Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Koppers, Fourth Quarter 2021 earnings conference call and webcast. At this time, all participants are in listen-only mode. [Operator Instructions] Following the presentation, instructions will be given for the question-and-answer session. 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 2021 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 have also posted materials to the Investor Relations page of our website that will be referenced in today's call. Consistent with our prior -- with our practice in prior quarterly conference calls, this is being broadcasted live on our website, and a recording of this call will be available on our website for replay through May 23rd, 2022. 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 this 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 Jimmy sue Smith, Chief Financial Officer. I'll now turn the discussion over to Leroy.

Thank you Quynh and good morning, everyone. So I'll start by saying I'm pleased to report that we again delivered strong results for 2021, and finished the year slightly ahead of our revised projections we provided last November. Moving into 2022, I and the rest of our team are excited to continue on the path of executing on our long-range growth plan to deliver $300 million of EBITDA in 2025. As always, I'll begin my comments with an update on Zero Harm as seen on Slide 4. In 2021, we achieved our lowest 12-month rate of serious safety incidents in the company, with 16 of our 43 operating facilities working accident-free for the entire year. And what's more we stayed on track for our fifth consecutive record year proactive leading activities, which are used to correct conditions or behaviors to proceed potentially life-altering injuries. We conducted more than 18,500 leading activities across the company in 2021, and this is an encouraging sign. It means that our efforts to prioritize training and education around identifying and mitigating the most potentially dangerous exposures are generating positive outcomes. Our culture of Zero Harm continues to move deeper into the organization through training and workshops for our front line employees, as well as sharing practical applications among our plans. Part of the training for front line employees includes conducting peer-to-peer observations. And as our worldwide team has come to understand, the key to Zero Harm is engaging with employees and leaders at a personal level by working aggressively to anticipate, identify, and eliminate the risk of serious incidents. In addition, we're making progress on improving our transportation fleet safety program to influence safe driving behaviors. We implemented measures to increase transparency, improved tracking of key performance indicators, and identify opportunities for synergies. We continue…

Thanks, Leroy. In this morning's press release, we provided our results for the fourth quarter and full-year 2021 and as seen on Slide 8, we achieved record performance in a number of categories this year. We had a new high in consolidated sales of $1.7 billion. Operating profit finished the year at a $157 million, matching last year's record. Adjusted EBITDA was a record $224 million, up from $211 million in 2020, the seventh consecutive year of improvement, and a record year for our Performance Chemicals segment. Adjusted EBITDA margin was 13.3%, marking six straight years in the 12% to 14% range. We also set a new record for adjusted earnings per share of $4.21 and reported operating cash flow of a $103 million, which brings us to 6 of the past 7 years with more than a $100 million in cash flow. We also reduced our net leverage ratio to 3.3 times at year-end while investing a $125 million in the business. And finally, the book value per share of Koppers equity has never been higher than year-end 2021. Now, moving to our discussion of fourth-quarter and full-year 2021 results on Slide 10, consolidated sales for the fourth quarter of 2021 were 405 million, an increase of $12 million or 3% compared with $393 million in the prior year. By segment, sales for RUPS decreased by $12 million or 7.5%. Sales for PC decreased by $11 million or 8.5% while sales for CM&C increased by $36 million or 38% compared to the prior-year quarter. As shown on Slide 11, consolidated sales for full-year, 2021, of $1.679 billion increased by $10 million as compared to the prior year. Despite the pandemic, 2021 sales represented the highest level of revenues in the history of the company, excluding KJCC. By segment, sales…

