Koppers Holdings Inc. Stock

Thanks. Good morning, everyone. I'm Quynh McGuire, I'm the Vice President of Investor Relations for Koppers and welcome to today's 2026 Koppers Investor Day. We appreciate that you're joining us, and we look forward to sharing our story today.

We've posted materials to the Investor Relations page of our website. at www.koppers.com that will be referenced in today's discussion. This event is being broadcast live on our website, and a recording will be available for replay for 1 year.

Before we begin, I'd like to note that today's discussion will include forward-looking statements. Certain comments made today 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 presentation 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 representation that our 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 today's discussion.

References may also be made to certain non-GAAP financial measures. The company's presentation, which is available on our website, contains reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures.

And I'll now turn the discussion over to Leroy, our CEO of Koppers.

Okay. Fantastic. Thank you, Quynh. I appreciate that. I want to start off by welcoming everybody that's in the room here today as well as those who have decided to join us virtually to Koppers' 2026 Investor Day.

Now for those I haven't met, I'm Leroy Ball, CEO and Board Chair of Koppers, and I recently enjoyed my 16-year anniversary with Koppers, having joined the company in September of 2010 as first the Chief Financial Officer before stepping into the role of CEO in January of 2015.

As we gather here today in mid-September at the start of a new college and professional football season, I'm reminded that a few things that capture the power of hope quite like the beginning of a new season. Every team starts with a clean slate and a renewed belief in what might be possible. Yes, dare I say even Cleveland Browns. And I hope we don't have any Browns' fans in the audience here today.

But, there's hope that the lessons learned from past setbacks have made us wiser and stronger and hope that the countless hours of preparation, sacrifice and hard work will pay dividends when the moment of truth arrives. And hope that this could be the season when all that effort, discipline and perseverance finally come together to achieve something extraordinary. And that's what makes the start of a new season so exciting, right?

Now as I step back and think about how the hope and excitement of a new season correlates to Koppers, I can't help but think that the same sense of possibility applies to us. We've learned from our challenges, we've strengthened our capabilities, and we've continued to invest in the future. And like every team taking the field this fall, we have every reason to believe that the work that we put in can translate into something special in a season ahead.

And today, you'll hear from several members of our leadership team who will share important updates on our company. The progress we've made during what I would characterize as our preseason here in 2026 and our plans to achieve higher levels of performance in 2027 and '28.

We have laid the foundation, we put in the preparation, and now we're focused on converting that preparation into sustained execution that translates into superior results as we enter this next phase of our strategy.

Now before we look ahead, however, I'd like to begin with a brief overview of Koppers for those who may be newer to our story. Koppers has evolved significantly over time. In 2014, we began transforming from a legacy carbon materials company and railroad company into a wood preservation technology leader through a series of strategic acquisitions.

And these include what are now the cornerstone of our growth strategy, Performance Chemicals or what we refer to in shorthand as our PC business, and Utility and Industrial Products or UIP. Meanwhile, our two legacy businesses, Railroad Products and Services, also known as RPS and Carbon Materials and Chemicals, or CM&C, have been asked to step back in prominence to play a different role in our go-forward strategy, but they still remain an important part of our value creation story. Now you'll be hearing multiple references to these names and acronyms throughout this morning.

Today, our 1,800 team members around the world provide wood preservation technologies, carbon compounds and services that support critical infrastructure. And guided by safety and sustainability, we help enable the movement of goods, the delivery of power and connectivity and the creation of outdoor living spaces.

Our products often operate behind the scenes, but their impact is everywhere. They help produce the aluminum that goes into the cars we drive and the airplanes that we fly on. They protect the crossties to keep rail networks moving the goods that power our economy. They preserve the utility poles that deliver electricity and support the communications infrastructure, connecting us to the digital world. And they protect the wood used in the decks, fences, docks and outdoor spaces that enhance everyday life.

Simply put, Koppers helps build and preserve the infrastructure that keeps the world moving, connected and growing. And with that perspective in mind, let's get things underway with a look at today's agenda on Slide 2.

Now I'm going to kick things off today with an overview of the company, which will include a summary of the portfolio transformation that has occurred during my time at the company as well as an update on Catalyst, the enterprise-wide transformation of our operating model that we launched in 2025 and of course, I will get into the rationale behind our 2028 strategic plan.

Next, Stephanie Apostolou, our Chief Legal and Strategy Officer, will discuss in greater depth how we are executing our strategy, which is designed to enhance value creation for our shareholders. She'll then follow that up by moderating a discussion with our business leaders on the various initiatives that they're overseeing and their impact.

Eric Brenner, our Chief Financial Officer and Treasurer, will then outline the financial framework supporting our strategy, including our path to 15% or higher adjusted EBITDA margins and $300 million of cumulative free cash flow through 2028. Then I'll return to wrap up and open the floor up for Q&A.

All right. Quynh has already gone over the safe harbor statement, but I do want to say that everything here today leads back to a single unifying theme. We believe that Koppers is well positioned to accelerate performance, extend profitability, increase cash flow and deliver meaningful value for shareholders for years to come, and here's how.

Slide 4 captures the investment thesis for Koppers in a single page. We've reshaped the portfolio. We've completed much of the heavy investment, and we've installed a more disciplined operating model. We are now positioned to convert that work into stronger margins, greater cash generation and higher shareholder returns.

Now most recently, we launched Catalyst, our enterprise-wide operating model transformation. Catalyst is fundamentally changing how we drive performance improvement across the organization by bringing greater structure, discipline, accountability and transparency to how we identify, prioritize, resource, execute and measure improvement initiatives. And as a result, we've already seen a meaningful step change in cash flow generation, reaching levels well beyond anything previously achieved in our history.

At the same time, we've sharpened our capital allocation approach, directing discretionary investments toward the most attractive areas of our portfolio, particularly PC and UIP, while returning substantial capital to shareholders through dividends, share repurchases and debt reduction.

Now taken together, these actions are creating a stronger, more resilient and more focused Koppers. And they're also establishing the foundation for what we believe will be the next phase of value creation, one that's characterized by stronger profitability, higher cash generation, disciplined capital deployment and increased returns to our shareholder base.

If we move to Slide 5, I'm going to show you what I mean. To start, Koppers begins from a position of strength as a market leader in critical end markets. The diversity in our end markets is a strength that's often undervalued as our business risk is spread across several distinct end markets. It's this diversification that helps moderate the effects of downturns or disruptions in any one particular end market.

The vertical integration of our chemical and wood treatment business is another aspect of our model that is often misunderstood. As others in the treating industry have dealt with quality issues, we've been able to bring our direct chemical expertise to the table to assure customers that we have experts in-house to address their concerns.

And I believe it has directly led to Koppers being the preferred supplier at several major customers. And with most major investments behind us, we're primed for a breakout with a little market tailwind. But even if markets remain subdued, we have a model that can still generate cash at a rate that is top tier with our cash flow yield comfortably in double digits at our current share price.

Moving forward, each business uniquely contributes to Koppers' value creation strategy. With RPS growth being limited as a pure repair and replacement business, it's all about optimizing our cost to serve by maximizing the utilization of our asset base in order to maintain our leading market share and generate cash to deploy to PC, UIP and to shareholders.

For CM&C, the end goal of driving maximum cash flow is the same as RPS, but we'll get there by better managing the inherent risk and volatility in the business that has experienced large swings in raw material costs over time and higher operating and capital costs for safety, environmental and plant reliability.

PC and UIP are positioned as our higher growth, higher margin, less capital intensive businesses where we look to continue investing to earn greater market share that results in higher sales and increased profitability and cash.

As PC and UIP grow to make up a greater proportion of our top line, our consolidated margins and free cash flow will expand in turn.

Now if we drill down another layer on Slide 6, you can see more details on the four businesses across three segments, all of which will serve critical end markets or support essential infrastructure. And together, they provide a balanced platform for managing risk, strengthening our market position in our treating business and supporting a more diversified earnings base that smooths out the peaks and valleys of the economic cycle.

As an example, our Performance Chemicals business is the recognized market leader in developing treatment solutions for the wood preservation industry, holding 139 patents, including the patent for MicroPro, the current industry standard for residential lumber treatment.

And clearly, the cornerstone of our portfolio, PC is a global business that generate attractive high teens margins and it is a business that we intend to build around. Our utility and Industrial Products business does a bulk of its business in the U.S. but also as the leading utility pole supplier in Australia. With an attractive margin profile, our smallest geographic presence and macro demand drivers that makes this the largest growth opportunity in our portfolio, UIP is being targeted as a prime option for growth.

Our Railroad Products and Services business is a major supplier of cross ties to all 6 Class I railroads as well as commercial rail customers. And while this will never be our highest margin business, I believe we can continue to optimize it by applying our Catalyst principles, generate adequate returns and use the cash to fuel growth in PC and UIP.

And finally, our Carbon Materials and Chemicals business serves most major aluminum producers in North America, Europe and Australia, while also operating as a key supplier of creosote in the North American rail crosstie industry. And with a structurally declining coke industry in developed countries, we've reached a point where our industry needs to think hard about how we work together to remain viable for our customer base that relies so dearly upon the key products that we supply, such as creosote and carbon pitch.

We are the #1 or #2 player in most of our markets, which are heavily concentrated. And we maintain that position by delivering superior quality, service and safe operations. And the journey to our current portfolio can be explained in 3 phases as the next slide will show.

Slide 7 highlights more than a decade of deliberate actions that have transformed Koppers into the wood preservation technology leader of today. 2014 to 2020 served as the portfolio transformation phase. We began the shift away from carbon products to focus on wood preservation first by acquiring Osmose, which is now our Performance Chemicals business and also Cox Industries, which is our Utility and Industrial Products business. And during this period, we closed or sold 8 of 11 CM&C facilities. We exited production in China and continue to prune the other parts of our underperforming portfolio by selling or shutting down 5 additional operating sites.

Now the year before this transformation began, CM&C made up over 60% of our top line and over 50% of our adjusted EBITDA. And by the end of 2020, that has been flipped with PC and UIP making up over 50% of adjusted EBITDA and CM&C just over 20%. Now this happened by adding leverage, which had been as high as 5.1x on a pro forma basis, but by the end of 2020 had been reduced to 3.5x. Now 2021 to 2025 was our expand and optimize phase. And it was during this phase that we made heavy capital investments across all 4 businesses that have brought us to where we are today.

We expanded service to higher-value carbon product markets by investing in enhanced carbon products line in CM&C Denmark, while exiting the lower-value phthalic anhydride business at our Stickney, Illinois plant. We bought a crosstie procurement business, enabling us to increase profitability at our Canadian plant and built a new crosstie treating facility at North Little Rock, allowing us to close our Denver treating plant and consolidate production. We invested in our Leesville, Louisiana utility pole peeling and drying facility to better serve the Southwest market. Then we acquired the Brown Wood Preserving utility pole business, which gave us greater access to the larger Midwest market and most recently acquired the Greenhill Reload, a Doug Fir procurement business, which expanded UIP's product portfolio. Now key investments in our micronized copper production and the addition of DCOI to our industrial preservative portfolio helped PC reach new heights in profitability before taking a step back in 2025 with the loss of some market share.

Now we were on a path to reach our 2025 target of $300 million in adjusted EBITDA, but a combination of that PC market loss, the Russia and Ukraine conflict, tariffs and a generally softer demand environment in PC and UIP prevented us ultimately from reaching that goal.

It did not, however, stop us from doing what we do best, which is finding other ways to attack the challenges and thus, Catalyst was born. So as we move to the next phase of our strategy from 2026 forward, we plan to accelerate cash generation through Catalyst by capturing the full benefits of significant investments made during our expand and optimize phase. And that's what makes our investment story attractive. Since the major capital projects are complete, we can focus on further optimizing the portfolio and harvesting cash to reduce leverage and share count as we look patiently for opportunities to grow in PC and UIP.

We exceeded our initial 2025 Catalyst target of $40 million in benefits by generating $46 million in total in that year. And in 2026, we're already delivering meaningful benefits and working capital improvements. And through 2 quarters, PC and UIP make up now 2/3 of our year-to-date adjusted EBITDA and just under half of our sales, and we expect those numbers to climb in the coming years. With a track record of actively managing our portfolio, Catalyst now provides the foundation for our next phase of profit optimization and cash generation. It's a really good story.

If we turn to Slide 8, we'll get deeper into that story. We can see how Catalyst is reshaping how we operate, make decisions and deliver results. By identifying, evaluating and implementing ideas from across the organization, we are strengthening our competitive position and increasing scalability. The early successes give us more confidence in this framework. And as I stand in front of you today, we're reaffirming our commitment to generate $90 million of benefits to annual adjusted EBITDA by the end of 2028 through a combination of commercial growth and cost savings which when added to the $46 million of benefits captured in 2025, will bring total Catalyst benefits from 2025 to 2028 to $136 million.

Now beyond 2028, we will continue incorporating Catalyst into our annual planning process to drive execution performance and improve performance. Now Catalyst is not a one and done cost reduction exercise as can be seen on Slide 9.

It is how we do business across our operations and it is delivering meaningful returns. We've identified initiatives expected to generate $90 million in recurring annual adjusted EBITDA by the end of 2028 across several key areas.

In the category of commercial excellence, we are targeting to generate $40 million to $53 million by improving our

right to win through a combination of rededicating ourselves to key customers, pricing actions, building out our network to open up new regional markets and adding technology to improve our sales team's effectiveness.

The category of network rationalization, which is set to generate $15 million to $22 million of benefits always seems to get the most attention because it's the easiest to understand and monitor. We can see when production has stopped at one location, and we can just as easily tell when it's ramping up with another.

We have been operating the plant consolidation playbook for a long time with our announcements this year that will be ceasing operations at Stickney, Florence and Vance just the latest in a long line of adjusting to changes in market conditions.

Now the remaining categories of manufacturing, procurement and other cost savings are estimated to generate another $20 million to $30 million of annualized benefits. And the important point is that these, again, are recurring benefits measured against the consistent 2025 baseline, and they're helping to offset today's headwinds, which have been massive.

To date, they've enabled us to combat the challenges of a stalled housing market, a pullback in crosstie replacements and unpredictable tariff environment, inflationary costs and a carbon products market upended by two wars while also still generating historic cash flow. The value of these initiatives should become visible as markets improve and the benefits flow through on top of a healthier earnings base.

So now I want to take the opportunity on Slide 10 to dig a little deeper into an important Catalyst case study that epitomizes our mindset as we approach Catalyst, and that's that everything was fair game for evaluation. And with that in mind, we conducted a thorough review of our organization design, which was an exercise that had never been conducted before Koppers to my knowledge. And while the hard dollar benefit opportunity is important, I'm actually most excited by the doors that our redesigned organization opens for us to capture even greater value in the years to come.

We designed the organization around five guiding principles: one, centralize where scale matters; two, streamline and simplify before adding resources; three, push down out or automate transactional work; four, invest -- or five, invest where capabilities create value and align for execution.

Let me provide a couple of examples here. So a shining example of where we look to centralize where scale and standardization matter is in the financial planning and analysis or FP&A function. Our former structure at FP&A roles in some businesses, but not all, and where we had them, they reported into our business unit heads. Now this made FP&A reporting extremely difficult to standardize. So we were getting varying quality of information from each area and we had no consistent view of performance below the headline metrics that we could point to across the enterprise.

We've now addressed this with FP&A resources in each business that roll up to a corporate FP&A leader who can ensure that our One Koppers model is applied consistently across the enterprise and vastly improving the value of our reporting and analysis.

Before the change, we had a handful of analysts that operated mostly independently, providing analysis that they thought important in a format of their choice. We now have a team of professionals that provide critical strategic decision support acting as a true partner to our business leaders while adding the value of efficiency, quality, governance and scalability that comes with a centralized function.

Another example is where we are strengthening our capability or risk judgment and value matter. As we benchmarked our spend across functions, we confirmed what we had long suspected, which is we've continually underinvested in our IT resources over time. And as a result, we're leaving value on the table.

In addition to investing in a new ERP platform that we're in the process of implementing, we've added roles to bridge the divide between the businesses and IT. Now this will enable us to derive the most out of our enhanced systems, while also adding AI and data enablement capabilities to help us harness the vast possibilities that exist to work smarter, faster, safer while also spending less to do it as we increase our levels of productivity.

And the last example I'll leave you with is related to designing the organization for execution, not theoretical performance. And it's reflected in the change in responsibilities of the members of my team. Effective September 1, Stephanie Apostolou assumed the role of Chief Legal and Strategy Officer, adding oversight of Catalyst and our transformation office to her responsibilities with the rationale of creating a strong link between strategy and the execution elements connected to Catalyst.

At the same time, Jim Sullivan, who is overseeing Catalyst as our Chief Transformation Officer, has now shifted his focus to the restructuring and transformation of CM&C.

Christian Nielsen continues to lead CM&C globally and manage day-to-day operations, but Jim is overseeing the Stickney closure, the disposition of the remaining assets at Stickney and the evaluation of options to further reduce our risk and exposure in CM&C markets.

There's no one else in our organization who has that depth of experience and the fact that I specifically asked Jim to take on these responsibilities demonstrates our commitment to designing the organization for execution.

Finishing this off. Our CFO, Eric Brenner, has now added oversight of procurement and logistics to his responsibilities, which will bring a greater focus to process standardization and analytics. This will help to ensure that we're capturing the full value available across our supply chain and working capital while continuing to deliver value to our customers.

Going through the org design was an intense 6-month process that has put us in a much better position to succeed. Responsibilities have been clarified. Key capabilities have been added where lacking. Roles have been better aligned to create value and an expectation of accountability for performance is now clearly understood throughout the company.

So now I want to shift gears and give you a closer look at how each of our main businesses plan to maximize their operations to serve customers, generate results and contribute to a higher level of performance.

So on Slide 11, I'll start with a video that features Doug Fenwick, our President of Performance Chemicals, who will discuss the customer relationships, technical expertise and market leadership to drive growth in his business.

[Presentation]

Now Slide 12 shows that Performance Chemicals reported $544 million of revenue in 2025 and an 18.9% adjusted EBITDA margin. And as Doug stated, Performance Chemicals provides copper-based wood preservatives and fire retardant technologies, including MicroPro, MicroShades, DCOI, CCA and FlamePro for residential, industrial and infrastructure end markets.

Residential demand is driven primarily by repair and remodeling spending, which is driven by existing home sales and, to a lesser extent, new home construction. Obviously, the interest rate environment and consumer confidence have a lot to do with what is going on in this business and those markers haven't been in a great spot in quite some time. But the industrial drivers are healthier and as evidenced by what we're seeing in our utility business, and they're expected to remain that way over the next several years.

Bottom line is if you've ever enjoyed a summer afternoon on a backyard deck chances are, you are walking across wood that's protected by PC treatment solutions. Our technical expertise engineering support and regulatory knowledge differentiate Koppers and help drive growth, customer satisfaction and profitability.

Now continuing to Slide 13. Next up is a video featuring Jason Bakk, our Vice President of Utility and Industrial Products, who will discuss the growth opportunities and competitive advantages driving this business.

[Presentation]

Now as outlined on Slide 14, our UIP business generated $305 million of revenue in 2025, which was an increase of 5.2% year-over-year. UIP supplies pressure-treated transmission and distribution poles to electric and telecommunications utilities. And our integrated supply chain with preservatives produced internally by PC and CM&C, give UIP customers the added benefit of surety of supply. And it also provides us a friendly conduit to others in the industry, which, in many cases, provides an inside edge when it comes to considering consolidation opportunities.

As a leading utility pole supplier in the U.S. and the largest utility pole supplier in Australia, UIP is the one business where we hold less than 30% market share in our largest market. So we have an opportunity to grow through targeted expansion in geographies that we know well through our other businesses.

In terms of pure market demand, grid modernization and AI-related power needs have created a multiyear growth opportunity, which we believe we can participate in, while also growing our footprint and capabilities to serve other parts of the U.S. And while the pace of data center development may vary, the underlying demand for grid expansion remains a compelling growth opportunity that isn't going away anytime soon.

