Good morning ladies and gentlemen. Thank you for standing by. Welcome to Koppers Second Quarter 2023 Earnings Conference Call and Webcast. At this time, all participants are in listen-only mode. [Operator Instructions] 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 Quin McGuire, Vice President of Investor Relations. Welcome to our second quarter 2023 earnings conference call. We issued our press release earlier today. You may access at 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 November 3rd, 2023. At this time, I would like to direct your attention to our forward-looking disclosure statements seen on slide two. 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 to certain non-GAAP financial measures. The company has provided with its press release and the slides referenced during this call which are 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 Smith, Chief Financial Officer. I'll now turn this discussion over to Leroy.

Thank you, Quynh. Good morning everyone. Thanks for joining us today. We have a lot of great stuff to cover. It was a great quarter and a lot I want to cover in terms of things to come. But why don't we just kick things off by starting on slide three where I want to remind everybody that Kopper is going to be hosting an Investor Day scheduled for Thursday, September 14th, 2023 at the Intercontinental Hotel in Chicago and also we have some activities planned for Wednesday, September 13th which will include a baseball game that evening to allow for some additional interaction between the attendees and our senior management team. I very much hope that you'll be able to join us for as many of these events as possible. The Investor Day presentation will also be available virtually with a live webcast and for those attending virtually, you'll have the opportunity to participate in real-time in the question-and-answer session following the presentation and we'll provide a replay of the Investor Day event on our website as well. We look forward to providing further insights on our business sharing updates on our strategic priorities and our longer term outlook while emphasizing our focus on driving shareholder value. So, let's turn to reviewing the second quarter. There's a lot of good things happening at Koppers both in Q2 and 2023 in general. Now, before I rattle off some of the highlights I want to start by saying that even under challenging market conditions we continue to validate our unique vertically integrated business model, which serves a diversified mix of infrastructure and related markets that need our products and services. More or less the same blueprint we've been using to drive transformational improvement over the past nine years and by continuing…

Thanks, Leroy. The press release issued earlier today detailed our second quarter 2023 results. My comments this morning are based on that information. So starting on Slide 9, second quarter consolidated sales were a record $577 million, up $75 million or 15% over the second quarter of 2022. By segment, rough sales increased $30 million or 15% from the prior year quarter. PC sales increased $31 million or 21% and CM&C sales increased $13 million or 9%. On Slide 10, adjusted EBITDA was also a quarterly record of $70 million with a 12% margin. By segment RUPS generated EBITDA of $22 million and 9.5% margin, PC had EBITDA of $32 million and 17.9% and CM&C had EBITDA of $16 million with a 9.7% margin. Moving on to Slide 11 our RUPS business generated record sales of $234 million compared with $204 million in the prior year quarter. Sales growth was primarily driven by $20.3 million of price increases across multiple markets, particularly for crossties and utility poles in the United States. Higher volumes for crossties and utility poles also contributed to the sales increase. From a procurement perspective, market prices for untreated cost tides remain relatively high, but they are stabilizing and as a result crosstie procurement was higher by 46% compared to the second quarter of last year, while crossties tide treatment increased by 3% versus the prior year quarter. Adjusted EBITDA for RUPS was $22 million, up from $13 million in the prior year, driven by price increases and $6.5 million in improved plant utilization, partly offset by higher raw material and operating costs. It's worth noting that the domestic utility and industrial products division of this business achieved record quarter sales and record adjusted EBITDA and margin contributing significantly to the overall performance for RUPS. On Slide…

Thanks, Jimmi Sue. Moving on to the notable happenings at Kopper, slide 20 provides highlights from our recent trip to Newport, Denmark. I was last here in 2019 and boy a lot changed. I really enjoy being at the plant and getting valuable feedback from our employees who love to show me all they've been up to since I was there last. Their pride in their performance is completely justified, as that location consistently ranks among the safest, most efficient and productive sites anywhere in Kopper. Our Newborn facility is an impressive operation and represents a model to which all our facilities should aspire to be. It was exciting to see the progress on our enhanced carton product plant, which is expected to begin commissioning this quarter. At its most base level, our enhanced Carbon Products plant will enable us to reprocess product generated for low-value markets and create a higher value product to be sold at a much higher price point. Longer term, we have the ability to make even higher value products including some that would have applications as a high-quality battery coating for the electric vehicle market. We've already received several patents for our enhanced carbon products portfolio and have others in the pipeline. It's a testament to the ingenuity of our CMC technical team and a broad-based commercial team that continues to move the ball forward quietly and methodically in this area. It will be exciting, when the new facility is officially in production at the beginning of next year. Thanks again to all the new board crew for the planning and work to win into making my time there, an amazing and meaningful visit. Slide 21 shows our 2022 corporate sustainability report, which was issued in June. The report details our pursuit of goals, supporting…

We will now begin the question-and-answer session. [Operator Instructions] The first question is from Liam Burke with B. Riley FBR. Please go ahead.

