Koppers Holdings Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to COPPR's fourth quarter and full year 2022 earnings conference call and webcast. At this time, all participants are in a listen-only mode. If you need assistance, please signal a conference specialist by pressing star followed by zero. 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 Quinn McGuire. Please go ahead.

Thanks, and good morning. I'm Quinn McGuire, Vice President of Investor Relations. Welcome to our fourth quarter and four-year 2022 earnings conference call. We issued our press release earlier today. You may access it via our website at www.coppers.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 and prior quarterly conference calls, this has been 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 toward our forward-looking disclosure statement 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 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 COPPERS, and Jimmy Sue Smith, Chief Financial Officer. I'll now turn over the discussion to Leroy.

Thank you, Quinn. 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 COPPERS 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 timeframe. And let's begin with a closer look at a summary of the key metrics for Q4 on slide four. 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 funny 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, which represents record sales. Adjusted EBITDA was $228 million, reflecting a record year in profitability, exceeding 2021 results of $223.5 million, and it's 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 in 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 in 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 plan to be, but indicative of spending that was pulled forward into 2022 that would have instead been spent in 2023. During the year, we also paid out our first dividend since 2014, a total of $4 million throughout the year and spent $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 six with their ties back to the six pillars that underpin our strategy to expand and optimize coppers 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 & James, the largest independent supplier of untreated railroad cross ties 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 chemical segment was able to secure approximately $40 million in new industrial sales. In CMC, our continued development of petroleum supplemented products across a variety of markets has helped to offset a declining market for raw material and secures our CMC business well into the future. Regarding wood treatment expansion, Copper's purchased 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 Summerville, 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 I railroad customer to collect and manage railroad cross-ties 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 expanded and optimized 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 Copper's common stock. A quarterly dividend will be paid on March 27, 2023 to shareholders of record as of the close of trading on March 10th. 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 24 cents 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 record of incidents in 22 decreased by 5% compared with the prior year. Zero harm 2.0 is well underway, We are re-energizing 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 through communications with our employees globally. We strongly believe that the key to zero harm is engaging with employees and leaders at a personal level. We know that when we increase leading activities aimed at health and safety, we can reduce the number of serious incidents. Zero Harm 2.0 is focused 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 COPPRS 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, Jimmy Sue Smith.