So next up on Slide 15 is Travis Gross, our Vice President of Railroad Products and Services and he's going to talk about the customer relationships, competitive strengths and strategic actions that drive this business forward.

[Presentation]

So going to Slide 16, we see that RPS represents our largest topline business at $622 million of revenue in 2025. And our product portfolio includes treated and untreated railroad crossties, rail joint bars and crosstie recovery services, which serves several aspects of our customers' needs. Demand is driven by railroad maintenance of way spending, which is recurring and replacement based rather than tied to new construction plus ongoing transit investment.

Our customers include Class I short line and commercial railroads as well as transit systems, Class I railroads purchased approximately 70% of all crossties produced in the U.S. and Canada, and Koppers remains the largest supplier of crossties to the Class I railroads in North America, supplying all six.

Key strengths include a strong quality system backstopped by captive wood preservative expertise, security of supply through internally sourced creosote and logistics advantages created by plants located on the rail lines of our customers.

It may not be the most glamorous business, but it certainly remains one of the most essential for the transportation of goods and people.

So let's move to Slide 17 for a video from Christian Nielsen, our Senior Vice President of Global Carbon Materials and Chemicals, who will speak to our plans for repositioning CM&C to streamline the footprint, derisk the business and reduce volatility.

[Presentation]

Now on Slide 18, CM&C reported $409 million of revenue in 2025 and an 11.2% adjusted EBITDA margin. CM&C distills coal tar in creosote, carbon pitch and specialty chemicals. And demand is driven by a diverse set of end markets, including railroad infrastructure, aluminum production, steel manufacturing and construction activity. We serve customers across North America, Europe and Australia through a flexible supply network.

And now earlier this year, we announced the pending closure of our Stickney facility, and we're shifting production to our Nyborg, Denmark facility, which will continue to supply products to our North American customers.

Key strengths include our position as a leading supplier of creosote, multiple sourcing options and vertically integrated operations. And through the actions that we're taking to streamline the business, we expect to significantly reduce production costs and improve cash generation.

Even a legacy business like CM&C is finding new ways to operate more effectively, providing part of the foundational cash to spur growth across the wider company.

Now our business connects to and operates from our sustainability strategy as seen on Slide 19. And this strategy is built on a foundational pillars: People, Planet and Performance. And zero harm remains the cornerstone of our culture, placing the welfare of our people, the environment and the communities where we operate as our top priority.

This continued focus on the health and safety of our people led to an all-time best safety rate in 2025. And we may be a little behind so far in 2026 in terms of leading activities and serious incidents, but even with fewer hours worked year-over-year, we're holding steady on our total recordable injury rate, which is a major achievement. Now this is a never-ending push for us as we constantly strive to get to our goal of zero.

Additional training and renewed effort to drive environmental improvements are central to zero harm in 2026. Our proprietary environmental metric called TEIR, which stands for Total Environmental Incident Rate measures a combination of airborne and surface exceedances.

And as Koppers-developed tool was fully implemented in 2026 to better understand our environmental performance and assess where we can improve. And while we're relatively mature on using data to drive safety decisions and improvements, TEIR is our first step to reaching a similar level of maturity and performance on the environmental side.

Our 2025 sustainability report issued in June details our 2030 sustainability strategy. And we are proud of the progress and recognition that Koppers has achieved to date. We intentionally focused on areas that could support sustainability imperatives while providing real business value. We believe we successfully threaded that needle to focus our strategy on the highest impact goals for 2030.

Now everything I've discussed so far leads to a fundamental question, how do these actions translate into higher earnings and stronger cash flow? As shown on Slide 20, this bridge illustrates the path from our 2025 adjusted EBITDA to our directional earnings potential in 2028.

And most importantly, we are not waiting for markets to recover. While market conditions will eventually improve, our plan does not depend on that outcome. Through commercial execution, cost actions, portfolio optimization and Catalyst-driven initiatives, we are taking action today that strengthen Koppers and support our 2028 objectives.

Now the earnings gap created by the contraction of the PC business is precisely what our 2028 strategic plan is designed to address through a combination of commercial execution, market share recovery, product line rationalization and Catalyst-driven self-help initiatives, we believe we can restore that earnings power and create meaningful value for shareholders.

And the key message I want you to take away is this: The majority of the earnings improvement reflected in our 2028 outlook is expected to come from actions within our control. Market recovery and pricing represent additional upside but not the foundation of the plan.

And we spent a lot of time today discussing how we're improving the quality of our business, expanding margins, strengthening operating performance, but ultimately, value is created when those improvements translate into cash generation. After all, EBITDA is important, but cash is what provides flexibility. Cash is what allows us to reduce debt, return capital to shareholders and invest in the highest return opportunities.

And as shown on Slide 21, our plan to generate stronger cash flow begins with streamlining our operations and enhancing our business mix. We're containing SG&A expenses, optimizing capital expenditures, reducing capital -- working capital requirements and maximizing cash generation from our CM&C and RPS businesses to be redeployed.

With a clearer path to stronger cash generation, our focus shifts from creating cash to deploying it in a disciplined manner. And specifically, we intend to accelerate deleveraging through excess free cash flow, return capital to shareholders through dividends and opportunistic share repurchases, particularly while we believe our shares remain undervalued as they are today, and pursue adjacent growth opportunities by expanding PC and UIP into new markets and geographies where we see attractive risk-adjusted returns.

And what I particularly like about this framework is that it's self-reinforcing. By improving our structure and business mix, we generate more cash. That cash then strengthens the balance sheet, support shareholder returns and funds attractive growth opportunities. Those investments in turn, further improve the quality and earnings power of the portfolio.

Now the initiatives I reviewed are designed to produce measurable results, and here's what success looks like in 2028 as outlined on Slide 22. Adjusted EBITDA margins of 15% or higher, which reflects the benefits of our self-help initiatives and a stronger business mix. 3-year EPS CAGR of 10% or higher, which delivers sustained earnings growth for shareholders. Net leverage at or below 2.5x, which demonstrate continued balance sheet improvement. Free cash flow averaging $100 million annually or approximately $300 million over the '26 through '28 time period, providing the flexibility to invest in growth, reduce debt and return capital to shareholders. And PC and our RUPS business is targeted to represent 85% or more of the sales reflecting our intentional shift towards higher margin, more durable businesses.

And taken together, these outcomes would represent a fundamentally stronger Koppers, a company with higher margins, stronger cash generation, greater financial flexibility and a portfolio positioned to create sustainable long-term value.

So how do we get there? And the path forward is clear, as we can see on Slide 23. We are advancing a disciplined set of priorities designed to strengthen the business, improve performance, increase that financial flexibility and drive long-term value creation, and we're confident in our ability to deliver. The strategy is clear, the priorities are defined and our team is aligned and that brings me back to where I started today. Every new season begins with optimism, but championships aren't won on optimism alone, they're won through preparation, discipline, execution and relentless focus on the fundamentals.

And over the past several years, we've strengthened our team, we've improved our capabilities, and we've built a playbook designed to create long-term value. The preseason work is almost behind us, and now it's time to take the field.

The opportunity in front of us is significant, the strategy is clear. The groundwork has been laid. The Koppers team is ready. And as we enter the next phase of our journey, we believe our best season is still ahead of us.

With that, I'm going to turn it over to Stephanie Apostolou, our Chief Legal and Strategy Officer. Stephanie?

Thank you, Leroy. Good morning, everyone. I'm Stephanie Apostolou, Koppers' Chief Legal and Strategy Officer. I've been with the company now for 15-plus years and my key responsibilities include legal, strategic planning, the Catalyst transformation office, risk management, engineering, sustainability and the zero harm functions.

Today, as seen on Slide 24, I'll be taking you through Koppers' strategy for focused value creation. It's a cohesive story explaining how we plan to create durable value across the portfolio with a targeted strategy for each of our segments.

After that, I'm going to moderate a panel discussion where you can hear directly from our business leaders about the macro factors impacting each of their businesses, the opportunities we see ahead and how we're using catalyst to drive execution towards our 2028 goals.

Now the strategy summarized here on Slide 25 are well underway and have begun to propel us towards those 2028 goals that Leroy just outlined. Our Catalyst transformation program is the engine driving consistent execution across each segment and function in our business. And each segment has a targeted strategy.

In Performance Chemicals, we're focusing on growth via new products and geographies. In UIP, we're looking for share gains and geographic expansion. RPS is maximizing cash flow through operational excellence. And CM&C is taking major actions to reduce risk, volatility and cash requirements.

These are four distinct plays under a single unified operating discipline, all driven by Catalyst and aims squarely at value creation.

Now before we go into our panel, I want to take a high-level look at each business unit starting here with PC, where we see several exciting opportunities.

First, PC is actively working on go-to-market plans for a number of new products. They have a next-generation residential wood preservative in the final stage of development and it offers improved performance and reduce copper dependency. PC is also developing fire-resistant infrastructure and building materials to meet rising demand driven by the increased prevalence of wildfires and new building code requirements out west.

We're also looking to expand PC into new growth markets. And the first example of this is our brand-new Brazil CCA manufacturing facility, which is targeted to be complete in Q1 2027.

We're also exploring adjacent chemistries and end markets that leverage PC's technical expertise in areas such as copper, biocides and other wood products.

Another differentiator for PC is its history of commercial excellence that provides for close customer relationships, which I'll explain more here as we get to Slide 27.

So how does Koppers and PC win? This shows how we turn these opportunities into a competitive advantage at PC. Our dedicated technical support and enhanced R&D capabilities deepen our partnerships by helping our customers solve product challenges and develop more cost-effective solutions. PC is not simply providing a preservative to their customers. They work with our customers on formulations, performance and process efficiency, and that deepens those core relationships and opens new opportunities.

So as we're heading into these 2027 contract renewals at PC, we believe this track record of innovation and partnership also provides an opening to retain share with existing customers and then selectively pursue further share gains. These are just a few examples of growth built on innovation, geographic expansion and commercial excellence at PC and you're going to hear more details about this shortly in our panel discussion.

Now I want to move on to UIP here on Slide 28. You see here that the U.S. wood pole market is projected to grow from about $2.2 billion in '22 and '23 to roughly $2.9 billion by 2028. And which is a 4.3% annual growth rate.

We believe that Koppers stands in the #2 position in the U.S. wood pole market with room to grow. Our primary opportunities for gaining share are concentrated mainly in the Midwest and Southwest markets in the U.S. And as you're going to hear in our discussion, we have deliberately built and bought new assets over the past several years that have established a network that allows UIP to effectively serve these markets.

A growing market plus a fragmented customer base gives us a broad runway for share gain in UIP. We have the infrastructure in place to expand UIP's reach, and we're working hard to generate the sales needed to make our path into these new regions.

Now RPS and CM&C are going to play a key role in generating cash flow over the next several years as we see here on Slide 29. RPS now features an improved streamlined portfolio after the sale of our KRS Railroad Services group and the shift in our KRR business to a recovery-only model, both in 2025.

In our core crosstie business, we're pursuing a strategy of reset and optimize as contracts with certain Class I customers come up for renewal or are open for renegotiation. And in addition, network optimizations are underway to increase utilization at our existing facilities as evidenced by the idling of our Florence plant, which we announced earlier this year.

In CM&C, we're moving to reduce risk through footprint consolidation, with phthalic anhydride production being discontinued in 2025 and now all North American supply shifting to our Nyborg, Denmark facility as we proceed with the closure of our Stickney, Illinois plant which we announced earlier this year.

We continue to expect the Stickney shutdown to generate the following benefits: $15 million to $20 million in annual adjusted EBITDA and $1 to $1.20 of annual adjusted EPS, $8 million to $15 million in lower CapEx, roughly 50% lower CM&C production costs versus 2024, and we've already seen record first half 2023 cash flow.

Essentially, we're maximizing efficiency and reducing risk in RPS and CM&C to provide the foundational cash to allow us to invest in more aggressive growth opportunities in PC and UIP.

So with that strategic framework established, I want to turn to our panel discussion featuring our four business leaders, I'm going to ask you all to please bear with us briefly as we bring them up and get this place set for our discussion. Thanks.

All right. So please let me introduce you to today's panelists. I'm going to start on my far left. We have Jason Bakk, our Vice President of Utility and Industrial Products. Here immediately to my left, we have Doug Fenwick, President of PC. Over here on my right is Travis Gross, Vice President of RPS. And on my far right is Jim Sullivan, President of Koppers Inc. Thank you all for joining this morning.

I want to start with the same question for each of you, and that is, if an investor looked at your business 3 years ago when we had our last Investor Day and compared it to today, what would be the biggest change they would see? Jason, let's start with you.

Sure. 3 years ago, investors would have seen UIP as a solid operating business with a focus on the Northeast and Southeast markets in the U.S., which, by the way, are two of the most competitive regions in North America. .

Today, you would see a very different UIP than you would have 3 years ago. Koppers has invested heavily in UIP, in its assets and its people in preparation for the demand growth we're expecting in the years to come.

Thanks, Jason. Doug, let's turn to you for that question.

Three years ago, I think PC would have been viewed as a very high-performing division of Koppers, very strong market positions. The [ share losses ] we experienced in 2025 were both challenging and quite frankly, humbling it for us, which ultimately made us a better, stronger and more customer-focused company.

Going forward. We're approaching the '27 contract negotiations with some real discipline and a commitment to deepening our partnerships. I believe we're positioned to be a long-term contributor to Koppers overall.

Great. Thanks, Doug. Travis, let's go to you next for that one.

Yes, I'd say 3 years ago, honestly, I think the investment community probably looked at RPS as an underperformer. I'm excited to say we've made a lot of meaningful changes in our operations. We're way more focused on customer economics, better project execution, improved network optimization. I think that discipline along with the investments that we've made, put us in a much stronger position moving forward.

Thanks, Travis. Okay. Now Jim, for CM&C.

Yes, sure. 3 years ago, investors would have seen CM&C coming off 1 of its best years ever, actually. It was its best year since 2018. But what was happening is we were facing some rapidly changing market dynamics. And those dynamics came in the form of reduced availability of our critical raw material under constant demand, which meant that costs went up.

So you've already heard of some of the actions that we've taken. We've already shut down the phthalic anhydride plant and our Stickney, Illinois facility, and we've announced the closure of the entire plan effective at the end of this month, and that will help offset some of these headwinds.

Thanks, Jim. I want to pivot now to get each of your takes on some of the larger macroeconomic impacts hitting your business.

So Doug, let's start with you. Tell us a bit about the markets where you play, how you see those evolving and how PC is positioned?

As Leroy mentioned in his presentation, we're a global player. We perform in almost every market around the globe. The current largest market for us is North America, and it's been relatively flat. We've been able to offset that by some share recapture in '26 and some new customer wins. We've been very proud of that.

'27 Is going to be challenging. We've got some sustained copper inflation, raw material volatility, diesel pricing, et cetera. We've been talking to our customers since the spring, we historically started talking to them in September, October, and we've managed to put together a few contracts, we're satisfied with that, but still have some work ahead of us going forward.

We're very well positioned though as far as our competition goes with our vertical copper integration, pricing discipline and our technical capabilities, that all supports our profitability and cash flow initiatives.

Industrial growth, also, as Leroy mentioned, has helped offset the flat residential market. Pole demand has been strong. Outside of our main competitor, we've been able to wrap up almost every pole manufacturer across the country as well as our introduction of DCOI. Our new industrial preservative has been very profitable for the division.

Okay. Great. Thank you, Doug. I want to turn now to Jason. Jason, we've been clear that UIP is a business we want to grow moving forward. So why are you confident that the utility pole market can support attractive growth for an extended period of time?

Yes. Great question, Stephanie. First, I'd like to say like the demand drivers are durable. And I'll start with aging infrastructure. The average useful life of a wood utility pole is approximately 50 years, plus or minus. And there's a large group of poles right now in the U.S. that are either at the 50-year mark or have passed, that need to be replaced simply because of their age. So that's a good tailwind for our business.

And then you have grid hardening, which is essentially the replacement small poles with larger, stronger poles. And this is being done in response to the increased storm activity that we've all experienced across the country. So another good tailwind to our business.

And then finally is load growth. And this is, I think, the most important contributor to our -- what we expect to see as a growing business in the years ahead. Over the last 20 years, load growth in the U.S. has been essentially flat. And now we're starting to see it increase, and it's expected to increase 2% to 3% per year, up to 2030 and probably beyond. The main driver for this is what we're all reading in the news with AI and the build-out of data centers, but you also have other contributors to power consumption, like increased manufacturing, crypto, electrification of vehicles. Again, all tailwinds for the business that we're excited about.

Thanks, Jason. I want to dig in a little deeper on that point. You mentioned data center demand. And how is that phenomenon impacting UIP specifically? Do you think it's real? Or is it overheated and hype?

No, AI demand is real. It's not hype, and it's changing the infrastructure needs across the economy. Over the last 14 years, utilities have increased their spend on CapEx every year. Last year in 2025, that investment was somewhere north of $200 billion. So again, lots of investment, it's increasing, and we expect that trend to continue.

Some prognosticators project $1.3 trillion to $1.5 trillion of CapEx investment from utilities through 2030. It's a big number. And that's not a one-for-one translation into pole demand, but it signals the major scale and duration of the investment cycle that our customers are entering.

So is UIP seeing growth from that increased utility investment yet?

Yes. I mean we're experiencing growth. We've -- we see strong demand right now. We have a very healthy backlog of orders. And like I said, utilities are preparing for the AI-driven load growth that again, we're all expecting in the years to come.

There's also another important factor that helps drive CapEx investment with utilities. And that's the rate increase approval by public utility commissions. So a utility cannot increase rates to its customers, many of us without getting approval from these commissions. And so the trend we're seeing is that these public utility commissions are starting to approve rate increases. And that ultimately leads to more CapEx investment from the utility because they're able to generate more revenue. So again, another positive tailwind that we're seeing in our business.

We have one Southeast customer who recently announced a $100 billion investment plan to build out infrastructure out to 2032, and that happened following an approval of a rate increase from a public utility commission.

So again, the industry pattern is rate approvals from these commissions lead to higher CapEx plans for the public utilities.

And one last question for Jason on this point. So how much of the opportunity do you think is underlying market growth versus Koppers' taking share? And why should our investors believe that UIP can successfully take share from established competitors?

Right. Another good question. Well, first of all, the utility pole market is expected to grow 3% annually through 2030, which will result in UIP growing its revenue in the mid-single digits.

As far as taking market share, UIP has operated in and continues to operate in the Southeast region of the United States, which is by far the most competitive region in the country and we've done it successfully. So we can take our assets and our knowledge and our experience that we've had in that we've had in the Southeast and use that to grow our business into the Midwest, into the Southwest and the Western states, which we've been doing and we'll continue to do now, especially with the growing demand.

On top of that, we have multiple treating, peeling and drying facilities located in the heart of the Southern yellow pine wood basket. And we have a strong logistics and procurement system as well.

So we've invested in all parts of the business in preparation for the expected demand. And we expect to continue to see growth from both the increase in volume and taking market share as we move into these new regions.

Thanks, Jason. That was a lot of great information, thanks.

So Travis, I want to turn to RPS now. So how should investors distinguish between the current environment you're seeing in the crosstie market and the long-term health of that market?

We're currently seeing softer crosstie demand, but in my 19 years, we have seen plenty of those purchasing cycles. So I would separate the timing of purchases from the underlying replacement need. Our customers may slow down those tie purchases temporarily. But at the end of the day, they have to replace that tie. The tie is going to age, the tie is going to wear. So ultimately, that maintenance has to happen for them to keep the network safe.

So lower purchasing today may represent deferred maintenance. And typically, what we see with deferred maintenance is higher demand in the future. So we're not attempting to predict the future. We're focused on what we can control. What we can control is our cost, our inventory management and cash generation.

So what are you and your team doing operationally Travis to prepare for that potential uptick in demand in the future?

