 11.5%. By segment, for the full year, RUPS generated EBITDA of $54 million or 7%, the PC segment had EBITDA of $76 million or 13%, and CM&C had EBITDA of $99 million or 16%. On Slide 16, RUPS had record fourth quarter sales of $193 million compared with prior year sales of $156 million for the fourth quarter. The improvement was primarily due to pricing increases in crossties and utility poles, higher volumes in commercial crossties, and an increase in activity at our maintenance of way businesses. While market prices for untreated crossties remain at relatively high levels, we are seeing some stabilization occurring. Compared to the prior year, crosstie procurement in the fourth quarter was up 60%, while crosstie treatment declined by 12%. Adjusted EBITDA for RUPS came to $13 million, up from $6 million in the prior year quarter. These results were driven by ongoing price increases and improved capacity utilization from higher crosstie volumes, partly offset by higher raw material and operating costs. On Slide 17, PC had record fourth quarter sales of $141 million, up from $119 million in 2021 as a result of higher volumes in the Americas and price increases implemented globally, offset in part by volume decreases in Europe and Australasia. Adjusted EBITDA for PC in the fourth quarter was $18 million compared with $19 million in the prior year. Higher overall raw material costs, including working through higher cost inventory, continued to impact profitability as they were not completely recovered through global price increases. As a reminder, we had a large tranche of customer contracts that did not allow us to pass on unhedged cost increases during 2022. These contracts expired at year end and have been replaced with new contracts that capture the current pricing environment starting in 2023. Slide 18 shows CM&C fourth quarter sales of $149 million compared with $131 million in the prior year. This was primarily driven by higher prices across product lines and geographies, along with strong demand in a market experiencing limited supply. These factors were partly offset by volume decreases in Europe and North America. CM&C adjusted EBITDA was $21 million compared with $25 million in the prior year quarter, reflecting higher raw material costs and other operating expenses, offset in part by a favorable pricing environment. Compared with the third quarter of 2022, the average pricing of major products was 7% lower, and average coal tar costs were 7% higher. Compared with the prior year quarter, the average pricing of major products increased by 40%, and the average coal tar costs were higher by 42%. As shown on Slide 20, we remain committed to a balanced capital allocation approach that includes investment in the business, returning capital to shareholders through dividends and share repurchases, as well as reducing leverage as appropriate. At year end 2022, we had $784 million of net debt and $412 million in available borrowing capacity. Our net leverage ratio was 3.4 times as of December 31, 2022, a slight increase from the prior year end, but a slight decrease from the preceding quarter despite funding the acquisition of Gross & Janes in the fourth quarter of 2022. And on Slide 21, total capital expenditures in 2022 were $105 million and $100 million net of cash proceeds. We spent $49.5 million on maintenance, $20.5 million on Zero Harm, and $35 million on growth and productivity projects. By business segment, $47 million went to RUPS, $11 million to PC, and $46 million to CM&C, and $2 million to corporate projects. And with that, I'll turn it back over to Leroy.