Thank you Jimmi Sue. Now before moving on to discussion of the business sentiments, and packing our various segments, I'd like to offer a quick review of some notable happenings across the companies since we were last together. So Slide 26, highlights some well-earned recognition for Koppers. Our company was named as one of America's most responsible companies for 2022 by Newsweek Magazine for the second consecutive year. The Newsweek partnered with Statista, to identify the winners from 2,000 thousand plus U.S. companies across 14 different industries. It is an honor to again be recognized by Newsweek for our company's performance in environmental, social, and governance areas. And the credit along with my thanks, goes to our team members worldwide. The Pittsburgh Business Times spotlight a two individuals from our leadership team, Jimmi Sue, and our Chief Sustainability Officer, Leslie Hyde, in two separate feature stories in recent months, and we're very proud of these accomplished members of our Koppers team who demonstrate leadership in our community, as well as in -- as well as within the Koppers organization. Slide 27 lists two recent leadership appointments that will help propel us forward on our path to sustained growth. Tracy McCormick has been elected as Treasurer, transitioning from her post as Assistant Treasurer. She's been with the company since 2011 and brings a depth of experience and knowledge of our businesses and finance organization. And also Dan Skrovanek has been named Vice President of Growth and Innovation, a new role at Koppers, transitioning from his position as Vice President of purchasing and strategic marketing, Dan will help us pursue ongoing growth opportunities in a variety of different areas by challenging the status quo and enabling our business leaders to execute the day-to-day in our strategic initiatives. And while Dan will have…

Over 2020. And we're currently projecting to give close to $20 million of that back in 2022 is cost continues to catch up. Our price curve begins to flatten out. But we can offset $8 million of that through upgrading distillate material to carbon pitch as part of our enhanced carbon product initiatives. And we achieved cost savings from other operational efficiency projects. Now our projections for the CM&C business only account for the market dynamics supporting our business to maintain its current strength through the first half of this year, which is as far as we have visibility. The other wildcard that we have to account for is the Russia - Ukraine situation as we sourced approximately 20% of our Coal tar raw material for Europe out of those countries. And while we have contingency plans to develop the keeps supply flowing, the potential for an impact on our supply chain cannot be discounted if the situation does not de -escalate. Slide 36 takes a look ahead for CM&C through 2025. The strong demand from the aluminum and steel markets should continue, particularly in the U.S. with the passage of the Federal Infrastructure bill. And as reliance on Chinese exports declines and worldwide shipping logistical challenges start to alleviate, we expect that our CM&C businesses will stand to benefit. As there have been additional announcements in 2021 on decarbonization projects to reduce or eliminate coal from steel making, and already this year, Cleveland Cliffs has closed our coal facilities in Follansbee, West Virginia and Middletown, Ohio, neither of which served Koppers. The trend towards new direct reduced iron and electric arc furnace projects will only reduce coke production further in the future, resulting in less domestic coal tar and put significant pressure on the three remaining small distillers. Work…

We will now begin the question-and-answer session. [Operator Instructions] If you are using a speakerphone, please pick up your handset before pressing the keys. [Operator Instructions]. At this time, we will pause momentarily to assemble our roster. Our first question is from Mike Harrison with Seaport Research Partners. Please go ahead.

Hi. Good morning.

Hi Mike.

A lot to digest there. I guess my first question is just on the overall guidance, you provide a point estimate, $230 million for EBITDA. My question is, if you had to provide a range around that number, would that be -- do you think that would be a narrower range or a wider range? It seems like you are feeling pretty good about what you can see for the first half, but maybe give us a little bit of a sense of how confident you are in that $230 million number. And what are some of the key variables that may not be within your control, especially as you look out to the second half?