Yes. So operationally, we're focused on staying flexible and disciplined. We're aligning our production and inventory with our current demand. We're reducing our working capital. We're managing our costs through actions like idling Florence.

But we're keeping the network ready. Our investments like North Little Rock, that provides flexibility and capacity for our network.

Catalyst provides a structure for that continuous improvement. And so when we see that deferred maintenance, create higher demand for our products in the future, we want to be ready to respond and convert that volume into cash.

Thanks, Travis. So Jim, let's talk about CM&C. You've got a number of external factors that continue to impact CM&C performance. How is Koppers is dealing with these variables?

Yes. So let's talk about the external factors first, none of which we can control. So there's three big ones, right? So the first one is the war in Europe. So the Ukraine-Russia war, what that did was it took out a significant amount of raw material from that market. And the demand for that raw material never changed. So the costs have gone up. So that's been difficult.

And then the other issue that we have on the external factors is a continual shift from -- in steelmaking production and technology. From basic oxygen furnace technology to produce steel, which produces coal tar to electric arc furnace technology, which just melt scrap steel, and there is no coal tar produced. So the availability of raw material in Europe and North America have gone down as a result of that. And once again, the demand has stayed the same, so the costs have gone up.

And the final external factor is the conflict in the Middle East. So as everybody knows, the conflict in the Middle East has rapidly escalated fuel cost, oil cost. And why that's an issue for Koppers is that some of our raw material in certain regions is indexed directly to oil costs. So as oil cost goes up, our raw material goes up. And normally, that will self-sort, but it has happened so fast that we have not been able to pass on those costs in the way of pricing to our customers as of yet.

Now to answer your question about what we're doing about it, so we've approached our customers and said, "Look, the past practice of having long-term pricing contracts, it's just got to end. The world is changing way too fast. We have to compress the timeline from when we can reset pricing." Now we are getting some -- making some ground on that, but we will have a chance to reset those contracts when it's time for them to renew.

And the final thing that we're doing is we're accelerating or expediting the closure of our Stickney, Illinois facility. So we moved that up a number of months, and we're set to be ceased distillation operations at the end of this month.

Thanks, Jim. Doug, I want to go back to you. I want to hear a little bit more from you about how innovation deepens customer relationships and creates additional avenues for growth at PC?

Sure, Stephanie. Any of you that toured our facility yesterday, can see our commitment to innovation, the investment that Koppers has made in that R&D center over the last couple of years is significant, and it's gone over very well with our customer base.

Our customers really see us as Leroy and Stephanie both said, they see us as a partner and not really as a supply partner -- as a supplier, and that goes a long way in collaboration, working with them on formulation, performance, processing efficiencies, et cetera.

And that opens up adjacent markets, new projects that we talked about yesterday that was in particular one customer that brought us a project that Doug and Jim's Group has been working on for about a year now. That provides not only an adjacent marketplace for us, but additional market share growth at that particular customer. We've got a very strong runway right now in additives, fire retardants, formulations and industrial applications.

You also mentioned in your video, Doug, the forthcoming patent expiration for MicroPro, which is PC's flagship residential product. How is PC preparing for that?

We're prepared. And again, we talked about this in our lab tour yesterday. That was one of the questions that came up.

MicroPro has been around for around 20 years now. We've enjoyed some tremendous market growth with that. It is the known standard in North America.

And while the patent expiration may create some new entrants, I believe capital, engineering expertise as well as regulatory barriers are going to create some real issues for anybody wanting to get into what's already an oversupplied market.

In addition to that, as we talked about yesterday, we have our next patented product, MicroPro XP coming in right behind it. We did introduce it to customers this year. There's tremendous interest in the product, mainly because of the reduced copper retentions in it. But our customers, as I explained yesterday, are battling with price increases this year, and they just thought it was going to be too much in order to do both a price increase and a new product introduction. But we're excited about that product line for down the road, and it's going to give us a strong hold on the market to continue.

Thank you, Doug. Travis, let's go back to you and RPS. So I know your team continues to find ways to improve performance and drive operational excellence. Can you tell us a little bit about how Catalyst has changed the way you operate?

Yes. I mean, Catalyst has really changed the way that we look at our business every single day. We approach Catalyst process with a simple mindset, find small, fix small, keep building on it. So -- we know those big improvements don't just come from one big move, where we see practical improvements show up in our business every day really across the business.

So we know that one improvement may not move the needle with those repeated small improvements across the network really tend to add up. And that Catalyst process allows us to share those good ideas across the company. So kind of become more of a common operating language for us and a way for us to continue to improve.

Do you have any examples of where a real Catalyst idea created value somewhere else in Koppers?

Yes. I think a good example comes from our Roanoke, Virginia plant. So that facility was dealing with premature pump failures. And so instead of the team just saying, well, that's a cost of doing business. They asked a question. They said, "Well, how do we identify that these pumps have problems before they fail?" So we installed what we call aftermarket pump monitors. Those pump monitors provide us with real-time and historical performance data, and it lets us know when something doesn't look right, that obviously helps us catch issues a little bit earlier, but it helps us reduce the replacement cost as well, improve that operational reliability.

So I think that's kind of a practical example of find small, fix small, but that idea was generated within RPS, but we can -- we have the ability now through our Catalyst process to share that throughout the company, and we've seen some of the benefits maybe like in Doug's business as well.

Yes, that was an interesting one. Engineering best practice really helped us at our Millington, Tennessee facility. We were having similar issues and our grinding in pump issues. And that best practice from Roanoke helped us install similar technology and eliminated some failures that we're having ahead of time as well.

Great. Maybe move on now to Jim where you've got some major projects going on and changes. Jim, pending the closure of Stickney, what benefits do you expect to realize?

Yes. So we touched on it a little bit, but the benefit from eliminating the Stickney facility and servicing out of Nyborg, we're going to reduce operating costs. I think you had it up on your slide, a 50% reduction in operating costs since 2024. So that's going to help.

But the other thing that sort of we didn't mention is that it's also going to improve the efficiency of our Nyborg facility. And the Nyborg facility is already an incredibly efficient operation. So the net result of this move is that we're going to improve profitability for CM&C.

Jim, what more can you tell us about CM&C overall moving forward?

Yes. So in the short term, we're focused on a safe closure of Stickney. Then they'll continue down the path of optimization, perhaps better said, continuous improvement, but the operators at CM&C are actually excellent. They're very good at removing cost, increasing efficiency. They're just facing some really tough market dynamics. So we're confident that we're going to be able to continue to improve.

And then the other thing we think there's going to be some strategic options. We're going to evaluate those. We'll evaluate those as it relates to us. They are going to help us serve our valuable customers better. Is it going to help improve our CM&C business or perhaps Koppers in general. The goal is improved profitability and reduced exposure to volatility.

Thanks, Jim. Jason, let's go back to you. You spoke earlier about the underlying dynamics of the pole market and Koppers' ability to win. We also talked about the additional investments that Koppers has made in UIP. Can you tell us a little bit about how those additional investments have benefited UIP's competitive position?

Yes. Sure, Stephanie. As was mentioned in Leroy's presentation, we acquired Greenhill in 2025, which procures Doug Fir poles. Doug Fir is an important addition to our portfolio. Doug Fir represents a significant percentage of overall wood utility pole sales every year. And with that acquisition now, we can generate revenue and profit from this market.

In 2024, Koppers acquired Brown Wood. Brown Wood includes a large treating facility in Northern Alabama and peeling and drying assets in Mississippi, an important acquisition for us. Brown Wood is strategically located and supports our expansion plans and provides access to UIP to key future growth markets for our business.

And then Koppers has built a greenfield site in Leesville, Louisiana, where we peel in dry poles, send them to another Koppers' location to be treated with creosote and then sell into the Southwest market, a relatively new market for our business, one that we're growing in and plan to continue to grow in, in the future.

And what's the overall outlook for that UIP expansion making an impact on our earnings, Jason?

Yes, right. So we deliberately built capabilities ahead of this growth opportunity that I've been talking about here through the presentation. And we're going to fill the network with profitable volume, finish integrating the acquired assets and use Catalyst to take cost out of the system, that will help improve margins. And we're using Catalyst now to do that. We'll continue to do so moving forward.

So our ongoing expansion effort into new markets will ultimately result in more revenue and profit for Koppers.

Thanks, Jason. Let's go back to Doug now. Doug, we talked about PC being one of our primary areas for growth. Can you tell us what PC is focused on for 2027 and how you see the growth path?

Again, outside of the significant price increase that we're going to be passing on next year, we're really focused on profitable volume growth. We're not just looking for units. We're looking for profitable volume growth going forward, where we were building market share through new customer wins as well as international growth. We think that there's some really nice underlying markets out there that we can build some significant market share going forward.

We recently, just this year, there was a bit of a surprise to us. We were able to displace one of our main competitors at a large box store retailer. I mentioned that yesterday during our tour, we were pleased with that. We see continued opportunities in that. But we're also working forward with our customers. We're trying to find customers that really value our reliability, our technical support, engineering and long-term partnerships.

Thanks, Doug. We also talk about wanting to invest in and around PC to leverage that business as a platform for growth in new markets, adjacent markets and geographies. So tell us a little bit about which adjacent markets and geographies you find most attractive and why?

We're looking at multiple bolt-ons right now. Most of them are outside of the United States, where we think, again, there's underlying demand and continue to support growth in our category.

Number one, we're looking at our two opportunities in South America, one in Asia. Our brand-new, CCA facility in Brazil, I believe that's been public news for a long time, is finally scheduled to be complete by the end of this year, early Q1 next year, just depending on some weather and climate permitting.

A lot of our analysts and investors probably don't know, but Brazil is actually our #2 profit center. It's a very strong growing marketplace for PC, and we put a lot of money effort into that facility over the last several years. It's going to be a very quick return on investment.

We currently toll blend there right now, facility north of Sao Paulo and one south of Sao Paulo. They've both been good partners with us, but any place where we can manufacture, do core manufacturing ourselves, versus toll blending is always more profitable for the division. So we're looking forward to that.

Our PC R&D center, again, that we toured yesterday, has exhibited to our customers that we are the only wood preservation company globally that's reinvesting in our industry right now. And we're continuing to review new technologies.

Obviously, copper-based solutions, which is our core, but we're also looking at biocides, material protection and wood enhancement.

Thanks, Doug. Okay. To finish up our panel today, I'd like to ask each of you to give me one sentence summarizing the single thing that you want investors to remember about your business after today. So Jason, let's start with you.

Yes, sure. I mean the work and investment that's already been done for UIP puts us in a great position to grow our revenue and increase profits over the coming years.

For PC, profitable growth. I'll repeat that again, not just growth, not just volume. We're looking for profitable growth, and we're doing that through customer relationships, very strong engineering team and our R&D breakthrough solutions.

Travis?

Yes. I'd like this group to remember that RPS is a resilient cash generator. We continue to improve through Catalyst, and we're ready to react as demand for our products changes.

Jim?

Yes. For CM&C, it's a deliberate transition towards a less volatile, less capital intense business model that will improve earnings.

All right. Thank you all for your information and insights. That concludes the panel discussion for today. I'm going to ask you all to bear with us again as we pause briefly to reset the stage and let these gentlemen exit.

Okay. Great. So to wrap things up for this portion of today's program, as you just heard from our business leaders, each segment has a key role in our next era of focused value creation, as you can see here on Slide 31.

Simply put, operational efficiencies and risk reduction in RPS and CM&C drive cash generation. Growth in PC and UIP drives earnings and Catalyst is the engine that powers execution across the whole portfolio. Taken together, these initiatives position Koppers to deliver higher profitability and long-term shareholder returns.

Thank you all for your time this morning. Next up is our Chief Financial Officer and Treasurer, Eric Brenner.

Good morning, everybody. You've heard about the quality of our market positions, the distinct role each business plays in our strategy and the way Catalyst is changing Koppers. My role is to translate that strategy into financial opportunity.

I will address where we are today, including the headwinds impacting current performance, but the focus is where we're going and what we believe Koppers is capable of by 2028.

Having joined Koppers approximately 3 months ago, I'm bringing an outside perspective, shaped by prior transformation experience. Based on what I've seen in this business I am confident that we have a clear pathway to our 2028 objectives.

Let me start on Slide 33 with a clear statement on how we view the path ahead. We plan to reach our 2028 goals by managing those items in our control. This company has a proud history of making bold moves to reshape its portfolio and aggressively reduce cost. The company-wide transformation will further strengthen execution of this strategy in ways our panel addressed today.

I was attracted to Koppers because of the company's willingness to embrace change, and I was excited to arrive in the middle of a transformation as I recently led one before. And personally, as we go through this transformation, I've seen firsthand the benefits it brings to our people, our processes and the financial returns that continue for years. We are well on our way to overperforming in the areas that everyone in this room can agree truly matter. And that's working capital efficiency, cash generation and the willingness to quickly address emerging risks in our industry.

Improvement actions are truly in flight across the entire company, creating a credible path to stronger margins and cash flow. They also help offset our current market headwinds that you heard from our panel.

In my first 3 months, I've seen firsthand how the Catalyst approach is improving our decision-making, speeding up our execution and driving urgent reactions to the problems that develop.

The plant closure of Stickney is one of the best examples with the team accelerating the closure time line by 3 months since the announcement just in May, which will move up plant cost reductions to combat the lower margin environment in CM&C.

And before moving on to the formal presentation, I wanted to share five key messages for today. First, Catalyst is our enhanced operating model. Second, we expect a structurally stronger cash flow profile as our earnings improve and the recent growth focused capital cycle moderates. Third, our capital allocation is set around clear priorities and return thresholds. Fourth, greater flexibility will allow us to explore adjacent growth, including M&A into attractive products and markets, but we will be selective and highly disciplined. And fifth, we remain laser-focused on returning capital to our shareholders.

Let's look at Koppers growth strategy with some context of historical financial performance as shown here on Slide 34. This history demonstrates both the resilience of the portfolio and the meaningful top and bottom line growth with significant expansion in our Performance Chemicals segment.

The financial trends also show that our current earnings do not represent the full potential of the business. Our trailing 12-month June '26 results capture real short-term pressure. And at the same time, I want to highlight how our trailing 12-month and year-to-date record cash flow performance shows the potential is real.

The current results are the starting point, not the destination. Today, the focus is the earnings and free cash flow potential that we are building towards for 2028.

This segment history becomes more useful when we connect it to the role each business plays going forward, starting with the next slide.

Looking at our business portfolio on Slide 35, we'll start with the RUPS segment. The turnaround in this business, as highlighted by Travis in the panel, propelled this segment to annual EBITDA record in 2025. While 2026 levels are expected to fall short of those record levels, we view this as a short-term setback and see multiple pathways to grow EBITDA in this segment.

First, as you heard from Jason, the utility pole part of the segment can drive both top and bottom line expansion with durable market demand and meaningful operating leverage with incremental volumes.

We built procurement and production capabilities before the full opportunity is visible in our EBITDA. The next phase for the RUPS segment and the utility pole part of this segment is conversion, fill the network with profitable volume, further optimize the assets to lower cost, increase the utilization and turn share gains into earnings that grow faster than revenue.

Then look at the Rail business. Rail is a resilient cash generator, as shared by Travis. Nimble enough to react to demand changes, which is improving further through the Catalyst program. Rail demand is projected to be softer here in '26, reflecting the delayed timing of purchases by our key customers, but that does not represent a disappearance of the physical replacement need. We are aligning our production and inventory today with our current demand. We're taking cost out while keeping the network ready for future growth.

This business has been further impacted here in '26 by lower pricing as we deliberately provided near-term price concessions to a number of strategic accounts to secure incremental volume for future growth.

Looking to CM&C. This segment is continuing its transition to a less capital-intensive model to lower cost and improve productivity. Closing Stickney and optimizing our supply chain are designed to preserve customer value and margin while reducing fixed cost and operating exposure going forward. As you can see from the drop in EBITDA between 2025 and '26, CM&C is working through weaker margins, pricing pressure and the mismatch in timing of sharply higher material cost associated with the Middle East conflict and flat pricing for the short term, which has limited our ability to pass through the higher raw material cost.

In the near term we are also absorbing Stickney closure costs and transition incremental costs that have also weighed on margins. Our North American sales today have included a higher proportion of noncore sales as we work to monetize inventory out of the U.S. In addition, we have and will incur additional logistics costs in the short term to maintain reliable supply to our critical North American customers during this period of transition.

To put a number to the margin challenges we see in the RUPS and CMC segments, I estimate a $45 million unfavorable annual impact to EBITDA with approximately $10 million of that related to the lower pricing in the RUPS segment, another $25 million related to the weaker CMC margins and $10 million related to higher costs due to tariffs and higher freight and logistics costs across all of our businesses.

Looking at Performance Chemicals, our most profitable segment, we see significant opportunities to expand it further. The team has reestablished commercial discipline following the '25 share disruptions. It's winning volume in a flat residential environment and pursuing expansion in a number of international growth markets, as highlighted by Doug. This is high-quality growth, not volume for volume's sake. It is also a strategic effort to improve the balance of the Performance Chemicals portfolio and reduce customer concentration.

Our trailing 12-month growth highlights our progress against these goals, and we're driven to grow this part of the business beyond the high EBITDA watermark of $143 million set in 2024. Across all of these businesses, we are not assuming these market conditions will reverse quickly. The environment may remain uncertain and dynamic. Our confidence in '28 comes from what we can control, not predicting the timing of a market recovery.

Catalyst benefits, stronger commercial execution and closure of high-cost facilities can drive meaningful earnings and cash flow improvement even if the markets do not improve. If there's one common thread of today's discussion, it is our Catalyst transformation, and it remains the most significant source of our confidence in our 2028 financial framework. It is delivering hard-fought offsets to near-term headwinds and providing a new way of working that makes the gain sustainable for the long term.

As seen on Slide 36, the quick win phase of Catalyst produced $46 million of benefits in '25 from urgent reactions to the margin hit. These gains were led by cost reduction actions with SG&A down 15% between '25 and '24 levels, with headcount down nearly 22% from the peak in 2024. The second quarter launch of the Catalyst in '25 moved us from the urgent reaction phase toward a repeatable platform for cash generation, capital efficiency and operating execution.

As the pipeline matured, the target of benefits increased from $40 million to $75 million. And today, our target now sits at $90 million of incremental recurring annual adjusted EBITDA benefits as measured against our '25 baseline volumes, cost and margins. This is fundamentally a self-help plan built to drive improvement without relying on the external environment. We have always pursued self-help opportunities, but Catalyst brought a new performance infrastructure that drives these efforts with greater consistency, speed and accountability.

I've seen firsthand how the new interfaces have sped up decision-making by making clear ownership and success criteria. And it's also brought our 4 business teams together to share best practice, leverage centralization and technology to improve customer service while lowering cost. We've already delivered $33 million of benefits here in 2026, offsetting market headwinds and have high confidence of sustaining these gains and delivering an additional $57 million of benefits by the end of 2028.

We have multiple levers across our business and across our commercial, production and procurement work streams. No single initiative drives the plan. The result will be stronger earnings and a business positioned for double-digit EPS growth. Two recent wins show why Catalyst is an operating system, not a collection of cost reduction projects, as shown on the next slide.

Slide 37 captures our first case study here that I'd like to highlight. In the rail business, we process millions of pieces of timber to create rail ties that withstand decades of weather exposure and heavy rail traffic. No 2 trees, no 2 pieces of timber are the same, yet we find ways to consistently deliver high-quality rail ties to our customers. One of our major costs is downgrading or scrapping untreated timber that do not meet our strict quality standards.

Through Catalyst, a cross-functional team set out to upgrade our inspection procedures to reduce waste and lower cost. This team built new performance dashboards, training and data analytics. The new data and common grading standards improved visibility to incoming quality, supplier performance and root causes of downgrades. With that data, work plans were established and quickly executed for each major type of loss and the result is improved yield, lower material cost and better consistency for our customers.

