Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Koppers First Quarter 2024 Earnings Conference Call and Webcast. [Operator Instructions]. 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 first quarter 2024 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 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 August 3, 2024. 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 press release, which is available on our website also contains reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures. Joining me for our call today are Leroy Ball, Chief Executive Officer of Koppers; and Jimmi Smith, Chief Financial Officer. I will now turn over the discussion to Leroy.

Thank you, Quynh. Good morning, everyone. I'll start by saying the obvious, which is that despite best efforts from the Global Koppers team, our first quarter financial results were a disappointment. While we expect that adjusted EBITDA will be lower year-over-year and signaled that in February, we fell short of our forecast and the consensus estimate by about 5%. Now as expected, our Performance Chemicals business and our Roland Utility Products and Services business both showed strong year-over-year growth in sales and profitability. Those impressive gains, however, were more than negated by slumping CM&C markets, in particular, in North America. An unplanned outage at our facility in Stickney, Illinois caused by weather-related factors that contributed to higher costs early in the quarter was far from the only factor, but ultimately made the challenging market dynamics even more difficult to offset. Now in these sorts of situations, we typically get help elsewhere to mitigate difficulties that we're encountering in specific parts of our portfolio. And while some help did come in the form of slightly better-than-expected Q1 performance from our PC business that ended up getting washed away by a poorer-than-expected outcome from our railroad maintenance of way business. Now as I'll talk about later in my commentary, I believe that 2024 will still be a strong step forward for Koppers in our quest to reach our 2025 financial commitments, and we are taking additional measures to improve our chances of finishing towards the high end of our revised guidance for this year. We will take this opportunity, however, where we seem to be facing more uncertainty than since the pandemic to temper our expectations slightly for the balance of this year. Now let's take a quick look at the headline numbers for the first quarter as seen on Slide 4.…

Thanks, Leroy. Earlier today, we issued a press release detailing our first quarter 2024 results. My comments this morning are based on that information. On Slide 8, we had consolidated first quarter sales of $498 million, down $16 million or 3.1% from the prior year quarter. By segment, REP sales increased $12 million or 5.6%. PC sales increased $3 million or 2.2%, while CM&C sales decreased $31 million or 20.2% from the prior year quarter. On Slide 9, adjusted EBITDA for the first quarter was $52 million, resulting in a 10.3% margin. BOSS segment, Brooks generated adjusted EBITDA of $18 million with a 7.9% margin. PC delivered adjusted EBITDA of $30 million and 19.9% margin, and CM&C reported adjusted EBITDA of $4 million with a 3.3% margin. On Slide 10, the RUPS business achieved record first quarter sales of $225 million compared to $213 million in the prior year quarter. This increase in sales can be attributed to $9.6 million of volume increases for crossties and a net $8.1 million of pricing increases across multiple markets, particularly for crossties and domestic utility pulp. These increases were partly offset by lower activity in our maintenance away businesses and a 4.2% volume decrease in our domestic utility pulp business, stemming from temporary customer overstock and budget realignment. Market prices for untreated crossties are stable but remained relatively high. First quarter cross-type procurement was up 2% from the prior year quarter, and crosstie treatment was 7% higher. Adjusted EBITDA for RUPS $18 million compared with $16 million in the prior year quarter. Profitability increased due primarily to net sales price increases and $3.7 million from improved plant utilization. These gains were partly offset by $10.6 million of higher costs related to operating expenses, raw materials and SG&A expenses. Margins for our Thai business…

Thanks, Jimmi Sue. Let's take a quick look at some notable happenings. As seen on Slide 20, we issued our 2023 annual report and proxy statement, which are available on our Kopper's website. You can also access these materials using the QR codes as shown. As seen on Slide 21, we recently completed the acquisition of Brown Wood Preserving Company, bringing its assets into our UIP portfolio. This transaction enables us to increase our presence in existing markets and offers an attractive entry point to new geographic markets for our utility pole business, which we believe continues to have strong macro trends supporting growth potential for the foreseeable future. The integration of the Brown Wood team and related capabilities is well underway. We're very pleased to welcome them into the Koppers family. Slide 22 shows the added capacity at our facility in Louisville, Louisiana. We now have a new poll pillar in Killen in place, increasing our piling and drying capacity to cost-effectively serve an underserved geographic market where we have historically lacked a presence. The Leesville site is close to sources of raw material. And once poles are peeled and dried, they're sent to our underutilized treatment facility in Summerville, Texas. Having this operation in place will improve our production efficiencies as well as expand our presence in new utility markets such as Texas. Now under review of each of the businesses, and I'll start with Performance Chemicals on Page 24. Q1 for our PC business played out almost exactly as we had planned it heading into the year. We projected flat residential volumes for the year. And in Q1, they finished off by about 1%. As anticipated, we realized the annualization of new residential and industrial business in Q1 that will temper as the year progresses. Adding Brown…

[Operator Instructions]. Our first question is from Liam Burke with B. Riley FBR.

Leroy, CMC, after you would resize the infrastructure had been a pretty consistent low single-digit grower, low to mid-teen EBITDA margin generator. And then, I guess, over the last 3 or 4 quarters, that EBITDA generation has fallen into the mid to low single digits. Has something changed in the business? Or is just the pricing on pitch just been so onerous that it's affected the margins here.