Okay. Mike. Sure. So they're -- like with our businesses, we often talk about a lot of moving parts, and they all seem to find themselves in different -- at different points each year. So we obviously feel confident in the 230 target that we put out there, which is why that's our target. We did a lot to move away from a range. This year it is -- gosh, that range, depending upon how you look at things could be quite wide. And a lot of that is -- comes back to again, the significant price increases that we're pushing through for this year, talked about $80 million to $100 million in price. And there's a lot of that, that's based upon cost increases that we know are basically have already been pass-through and are in place. And a good bit of that is also related to cost increases that we expect will be coming. And we're trying to again, make sure that we account for. So depending upon how that sort of plays out, if it plays to our favor, again, the number could be certainly higher than 230. No question about it. If it's not, then we could struggle to get there. But we have a number of other projects that we have in place that are back-filling part of that as well. And that's what I tried to outline in each of the different business segments. But the key things for us is, for this year as we look at it, certainly getting price and being able to maintain volume, not lose any major volume as a result of pushing price in 2022 is going to be an important factor. Hardwood sourcing for the rail business is going to be an important factor for us. And outside of those two things, really the CM&C business, I'd say there's some upside there, it's just the limited visibility that we have that prevents us from providing a stronger show of confidence in terms of the estimates that we put out for that particular segment. So yeah, I mean, I realize, a lot of moving parts. It's certainly not simple. But this is the balancing act that we play every single year. And so we know that these markets are going to be at different places at different points in time, and so we continue to put money back into the business to take costs out to make improvements that will allow us to continue moving forward as we just -- as each of these businesses go through their normal ups and downs of the cycles that they deal with.

All right. In terms of the RUPS business, you mentioned the Class I contract extensions. And you also mentioned your longer-term expectation of higher Green Ties purchases that would impact working capital. Did any of those contract extensions change the business model? I know a few years back you had a model switch that lead to you guys taking on more working capital. Is that part of what we're talking about here?

No, it's not, I mean, so the working capital increases that we talk about, expecting from RUPS just come back through -- just come from a normalization of Crosstie purchases, as our Crosstie purchases have declined over the past year, that's less inventory that we end up carrying as a result and as they go back to more normalized levels, we're going to have inventory levels that will rise accordingly. If we grow our business as we anticipate doing, moving on into 2023 after the Little Rock expansion. Again, we're going to need even more ties, which will require working capital for some part of that. So there's nothing that changed in our contract extensions that changed the business model as it relates to each of our customers.

All right. And then, onto the PC business, you mentioned the $20 million worth of net price versus cost headwind, it sounded like $30 million of pricing this year and about $50 million of higher cost. I guess, help us understand, the way the contracts work there, do you just need to play a longer game? And you're going to need to get additional pricing in 2023 to offset things. I guess I'm just thinking with your strong position, kind of Number 1 in North America, it would seem like you should be in a better position to get more pricing to offset the costs.

So there's a certain element of that, in terms of being limited in passing certain costs through related to agreements that are in place and covered through hedging agreements and things like that. The point that I tried to make in my prepared comments, which I probably didn't make maybe that well, were we actually got some price in 2021. In fact, we got close to $25 million in price in Performance Chemicals in 2021. And we -- and as a result, I think we out earned in 2021 when you look at the fact that we had an 8% volume decline year-over-year as well. And so we were able to get out in front of some of the costs. And now some of that is going to come back through in terms of the higher-cost that we can't, if you will, double-dip in terms of passing on additional price for some of that. So there's that element of it. And then the other element that you point to which is, yes, there is some cost increases that we are incurring this year that have not yet been passed on to certain parts of our customer base, but will be as we move out into 2023.

Okay, that makes sense. Maybe just a couple of housekeeping questions and then I'll turn it back. First of all, the insurance recoveries for 2021, it looked like a little over $6 million in the cash flow statement. Was there some Q4 recovery in the CM&C business? I know you had a fire at Stickney earlier in the year, just wondering if insurance contributed to some of the strength you saw in Q4?

Hi, Mike. It's Jimmi Sue. You're exactly right. There was about $2.5 million of that insurance recovery was fourth quarter, and the majority of that was in the CM&C business related to the fire.

All right. Thank you. And then my last question's on the -- actually on your debt structure. The 2025 notes that you have looked like they're callable here in early 2022. They have a coupon of 6%. Is there any chance that you might look to refinance those notes to a lower rate, I guess, before, before interest rates start to move significantly higher?

We are actively monitoring that market Mike, and considering our options.