Our next example is on Slide 38. In indirect procurement, we replaced fragmented purchasing practices that varied across our various businesses and locations with analytics, centralized governance and a repeatable bidding process. The result is lower operating cost, a consolidated vendor base and a scalable platform for further improvements. Through this initiative, we were able to consolidate nearly $50 million of spend across our businesses.

And by doing so, we were able to lower the cost of diesel. We were able to install MRO inventory at a number of locations that improves working capital, and we standardized safety equipment that supported our sustainability goals, while also lowering cost. Both of these case studies show how the team started looking for nickels and found silver dollars along the way.

Small operational improvements create meaningful value when they are repeated across the enterprise. These are just 2 examples of nearly 500 Catalyst initiatives currently underway. Looking at Catalyst from a financial perspective on Slide 39, we see our bridge to our potential 2028 EBITDA margin. Our in-flight improvement initiatives support 280 basis points of margin expansion by 2028, and that is our path to EBITDA margin greater than 15% and greater than 10% annual EPS growth.

As I mentioned previously, the current market headwinds in RUPS and CMC are driving lower margins today, but we expect those to moderate in the future. In particular, we expect a modest recovery, primarily in the CMC and RUPS segments from our current '26 levels. In addition, our improvement initiatives have partially offset these impacts in the short term and will benefit us in all market conditions.

Our situation reminds me of walking up a down escalator. We have a clear goal to get to the top and are exerting effort to keep pace and moving ahead of that downward momentum. But as we fight and get to the top, you will see us pick up speed, and we can really make progress against our goals when we hit that flat top. Driving in our favor to support these goals include our underway closure of Stickney with a near-term benefit to our cost. We have other plant and network optimizations in flight that are being completed this year.

We also have supply chain and procurement targets underway like the case study that I shared. And as you heard about from our panel, we are also focused on securing commercial gains to grow the top line. And our commercial plan includes leverage from identified share opportunities as well as our robust installed capacity in the key markets that we serve. Improving earnings is only one part of the objective.

Slide 40 shows that structural improvements in cash flow provide greater financial flexibility and support meaningful shareholder returns. Our 2026 free cash flow run rate is above target, led by improving working capital efficiency in '26. In addition, in prior years, we've derisked our pension plans, reducing that cash obligation. We also see our cash model improving as the growth investment cycle has been substantially completed.

Future capital requirements are lower and the '26 through '28 cash taxes are expected to remain significantly below our book tax rate of 28%. In the near term, our cash flow will be restricted by our in-flight closure activities. Restructuring and asset closure costs are expected to have a cash impact of approximately $80 million over the next 3-year period. I know this is a very large cost, but this is a very high-return project that improves utilization, safety and cost while lowering our capital requirements going forward.

Structural drivers such as improved earnings, lower CapEx and better conversion create a pathway to average annual cash flow of greater than $100 million with further upside as our Catalyst benefits are realized and the Stickney asset remediation costs subside. With a stronger cash flow profile taking shape, let me turn to how do we intend to deploy the cash. As this audience knows, greater cash generation creates opportunity only when paired with discipline.

Our first priority will remain safe and reliable operations. As seen on Slide 41, future capital spending is expected to be in the range of 2% to 3% of revenue going forward, down from an average of nearly 5% in the period of 2021 to 2025. This is a reduction and lower growth capital following the significant investments in that period as well as lower maintenance CapEx as a result of our in-flight network optimization efforts.

In particular, the closure of Stickney alone removes $8 million to $15 million per year of required maintenance CapEx. After maintaining our assets, we will balance the deployment of discretionary cash between shareholder returns, deleveraging and selective growth. We are targeting approximately 50% of future free cash flow for shareholders, subject to our revolving credit facility terms and business needs. The mix will flex with leverage, valuation and the environment.

Every dollar must compete for the best risk-adjusted return. We've returned over $187 million to shareholders through dividends and share repurchases. As shown on Slide 42, the dividend has grown 10% annually for 4 consecutive years and repurchases remain a meaningful tool for per share value creation. A stronger free cash flow profile should allow us to substantially return cash going forward.

We will remain valuation sensitive, balance returns with leverage reduction and preserve capacity for investments that can create long-term value. Increased cash is not intended to accumulate without purpose. It will be deployed against a clear hierarchy with accountability for returns. Slide 43 illustrates that improved cash flow has enabled debt repayment while we've also returned capital to shareholders.

We remain committed to a leverage target of 2 to 3x. We may temporarily exceed this leverage range for the right acquisition, but only when the strategic logic is compelling, returns meet our thresholds, and there's a clear path back to our target leverage. The balance sheet target is about financial flexibility and the freedom to act as opportunities appear. The debt finance Brown Wood acquisition pushed up debt and leverage ratios, but it brought a strategic asset, enabling our segment growth plans with new access to new markets in the utility pole market.

Since the Brown Wood acquisition, we've been working on improvement in leverage through both the expansion of earnings and repaying debt. I'd also like to highlight that at the end of June, we had $390 million of liquidity and no significant near-term debt maturities. As cash generation and balance sheet flexibility improve, we can be more active in exploring investments in new products and markets.

As shown on Slide 44, our focus includes geographic expansion for our UIP and Performance Chemicals business. We will look to expand our portfolio in the Performance Chemicals space, and it will evaluate strategic bolt-ons supporting the core business. We will be disciplined and measure everything against the criteria laid out on this page. An opportunity must fit our capabilities and culture, strengthen the leadership position, add a product or location value and offer clear synergies. We will compare any acquisition against organic alternatives.

Financially, we target an IRR greater than 12%, EPS accretion in year 1 or 2 and an opportunity that will improve our growth and margin quality going forward. The test for any potential deal is not whether it makes Koppers bigger, but it is whether it earns an attractive return and improves the portfolio over the long term. Having gone through our business and our look ahead, I want to reaffirm our financial targets for 2028.

As captured on Slide 45, those goals include adjusted EBITDA margin greater than 15%, 3-year adjusted EPS compound annual growth of greater than 10%, net leverage below 2.5x, free cash flow that averages $100 million per year and to signal a shift in our portfolio, we are targeting 85% of sales from our PC and RUPS segments. The drivers behind these goals are clear today, an in-flight transformation, a focused portfolio, recurring replacement demand, favorable infrastructure investment in the markets we serve as well as a number of growth opportunities ahead.

For these goals, we do not require any further M&A or divestitures and should markets strengthen beyond the modest recovery I highlighted before, that would only provide additional upside for our '28 objectives. As I wrap up, I wanted to end where I began. The current environment contains real headwinds, and we are addressing them quickly and directly. But current conditions do not define the earnings potential of Koppers.

Our focus on execution is building momentum across the business and strengthening our confidence in our ability to deliver against these '28 objectives. Our algorithm is simple: Self-help expands margins, higher earnings and lower CapEx increases cash, cash funds returns, deleveraging and disciplined growth. And those choices compound for per share value creation. This is the next chapter of Koppers, higher earnings, increased cash, enhanced shareholder value.

As the newest member of the leadership team, I am energized by the opportunity and confident on our path to our '28 targets. Thank you very much for joining us today. And I would now like to turn today's events back over to Leroy.

Thank you, Eric. We've thrown a lot at you so far this morning, but we are going to open it up for Q&A right now. While they assemble the question roster virtually, I'll ask anybody in the room who has a question, maybe raise your hand, and we have someone with a microphone who will come around to have you ask it. So I'll pause and let them prompt for questions online.

[Operator Instructions].

Okay. So while they're assembling the questions online, yes, Michael, you have a question?

I do. You've mentioned your leverage target that you'd like to get down to 2.5x. I believe you're in the nature of 3.5x now. We're seeing interest rates go up, likely to go up further. Do you see -- foresee accelerating debt paydown? If you could just have any comments on that.

Yes. I mean -- so right now, we -- as we talked about, right, we're deploying capital to share repurchases. We have a dividend that's in place. I think we have our capital expenditures pretty much under control with no near-term big movers there. So really, everything in excess of that has been going to debt pay down. I think we'll continue to evaluate that as time goes on. But we're going to be able to make meaningful progress by still being able to deploy capital to shareholders through those share repurchases as well as paying down debt.

I think if we -- if it moves in terms of the cash that we're generating more towards debt repayment versus share repurchase, I don't think it's going to be meaningful in the greater context. We are limited through our credit facilities in terms of what we're able to actually deploy towards share repurchases, and it's around $50 million a year. So we have a natural cap that still gives us plenty of room for substantial debt reduction on an annual basis. So it could cause us to push a little bit more over there, but I wouldn't say it's anything dramatic from my standpoint at this point.

Other questions in the room? Yes, Jim?

Leroy, this might be for Jim or Travis, but I understand the profitability increase at the CMC business by consolidating production to Denmark. But is there any margin implication on the RUPS business with the transportation cost of creosote back to North America?

Yes. Do you want to come up and talk about that, Jim?

Thanks, Jim. So the answer is -- short answer is no, right? So because the net result of all these changes is improved profitability. We're pulling out costs. We're not going to add costs. There is incremental logistics costs, but that's more than offset by the closure of the Stickney, facility.

Do we have anything online? Okay, we have another one in the room. Yes.

Around the geographic expansion you guys highlighted, what was it about those specific markets that made them attractive? And how do you guys evaluate where to expand next?

So I'll let Doug come up and address PC. I'll just say because I'll respond to the UIP -- come on up here, Doug. I'll respond to the UIP one because it's -- I think it's pretty simple and straightforward, right? Again, we hold significant market share east of the Mississippi. There's a big market, as you saw up on that slide, West.

And we had little presence there just a few years ago. And so we're building a presence -- we know we have the capabilities to compete for market share. And so to us, it's an untapped market and one that we know well. So for us, it was a no-brainer, and that's one of the easier decisions. As it relates to Doug's business and it's more geographic outside of the U.S., I'll let you comment as to sort of what you see as the attraction.

The 2 markets we've been talking about mentioned yesterday as well as today, Brazil is a massively growing marketplace for us. It's a huge agricultural center, very big in beef and cattle production and lots of export opportunities for that country going forward. It's a massive land mass, lots of unexplored areas that they're building into farming. The government has been very proactive in land grants and building out of ranches. So we see a real opportunity in that agricultural spec going forward.

Asia has been a growing marketplace for us. We've played in that market for years. Where it's really catching up to us now is on freight. We used to be able to ship a container there for around $3,000. It's up to around $7,000 a container now. So we're shipping Asian material out of our Millington, Tennessee facility, our Rock Hill facility at great expense by looking at a facility in Asia, which we've been looking at hard for about a year now. We can cut down our logistics costs significantly as well as our raw material importing costs from different countries that we get our raw material costs -- raw material supply from.

Other questions in the room or online? Yes, Jim?

Is there, Leroy, one aspect of Catalyst that you're most excited about that you feel is underappreciated right now by the market, by the Street?

Gosh, Jim, that's a great question. It's a tough answer, right, because as we show up again in the presentation, significant benefits that we've already realized as well as benefits that we expect to realize going forward. But when you look at the overall results, right, they haven't moved up. In fact, they've come down a little bit, right, because of the significant headwinds that we've been seeing.

I think the magic of Catalyst is that there's no silver bullet in that whole process. Yes, you have a big initiative like the Stickney closure that has some significant dollars attached to it, but it really is hundreds and hundreds of projects that range anywhere from $50,000 on up. Even the org design, right, $3 million to $5 million out of $136 million over that time period, it's meaningful because it's -- at least it's in the millions, but it would be one of actually the bigger returns.

But the magic of Catalyst is it is broad-based, and it is just across the entire enterprise, so many of these smaller projects that just stack up, stack up, stack up. And again, what really excites me is the position it puts us in when we just get just a little bit of wind at our backs. And I've been in this role for 12 years, been with the company for 16, and I've seen the ups and downs. And there's been times when we've been -- it seems like we're walking into a hurricane and other times when, again, we have a lot of wind at our backs.

This is probably the longest prolonged period of time that I've seen where we've just seen general market stagnation. And so we're doing everything we can, as Eric aptly put it, right, walking up a down escalator. That's the way it feels like. But man, I mean, the structural improvements that we're making is just going to put us in a position to really see a step change when we see just a little bit of stuff coming back the other way.

So I tell our team and teams below them, stay focused, stay positive because things will turn. And when they do, we're going to see a release that is actually going to be quite compelling.

So, yes, in the back, yes, Gary.

With what you're doing in the utility pole expansion in the Southeast or Southwest, right? Can you give us an early read on how successful you may be taking some market share? And also, what gives you the confidence that you can gain that share?

Sure. I'll let Jason respond to that.

Yes, right. So it's a new market for UIP that we're expanding to in the Southwest. We have been gaining market share, since we've entered that market. And we feel confident that, that market will continue to grow. A big part of that market is the oil fields. They utilize the creosote poles. And so that business is doing well.

But something else we've noticed in the Southwest is that there's a significant demand for DCOI-treated poles. And we've seen growth there with that particular treatment type. So again, like both creosote- treated poles and DCOI-treated poles are in demand in that region, and we make both, and we feel pretty confident that we're going to grab market share.

Anything further? I do want to add an addendum to, Michael, your question earlier again about what would cause us to think about allocating more dollars towards debt repayment versus returning capital to shareholders.

The piece that I didn't mention, right, is we believe and we continue to believe that the stock is undervalued. We are generating double-digit free cash flow yield, which we expect to be able to do that sustainably at current share prices. So look, as share price moves up, and we see that free cash flow yield come back down, maybe down into the higher mid-single digits, that may cause us to think about how much we might allocate there versus debt reduction or something like that.

So we're not in a vacuum, and I don't -- and so there's multiple things at play there, but that would be one of the other things that would cause us to think differently about that. But as it relates to rates and where they kind of -- what happened yesterday versus what we see on the horizon, we still think that our debt load is more than manageable. And there is a clear path towards paying down debt over time that's going to just naturally bring our interest costs down as well.

So, okay, I think we're probably out of questions at this point. I don't think we have anything online, right? So with that, I thank you all for taking the time for those again who traveled down here to Atlanta, I appreciate you taking time out of your schedule to do that. I know travel these days is not easy. For those who chose to join us online, thank you for doing that. We really appreciate your interest in Koppers.

Again, we are geared up and ready to perform, take the field, as I said earlier. And we believe that the season we have in front of us is going to be a special one. So we look forward to telling you more about it and giving you updates on our progress as we go forward. But thank you for your time and attention today, and have a great rest of your day. Thank you, everyone.

you I'm going to go ahead and do it. Welcome to COPPA's second quarter 2026 earnings conference call and webcast. At this time, all participants are in a listen-only mode. If you need assistance, please alert a conference specialist by pressing star followed by zero. Following the presentation, instructions will be given for the question and answer session. Please note today's event is being recorded.

And at this time, I'd like to turn the floor over to Quinn McGuire. Please go ahead. Thanks, and good morning. I'm Quinn McGuire, Vice President of Investor Relations. Welcome to our second quarter 2026 Earnings Conference call. We issued our press release earlier today. You can 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 is being broadcast live on our website and a recording of this call will be available on our website for replay through September 6, 2026. 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 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 conclusion 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.

Also, references may 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 and Chair of COPPERS, and Eric Brenner, Chief Financial Officer officer and treasurer. At this time, I'll turn the discussion over to Leroy. Thank you, Quinn. Good morning, everyone. Thank you for joining us today.

The second quarter represented another important step forward in the execution of our transformation strategy. During the quarter, we continue to drive significant cash generation, improve our operating footprint, and advance several initiatives that we believe will create meaningful shareholder value over the long term. Most notably, in May we announced the decision to discontinue distillation and chemical operations at our sticking facility and transition those activities to our Nyborg, Denmark facility as referenced on page 4. Since then, we completed several significant milestones in the project, and we're now accelerating the closure by a quarter with a new target date of September 30, 2026, for the end of distillation activity at Stickney. This action contributed to significant non-cash charges in the quarter that impacted our reported net loss and gap earnings per share. This action represents exactly the type of difficult but disciplined decision required to optimize our asset network and improve the long-term earnings power of the company. We continue to expect this initiative to generate annual adjusted EBITDA benefits of approximately $15 to $20 million, improve adjusted earnings per share by roughly $1 to $1.20 per share annually, and reduce annual capital spending requirements going forward.

Let's now move to page 5, which outlines our results for the second quarter, including adjusted EBITDA of $71 million, a 13.7% adjusted EBITDA margin, and $1.37 in adjusted earnings per share. Second quarter sales were $520 million, an increase of 3% compared with the prior year, led by volume growth in our performance chemicals and utility pole businesses. While we were pleased with our top line performance, profitability was impacted by a challenging cost environment throughout the quarter. Coal tar costs increased approximately 12% year over year and 15% sequentially, while freight and logistics expenses also moved higher as energy markets and transportation networks remained volatile. These pressures were most pronounced within our carbon materials and chemicals business and portions of our railroad and utility products and services segment. Now, as we've discussed previously, there's often a timing lag between when these cost increases are incurred and when they are fully recovered through contractual mechanisms, pricing actions, and product mix improvements. We're actively working with customers across our portfolio to recover these higher costs and have historically demonstrated our ability to do so over time.

Despite these headwinds, our teams remain focused on execution. Through productivity initiatives, network optimization efforts, and disciplined cost management, we were able to offset a meaningful portion of the inflationary pressure and deliver adjusted EBITDA of $71 million during the quarter. Our focus on cash generation continued to produce meaningful results. Operating cash flow for the first six months of the year was a record $96 million compared with $28 million in the prior year period. Free cash flow for the same period totaled a record $73 million, demonstrating the benefits of our inventory alignment efforts and operational improvements across the organization. Our capital allocation priorities remain unchanged. We're continuing to invest in the business, reduce debt levels, and return capital to shareholders.

During the first half of the year, we returned $47 million to our shareholders through share repurchases and our dividend program, while also reducing debt by $22 million. We believe the actions we're taking today better position COPPA to deliver stronger returns and create long-term value for shareholders. And to further support these efforts, we're implementing a realignment of roles and responsibilities among our leadership team to further enhance our performance and culture. Effective September 1st, Stephanie Apostoli will be taking on the role of Chief Legal and Strategy Officer, adding oversight of Catalyst, our transformation office, to her responsibilities in order to strengthen the link between strategy and execution. Coinciding with that change, Jim Sullivan is shifting his focus from our broader enterprise-wide transformation efforts to more specifically owning the restructuring and transformation efforts of CMC. Christian Nielsen remains the global leader of CMC in running the day-to-day operations. Jim will own oversight of the STICNI closure, disposition of the remaining STICNI assets, and sourcing, evaluation, and recommendation of our options to reduce our risk and exposure in the CMC markets.

These changes in our operating model will ensure that we're better aligned to execute our strategy, operate more effectively as one enterprise, and strengthen overall performance across the organization. Our broader outlook for the business remains intact. The essential infrastructure markets we serve continue to benefit from long-term replacement and maintenance cycles, and our in-flight transformation initiatives continue to improve the quality, profitability, and cash generation characteristics of our portfolio. While demand remains uneven across certain end markets, we are encouraged by the momentum in markets served by performance chemicals, the strength of utility infrastructure demand, and the progress we're making against our catalyst transformation objectives. We remain committed to our long-term targets of generating greater than 10% adjusted EPS CAGR, more than $300 million of cumulative free cash flow through 2028, and taking the company to a sustainable mid-teens EBITDA margin profile. Next, I want to thank our employees around the world for their continued commitment to safety, operational excellence, and customer service. As seen on page 6, 22 of our 40 operating locations worked injury-free in the second quarter, and we remain committed to our zero-harm vision as the foundation of everything we do.