Yes. So it's a good question. We operate now out of 3 regions, right, with 3 facilities. And so I'd say as it relates to, and this business in general, right, goes through its cycle as we talk about that 2022 was a situation that we knew was at the top end of the cycle, and we had foreshadowed that, that was not going to repeat in '23 and of course, it didn't. Australia and Europe are in solid places, right? They still go through their cycles, but they're in solid places. Now with that, they're not at the peaks of where they were at, but they're still generating good margins, good profitability, and there's not a lot of capital that has to go back into those businesses. So they're in good spots. North America is a different situation. And it's really not a pricing issue actually. We get some of the best pricing globally on our products coming out of the CM&C business in North America. The North American situation it's a volume issue and a cost issue. So when we restructured and went down to 1 facility in the U.S. and took down the 2 remaining, which we talked about, but we don't give a lot of play to since we went through a situation where we restructured our supply contracts as well. And if you will, reset pricing and how we were going to price the raw material that we were buying on a go-forward basis. And what has happened over the course of time is the aluminum markets have contracted and run into a tougher situation from an overall demand standpoint here in the U.S., meaning that there's less demand today than there was. So while coal tar availability has also shrunk, it's put us in…

Great. And then on PC, it looked like the industrial business was up, well, it was up 15% for the quarter, but you talked about moderation through the balance of the year that uses looked like it was on a steady upward trajectory.

Yes. Yes. So what I mean by that is I think in my initial comments at the beginning of the year, and I still stand by them, I think we were thinking throughout the entire year, we'd see about an overall 5% to 6% uptick, I think, in industrial, which would include some of the annualization of new business that we took on last year. And so we brought business on throughout the year last year. So certainly, in the early part of the year, you're going to have higher variances, if you will, from new customers that might have been added a little later in the year, and that's going to pop the numbers up in the early going to levels like that 15% as the year goes on and we basically last the origination of our supply agreements with them, those variances will be much smaller, which will bring the number down as the year goes on. But we still expect that we'll be in that 5% to 6% overall increase range.

The next question is from Gary Prestopino with Barrington Research.

You're talking about what you're doing on the railroad side, which you're pretty adamant about that if you didn't get these price increases, you were going to take some kind of drastic action. You're now attacking it from the cost side, which I guess I'd like to know what are you going to do differently now versus what you had done? And then with the entities that have accepted a price increase, is there a risk there that they'll come back to you and say, hey, you didn't increase prices to ex-customer why us?

Yes. So I think there's always that risk. And look, we've had customers who have been great about understanding and working with us on this. All these relationships ebb and flow. And to be honest, a lot of them have been flow based upon where the pressure is coming, if you will, from an investor standpoint, right? So we all know going back 7, 8 years ago, the heavy push towards precision scheduled railroading, which really had a heavy emphasis on cost as well. And so I can tell you the relationships during those periods of time, in most cases, for the railroads who were going hard at that, we're not great. Some of those have turned around and are in better spots now. I guess really what I'm trying to say is, as we sit here today, there's a certain portion of our customer base that I think has recognized the value of having a healthy supplier who produces high-quality products and services them well. And for those, they've been willing to step up and say, we understand we've all gone through unprecedented times. And we understand that you might be contractually constricted in terms of what you can pass on to us, but we're willing to help you through this. And so for them, we're going to take a consistent approach as we probably have in the past. For those who have drawn a hard line just more or let's say, you know what, that's your problem. Then in terms of what are we going to do differently? Well, that's going back to looking hard at what we're doing today that falls outside of the contract that cost us money, real money, and those are the things that we're going to quit doing, which will enable us to…

The last question today comes from Michael Mathison with Singular Research.

I'd like to start with the Brown acquisition. Just some quick arithmetic. It looks to me like your utility pole volumes will increase by about 1/3. When the integration is complete, what do you foresee as the impact on RUPS margins overall?

So it's a good question. It's a good question. Jimmy Sue, I'm going to defer to you to sort of take a first crack at this, and then I'll provide any supporting comments.

Sure. So in terms of the utility business margins, I think I would characterize it as the Brown acquisition margins were similar to the margins that we are experiencing in the utility space. So I don't think it will significantly impact the margins there. Your comment on volumes. Did you say you thought they were going to go down by 1/3?

No, up by 1/3.

Up by 1/3. Okay. All right. So yes, I think once we sort through sort of integration and supply channels, I think the margins will be in the ballpark of where they have been for the last year or so.

Looking at Performance Chemicals. In your release, you noted a little bit of pricing weakness despite a volume increase. How do you see pricing for the balance of the year?

Well, pricing, we're more or less locked in for most of our pricing other than spot stuff. And so I don't expect much of an impact at all. And the dollars that we saw in the first quarter really nothing compared to some of the movements we've seen over the past few years. So it will have little to no effect, I think, in this year. And then, of course, we'll be coming up on renewals at the end of the year, and we'll see where that goes. But we're pretty much locked into pricing for all of our largest customers. And so you're not going to see much. Anything you see on the pricing thing is going to probably be more mix related than anything else.

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 again want to thank everybody for their support. As I mentioned at the top of the call. The first quarter financial results were not where we wanted them to be or expected them to be. We still think we have the opportunity to finish the year strong and actually finished the year hopefully towards the higher end of the range that we put out there right now. A lot of work is going on within the various businesses to improve them going forward. And we remain committed to our 2025 goals while we also shape the plan beyond that. So I appreciate everybody's interest in Koppers and your support, and thank you for that and look forward to catching up with you again next quarter. Thank you.

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