Alright, thanks very much.

Thank you.

The next question is from Chris Howe with Barrington Research, please go ahead.

Good morning, Leroy. Good morning, Jimmi.

Hi, Chris.

Good morning.

Good morning. I wanted to dig into some of Leroy's comments here within the PC segment. I believe you mentioned a customer acquisition of note, as well as the puts and takes behind that large supply arrangement, the five-year arrangement. Can you talk about anything going on within the market dynamics underneath the PC segments that we should make note of here?

Well -- so Chris, the market continues to be strong. And we've demonstrated certainly over the last five years, our -- the strength of our team in serving our customer base that has continued to consolidate treating capacity. And so we have no doubt benefited from that from a volume standpoint. We've also done, I think, an amazing job of picking additional business from long-standing customers of some of our competitors. I think, again, due to our commitment to this industry in this market, and again, just the great job that our team does of serving our customers, as well as the R&D leadership that, I think, we've demonstrated over the year. So look, we are the number one player in this market. There's a reason we are, and as a result, we've been able to not just maintaining a solid book of business, but continue to grow it. And so we're thankful for that, and we certainly appreciate our customer base that's been an important part of that growth over the years. We are getting to the point where I think we're pretty saturated, in terms of our market share in the residential side, which has us turning our attention to see what we can do to grow on the industrial product side. And so we think there are opportunities there. And I mentioned the conversion of one customer. Again, a long-standing customer. A nice addition to our account portfolio, just in the past six months or so. And we're going to continue to look for those sorts of opportunities and sell what we do and our commitment to the industry. We think that for the most part that will end up carrying the day.

And then I wanted to get an update just on something you've been mentioning recently, the sustainable battery projects. How is your participation in that going? Any update here?

So no substantive update. We continue to provide product for testing, continue to work with various partners. I'd say everything continues to trend positive in that area. We continue to still be excited as do the folks that we're working with in terms of our product and its performance. So nothing -- again, nothing substantive to report at this point. That is a longer range project, but all signs are still pointing in a positive direction.

Okay. And then lastly, probably immaterial, but the bullet point on Russia, Ukraine, to spur topic of minds. How meaningful is that? Is that anything to make note of other than it will have an impact?

Yes. So, it's had an impact on our fire-retardant business. And we're working through that. That's a smaller part of our portfolio. But we're working through those issues. On a CM&C side, we have yet to have any impact from it. But could, and if we do, again, it's less than a quarter of our supply that we use to fill our Nyborg, Denmark plant. And so if we aren't able to get product from there or if the costs, it costs us a lot more to get product from there and we're not able to pass it on. It could have some level of impact or if we're unable to get products and we can't get other products from other suppliers than it could certainly have an impact. Overall, it's hard to say what that could possibly be in the grand scheme of things. It would be a hit, but not something that would blow a tremendous hole in our business.

Okay. Thanks for taking my questions.

Yes.

The next question is from Liam Burke with B Riley, please go ahead.

Good morning, Leroy. Good morning, Jimmi Sue.

Morning

Morning.

Leroy or Jimmi Sue, during the margin discussion on RUP, you talked about the obvious conversion to new treatment coatings on the chemicals. Was that expense hit a one-time conversion cost or was that an ongoing increase in cost of goods?

Liam, that was one time.

Okay. And is there any meaningful change on that conversion in terms of how that affect your margin?

Well, I mean, we're through those two conversions at this point which are important. So we're now able to treat normally there. We're treating different products. One of the products are already internally produced and sourced product from our Performance Chemicals business. We do get greater throughput as a result of that, so it helps in terms of our operational efficiency. And obviously we get to sell more CCA and DuraClimb products. So from that standpoint, they're positives as well.

Great. And then, on the recovery -- on the tie recovery business, you said it was slow going. You're still working with your customers. Is that part of the entire life tie Lifecycle Management business, or are you working that service as separate offering?