So turning to page eight, we issued our 2025 Corporate Sustainability Report detailing the company's progress in advancing its sustainability goals and introducing the framework for our refreshed 2030 sustainability strategy, focusing on people, climate and energy, products, and supply chain. Copper's team has embedded sustainability into our culture and core business processes, enabling us to better respond to changing market dynamics and customer expectations while supporting long-term resilience amid our continued evolution. For more information, please use the QR code to access this report. As shown on page 9, Copper has gained additional recognition by being named to Time Magazine's listing of America's best companies for 2026. Moving on to page 10, COPRS will be hosting an investor day on Thursday, September 17th in Atlanta. mark your calendars and plan to join us for our investor day and related activities. I'll return in a bit to provide my view on how we're seeing the current year within each business while also reviewing our outlook for the remainder of 2026. But first, I'd like to formally introduce our new Chief Financial Officer and Treasurer, Eric Brenner, who joined COPRS in late May.

Mark has extensive experience in the chemicals and manufacturing sectors, combined with his proven ability to drive capital deployment. operational excellence, and strategic transformation. Please join me in welcoming Eric to the COPRES team. Now I will turn the call over to him to speak in more detail on our second quarter financial performance. Eric?.

Thanks, Leroy. Before discussing the quarter, I want to start by thanking Brad Pierce, our Chief Accounting Officer and the entire finance team for their support throughout my transition. Over the past two months, I've had the opportunity to spend time with our leadership team, visit operations, meet employees across the organization, and engage with investors. What has stood out most to me is the strength of the culture, our commitment to safety and sustainability, as well as the dedication of our people serving our customers every day. I joined Coppers because I believe we are really well positioned. We have leading positions in the markets we serve, and we have a robust $90 million pipeline of improvement initiatives that can unlock significant value through capturing above market growth in the utility and performance chemicals businesses, optimizing our production network, and stepping up our performance and culture. I have seen firsthand a team that is focused on execution and committed to creating long-term value. With that, let me turn to our results for the quarter.

I'll begin with the consolidated results, then cover segment performance, cash flow, and capital allocation before turning the call back to Leroy. As shown on slide 12, second quarter net sales were $520 million, up $15 million or 3% from the prior year quarter. excluding the net unfavorable $16 million impact of our 2025 acquisitions, divestitures, and product line rationalizations, as well as a favorable currency conversion effect of $7 million, net sales increased $25 million, or 5.1%. The increase was driven primarily by growth in our performance chemicals business and higher utility pool volumes. partly offset by unfavorable pricing and sales mix in the RUPS segment. On slide 13, adjusted EBITDA was $71 million, down $6 million, or 7.9% from the prior year quarter. This decrease was driven by higher raw material costs, unfavorable pricing and RUPS, higher freight and legal costs, as well as the impact of the 2020-2021 year. 2025 divestitures. These unfavorable changes were partially offset by lower operating costs and improved throughput from our network optimization efforts. Turning briefly to cash flow, operating cash flow for the six months ended June 30th was a record $96 million compared to $28 million in the prior year period.

The improvement was driven primarily by working capital gains as we deliberately aligned inventories with forecasted demand and leveraged our production network optimization efforts. The timing of the quarter end also favorably impacted our change in working capital in Q2 of 26. In addition, working capital in 25 was negatively impacted by approximately $14 million of pension funding related to the US pension plan de-risking activities. Free cash flow was also a record at $73 million compared to $1 million in the prior year period. Now, looking to segment performance, I'll begin with our railroad and utility segment on slide 14. RUP's second quarter sales totaled $246 million compared to $250 million in the prior year quarter. Excluding the impact of acquisitions, divestitures, and foreign currency, sales increased 2% led by volume growth.

The sale of our railroad services business in the third quarter of 2025 reduced sales by $12 million year over year. We also experienced price decreases in multiple markets, primarily in cross-ties. As mentioned earlier in the year, we made certain price concessions in 26 in order to secure additional contractual commitments. These headwinds were partly offset by approximately 16% volume growth in the North America utility pole business, including the acquisition of a pole procurement business in the western U.S., and by approximately 2% higher cross-tie volume year over year. Rupp's delivered adjusted EBITDA of $26 million in the second quarter compared to $32 million in the prior year period. Profitability declined due to higher raw material cost and lower maintenance of weigh activity, primarily related to the sale of the railroad service business. Net sales price decreases and unfavorable sales mix were partly offset by higher sales volumes in the utility pole business.

We continue to make progress moving our Florence cross-tie and our Vance utility pool production to other facilities to improve the RUPS overall cost position for 2027. Turning to slide 15, our performance chemicals business reported second quarter sales of $168 million, up from $151 million in the prior year quarter. Excluding favorable foreign currency changes of $2 million, sales increased 10%. We saw strong volume gains in all regions, including 11% sales growth in the Americas, excluding foreign currency impact, with market share gains in an otherwise flat demand environment. Sales in Australasia increased 26% year over year. These volume gains were partly offset by lower pricing, primarily in Europe. Adjusted EBITDA for the PC business increased to $38 million in the second quarter, compared with $29 million in the prior year quarter.

The 31% increase was driven by higher sales volumes and lower material cost. Note that the impact of increased copper cost was partially by our copper hedging program. These benefits were also partially offset by higher logistics expense. Slide 16 shows that the CMC sales reached $106 million in the second quarter, compared to $104 million in the prior year period. Excluding the impact of the thalic shutdown in foreign currency, sales increased 4%, driven by higher volumes, primarily in Australasia. We saw volume and price increases for carbon black feedstock and volume increases for carbon pitch. However, global prices for carbon pitch declined by 2% driven by market dynamics, particularly in Australasia. foreign currency changes from international markets had a favorable impact on sales by $4 million.

Adjusted EBITDA for CMC in the second quarter was $8 million compared to $17 million in the prior year quarter. Profitability decreased due to higher raw material, operating, and SG&A expenses of $9 million, partly offset by cost savings from discontinuing our phallic production. As additional context in the market dynamics, average pricing for major products increased by 7%, while average coal tar costs increased by 15% compared to the first quarter of 2026. Compared with the second quarter of 2025, average pricing for major products was lower by 3%, while average coal tar cost increased by 12%. As shown on slide 18, we continue to take a balanced approach to capital allocation. of the $96 million of cash generated by operations, approximately 25% was reinvested back into the business. 50% was returned to our shareholders through dividends and share repurchases, and 25% was used to repay debt. Year to date, we spent $24 million on capital expenditures, and we continue to anticipate total gross capital expenditures of $55 million for the full year. Share repurchases in the first half totaled approximately 44 million, including shares withheld for tax obligations under incentive stock plans. we have approximately $30 million remaining under our $100 million repurchase authorization.

We also continue to return capital to shareholders through our quarterly dividend of $0.09 per share. At June 30th, we had $390 million in available liquidity and $857 million of net debt, representing a net leverage ratio of 3.5 times. We remain focused on our long-term goal of reducing the net leverage ratio to 2 to 3 times. As highlighted on slide 19, our board of directors declared a quarterly cash dividend on August 5th of 9 cents per share, reflecting a 12.5% increase from the prior year. While future dividends remain subject to ongoing board approval, maintaining a quarterly dividend at this rate would result in an annual dividend of $0.36 per share for 2026. In summary, our second quarter results showed solid sales growth, record year-to-date operating cash flow and free cash flow, and continued discipline in capital allocation. We remain focused on delivering for our customers, as well as safe and reliable operations, while executing the actions necessary to improve margins, and cash flows.

With that, I'll turn the call back over to Leroy for additional commentary.

Thanks, Eric. I'll spend the next few minutes on what we're seeing across our major end markets, how those views have evolved since the first quarter, and how they are informing our outlook for the remainder of 2026. While the macro environment remains uneven, we continue to see clear areas of resilience and opportunity, particularly in the two businesses that are fueling our evolution to a higher margin, stronger cash flow portfolio, performance chemicals, and utility and industrial products. We'll start with performance chemicals on page 21. As expected, overall residential treated wood demand has remained relatively flat. That said, our PEC business delivered year-over-year volume increases led by market share gains and continued industrial demand. This volume growth reinforces the strength of our leading market position and recognition of our reputation for innovation in a market that is not broadly expanding. The housing backdrop remains challenging overall.

The national average 30-year fixed mortgage rate was 6.76% as of July 31st, marking a 12-month high. Existing home sales declined 2.4% month over month while increasing 2.8% year over year, and the National Association of Realtors' current force forecast continues to estimate a 4% increase in existing home sales for 2026. At the same time, the leading indicator of remodeling activity now forecasts renovation and repair spending growth to slow to a half percent in the second quarter of 2027. Reduced housing starts and the persistent economic uncertainty are continuing to limit gains in remodeling spending. On the cost side, copper prices remain at historical highs and are forecast to stay at $6 per pound or higher. that will require meaningful price increases in 2027 as the remainder of our copper hedges for 2026 roll off. In addition, the Iran conflict and the changing tariff environment are creating added volatility around input costs. As a result, my takeaway for PEC is this.

Residential demand remains steady but not growing. Share gains are helping offset a flat residential market, and we are preparing for the pricing actions needed to address sustained copper inflation and a volatile cost environment for our remaining raw materials. Moving to utility and industrial products on page 22. This business remains one of the more constructive parts of our portfolio. Organic demand was up 12% in the second quarter and 10.5% year to date compared with the prior year periods. Volumes also benefited from our new Douglas Fir supply assets, which are helping to increase our market reach and improve our access to fiber. Gross margins improved in the second quarter, although they remain under pressure from higher fiber and diesel prices, while pricing has stayed relatively flat.

Despite a higher reallocation of corporate overhead expenses to UIP, second quarter profitability still exceeded the prior year quarter. Market sentiment remains bullish for the balance of 2026, primarily driven by the continued build-out of AI infrastructure, which is contributing to increased electricity demand. The investor-owned utility market remains strong, and we expect that strength to continue into 2027. constraint regarding fiber availability remains, particularly because demand is concentrated in a relatively narrow range of pole classes and lengths. We're also monitoring raw material inflation risk. Forest harvesting has slowed as lumber demand has weakened, and pulp and paper mill closures are putting additional pressure on supply. Overall, however, this is a strong market for coppers, and we remain focused on capturing that demand while actively managing the cost side of the equation. Turning to page 23, in railroad products and services, the market remains varied.

In the second quarter, an unfavorable mix in lower average pricing more than offset the benefit from higher year-over-year volumes. Commercial sales backlog remains solid for the second half of 2026, providing a partial offset to the pullback in Class 1 volumes and improving our visibility for near-term revenue. That's when railroads have tightened their capital budgets during the quarter, which reduced treated time procurement volumes and compressed order timelines across their networks. created a more challenging demand environment for treated ties. We also see some positive indicators. Rail shipment strengthened during the second quarter with North American rail traffic up 3% year-over-year through late June and car loads up 2.5% in May, which marked the fifth consecutive monthly gain. Now the pullback in Class I demand is having a negative impact upstream, however, particularly on sawmills. Reduced production and widespread mill closures are affecting the hardwood supply base.

Recent sawmill closures removed an estimated 100 million board feet of industry capacity, which equates to roughly 4.5 million cross-tie equivalents. Long-term hardwood supply and pricing remain uncertain as these closures accelerate. On the operational side, we are making steady progress. Consolidated working capital improvement was largely driven by RPS, with the wind down of our Florence plant as a main contributor. In addition, second quarter operating expense was the lowest it has been since the second quarter of 2022, with the Florence consolidation on pace to deliver expected benefits. To summarize, while the Class I market is pressured in the near term, we have secured a strong backlog of business that will drive profitability higher as we continue to realize operating improvements from our consolidation actions. Moving to carbon materials and chemicals on page 24, globally, carbon markets remain volatile.

The Middle East conflict is continuing to drive oil and tar prices higher, and aluminum prices have risen steadily to approximately $3,600 per metric ton, more than 20% above first quarter levels. Several Middle Eastern aluminum producers are operating at reduced throughput, creating an opportunity for producers in Australia, Europe, and North America to increase production and supply. The financial impact on CMC from the spike in oil prices during the second quarter was approximately $2.3 million, with another $4.6 million impact expected in the second half of 2026. The most important operational update is the acceleration and ceasing production at our facility located in Stickney, Illinois. We've moved up our previously communicated target with the discontinuation of distillation now expected by September 30, 2026. We recently overcame a potential hurdle by extending the collective bargaining agreement with the STICNE workforce through June 2027, as we will need key personnel during post-production activities. Our new US terminal is operating as planned, receiving its first shipment and delivering its first rail car to our customer.

Copper now supplies both pitch and creosote oil from Europe to the US market. This capability provides a competitive advantage over many European and US competitors who are more exposed to capacity rationalization. In short, CMC continues to face a difficult market environment, but our decisive actions will improve the business structurally, strengthen our supply chain, and position the segment for better performance over time. Taking a step back, all these actions connect directly to Catalyst, our strategic transformation program, the details of which are shown on page 25. Now, COPRS is in year two of this multi-year transformation process, and through our transformation office, hundreds of individuals across the organization have identified, evaluated, scoped, quantified, planned, and implemented the process. and executed hundreds of commercial and cost-saving opportunities. The objective is straightforward, maximize performance across every dimension of the company and establish a new way of working that elevates coppers to the next level. Through June 30th of 2026, we achieved $33 million in year-over-year benefits, including $6 million in PC, $9 million in RUPS, $6 million in CMC, and $12 million in corporate.

Examples include purchase card cost savings, volume growth, procurement contract savings, and plant process changes. We also reduced working capital by $17 million through June 30th. Looking forward, we've identified more than $90 million in benefits for 2026 through 2028, which includes the $15 million to $20 million of annual adjusted EBITDA benefits from the action we're taking at this TICNI facility. Our 2028 objectives remain clear. We're targeting adjusted EBITDA margins above 15%, a three-year adjusted EPS compound annual growth rate above 10%, net leverage between two to three times, average annual free cash flow of $100 million, and a portfolio where PC and RUPS represent more than 85% of our sales. The central point is that Catalyst is not an isolated cost program. It's a comprehensive effort across process, technology, and talent designed to generate meaningful earnings growth, improve cash flow yield, and increase capital efficiency. Now let's take a look at our updated 2026 guidance.

As we think about the balance of the year, we're incorporating the market conditions I just reviewed, the progress we're making through catalysts, and the structural actions underway across the portfolio. Beginning on page 27, we continue to expect 2026 sales to be in the range of 1.9 billion to 2 billion. The key message here is that we're adjusting the range for each segment to reflect current visibility across our businesses, which is anchored by a strong backdrop for utility pole demand, market penetration in PEC and UIP, pullback in RPS demand, and continued volatility in carbon markets. Moving to adjusted EBITDA on page 28, we're now expecting a range of $240 million to $250 million for 2026, excluding special charges. The bridge reflects several moving pieces across the portfolio. We continue to see benefits from PC with an expected contribution of $17 to $20 million. ROPS is expected to be down $8 to $11 million with RPS driving that decline.

And CMC is expected to be down $19 to $23 million, reflective of its continued challenges. Now, the outlook reflects the combination stronger PC performance, continued cost and market pressures in RPS, and the significant input cost and market volatility affecting CM&C. Turning to page 29, we now expect adjusted EPS for 2026 to be in the range of $3.80 to $4.20 per share, excluding special charges. The EPS range reflects a realistic view of the near-term environment while still preserving the path toward our longer-term catalyst objectives, including more than 10% adjusted EPS CAGR over the 26 to 28 period. On page 30, you'll see that free cash flow remains a central part of our investment case. Operating cash flow improvement is coming from all areas other than operations and supports what would be a new all-time high operating cash flow of $175 million. We've We plan to deploy 55 million to CapEx, leaving 120 million of free cash flow to deploy, which is on pace to be split fairly evenly between debt reduction and return to shareholders.

Even in a volatile market environment, we continue to expect strong free cash generation supported by disciplined capital spending, working capital improvement, and the benefits of our catalyst transformation initiatives. Finally, onto our capital expenditure plan on page 31. We still expect 2026 capital expenditures of approximately $55 million by category that includes $34 million for maintenance, $12 million for zero harm, and $9 million for growth and productivity. Excluding capital for growth and productivity and STICNI, our new base repair and maintenance and safety capital should be between $35 to $40 million on an annual basis as a starting point going forward. Now to wrap up, the second quarter reflected both the challenges and the opportunities across our portfolio. Market conditions remain mixed with continued volatility in raw materials, housing, rail, and carbon markets. At the same time, we're seeing encouraging results in performance chemicals, strong demand and utility pulls, continued progress on working capital, and meaningful benefits from Catalyst.

Most importantly, we're taking decisive actions to improve the long-term earnings power, cash flow profile, and capital efficiency of coppers. We believe those actions position us well for the balance of 26, and more importantly, for the 2028 objectives we've reiterated today.

With that, we would be happy to take your questions. To withdraw your questions, you may press star and 2. Once again, that is star and then 1 to join the question queue. We will pause momentarily to assemble the roster. Our first question today comes from Gary Prestapino from Barrington Research. Please go ahead with your question.

Oh, good morning, Leroy, Eric, and Quinn. Hi, Gary. Um... I was going through my notes from last quarter. Your target for catalysts was $30 to $40 million of benefits. You've already achieved $33. And you didn't really mention anything about that range. Is it possible that we could be seeing more than, you know, that $40 million at the high end in catalyst benefits this year?.

or is it just accelerated for the first six months of this year? Yes, I mean, it's a little bit of both. I mean, yes, I would expect that we will probably come in over the high end of that range, Gary. But as we've seen, you know, over the course of our transformation efforts, right, all of that is essentially going to offset the headwinds that we're experiencing across, you know, our portfolio of businesses. I would expect that, yes, that number would come in higher, but that would be absorbed within and offset by some of the other headwinds that we've mentioned.

Yes, okay. I just wanted to make sure. Yep. I had that right. And then just getting back, you mentioned several – different input costs that impacted you in Q2. I would assume there's still a fairly high elevated levels in Q3.

Yes, I mean, we don't see that situation abating in the near term. You know, it's volatile markets out there right now. You know, the Middle East conflict, certainly is having downstream impacts. We mentioned that. primarily within our carbon material and chemical business. That's one of the reasons we've seen that business struggle as much as it has this year, but it also has impacts within our freight and logistics network across the business lines, and even impacts on some other key raw materials that we utilize within PC. So it's, you know, DRIPSA, and drops that unfortunately accumulate into millions of dollars that create the headwinds that we're working to continue to offset through the Catalyst Transformation Program. So yes, we don't expect the challenges we're facing. currently from an input standpoint to abate any time in the near term.

Certainly getting some resolution, you know, again, on the Middle East conflict and having markets settle down a little bit will be helpful. You know, we do believe that, you know, again, either through contractual mechanisms that are already in place, you know, primarily in the CM&T business as well as, you know, some contracts that we have coming up here in the back half of this year heading into 27, it positions us to be able to reset some things as we go into the next half of this year.

at 27 and put us in a better position. Do you have, when you're talking contractual, are there, do you have the same kind of contractual requirements.

issues with your other two segments, or is it just basically CMC? Yes. Well, CMC is the one that's bearing the biggest brunt of things. And so, you know, depending upon regions and customers, right, there's opportunities to, you know, to reset pricing anywhere. from a three month, well we have a portion of our business that's spot related where we're able to actually adjust pricing as the situation changes pretty fluidly. But within some of our larger pieces of our business, it's more three to six month resets. And so, but within other parts of the business, again, there's longer-term contracts that are coming up for negotiation here in the back half of this year. and that'll provide us an opportunity to try and get things reset within, you know, those businesses that have that aspect to it. And then we have other contracts within certain businesses that allow for a certain percentage of cost pass-through. And so, you know, those will go into effect at the beginning of next year as well.

So I think we're well positioned as we head into 27. But certainly it would be helpful if we could reduce the volatility that we've been seeing over the past six months, six plus months as it relates to the, you know, the the impacts from the Middle East. Okay. Thank you. Yep.

Our next question comes from Liam Burke from B. Reilly Securities. Please go ahead with your question. Sure. Good morning, Leroy. Good morning, Eric.

Hey, Liam. Leroy, when I'm looking at RUPS, how much is a gating factor on profitability? How much are the class one relationships a headwind or tailwind to profitability?.