Thank you, Jimmi Sue. I want to quickly review some significant developments across the company. Koppers has been recognized as one of America's Most Responsible Companies in 2023 by Newsweek for the third year in a row, selected from over 2,000 companies across 14 industries. This accolade acknowledges our performance in environmental, social, and governance areas, reflecting the efforts of our global team members who know that short-term financial success is only meaningful if we ensure the health of our company for future generations. Additionally, Leigh Ann Richardson, our Senior Manager of Regulatory Affairs, received the Women Make America Award from the Manufacturing Institute, recognizing exceptional female leadership in manufacturing. Leigh Ann exemplifies not only great skill but also outstanding character. We congratulate her and appreciate her representation of Koppers. Now, let’s discuss what I believe will be the crucial factors for our success this coming year. We will be closely monitoring two or three key areas in each business that will determine our ability to achieve our $250 million adjusted EBITDA goal this year. Starting with Performance Chemicals, we will focus on three primary areas. The first is pricing; last year, we honored our multi-year agreements and absorbed significant cost increases in nearly all categories, except for copper, where we were largely hedged. We are focused on long-term negotiations for new pricing effective January 1, 2023. Those price increases are now in effect, and based on one month of data in '23, we are seeing annualized price increases of over $60 million. It’s critical that we maintain our market share during this process, and so far, we appear to be on track. Although we've lost some volume from customers looking to diversify their suppliers, we've gained volume from a significant treater who had a long-standing relationship with a competitor. The second area of focus for Performance Chemicals this year is ensuring that residential demand does not drop significantly. We anticipate a 5% to 10% year-over-year decline in base volumes, excluding any changes in market share. The start of the year was tough, with volumes about 20% lower than in January 2022. However, we still experienced higher year-over-year profitability due to our pricing strategy. While macro data indicates a downward trend, we saw some recovery in volumes in February, so I remain optimistic about our expectations if we can keep the organic volume decline to 10% or less. The third positive area for us is the replacement of the non-copper produced industrial preservative Penta with Koppers products such as CCA and DCOI. In 2022, we saw a 33% increase in industrial sales volumes, and in January of this year, volumes were up 40% compared to January last year. Although that rate of increase is unlikely to continue, we expect to benefit in 2023 if Penta continues to phase out following its loss of EPA registration in the U.S. and Canada. Turning to our Utility and Industrial Products division, we continue to see strong demand. Therefore, our main goal for UIP this year is to keep our facilities running smoothly to meet this demand. We prepared our facilities to move away from treating with Penta in 2021 while also adding necessary filling and drying capabilities. Now, our focus is on recouping cost increases that arose in 2021 and 2022. We have successfully maximized the value of our products in a tightening market, with federal funding for new broadband and renewable energy projects bolstering construction activity and utilities needing to accelerate pole replacement programs due to aging infrastructure. The UIP team has made significant progress since last May, and January, typically a slower month, turned out to be their third most profitable month ever. Last year was their best profit year, exceeding previous records by over 30%, and we anticipate even better results this year. Another key for UIP is getting the Leesville, Louisiana facility online by the third quarter. This facility, which will complement the Summerville, Texas treating facility, will address the Texas market for creosote poles. The property is cleared, and drilling will begin soon, allowing for timely installation of the equipment. In the Railroad Products and Services division, we are prioritizing the rebuilding of our dry inventory, which has been significantly impacted due to challenges in obtaining green ties. We're back to purchasing at rates in line with current demand, but those will need to rise further to improve our dry inventory levels and reduce reliance on cylinder time for our ties. Another focus will be recovering the value of our creosote preservative in the market. Given the dynamics affecting the market for coal tar raw materials in 2022 and early 2023, our raw material costs have exceeded the compensation we receive from our RPS customers. We are making progress with necessary price adjustments and are optimistic about achieving favorable outcomes soon. Finally, our last key for RPS in 2023 is completing the North Little Rock expansion by mid-year. The timing of this project was affected by the COVID pandemic, but we are nearing completion and expect this to be one of the most efficient treating facilities with a sustainability profile that is more in line with current industry trends. Now looking at our Carbon Materials and Chemicals business, our first focus is navigating the challenging raw material market, which has been exacerbated by the recent earthquake in Turkey. While we haven’t relied heavily on the Turkish tar market, it has become a more viable option recently due to the loss of supplies from Russia and Ukraine. However, production challenges will also persist, placing further strain on spot material availability. While we have secured contracts for most of our supply needs, we are forgoing opportunities to acquire more due to constraints in the raw material market. The second focus is on promoting the acceptance of petroleum blended products. As the supply of coal tar raw materials has decreased, our ability to maintain similar sales volumes hinges on our capacity to replace coal tar with petroleum products. Hybrid products have been established for years, and it’s increasingly critical to shift more customers toward these. We are also working to encourage adoption within the utility pole market, a relatively small but important segment that has been resistant to change. The last key for CMC this year involves navigating demand without being significantly hindered by recession impacts. We have modeled demand year-over-year and noted that some pent-up demand from 2022 remains, which should carry over into this year. Even in the face of a possible recession, we believe existing backlogs will support us through 2023. For our 2023 guidance, we project sales of approximately $2.1 billion compared to $1.98 billion in 2022, with all business segments expected to see growth. RUPS sales will stem from a mix of pricing and volume increases, while PC will rely on pricing with anticipated volume declines, and for CMC, we expect a slight price increase with stable volumes. Our adjusted EBITDA projection for 2023 is set at $250 million, which would mark our ninth consecutive year of growth and the largest year-over-year increase since 2015. RUPS and PC should yield significant profit increases, while CMC is expected to see a downturn. We anticipate an adjusted EPS for 2023 around $4.40, up from $4.14 the previous year, although higher average interest costs will impact earnings growth from operations. Nevertheless, we predict 2023 will conclude with our highest adjusted EPS in company history, surpassing the $4.21 achieved in 2021. Our capital spending is expected to be about $105 million in 2023, consistent with 2022. Maintenance and Zero Harm expenditures will be approximately $65 million, while around $40 million will go towards completing major growth and productivity projects, including the North Little Rock expansion, the Leesville facility, a new grinding mill for Performance Chemicals, and enhancements at our Nyborg, Denmark facility. Looking ahead, we expect to reach $300 million of EBITDA based on our five-year capital plan. As of now, we have spent $127 million over the past two years, or $142 million if we include the Gross & Janes acquisition which replaced other capital investments. Ultimately, we do not expect to need to spend an additional $108 million to $158 million in growth capital in 2024 and 2025 to achieve our goal of $300 million EBITDA. While we might consider attractive projects that offer high returns, we aim to generate more EBITDA from our planned expenditures rather than relying on market growth or M&A to hit our $300 million target. In summary, we are dedicated to enhancing our competitive advantages and positioning ourselves for increased sales and profitability. Koppers operates in a niche market with consistent revenue and solid barriers to entry. Although demand trends in our markets may not yield significant growth, they remain stable, allowing us to optimize our operations while pursuing expansion opportunities where warranted. Throughout these remarks, we've stated our commitment to executing our strategy to grow and optimize our business, ultimately achieving our goal of $300 million in adjusted EBITDA by 2025. Now, I will open the floor for questions.