Thank you. Good morning, Leroy. Good morning, Jimmi Smith.

Good morning.

Good morning.

Leroy, could we go in a little more about the rough EBITDA margins. They were -- I mean they were terrific, but then we spent some time looking at the railroad products and services and material raw materials costs and how it's affecting margins in that business segment. What are you doing outside of rail that has delivered such a nice number?

So, I'd say the pole business, certainly, has been helping to keep the margins up or pull the margins up in that business. Demand is strong in the US and it's created a good pricing environment. We had a lot of -- a lot of cost increase come through in the back half of 2021 heading into early 2022 that we were playing catch up on, and we've been able to get caught up on that and being in a good pricing position, with strong demand and some of the projects quite frankly, that we put into place to help improve efficiency reduce some bottlenecking within our facilities improving efficiency reducing costs. It's been a number of different factors, Liam, that's come in, but it always helps to have a healthy market for sure and so that business has performed well and our Australian business, is in a pretty strong position as well. They always have been. They're just a smaller piece of the overall, pie. But the utility business has absolutely been the leader on the upside, and we have work to do when it comes to the rail piece of things. We -- costs have gone up significantly over the past couple of years, and we're trying to recoup that in the form of price increases and we're continuing to work down that path. And I do have confidence, we'll be successful because we need to have a healthy supply chain.

All things aside, I mean is this 9.5% presuming, you do get some price increases on ROP. Is that a sustainable number?

Well, the expectation is that we get this business back into the double digits. I mean this business should be -- should absolutely be, in the 12% to 16% margin range is where it should be overall and that's what we've been aiming to get back into. A lot of the projects, we've been undertaking, are geared towards doing that. We've been asked the question before, why spend money on a business that is generating 6% margins, which it was before? And are there returns there? We believe there are and we believe we're starting to see some of the impact of that. A lot of the benefits there have been overshadowed by costs just escalating that up to this point in time we've had a little more trouble actually getting back but we'll figure that one out.

Okay. Great, and really quick Jimmi Sue. Operating cash flow was slightly negative for the first six months of the year. Usually in the second quarter cash flow is strong enough to flip into the positive territory. Understanding that working capital timing issues, can affect that number. But was there anything in the second quarter cash flows that created or did not get you over the positive operating cash number?

And so I think you hit on the biggest thing there Liam, which was the operating -- the working capital kind of not flipping as early as it normally does. But I will say, we saw a strong acceleration in cash flows in the month of June and are continuing to see that. So we think we're seeing sort of our normal pattern just maybe on a month or 6-week delay from when it has normally started.

Great. Thank you, Leroy, and Jimmi Sue.

Thanks, Liam.

The next question is from Gary Prestopino with Barrington Research. Please go ahead.

Hey, good morning, all. General question in terms of with the infrastructure build federal spending and all are you starting to see more money being released there for you for specifically what you do that...

Having -- money that having a downstream impact on our -- the purchase of our goods and services, yes. Certainly, we're seeing that in the pole side. The demand there has always been relatively healthy but it has amped up with infrastructure dollars being led out and we're seeing it on the rail side as well. So, yes dollars are out there being spent and it is having an impact.

Okay. And then in terms of what you're talking about getting I guess pricing further price increases for the Korea South is that with entities that have not given you any price increases, or are you going to have you have to go back to some of the other some of the ones you already negotiated and try and pass on higher price increases?

So, it's a little bit complicated, right? And when I mentioned Chris to be totally blunt, right? It's across the board. We've had significant increases. Obviously, we know what's going on in the labor front. Goods and services you name it and the costs have gone up right? And so we have contractually with the long-term contracts we have in place we do have an ability to recoup some of that and we have up to a certain limit. It's just not been enough and so we're trying to work -- we're trying to work within the bounds of the contract to ensure that we can get back fair value for the items that have exceeded our ability contractually to get the price increases for and as I continue to beat the drum right I mean, it does not serve the rail industry to have unhealthy supply chain and so we'll continue to work. Well, I think I can tell you we believe we have bottomed out from that standpoint and there's nowhere to go but up but we're going to be fighting as much as we can to try and get ourselves back to where we need to be.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to CEO, Leroy Ball for any closing remarks.

Thank you. I just want to again thank everybody for your interest in Koppers for your participation on today's conference call. I hope you can make it out to Chicago for our Investor Day in September till then please be safe. Thanks. Bye-bye.

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