Yes, so right now the situation where we had a couple different circumstances with with contracts expiring that enabled us to compete for, in some cases, larger shares of business, which we were able to get. In other cases, it was, you know, to be able to consolidate capacity, and we made concessions to, price concessions to secure that business and enable us to to plan an orderly exit out of our Florence facility. As volume ramps up from that customer base and we're able to take costs out of the system through that consolidation, we're going to see those improvements run through RPS. Right now, we're in the early parts of that, and so we haven't seen the demand moving up yet. to the levels that we expect them to. And we're still treating ties out of Florence, which we expect to finish up in the fourth quarter of this year. So again, we're going to be in a much better position heading into 27. as some of these contracts move up with higher volumes coming through and more costs getting taken out of the system. So we're in a good spot, it's just right now we're working through this period where things haven't ramped up fully. we're still bearing cost of the plant at Florence that eventually will go away.

Got it. Thank you. And you talked about market share gains in PC.

Where is that coming from and how is that working through the segment business? Yes. So, you know, we had announced, I think, in the early part of this year that we had gotten some volume back. Yes. some volume that we had lost in the previous year. as well as adding some market share from a customer base that had made an acquisition and made a decision to move some of their chemical business that they had with a competitor over to coppers. We benefit from operating leverage and getting more volume through our plants. And, you know, we've seen that reflected this year in being able to add volume in an overall flat environment. And then, you know, on top of that, you know, when we talk about strengthening the pole side of the business, it's the PC business that produces chemicals that goes into that market. And so that market is strong.

And so our industrial chemical demand has been strong. And we have at least a pretty good-sized customer on that side of the business that was rebuilding inventories in the first half of the year. And we'll see that tail off in the back half of the year now that they've kind of normalized their inventory.

Great. Thank you, Leroy. You're welcome, Liam. Thank you. And our final question for today comes from Michael Matheson from Suddhodian Company. Please go ahead with your question.

Congratulations on the quarter, you guys. Thank you, Michael. Turning to my questions, PC saw a big increase in margins this quarter. Can you comment on what drove the increase and is 20 plus percent the new normal?.

Yes, thank you for the question. I think we were very pleased with the PC business and the performance in the second quarter. As Leroy highlighted, we had some nice market share gains, and with that, improved our customer as well as product mix, and I think when we look at the margins, it is both from the customer and product mix with that industrial growth driving higher margins versus the prior year quarter.

Terrific. Then turning to CMC, do you guys expect to retain all of the CMC clients who had been receiving product from Stickney or will there be a small amount of client loss, do you think?.

So, there's certain product lines that we will likely not continue to participate in, but in our main product lines, I would expect, we expect that, you know, we will continue those relationships and continue to supply. There will be a small erosion of our customer base, but the predominant amount of our customers and volumes will remain, except they'll be sourced out of Europe.

Got it. And then one last question. Regarding your priorities for deploying free cash flow going forward, Does the rising interest rate environment lead you to consider allocating a little bit more cash toward debt reduction versus share buybacks?.

Well, I think that we've continued to take a pretty balanced approach, and we've talked before about the inherent constraints we have on share repurchases in our credit facility, so we already have a mechanism that limits our ability to repurchase shares up to a certain level. With the strong free cash generation that we're expecting to continue going forward, I would expect that at least half, if not more, of the free cash that we generate will be going to reduce debt. So we'll make meaningful, we'll see meaningful reductions over time in terms of our debt while still being able to opportunistically repurchase shares as we continue to see the strong cash flow yield that we're putting.

producing. Okay, great. Well, thank you for taking my questions and good luck in the coming quarter. Thank you, Michael.

And that will conclude our question and answer session. I'd like to turn the floor back over to CEO Leroy Ball for closing remarks.

Thank you. You want to just again take a moment to thank everybody for your time today and participating on today's call and for your continued interest in COPPERS. Until next quarter, take care.

The conference has now concluded. We thank you for attending today's presentation. You may now disconnect your lines.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Koppers' First Quarter 2026 Earnings Conference Call and Webcast. [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 Quynh McGuire, Vice President of Investor Relations. Welcome to our first quarter 2026 earnings conference call. We issued our press release earlier today. You can access it via 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 June 8, 2026.

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.

Also, references may 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 and Chair of Koppers; and Brad Pearce, Interim Chief Financial Officer and Chief Accounting Officer.

At this time, I'll turn the discussion over to Leroy.

Thank you, Quynh. Good morning, everyone. I'm pleased to join you today to provide more insight on Copper's performance in the first quarter of 2026 as well as provide an update on how we're progressing towards our 2028 transformation targets. So let me start with our major news this morning. At the present moment, in Chicago, where just a few hours ago, I delivered the unfortunate news to our workforce here of our conditional decision to begin immediately winding down production at our Stickney, Illinois facility, with a target to seize distillation by the end of this year. And note that I'm using the word conditional because the decision is subject to the satisfaction of any bargaining obligations that might exist with the union representing certain employees at the facility.

Now as outlined on Page 4, this conditional decision impacting approximately 85 employees was driven by the continued challenging market conditions that have persisted for well over a decade. When we made the decisions to close our other 2 U.S. facilities for CMC in 2016, approximately 565,000 metric tons of coal tar were being produced and readily available in North America. After the most recent plant closure we announced earlier this year of Algoma Steel, the number has now dropped to 350,000 metric tons, simultaneously putting pressure on raw material pricing and reducing our throughput.

This has resulted in higher unit costs, which have not been able to be fully recovered in the form of higher pricing. And adding to the mix is that despite having spent over $100 million in capital at Stickney over the past 5 years, which is a multiple of the spending in any other copper site, we still find ourselves dealing with reliability issues, which means we would still have significant future capital requirements to address aging equipment.

This is not a people issue as the team at Stickney has done heroic work over the past 10 years to try and get us to a better place. And I sincerely thank them for their efforts but the bottom line remains that we feel we've done everything we can to make this operation viable, and we just don't see a credible path to get there. At this time, we're tentatively targeting fourth quarter of 2026 for shifting production to our coal tar distillation facility in Newborn Denmark. In the meantime, we've further strengthened the supply chain from newborn to the U.S. through expanded shipping and terminal capabilities in order to ensure an effective transition for existing pitch and creosote customers. We anticipate investing between $10 million to $15 million to further strengthen that supply chain over the next few years, which can be done while staying within our annual $55 million maintenance CapEx as capital is freed up from Stickney.

Now the discontinuation of production activities at Stickney is anticipated to result in pretax charges to earnings of $227 million to $262 million through the end of 2029, which includes $170 million to $195 million of noncash charges projected to be recorded in the second and third quarters of this year. Cash closure charges of $57 million to $67 million will be spent over a 3-year period beginning in the second quarter of 2026. These charges will be funded by the operating capital cash benefits generated by this action, which are expected to total $15 million to $25 million on an annualized basis. and therefore, will have a little impact on our near-term free cash flow projections except for timing. At the same time, the longer-term result of this move will be significantly accretive to free cash flow.

We're estimating that the adjusted EBITDA savings related to this action will reach an annual run rate of $15 million to $20 million in 2027 and beyond, which would result in a 75 to 100 basis point bump in adjusted EBITDA margin. and translating the adjusted EBITDA benefit to adjusted EPS would result in an increase of $1 to $1.20 per share. We also anticipate $8 million to $15 million in reduced future annual capital expenditures.

I again want to thank our Stickney employees for their continued hard work and determination while operating under persistently tough circumstances. I understand that this situation is incredibly difficult and will have a real impact on our employees and their families, which we will make every effort to minimize. Our priority is to provide the support and assistance needed to help the employees navigate any transition as we map out the future of our CMC business.

So now let's move on to Page 5, which outlines our results for the first quarter, including adjusted EBITDA of $49.3 million, which is a 10.8% adjusted EBITDA margin. We had an operating profit of $22 million and $0.57 in adjusted earnings per share. We generated operating cash flow of $46.3 million and free cash flow of $34.9 million. Both cash flow metrics representing a first quarter record. On a trailing 12-month basis, operating cash flow of $192 million and free cash flow of $139 million also represent new highs. Capital expenditures net of insurance proceeds and sale of assets for the quarter were $11.4 million, and we also deployed $29 million in share repurchases and $1.9 million in dividends while keeping total debt consistent with December 2025.

So now let's move on to our Zero Harm accomplishments as seen on Page 6. Thanks to the commitment of our worldwide team, 30 of our 40 sites were accident-free in the first quarter. Our European CMC and PC businesses as well as our Australasian PC and CM&C businesses had 0 recordables in the first quarter leading activities. A key contributor to our serious safety incidents took a step back compared with prior year quarter. However, our recordable injury rate improved from prior year. The objective of Zero Harm is to constantly focus on what is most important, the health and safety of our team members, and we will never lose sight of our goal 0 by reinforcing the foundational elements of the safety culture deploying additional tools and training and driving environmental improvements in 2026 and beyond.

So turning to Page 8. We issued our 2025 annual report and 2026 proxy statement, which are available on the Koppers' website. Now for more information, please use the QR codes to access these materials. As shown on Page 9, Koppers has gained additional recognition by being named a Newsweek Magazine's 300-member listing of America's most terrible companies for 2026. This one reflects our employees' ongoing commitment to volunteerism and our corporate support of community initiatives and causes. It joins previous recognition of copper as one of Newsweek America's most responsible companies. USA TODAY's America's Climate Leaders list in Times America's best midsized companies.

Now on March 30, our leadership team joined me to ring the closing bell on the New York Stock Exchange, celebrating 20 years of copper as a publicly traded company as seen on Page 10. In addition, I participated in an interview on the financial news program taking stock to share the story of our continuing path to sustainable profitability for our customers. Now moving on to Page 11, Koppers will be hosting an Investor Day on Thursday, September 17 in Atlanta. On September 16, the prior day, we will be conducting a tour of our research and development lab on our Performance Chemicals business. On Wednesday evening, the copper's executive team will also host a meeting great reception. So look for more details in the months to come. In the meantime, please mark your calendars plan to join us for our Investor Day and related activities. Now I'll return in a bit to provide my view on how we're seeing the current year within each business while also reviewing our outlook for the remainder of 2026.

But for now, I'm going to turn it over to Brad to speak in more detail on our first quarter financial performance. Brad?

Thanks, Leroy. Earlier today, we issued a press release detailing our first quarter 2026 results. My remarks today are based on that information. As seen on Slide 13, we reported consolidated first quarter sales of $455 million, essentially flat compared with prior year sales. Relative to the prior year quarter, rep sales decreased by $15 million or 6%. PC sales were up $21 million or 18%, and CM&C sales decreased by $7 million or 7%. On Slide 14, adjusted EBITDA for the first quarter was $49 million, representing a 10.8% EBITDA margin on sales compared with $56 million and 12.2% in the prior year quarter. By segment, RUPS generated adjusted EBITDA of $23 million or 10.3% EBITDA margin. PC generated adjusted EBITDA of $26 million or 18% EBITDA margin, and CM&C reported adjusted EBITDA of $1 million or 1% EBITDA margin.

Turning to the RUPS business. Slide 15 shows first quarter sales of $220 million compared with $235 million in the prior year quarter. Of the $15 million change in sales, approximately $10 million of the decrease came from the Railroad Structures business that we sold in 2025. The remaining decrease in sales can be attributed to customer mix and price decreases in our Class 1 crosstie business. and lower activity in the maintenance of way businesses. These factors were partly offset by volume increases in our utility -- in our domestic utility pole business, higher commercial crosstie volumes and a $1.4 million in favorable foreign currency changes compared with the prior year period, mostly attributed to our Australian utility pole business. RUPS delivered adjusted EBITDA of $23 million compared with $26 million in the prior year due to lower sales and lower sales volumes.

Turning to Slide 16. Our Performance Chemicals business reported first quarter sales of $142 million, up from $121 million in the prior year quarter. This increase was primarily due to a 15% volume increase, higher sales activity, primarily in the Americas and $2.7 million in favorable foreign currency changes from international companies. Adjusted EBITDA for PC increased to $26 million versus $20 million in the prior year quarter. Profitability benefited from higher sales volumes and higher prices partly offset by $2.4 million of higher raw material and operating costs.

Slide 17 shows that sales in the first quarter for our CM&C business were $93 million compared to $101 million in the prior year quarter. This decrease was primarily driven by $14 million of lower volumes related to our phthalic anhydride business which was discontinued in the second quarter of 2025 and lower sales prices across most products, especially carbon pitch, which was down 9% globally. These were partly offset by volume increases in carbon pitch, naphthalene and carbon black feedstock as well as $7.6 million in favorable foreign currency changes from international companies. Adjusted EBITDA for CM&C in the first quarter was $1 million compared with $10 million in the prior year quarter due to lower sales prices and higher operating and raw material costs partly offset by operating cost savings associated with discontinuing the talc anhydride business.

Compared with the first quarter of 2025, the average pricing of major products was lower by 11%, while average coal tar costs were slightly higher. As shown on Slide 19, we continue to pursue a balanced approach to capital allocation. In terms of investments to position the company for the future, $11.4 million was spent in the first quarter for capital expenditures. We are anticipating a total of $55 million in gross capital spending for the full year of 2026. Our share buyback activity in the first quarter totaled approximately $29 million, including those associated with tax withholding from our incentive stock plans. We have approximately $45 million remaining on our $100 million repurchase authorization. We also continued to return capital to shareholders through a quarterly dividend of $0.09 per share. At March 31, we had $386 million in available liquidity and $877 million of net debt, representing a net leverage ratio of 3.5x.

We remain focused on our long-term goal of reducing the net leverage ratio to 2x to 3x. Slide 20 provides additional detail on our total capital expenditures for the first quarter of just over $11 million. We deployed approximately $7 million to maintenance capital spending with the remaining balance allocated to Zero Harm initiatives and growth and productivity projects. Capital expenditures were approximately $5 million for RUPS and $3 million for both PC and CM&C.

As highlighted on Slide 21, our Board of Directors declared a quarterly cash dividend on May 7 of $0.09 per share reflecting a 12.5% increase from the prior year. This dividend will be paid on June 15 to shareholders of record as of the close of trading on May 29. While future dividends are subject to ongoing Board approval, maintaining a quarterly dividend at this rate will result in an annual dividend of $0.36 per share for 2026.

With that, I will turn it back over to Leroy.

Thank you, Brad. So I'll now review the market outlook for each of our businesses, starting with Performance Chemicals on Page 23. Now despite a number of different headwinds on demand, such as the Middle East conflict, higher mortgage rates, lower health and turnover and general inflationary pressures. Our PC business still posted a healthy 15% top line gain from volume in Q1.

As we expected, the gains came from market share growth of about 9% and customer inventory build added about 6%, while organic volumes were mostly flat. Through Q1 that puts us reasonably on track to likely exceed our expected top line increase of 11% as the inventory build will continue through Q2 and then taper off. However, we will only begin hitting our run rate for market share growth in Q2 as we finish the remaining plant conversions. As I mentioned, most external markers that drive the health of this business, such as mortgage rates turnover in repair and remodeling spending are still lagging. But the recent move from our customers is more hopeful than it has been in some time, that a recovery may be around the corner.

Now we're discounting that optimism for now until we begin seeing it in the numbers. So as a result, we're still forecasting flat demand on the basin residential business. with a mid-single-digit volume increase expected for our Industrial Products segment has driven by growth in utility pole demand. Now on the cost side of the equation to say there's a lot of noise in the system would be a vast understatement between potential EPA tariff recovery. Net exposure to the across the board, 10% tariffs that were put in place in response to the IEPA rolling, higher fuel costs from the spike in oil and copper volatility, I'd say we have more working against us than for us right now. And with what amounts to a $5 million to $10 million current net exposure, our procurement team has been working hard to offset it by negotiating better pricing in certain materials while our commercial team has been preparing to implement fuel surcharges.

Koppers continued to hold its lofty pricing with modest periodic corrections but it looks like mid- to high $5 per pound copper is likely the new low watermark, and we're now above the $6 threshold. So that's going to require at least $50 million in price adjustments in 2027 to just recover that increase.

In summary, PC has gotten off to a strong start, giving us confidence to move our sales projection up slightly from our initial view of the year while holding our EBITDA projection where it was as those additional sales get offset by a net cost increase. And that's obviously contingent on base residential volumes holding study and our ability to mitigate some of our cost exposure via pricing pass-throughs and other cost reductions.

Now moving on to our Utility and Industrial Products business, shown on Page 24, market sentiment remains bullish for all the reasons we've continued to talk about, which include increasing electrical demand related to build out of AI infrastructure, crypto mining, EV development and new manufacturing. Now our first quarter sales increased by 12% due to volume, and that reflects the bullish that bullishness with 3% of that 12, resulting from the December 2025 acquisition of our Doug First supply chain. Now in our targeted underserved regions, we grew volumes by 9% coming off of growth in 2025 of 17%.

Market demand remains concentrated on a limited range of pole sizes, and this has put pressure on fiber sourcing and driven up raw material costs, which we're working to recoup to return margins to our long-term target. We expect some cost relief on the whitewood side when our pillar in Leesville, Louisiana, which was damaged by fire last September comes back online, which will enable us to bring more peeling capacity back in house and lower our third-party costs. As mentioned earlier, our DF acquisition is showing early dividends by increasing our access to this important fiber enabling us to better compete for previously unavailable business.

And on the flip side, the Southern Yellow Pine market is under pressure due to closures of pulp and paper mills and lumber mills as well as fires that destroy tracks of timber in the Southeast. Now sales volume is strong and pricing relatively flat, we have more work to do to bring costs into check. Getting the Leesville pillar back online will help along with the consolidation of Vance production into Kennedy, which began in Q1 and should contribute $2 million in savings by year-end. We're experiencing a higher cost for fuel and freight that we're working to pass on, the additional catalyst initiatives, our transformation program launched in 2025 are expected to generate further cost savings which will help to overcome the additional corporate cost allocations that have been shifted to UIP this year and enable our full business to contribute to the year-over-year EBITDA improvement projected for the ROP segment.

The market outlook for our Railroad Products and Services business is summarized on Page 25. And our Q1 top line was down compared to prior year despite crossties sold being consistent with prior year. After adjusting for the sale of our KRS business last August, the main driver of our revenue decline was an unfavorable mix with lower pricing having a smaller impact. We had a greater proportion of treatment service-only sales in Q1 compared to prior year, combined with lower green tie purchases and black tie shipments. The severe winter storms that hit much of the country in Q1 knocked our plants offline for a number of days.

This impacted production and shipping, which we began making up in March but uneven customer car flow in and out of our plants also had an impact, and our customers have pledged to work on improving that situation, which should enable us to catch up as the year goes on. And while we've had a few customers pull back on their demand for the year, most of it was known as we entered 2026. And a few others are increasing demand, which is expected to more than offset the other railroads reductions. Commercial backlog remains as strong as ever, delivering 3% higher sales in Q1 and the price reductions we exchanged for growing our piece of a smaller market this year will be made up through the year as we work to idle the Florence, South Carolina facility by October.

We also continue to relentlessly go after costs with Q1 representing the eighth consecutive quarter of reduced operating expense and direct SG&A compared to the prior year quarter. While we expect to be in good shape from a demand standpoint this year, the overall lower industry demand is waking havoc on sawmills, resulting in reduced production and widespread mill closures. I mentioned our strong cash quarter during my earlier comments, while our RPS business led the way in that area with stellar working capital management, holding inventory in check during a period where we usually see a build. And while we still expect strong sales in both RPS and UIP for the year, we're incorporating more of an unfavorable mix into our forecast for the year, also baking in some of the impact from higher oil. This is bringing our revenue projections down by $10 million on both the top and bottom end of our range as well as bringing our EBITDA projections down proportionately.

Now the outlook for our C&C business is summarized on Page 26. Overall, the market continues to be in turmoil with Q1 results reaching their lowest point since the beginning of our major restructuring efforts in 2016. The war in the Middle East, which began 2 days after our last earnings call, has only made the situation in this business more challenging as oil price shocks have resulted in rapidly escalating raw material costs. higher oil prices hold, we'll be playing catch-up over the next couple of quarters regarding passing on higher pricing. This is estimated to have a $5 million impact on CM&C over the remainder of the year in addition to the $1 million impact it had on Q1 for this segment.