Yes. No, it's -- well -- so I'll say it is a separate offering. Although we continue to try and present a Lifecycle Management value proposition to our customer base, but it is a service that is offered today separate and apart from the crosstie supply that we provide.

Great. Thank you, Leroy.

You are welcome.

The next question is from Chris Shaw with Monness Crespi, please go ahead.

Good morning, everyone. How you doing?

Morning.

Good

There were a lot of puts and takes in the PC segment in the outlook for 2022. I got a little lost in there. Are you projecting higher volumes [Indiscernible] '22?

We are over '21. Yes. What we're trying -- what we've attempted to do is kind of go back and look at it in the view of our last normal year because it's just been a lot of volatility last few years.

Right. Is that -- so is it based on market conditions or I guess maybe a combination market conditions and new customer wins?

You got it exactly right. It's a combination of both.

Got it. But then, just -- what have you -- you talked about the lack of visibility in the second half for CM&C. So what are you projecting in that estimate that you've had there for the guidance for CM&C business this year for the second half? I mean, what's your -- what's in that guidance that you are in expectation for the second half, I mean, lower costs, lower prices? Just curious what you sort of [Indiscernible].

So our guidance for the second half is essentially a flattening out of our pricing, right?

Yeah.

So we're going to see price increases flowing through in 2022. Much of that being put through in the first part of this year, and then we see a flattening out of that with costs continuing to -- particularly raw material costs continuing to increase throughout the year. So it's the catch up on the cost that we've been out in front of from a pricing standpoint. That's what we have in that back half of the year, but that market is from a pricing standpoint, you are constantly address -- adjusting, from a cost standpoint, raw material cost input, you're constantly adjusting. And so we're always trying to maintain a certain level of margin in that business are spread over our costs. It becomes tougher in -- as markets get more competitive, when you have customers that are closing capacity and it's impacting competitors who are trying to backfill business and so now they're becoming more competitive in business that we might already retain. There's, again, a [Indiscernible] facilities that are closing down, which is causing competitors to evaluate whether they're going to bypass that volume or whether they're going to try and compete to get -- to backfill that volume and potentially drive up raw material costs and things of that nature. So we're just being cautious in terms of our outlook with a lot of balls in the air at this point. So we have pretty decent visibility for the first half and we think it will be strong. And -- but we're holding off on the second half until we get a little further out into this year and see how things develop.

Like a bunch of years ago, oil prices used to be a decent proxy for sort of the pricing you could get in the CM&C business. Is that still the case, or is that sort of dislocated?

Certainly as it relates to carbon black feedstock and [Indiscernible], and in some ways, maybe even naphthalene, but yes, it's still is -- as oil prices move up, pricing in those product lines moves up as well. In some cases, it also then drives up from material costs, right?

Yes.

So again, there's that piece of the equation, so --

And then just to ask about that, the coal tar availability going forward. Is this a -- I hadn't read about the Cleveland Cliffs shutdown, but I mean is that a -- existential threat for likes the Stickney plan going? Could you just really think that's so bad in America [Indiscernible] you entered just filling it within [Indiscernible] or is that just prohibit on the expenses?

Well, so the -- again, the facilities that close or facilities that don't serve our facility, we can import tar if and when we need to, and we have in the past. I'd say there's more of an existential threat to some of the smaller distillers that that impacts because it has an outsized impact for them. I think, as one of the two largest players in this market domestically, we're in a stronger position to be able to maintain the production that's still going to be out there to a large degree moving forward. And the trend in that market certainly has been towards moving away from blast furnace steel. It's also -- despite the -- those two recent announcements, I think it's starting to, we believe, level out. And could there be some more? There could, but we feel pretty comfortable and confident with what's remaining out there and our position for supply moving forward.

That's helpful. Thanks so much.

Yes.

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.

I just want to finish off by thanking everybody for participating on today's call and also for your continued interest in Koppers. So please continue to stay safe and we'll talk to you again next quarter. Thank you.

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