Koppers Holdings Inc.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Copper's fourth quarter and full year 2023 earnings conference call. At this time, all participants are in listen-only mode. Following the presentation, instructions will be given for the question and answer session. Please note, 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 full year 2023 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 have also posted materials to the investor relations page of our website that will also 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 28, 2024. At this time, I would like to direct your attention to 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 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 Coppers, and Jimmy Sue Smith, Chief Financial Officer. I will now turn this discussion over to Leroy.

Thank you, Quinn. Good morning, everyone. It's a pleasure to be with all of you today and to have the honor of reporting on another year of strong performance for Coppers. Thanks to the diligence, hard work, and energy of our team worldwide, once again, we delivered record results, both in the fourth quarter and for the full year, across a number of different categories. Our strategy to expand and optimize our unique vertically integrated business model serving key infrastructure markets positions Coppers for continued growth and profitability, as well as cash flow generation. I'll begin with a summary of key metrics for the fourth quarter seen on slide four. Consolidated sales of $513.2 million, a fourth quarter record compared with $482.6 million in the prior year. And this represents the ninth consecutive record in current quarter sales. We generated adjusted EBITDA of $53.9 million, a record quarter compared with $52.1 million in the prior year quarter. And this was the sixth consecutive current quarter record. Our adjusted EBITDA margin was 10.5% versus 10.8% in the prior year quarter. But for an increase in our bad debt reserve in Q4 2023, we would have finished the quarter at an adjusted EBITDA margin of 11% on the nose. Fourth quarter diluted earnings per share was 59 cents compared with 65 cents per share in the prior year quarter, while adjusted earnings per share for the quarter were 67 cents compared with $1.09 in the prior year quarter. The combination of the after-tax effect of the previously mentioned bad debt reserve and a higher-than-anticipated tax rate had a $0.09 per share impact on our quarterly EPS. Slide 5 outlines our four-year key metrics for 2023, starting with record consolidated sales of $2.15 billion, marking the first time in our company's history that we exceeded the $2 billion mark in sales in the fifth straight year of record sales, up from $1.98 billion in the prior year. We achieved record operating profit of $195.2 million compared with $137.7 million in 2022. Adjusted EBITDA was $256.4 million, which was the eighth consecutive record year in profitability, up 12.4% from $228.1 million in the prior year. This was the ninth straight year of achieving year-over-year improvement in EBITDA. Adjusted EBITDA margin for the year was 11.9% compared with 11.5% in the prior year. Diluted earnings per share were $4.14, the second highest diluted EPS from continuing operations in the company's history, up from $2.98 in the prior year. Adjusted earnings per share of $4.36 was a record, compared with $4.14 in the prior year. We generated a record operating cash flow of $146.1 million in 2023, up from $102.3 million in the prior year. This represented the fifth consecutive year of delivering operating cash flow of greater than $100 million, It is even more impressive given that we spent $42 million more on cash interest and taxes in 2023 compared to 2022. Our net leverage ratio came down to three times at year end 2023 compared with 3.4 times at the prior year end. Jimmy Hsu will provide more details on that in her remarks. Additionally, 2023 marked our second best yearly safety rate, And Copper's was named the Newsweek's most responsible companies for the third straight year and to USA Today's first ever list of America's climate leaders. We're very proud of all the accomplishments we were able to realize in 2023, including record-setting stock price performance as Copper's share price increased 82% over the year. And we reached new all-time highs in price, market cap, and enterprise value. In short, I would describe 2023 as the best all-around year in Copper's history as we pushed the bounds of performance in just about every conceivable category. For all the feel-good emotions about 2023, we recognize that there is no off-season at Coppers, and we're already geared up for 2024. In that vein, we announced earlier this morning, as shown on slide 7, that Coppers has signed an agreement to acquire substantially all the assets of Brown Wood Preserving Company, which manufactures and sells pressure-treated wood utility poles for approximately $100 million in cash. The acquisition aligns with our plans to grow our utility pole treatment business through both organic and inorganic means. Headquartered in Louisville, Kentucky, and with operating locations in Kennedy, Alabama, and Matheson, Mississippi, this transaction offers Copper's additional assets to serve markets in the Midwest and Southeast regions of the United States. On slide 8, we highlight the strategic rationale for the acquisition of Brownwood, which is pretty straightforward. We need more assets, and Brown has them. Not only that, but a good portion of the assets are new and recently installed. By the time we close sometime in the second quarter, they will be close to having a new peeler and dry kiln online after having added drying and treating capacity in 2022. In total, we'll be increasing our peeling capacity by close to 50%, our drying capacity by over 40%, and our pole treating capacity by approximately 50%. The 2024 exit run rate for Brownwood should approximate $100 million of top-line sales with the ability to take it even higher with little to no additional investments. Add in synergies, and we can see this acquisition easily adding $25 million or better of EBITDA to our results by 2026. For this year, given the uncertainty of the exact timing of the closing, the new assets coming online, and our cost of integration, we'll be modest in our contribution expectations for 2024, which we'll provide at closing. But as mentioned in the separate press release announcing the signing, we believe that Brownwood can add between $15 to $25 million to our 2025 target adjusted EBITDA of $300 million and will certainly be accretive in the first full year of ownership. I can't stress enough how bullish we are on this market, and you can expect that we'll continue to dedicate a healthy portion of our growth capital to the utility pool market over the next several years. Moving on to a brief review of our continuing zero harm efforts, as noted on slide 10, the primary focus in 2023 was rolling out zero harm 2.0. This is a comprehensive program to re-energize the zero harm level of engagement at the front line of operations to accelerate our progress towards zero. One specific example of a win in that arena is a 72% year-over-year decrease in the total recordable injury rate in our UIP business, attributable to enhanced training and a focus on our life-saving rules, which had been delayed as a result of the COVID-19 pandemic. Compared to prior year, we saw a 50% increase in 2023 in leading activities, defined as steps meant to enhance awareness and practice of measures designed to avoid and eliminate injury. Overall, 23 of our 45 operating facilities worldwide worked accident-free for the fourth quarter of 2023 with zero recordable incidents in CM&C Australasia and PC Europe. While zero harm activities can never slow down or stop, we take pride in the fact that our total rate of recordable injuries in 2023 decreased by 11% compared with the prior year and finished the year only slightly higher than our best ever rate, which was achieved in 2018. On slide 11, I want to recognize some of the unsung heroes of our company. This past November saw our third annual Zero Harm Truck Driving Championship competition held in Pittsburgh, which brought together top professional drivers from around our company to compete and display their skills. Competitors were selected based upon their adherence throughout the year to Copper's safe driving principles as evidenced by their top-tier performance measured by our safe driving metrics. Congratulations to the top drivers and award winners, Bill Bailey of Copper's Recovery Resources in first place, Mike Fogarty of UIP in second place, and Andy Hutto of UIP in third place. Now we'll turn the discussion over to our Chief Financial Officer, Jimmy Sue Smith.