On the plus side, this could potentially create some market opportunity for Australian, European and North American aluminum producers to fill the void of Middle East aluminum producers and will likely create an opportunity of more sales for coppers. The continued uncertainty in the carbon products markets only highlights the necessity to take a major action, which we're doing by ceasing production at our Stickney site. There's no need to repeat all the financial details I previously mentioned, but they are once again outlined on Page 26 and speak for themselves.

Once we felt comfortable that we had the capacity to reliably absorb the U.S. volume in Denmark and could beef up our logistics assets to further improve reliability, it became a very unfortunate but obvious no-brainer to move forward with shifting production to Europe. And while there are no celebrations at Koppers to commemorate this action, it's an unquestionable win for our shareholders. This action is expected to pay for itself over the next few years while improving earnings and long-term cash flow significantly. In addition, by significantly strengthening our European operation, we increased the likelihood that weaker European competitors will eventually succumb to the challenging market conditions. For this year, though, we're going to have to reduce both our revenue and EBITDA estimates for CMC due to impacts from higher oil and generally worse market conditions.

As shown on Slide 27, we're a little over a year into our Catalyst transformation and executing successfully on many initiatives. In Q1, we realized $14 million of benefits spread across our business segments and corporate functions. In PC, the driver was market share growth and new products. In RUPS, it was the plant consolidation of Vance and market share growth. For CM&C and corporate, it was procurement savings. In addition, we're using catalyst to improve our working capital discipline, delivering $16 million in benefits in Q1, driven primarily by inventory control and RPS. Adding the benefits from our sticky announcement, we've now identified a minimum of $90 million of benefits to be realized from 2026 through 2028. And of that, we expect $30 million to $40 million of benefits in '26, which is up by $10 million on the low end. this puts us squarely on track to deliver on our 2028 goals of adjusted EBITDA greater than 15%, a 3-year EPS CAGR of more than 10%, net leverage of lower than 2.5x, a 3-year free cash flow average of $100 million minimum and our combined PC and RUPS segments making up 80% -- 85% or more of our sales. The result of reaching those metrics should result in significant shareholder value creation.

Now as we move on to Slide 29, our consolidated sales guidance remains at $1.9 billion to $2.0 billion in 2026 compared with $1.88 billion in 2025, with higher sales in PC and RUPS more than offsetting lower CM&C sales. The foundation of customer demand is proving to be solid 4 months into the year, especially for our PC and RUPS segments as we have now turned the corner on our PC market share loss from last year and are starting to see the needle move in the other direction.

On Slide 30, we're lowering our adjusted EBITDA forecast to $240 million to $260 million in 2026 compared with $257 million in 2025. The major reason for shifting our previous range of guidance down by $10 million is the impact of higher oil across our entire enterprise. The war in the Middle East was not a variable we had contemplated when we communicated our 2026 guidance in February. And while we believe it is contained to a less than 5% impact on our consolidated EBITDA, we believe it's prudent to incorporate it into current guidance at this point while the various other puts and takes are projected to offset each other.

Slide 31 shows our adjusted earnings per share bridge, which reflects a range of $3.80 to $4.60 per share in 2026 compared with $4.07 in 2025. Year-over-year, that represents a 3% increase at the midpoint and a 13% increase at the high end. Most of our projected improvement is expected to come from lower interest expense and benefits from a lower share count.

On Slide 32, we now expect an even higher jump in both operating cash flow and free cash flow this year. As a result, this will provide the most cash we've had for debt paydown since 2020 when we received the cash proceeds from selling our KJCC business. Not only with operating cash flow and free cash flow represent new highs at these projected levels, but more importantly, 2026 will represent an inflection point for our step change in cash generation as we expect these new higher levels to become the norm than our current market cap, this equates to a 10% to 15% free cash flow yield and places coppers at the top end of whatever industry you want to compare us to and provide several attractive options for how we deploy our excess cash.

On Slide 33. In terms of capital spending, we continue to forecast $55 million for the year, consistent with $55 million spent in 2025. Currently, we're spending at a run rate lower than $55 million. But we'll still like we spend at that rate for the year as we take dollars that we would have spent at Stickney this year and put it towards bulking up our logistics assets. The foundation we have built over the past decade has set us up to create significant shareholder value over the next several years, and I'm confident we will deliver. We still maintain leading shares in niche markets that utilize our essential products with low capital requirements going forward and couple that with the unlocking of significant cash flow, we find ourselves in a strong position to deliver shareholder value in multiple ways. While today represents a difficult next step. I believe it's the right one for our customers, our team members at Koppers and our shareholders who have patiently hung in while we have methodically built a model that is built to last. So now I would like to open it up to any questions.

[Operator Instructions] The first question will come from Gary Prestopino with Barrington Research.

Throughout your narrative on what you're looking for go forward in a couple of your segments. You mentioned you've got to get some price increases to offset some of these input increases. I mean in the past, how successful have you been at driving those kind of price increases? And what's generally the lag? How long does it usually take relative to where we are right now in the cycle?

Yes. It's a good question. So I think it varies, and it varies depending upon business unit as well. But I'd say, for the most part, we have been successful. But yes, there's a aspect to it. There's been some changes that we've made in some of our agreements over the past coming through COVID and that big inflationary environment that we were in, that we got kind of caught in for a period where we were hamstrung in terms of being able to pass on some of these increases. We were able to make some changes in certain contracts that give us more flexibility to pass stuff on a little more currently. .

I would say, generally, the way that we feel about it as it relates to passing on fuel surcharges, those sorts of things I think we have an ability to do that more or less currently, right? So there's little to no lag that needs to happen there. We've tried to -- in regards to, again, some of the larger relationships we have, understand exactly whether this stuff was going to be sustainable or short term. But we've obviously gotten to the point now where we're moving forward on trying to work with passing that on. As it relates to some of the bigger issues in terms of impacts on raw materials that we know are going to linger for a bit. Most of our contracts on the CMC side, we're at least 1/4 to 6 months from being able to pass that on, which is why we talk about the impact we see more or less in the back half of the year that we will get to catch up on until we probably turn the page into either the fourth quarter or into 2027.

And then on the PC side of things, we tend to go through a couple of year agreements in the latest cycle wraps up this year. So discussions will be happening in the back part of this year, actually discussions are currently happening about trying to give them some insight in terms of where the overall cost structure looks like at this point and what to expect. So we'll have more news on that as we get to the back half of the year. And as we talk about often, we're mostly hedged for the biggest piece of that as it relates to copper. But there will need to be a reset on that as we head into next year. But we also are continuing to work on new products that can help maybe minimize the amount of copper that needs to go in and/or retention rates. And so there's all kinds of things that we're working on to try and mitigate and minimize the impact on our customer hopefully put a few more dollars in their pockets as well as ours and just create more success for the industry.

So it's a mixed bag, Gary, but we -- bringing the guidance down by $10 million, both top and bottom end of the range with our best attempt from an unmitigated standpoint, that's what we would expect for the year related to the oil impact, which is the biggest -- well, other than Koppers is the biggest impact that well, the biggest impact we're currently facing on an ongoing basis, it will be Koppers in oil. But we feel pretty good that we have that captured there with a little opportunity for upside on pass-throughs.

Okay. That's a good explanation. And then as it relates to what you're doing with -- in the CMC business, I realize it's a difficult decision. It's always hard to tell people of that decision. Is it mostly just your looking at it as cutting excess capacity there just isn't the end demand there. And by folding everything in a Board, you would expect that you'd get more utilization of that facility and you can get your margins up that way. Is that kind of how we should think about it?

It is another consolidation play. Yes, it is. We have excess capacity at Nyborg. That's freed itself up over the last couple of years. At the same time, raw material availability in North America has come down. So with what we have remaining, here in North America. We found that we could comfortably fit that into our Nyborg operations and have very little incremental cost to do so. And so we could essentially again, source raw material from North America process it there and actually still serve the vast majority of our customer base here in North America. And cut out a significant level of fixed costs in the process. So yes, it's a consolidation play.

The next question will come from Liam Burke with B. Riley Securities.

Leroy, with the shifting of production from Stickney to Nyborg, do you anticipate any competitive disadvantage, having your in-house creosote for the coatings has been at a competitive advantage. Will the greater distance affect that competitive advantage?

No, we don't believe so. I mean that's really happening today. We already bring significant amount of Crest into North America. Like I said, with where the cost structure with that, in fact, what we believe is we'll be able to actually improve the reliability of the supply chain because -- while certainly, distilling in Chicago, you can look at and say, well, again, you're closer to your customers, there's no question. But again, the aging equipment that we have there has created a host of different reliability issues over the years. And so we would find ourselves scrambling at times despite the fact that, again, we had operations right here. Nyborg is -- it's a beautiful facility. It's been incredibly well maintained. And we do not deal at all with those sorts of issues as it relates to that.

So yes, you're extending the time to get product back and forth. But again, we're adding tank capacity here. We already have a terminal set up that -- and actually a fairly mature logistics operation that's been doing this for a while. And our competitor does make similar sorts of shipments back and forth across the pond as well. So this is not unique. It's not new, and we believe it actually improves the reliability and competitiveness for us, which is, again, a driver for us making the decision.

Great. That is good news. On copper pricing, you've been able to increase prices to your customer with margin? Or is that going to create a competitive pricing problem? .

Well, I think we'll be pricing to market. And because we're not the only one in this situation. Our margins fluctuate. They range anywhere in that 17% to 22% range over time. We've had 1 year, I think, where it fell down below that. That was actually, I think, in '22 or '23 when we ate a lot of cost, and it was not necessarily on the copper side, it was on all the other raw material pieces that we weren't able to pass through at that point in time. That was an anomaly. We've had an occasion here or there where we bumped up above that 22% range. I see no reason why going through this round, we'll end up somewhere in that range coming out of it. But we'll have to be competitive. I mean it's -- and we'll definitely be doing that while also, again, hoping to demonstrate to our customers our commitment to them, our commitment to the industry in terms of looking to develop new products for them to take to market and again, help them from a profitability standpoint. So I think we're in a good position to sort of maintain that 17% to 22% margin range overall.

The next question will come from Michael Mathison with Sidoti & Company.

Congratulations on the quarter, you guys. Very impressive. Just turning to my questions. You mentioned a $10 million impact this year from the increase in oil prices, which, of course, fluctuate, and they were down a lot in the past few days. Is there a rule of thumb that we can use that if oil prices move by x, the impact to Koppers is Y percent?

Yes. I wish it was that simple. I wish it was that simple because there's so many tentacles to it that it's tough to put your finger on it with that level of precision. But you can look at sort of the current situation that we're going through as a little bit of a guide. I mean, with oil prices rising suddenly at the end of February up into anywhere that $100 to over $100 a barrel range, right? We're sitting here telling you and talking about the fact that, that's going to have what we believe up to a $10 million unmitigated impact over the year. So that gives you some indication in terms of that level of sensitivity. But we do have abilities to pass some of that stuff on to negotiate higher pricing because, again, these sorts of things don't just impact us. They impact our competition as well. And so it's not a situation where any of this sort of stuff is copper specific. I believe we will get it back over a reasonable time frame, and that's what we'll work to do. But when you think about it overall, I mentioned this number here is going to be less than a 5% impact. It's -- again, it's meaningful to the numbers that we gave out. But in the grand scheme of things, not necessarily so, and it's something that we'll be able to pull back in over the next 3 to 12 months, I would say.

Okay. Fair enough. Turning to the future of the CMC business. If we look forward to 2027 after the planned shutdown at Stickney, is there an EBITDA margin target for CMC that you can share with us?

I would say that we certainly have run those numbers internally. And I would say that it would be in line with our overall consolidated margin target. So we have talked about one of our transformation target goals is to be at a 15% or greater EBITDA margin from an overall company standpoint. And I think our expectation is that this particular business will be right around that number.

Okay. Perfect. Very helpful. Just turning to PC. The sales growth there was especially striking. Flat overall market residential sales. What drove the market share increase, if you can share that with us? .

Well, it was a situation where it was a stark change last year, as you know, as we took a market share hit. We had talked about in the back part of last year that we thought we had opportunities to win back a little bit of that market share. And we were able to do that to some extent, while also picking up some additional market share from some of, again, our larger customers who still has a little bit of business out there in the other camp. We -- the other 2 camps. And again, through some different product development we had done, we were able to get comfortable to make some conversions on some straggling plants that were not in our network at this point in time and get them moved over. And on the industrial side, I think we've done a really good job. Tommy Kaiser and his team in PC have done a really good job of continuing to develop that business. And that is a business that's in a nice healthy spot right now, too.

So it's just our sales team has, I think, consistently done a really good job of building that customer network, relationship network. And sometimes we've been successful more often in winning that business than losing it. they're going to go through some phases. And again, we went through a good 8 years of nothing but wins, wins, wins. And all that just made us more vulnerable at some point that some business was going to get moved away, and that's what happened last year. And we kind of did a reset. And I think we've -- I think we've proven to our customer base that we understand they're incredibly important to us, and it's our job to help them be more profitable and open up doors for them to be successful because their success is ultimately ours. And -- but we had signaled that near the end of last year, and now it's just being put into action.

The final question will come from Jim Marrone with Singular Research.

My question is just with regards to all this volatility with regards to commodity markets, inflationary pressure. Are you -- what are you getting the sense of from -- with regards to your competitors? Is there a lot of tailwinds with regards to them or headwinds? Or in other words, are you finding any M&A activity opportunities as a result of all this volatility in the markets?

Yes. It's a good question. That's a good question. Look, 3 of our 4 businesses, we hold such significant share that any sort of M&A consolidation activities for us in those businesses are really unlikely from an antitrust standpoint. So it doesn't really matter at the end of the day as it relates to RPS and for the most part, PC, certainly in North America as well as CM&C. UIP is a different animal. And certainly, we would have much more flexibility in terms of M&A in that space.

We continue to keep up our relationships and have our conversations and see where they go. I know there's a lot of companies and certainly on the smaller end that are feeling the pinch. And -- but there's nothing to -- that we have to report at this moment as it relates to that. We continue to keep monitoring and keep our eyes on it. And if something pops up, obviously, we'll be looking to evaluate it. And if it makes sense, we'll do it. And if it doesn't, we'll pass and go on from there. But it's really only one business where we have that sort of opportunity as it relates to the core business, and that's on the UIP side.

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

Yes. So thank you. I really appreciate again everybody's patience and hanging in. It's been a tough hard fought last year, but the company again, and our team continues to do an amazing job keeping their fellow teammates safe, keeping everybody focused on the bigger goals at hand. And while again, today is unfortunate and painful chapter in our history from a people standpoint for shareholders, it's clearly a win, and we're seeing that reflected in the market today. We look forward to continuing to execute on our plans and updating you on them in the future. But thank you, everybody, for tuning in today.

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

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Koppers Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. [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 Quynh McGuire, Vice President of Investor Relations. Welcome to our fourth quarter and full year 2025 earnings conference call. We issued our press release earlier today. You can 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 May 26, 2026.

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 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.

Also, references may 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 Brad Pearce, Interim Chief Financial Officer and Chief Accounting Officer.

At this time, I will turn the discussion over to Leroy.

Thank you, Quynh. Good morning, everyone. I'm pleased to join you this morning to provide more insight on Koppers' performance in 2025 and how we see 2026 developing based upon current information.

So let me start on Page 4, which lists highlights for last year overall, which include adjusted EBITDA of $256.7 million and a 13.7% adjusted EBITDA margin, the second highest year on record for both when you exclude KJCC and on an as-reported basis, 13.7% adjusted EBITDA margin actually represents a new high watermark for Koppers. We reached operating profit of $167.8 million, also the second highest year on record, $4.07 in adjusted earnings per share, marking the sixth consecutive year above $4 after never reaching that mark previously and operating cash flow of $122.5 million for the seventh straight year of more than $100 million in that category.

In addition, we've tapered back our capital expenditures to a normalized $55 million, enabling a heavier capital deployment allocation to shareholders as demonstrated by $38.2 million in share repurchases and $6.4 million in dividends. Also, $21 million went towards inorganic growth with a small acquisition of a utility pole procurement business in one of our targeted growth areas, UIP, and we still had $12 million remaining to pay down debt.

In early 2025, we launched our transformation process named Catalyst, which delivered $46 million in benefits during the year. Catalyst helped to deliver EBITDA within 2% of prior year, while our sales declined by 10%. The conscious decisions to exit our phthalic anhydride business and sell our railroad structures business accounted for 4% of the overall sales decline with the other 6% resulting from softer market conditions and some net loss of market share.

Other benefits derived from Catalyst in 2025 include reducing our adjusted SG&A costs by 15%, while also reducing our employee count by 11% from year-end 2024 and 17% from our employment high watermark in April of 2024. With 1 year of Catalyst under our belt, I believe we're on track to reach our goals of double-digit adjusted EPS growth over the next 3 years, $300 million of cumulative free cash flow over that same time period and a mid-teens margin run rate by 2028. Now to ensure that our leaders remain highly motivated to achieve those goals, earlier this year, our Board approved a long-term incentive program that has target goals that substantively align with the external targets I just summarized. I'll speak in more detail on Catalyst later in this presentation.

Now let's move on to our Zero Harm accomplishments as seen on Page 5, which are just as important as our financial performance. We had 21 of our 41 sites work accident-free with our European CM&C and PC businesses as well as our Australasian PC business having 0 recordables in 2025. Significant improvement was achieved company-wide with leading activities up by 26%, which is a key contributor to our serious safety incidents being down by 70% compared with the prior year. It also led to a 19.5% year-over-year improvement in our total recordable injury rate, driving it to a new all-time best for the second year in a row. It's a true testament to our team and their leaders who persevered through a stressful environment in 2025 and never lost focus on what's most important, the health and safety of their colleagues. Congrats to the Koppers team on a tremendous accomplishment and never losing sight of our goal of 0.

Turning now to Page 6. Koppers was named the Newsweek Magazine's listing of America's Most Responsible Companies 2026, representing our sixth consecutive year on that list. This honor is the result of some 600 companies being evaluated on upholding their social responsibility based on key performance metrics that include environmental, social and governance performance, financial results and more. During the past year, we also earned recognition as one of America's Best Midsized Companies of 2025 from Time Magazine based on employee satisfaction, revenue growth and sustainability transparency.

Like Zero Harm, sustainability has been woven into the fabric of how we operate at Koppers, which has enabled us to punch above our weight in this area. National recognition from organizations like Newsweek and Time help lend credibility to our results. And while this alone won't win us business, it will most definitely be part of the overall decision-making progress and maybe tip the scales in our favor when we're in a tight competitive situation. Kudos to the Koppers team for refusing to just check the box on Zero Harm sustainability and instead making it a way of life at Koppers. I'll return in a bit to provide my view on how we're seeing the current year within each business while also reviewing our 2026 projections and give more flavor for our potential in '27 and '28 as Catalyst hits peak acceleration.

But before I turn things over to Brad Pearce, our Interim CFO and Chief Accounting Officer, I would like to take a moment to recognize Jimmi Sue Smith, who announced her retirement from Koppers earlier this year. Jimmi Sue joined Koppers as our VP of Finance and Treasurer, mere weeks before the pandemic in 2020. She was part of a leadership team that navigated the company through those trying times and positioned us for success as the world gradually returned to a new sense of normal. She was promoted to be the company's CFO, excuse me, in January 2022 and continued making her mark by leading the shift of capital deployment towards shareholders by reinstating the company's quarterly dividend and taking a more aggressive approach to repurchasing our undervalued shares. I could go on and on with Jimmi Sue's accomplishments, but I'll save that for her retirement celebration and just finish by saying that I thank her for her contributions and wish her the best in retirement.