Our first question is from Liam Burke with B. Riley FBR. Please go ahead.

Yes, thank you. Good morning, Leroy. Good morning, Jimmi Sue.

Hi, Liam.

Good morning.

Leroy, there's lots of puts and takes on the PC margins. You've got price increases coming through. You've got volumes coming down. Typically, it's been one of your best profit producers. If I take a look at the puts and takes and looking for improvement on the margins, do you see that business approaching historical profit margin levels over time?

Liam, there's no question we are aware of that. The only significant change in that business over the past year was our decision not to pass some of the non-copper cost increases onto our contracted customers. Consequently, we absorbed those costs this past year. Throughout the latter half of the year, we engaged in rigorous discussions to implement the cost pass-through starting January 1. As I mentioned earlier, we've begun to see that reflected in the early part of this year. For us, the main concern is our expected volumes this year. The data, unfortunately, doesn't indicate a positive trend, as we've already noted year-over-year volume declines in the early part of the year. However, we believe that as the year progresses, the comparisons will improve, and we should comfortably remain within a 10% decline for the year. This is a natural adjustment after a very hot market in repair remodeling over the past couple of years as it takes a breather. Looking ahead, as conditions stabilize in a consistently positive manner, we should be well-positioned to achieve good returns in that business. Our target is to elevate margins back into the high teens and around the 20% mark. We anticipate that by the end of this year, we should start to see margins approaching the levels we've historically experienced.

That's great. And sticking with PC, you had high-cost inventory that ran through the profit and loss statement in the fourth quarter. Have you run through all that inventory? Or are you still carrying that on the books as we finish the year?

I'll let Jimmi Sue respond to that.

Thanks, Liam. We went through the substantial majority of it in the big product lines. There's still maybe one or two ancillary raw materials where we have some higher cost still on the books, but we are through the vast majority.

Okay, great. Thank you, Leroy. Thank you, Jimmi Sue.

Yes, thanks.

The next question is from Laurence Alexander with Jefferies. Please go ahead.

Good morning. Can you give a sense for how far the shift is in industrial preservatives and how you think the end game will look, both how long it will take for the transition and where you see kind of the net contribution by, say, '26 or '27?

Well, there's a lot in there, Laurence. I'll say that there is a transition period to essentially move away from Penta. We began that transition from a trading standpoint early. Those were the conversion projects we were doing in '21. So, we are beginning last year, we have no longer been actually treating with Penta. We've been treating with either CCA, depending upon where the business shifted to either CCA or copper naphthenate. DCOI has now been introduced as well, and we're looking at a potential conversion project there. I'd say that at this point, it's tough to say where it's at in terms of the overall shift, but we've worked hard to try and move individuals off of Penta. At this point, it's been now, I think, a year since it's been actually actively produced. So, basically the suppliers have been running through inventory and drawing down inventories as they transition. I would say, by the time we get through this year, I can't imagine there's going to be a whole lot left that's out there. So, I would say the vast majority of the shift, I would expect, would have been completed by the time we get through the end of this year. And again, we're seeing it reflected in the significant volume increases that we're seeing year-over-year in our CCA and now our new DCOI category. So, once we get into 2024, I would think things would start to, if you will, flatten out in terms of replacement of Penta, and it will be more along the lines of whatever the organic growth rates might be.

Okay. Great. And then, with the steel and aluminum exposure in CMC, can you talk a little bit about how the supply dynamics are different this cycle? If there is a recessionary slowdown, how much less cyclicality you might see compared to the last two downturns?

Yes. Well, considering our current situation, it really depends on the depth of the challenges ahead. There is a significant backlog of demand that we are working through, which helps cushion any impacts as the market contracts. Our expectations for this year are that, regardless of what happens globally, the backlog might decrease, and some projects could be put on hold. However, we are not currently focused on new orders, so we feel fairly confident that we should remain in good shape for the year ahead. As time progresses, we will assess whether new projects come in and our position heading into 2024. For now, we believe we are not completely protected, but we are in a reasonably strong position to manage a potentially softer demand throughout the year.

Okay. Great. And then, just one last one just on the capital profile. Can you give your current thinking around potentially refinancing debt earlier? It seems like every couple of weeks, people on the credit side flip-flop about whether we're heading to higher rates for longer or if it’s better to wait to see how rates contract over the next 18 to 24 months. But just can you give us a sense for how you're thinking about managing the risk on the refinance side?

Thanks, Laurence. This is Jimmi Sue. We are constantly monitoring the market and certainly we'll be looking for a productive window here in 2023 to avoid the bonds going current in early 2024.

Okay, great. Okay. Thank you.

Showing no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to President and CEO, Leroy Ball, for any closing remarks.

Thank you. And I just, again, want to thank the employees of Koppers for a great performance in 2022. A lot of hard work went into achieving the results that we were able to post for this past year. We feel great about the next couple of years coming and, again, look forward to delivering upon the plan that we have presented. And thanks, everybody, for your support.

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