Now I'll turn it over to Brad, who's done a wonderful job stepping into the CFO role as we go through a more deliberate search process for Jimmi Sue's successor. He will speak in more detail to our fourth quarter and full year financial performance.

Thanks, Leroy. Earlier today, we issued a press release detailing our fourth quarter and full year 2025 results. My remarks today are based on that information. As seen on Slide 8, we reported consolidated fourth quarter sales of $433 million, down $44 million or 9% from the prior year. Relative to the prior year quarter, RUPS sales decreased by $7 million or 3%. PC sales were down $20 million or 14% and CM&C sales decreased by $17 million or 15%.

As shown on Slide 9, full year sales totaled $1.9 billion, a 10% drop from prior year sales of $2.1 billion. RUPS continued to be our largest segment with sales of $927 million, followed by PC with sales of $544 million and CM&C with sales of $409 million. Each segment was lower as compared to the prior year with a 2% decrease at RUPS, followed by 17% and 18% decreases for PC and CM&C, respectively.

On Slide 10, adjusted EBITDA for the fourth quarter was $53 million, which represents a 12.3% EBITDA margin on sales. By segment, PC delivered adjusted EBITDA of $28 million, followed by RUPS of $22 million and CM&C of $4 million. PC led with adjusted EBITDA margin of 22%. RUPS maintained adjusted EBITDA margin above 10%, while CM&C reported a 4% margin.

Full year adjusted EBITDA results, as seen on Slide 11 were $257 million, reflecting a 13.7% margin. RUPS adjusted EBITDA was $108 million, returning a 12% margin, while PC delivered adjusted EBITDA of $103 million, a 19% margin. CM&C adjusted EBITDA totaled $46 million, resulting in an 11% margin.

Focusing on the RUPS business, Slide 12 shows fourth quarter sales of $209 million compared with $216 million in the prior year quarter. Approximately $5 million of the decrease in sales was due to lower volumes of commercial crossties and lower activity in the maintenance-of-way businesses. The lower maintenance-of-way revenue is due in part to the sale of our railroad bridge services business earlier this year. These were partly offset by volume increases in our domestic utility pole business of around 10% and $4 million of price increases, mostly in crossties.

RUPS delivered improved adjusted EBITDA of $22 million compared with $18 million in the prior year. The improved profitability was primarily driven by approximately $7 million in lower operating expenses, coupled with decreased SG&A costs and net sale price increases. These improvements were partly offset by net lower sales volume.

Turning to Slide 13. Our Performance Chemicals business reported fourth quarter sales of $128 million, down from $148 million in the prior year quarter. The decline in sales was primarily due to volumes decreasing by 16%, mostly as a result of market share changes in the United States. This was partly offset by net sales price increases. In spite of the drop in sales, adjusted EBITDA for PC was $28 million, just below the $29 million of adjusted EBITDA in the prior year quarter. While profitability was impacted by lower sales volumes, it was largely offset by lower raw material costs, net of our copper hedging program, lower logistics costs and higher royalty income.

Slide 14 shows that sales in the fourth quarter for our CM&C business were $96 million compared to $114 million in the prior year quarter. This decrease was primarily driven by $17 million of lower volumes related to our discontinued phthalic anhydride product line, lower volumes and sales prices for carbon black feedstock and a 7% reduction in prices globally for carbon pitch. These were partly offset by volume increases in carbon pitch, primarily in Australia and around $4 million of favorable impacts when translating our foreign currency sales into U.S. dollars.

Adjusted EBITDA for CM&C in the fourth quarter was $4 million compared with $9 million in the prior year quarter. This was due to net sales price decreases and lower plant utilization, partly offset by operating cost savings associated with discontinuing our phthalic anhydride business. Compared with the fourth quarter of 2024, the average pricing of major products was lower by 4% while average coal tar costs were higher by 10%, which led to lower EBITDA margins.

As shown on Slide 16, we continue to pursue a balanced approach to capital allocation. In terms of investments to position ourselves for the future, $12 million was related to the termination of our U.S. pension plan. $21 million was earmarked for the acquisition of the utility pole procurement business and approximately $48 million was allocated for capital expenditures, net of cash received from insurance proceeds and asset sales.

Our share buyback activity in 2025 totaled approximately $38 million or a total of just under 1.3 million shares. We have approximately $67 million remaining on our $100 million repurchase authorization. In addition to the share repurchases, we also returned capital to shareholders during 2025 through our quarterly dividend of $0.08 per share. At December 31, we had $383 million in available liquidity and $881 million of net debt, representing a net leverage ratio of 3.4x. We remain focused on our long-term goal of reducing the net leverage ratio to 2 to 3x.

On Slide 17, total capital expenditures for the year were $55 million gross or $48 million net of asset sales and insurance recoveries. The majority of our investment was allocated to maintenance capital spending of $45 million, with spending on Zero Harm initiatives and growth and productivity projects, each totaling less than $6 million. Capital expenditures were evenly distributed among the 3 business units of between $15 million and $19 million apiece. We are projecting CapEx to be approximately $55 million in 2026, a level on par with 2025.

Finally, as highlighted on Slide 18, our Board of Directors declared a quarterly cash dividend in February of $0.09 per share of Koppers common stock, reflecting a 13% increase from 2025. This dividend will be paid on March 23 to shareholders of record as of the close of trading on March 6. While future dividends are subject to ongoing Board approval, maintaining a quarterly dividend at this rate will result in an annual dividend of $0.36 per share for 2026.

With that, I will turn it back over to Leroy.

Thanks, Brad. Now before I dive into each of the businesses, I'd like to provide our perspective on the recent Supreme Court ruling, which vacated tariffs under IEPA. Prior to the ruling, we were estimating a tariff impact on our business of around $5 million to $6 million in 2026. Removing the IEPA tariff and replacing it with a worldwide tariff of 10% essentially reshuffles the deck and leaves us in a slightly better position. Of course, these are only in place for 150 days, and the administration has promised to use this time to put more permanent tariffs in place. So it remains to be seen how it will impact our business.

Perhaps a greater concern are potential tariffs under Section 232, which has an ongoing investigation into refined copper imports. We do not import copper for our products as we use domestically sourced scrap copper. But for unhedged copper requirements, any tariff on refined copper will increase the market price of this key raw material for our PC business. The uncertainty of tariffs continues and the numbers seem to change from day to day. So while I'm providing our most current view, that can obviously change quickly.

Okay. For now, I'm going to review the market outlook for each of our businesses, starting with Performance Chemicals on Page 20. So let me leave with the good news. We're projecting a top line increase of approximately 11% in 2026, driven entirely by market share expansion in both our residential and industrial product lines. A large component of our Catalyst initiatives for PC centered around converting commercial opportunities that we knew were in play coming into 2026 as new business. We realized success on a number of accounts, refocusing our attention on serving the customer while also demonstrating the value of our R&D and tech service capabilities to convert a portion of business to new technology. In addition, our PC team continues to be focused on commercializing the next generation of reduced copper wood preservatives and in-demand fire retardants.

Moving to the external market data. We interpret market sentiment is neutral to slightly positive for 2026 with our internal models reflecting overall flat market demand. Existing home sales in 2025 were flat compared to 2024. And while the fourth quarter upswing gave some hope of stronger existing home sales activity in 2026, January's numbers were disappointing as they registered an 8% month-over-month decline, getting the year off to a tough start.

The average mortgage rate fluctuated between 6.2% to 6.3% in the fourth quarter, down from earlier in the year. And the rates are currently at about 6% and expected to moderate slightly in the near-term, although that's not expected to have a meaningful impact on the housing market. The leading indicator of remodeling activity or LIRA is forecasting year-over-year growth in home renovation and repair spending of 2.9% in early 2026 and eventually easing to 1.6% growth by the fourth quarter. Building product sentiment remains neutral with cautious optimism in select commercial and infrastructure segments.

Listening to our customer base, it seems the disappointment of 2025 is still fresh in their minds, and so they're reluctant to build in any significant rebound until they can get clear signals. This has our model for 2026 baking in flat organic volumes for residential products with a modest low to mid-single-digit volume increase expected for our Industrial Products segment, driven by growth in utility pole demand.

On the cost side of the equation, excluding copper, we're expecting a mix of increases and decreases in our raw materials to mostly balance out and have little impact. Copper prices have continued their steady rise over the past year and currently are 25% higher than average prices for 2025. Because of our hedging strategy, we're mostly insulated from the increase at current price levels, assuming scrap copper pricing continues to behave as it historically has. The price separation between the LME and COMEX indices that we discussed last year has not been an issue recently, but changes in the tariff environment could see this return.

In the meantime, we continue to work to manage this risk. If the copper markets do not abate as we enter into contract discussions later in 2026, current prices would represent a $50 million pricing pass-through necessary to account for the increased copper costs. The Catalyst benefits for Performance Chemicals targeted in 2026 are mostly commercially driven and are already secured, where PC results ultimately end up in 2026 will depend more on the direction of base demand compared to our flat outlook and the uncertain cost environment driven by tariffs.

Moving on to our Utility and Industrial Products business shown on Page 21. Market sentiment remains bullish mainly due to increasing electrical demand related to build-out of AI infrastructure. In addition, it's anticipated that crypto mining, EV development and new manufacturing will contribute to increased electrical demand over the next 5 years. Utilities are being pressured to limit price increases resulting from higher demand and data centers owned and operated by large tech companies are expected to be required to share the resulting cost burden with consumers.

Now we entered 2025 with a clear objective to grow our business outside of our traditional regional markets in the U.S., and we were able to do that, growing our nontraditional markets by 17% on the top line while keeping our core regional markets flat, which resulted in an overall 6% sales increase. And we're targeting an even greater top line performance in 2026, driven once again by growth in targeted regions, added sales from the pole procurement acquisition made in late 2025 and a modest organic market improvement after lower-than-expected growth last year.

In 2025, we made investments in our distribution assets, fiber supply, technology platform and sales team, including adding new sales leadership at the beginning of 2026 that we believe position us as a formidable competitor on new accounts. And after the acquisition I referenced in December, we acquired a small business specializing in the procurement of Douglas Fir fiber, which is traditionally used for transmission poles. This is important for solidifying opportunities to grow our sales base by adding to the opportunities we've historically been shut out from due to not having that wood species in our portfolio.

It represents our next step in building out our portfolio in a measured way. And to quell any worries that we would spend significant amounts of capital in the hopes of future business, this transaction represents a lower cost, lower-risk approach to securing a new critical supply chain. This will open doors in existing markets while also providing a platform to potentially build from as we think further about the Western markets.

While sales showed modest gains in 2025, we took a step back on our cost management in UIP last year, and that makes this business ripe for the planning and execution discipline that Catalyst fosters. Opportunity bounds on the cost front in UIP, and we will be going after it hard in 2026. Of the improvement targeted for UIP in 2026, over 3/4 of it is cost related. Part of the cost improvements relate to a consolidation of production resulting from the recent idling of our plants in Vance, Alabama mentioned earlier. That production has moved to our nearby facility in Kennedy, Alabama, which will realize the benefits of improved cost absorption. Vance will remain in our network but not operate as we continue to monitor our long-term manufacturing requirements in this important growth market.

The market outlook for our Railroad Products and Services business is summarized on Page 22. Railroad industry consolidation continues to impact market trends and the pressure to improve operating performance, resulting in reduced capital spending by our customers. As mentioned on prior calls, for the second straight year, our railroad customer base reduced their forecasted tie requirements communicated to us heading into the calendar year as they pulled back on their tie programs.

Thankfully, this past year, we were able to balance out the lower-than-anticipated volumes with some aggressive cost actions, improving our profitability in this business to a level not seen in a decade. And as we approach customer discussions for 2026, 2 Class 1 customers indicated an additional pullback in volume for this year, which would have a significant impact on our RPS profitability without some counteraction. We believe we've been able to primarily offset that impact in 2026 by agreeing to provide price relief while receiving a larger contractual commitment from one customer as well as an extension of our current agreement.

We're also mitigating the impact of lower volume from a second customer by idling production capacity and consolidating operations across our remaining treaty network, as mentioned earlier. There's a lot going on with the Class 1 customer base, but the main point for our shareholders is that we're in the most competitive position to capitalize on a Class 1 market dealing with a lot of uncertainty right now. And while the pie may be smaller, our piece of it is expected to grow to volumes that we haven't seen since 2017. The commercial crosstie market remains very competitive, but we continue to make inroads there and as of the end of January, have the highest backlog that we have had in the past 5 years.

As for operations, we've realized much of the low-hanging fruit over the past 18 months and are looking to maintain the gains we have made heading into 2026. Much of the benefit has been derived by doing more with less. In 2025, we had 1% more in crosstie sales in '24 with 38 or 7% fewer people than where we ended 2024. In the crosstie portion of our business, we are down by 105 people or 16% compared to our peak employment level at April 2024. The idling of the plant that I mentioned will result in another net 76 employee reduction, which will serve to offset anticipated price reductions.

Sawmills are experiencing the impact of the industry pullback, resulting in sharply reduced production and widespread mill closures. It remains to be seen what long-term impact this could have on hardwood availability and pricing, but in the near-term, it's a buyer's market. Catalyst benefits included in our 2026 projections primarily relate to plant consolidation, material waste reduction and commercial and operations improvements.

The outlook for our CM&C business is summarized on Page 23. And overall, the CM&C market remains in turmoil as evidenced by sharply reduced financial performance realized in Q4. Structural improvements made in 2025 by closing our phthalic anhydride plant, along with successfully executing on several Catalyst initiatives are projected in the near-term to be offset by higher net global coal tar costs, reduced throughput as a result of a key raw material supplier exiting the market and pricing pressure brought on by trying to maintain business in a troubled market.

On the plus side, we do have a strong base of raw material supply locked down for several years in each of our geographic markets, which assures us a certain level of throughput. Also, as mentioned during my RPS commentary, I believe we're positioned to grow our share of the crosstie market, which will provide a strong baseload of creosote demand.

The strong connection of our U.S. and European logistics network also keeps us on par with our major competitor. And it also provides an advantage against other European competitors more reliant on less attractive export markets to supplement their domestic customer base. This is why we think we will see some capacity rationalization in Europe at some point as it gets tougher to withstand the current market headwinds.

The loss of tar supply in the U.S. from a supplier that's closing their coking operations presents a challenge to U.S. operations. Conversely, it presents an opportunity for our European operations to increase their share of the market as they have ample raw material availability. Catalyst benefits targeted for CM&C in 2026 cover all aspects of the business from production to logistics, procurement and sales. Our greatest opportunity for improvement remains in CMC, and I'm confident that we will see it realized over the next 3 years.

As shown on Slide 24, we're about a full year into our Catalyst transformation and executing successfully on many initiatives. The $46 million of benefits that we realized in 2025 more than offset the $40 million-something impact of lower sales on our PC business and almost got us back to our 2024 adjusted EBITDA level. As we've continued to evaluate Catalyst opportunities, we've been able to increase our pipeline from what we previously communicated and now believe we can generate up to $75 million of benefits in the '26 through '28 time frame compared to the $40 million that we had expected back in November.

The main driver for the increase is due to the optimization of our manufacturing network, and we were also able to add to each of the other targeted functional areas. Of the $75 million estimated over the next 3 years, we target between $20 million and $40 million as achievable in 2026. Like 2025, we're experiencing headwinds that are preventing the full impact of the benefits from being reflected in EBITDA, although adjusted EPS and operating and free cash flow should both increase significantly.

I'll reiterate what I said back in November when I look at our full potential, I see an organization that should be able to deliver 15% plus margins on a consistent basis, an organization that should be able to drive earnings improvement of greater than 10% on average over the next 3 years, an organization that should be able to reduce leverage to the low end of our stated range below 2.5x, driven by significantly greater free cash flow generation, what we have targeted to be $300 million or more over the next 3 years.

Our path to get there is the continued evolution of our portfolio that would make PC and RUPS a larger share of our top and bottom line as we focus on our more structurally sound businesses that have opportunity for growth and have proven to consistently generate higher margins with lower capital requirements. You're seeing that playing out in our 2026 projections, which I'll move on to now.

As shown on Slide 26, our consolidated sales guidance of $1.9 billion to $2 billion in 2026 compares with $1.88 billion in 2025, with PC and RUPS making up 80% of our top line, the highest percent of total sales in company history and closing in on our 85% of sales target.

On Slide 27, we're forecasting adjusted EBITDA of $250 million to $270 million in 2026 compared with $257 million in 2025. The biggest risk to achieving the midpoint include realizing the lower end of our Catalyst capture rate and seeing further end market softness. Additional risks are higher costs driven by tariffs or other factors and extended operational disruptions. Our biggest opportunities of exceeding the midpoint are if we meet the higher end of our Catalyst capture rate and see end markets strengthen.

Slide 28 shows our adjusted earnings per share bridge, reflecting a range of $4.20 to $5 per share in 2026 compared with $4.07 in 2025. At the midpoint, the contribution from operations, interest savings, lower depreciation and amortization and benefits from a lower share count are partly offset by higher taxes from higher net earnings. While we don't provide quarterly earnings guidance, it is worth noting that our first quarter this year will be the weakest of the 4. This is due to the greater-than-normal effect of the severe winter weather that's impacted our operations and shipping schedules. And in addition, there are several Catalyst initiatives that are in earlier stages and won't pick up momentum until the second and third quarters.

On Slide 29, as I've been signaling for the past several quarters, we are expecting to see a sizable jump in both operating cash flow and free cash flow this year. As a result, this will provide the most cash we've had for debt paydown since 2020 when we receive the cash proceeds for selling our KJCC business. Not only would operating cash flow and free cash flow represent new highs at these projected levels, but more importantly, 2026 will represent an inflection point for our step change in cash generation as we expect these new higher levels to become the norm.

At our current market cap, this equates to a better than 15% free cash flow yield, and this places Koppers at the top end of whatever industry you want to compare us to and provide several attractive options for how we deploy our excess cash. This also implies about a 50% opportunity in our share price just to bring it back to the current 10% yield level based on 2025 free cash flow. The foundation we've built over the previous 5 years has set us up to create significant shareholder value over the next several years, and I'm confident we'll deliver. We still maintain leading shares in niche markets that utilize our essential products with low capital requirements in the near-term and rising cash flow to deploy towards further reducing our share count and our debt.

Now I would like to open it up to questions.

[Operator Instructions] Our first question comes from Gary Prestopino with Barrington Research.

Leroy, I want to refer to Slide 20 here with the PC business. Last year, you said there was a competitor that came in and took share, lowered prices. And now what you're saying is that for 2026, you're looking at market share capture in both residential and industrial markets. So -- and you've raised prices. Could you maybe square what is actually going on and take a deeper dive into that market? How you're able to get share, prior share was lost because of price competition?

So yes. So Gary, we did take a market share hit in 2025. It was the most significant portion of our PC sales decline. And there was some business that was available to potentially recapture in -- heading into 2026, and we were able to convert on a portion of that. But there's -- I'd say the bulk of the business that we're adding in 2026 is unrelated to that market share loss. It's current customers where we had already had a pretty good footprint with them, but through some consolidation that they had done that had business with, again, one of our major competitors. They had elected to move some of that business over to our new technology in those areas. And so that's a good piece of it.

The industrial business, we've made inroads in over the past number of years. So there's kind of nothing new from that standpoint. I will say, and I do want to make sure I clarify, like we are not growing market share and improving price in 2026. That's not happening. It is a competitive market out there. It continues to be. And so I expect that we'll see some price compression in '26, but we will see market expansion in '26 on the PC side.

Okay. And then did you -- you may have done this. There's a lot of information here. We got to go over, obviously. But did you kind of segment what you anticipate the Catalyst benefit to be in 2026?

Yes. I mentioned in my prepared remarks, I think we're targeting somewhere between $20 million and $40 million of Catalyst benefits in 2026.

Okay. And I'm sorry, I missed that. I'm trying to keep...

Yes. No worries.

And then lastly, just kind of a philosophical question here. In the Slide 24, where you're talking about your objectives of getting PC and RUPS up to 85% of sales. And I would assume that you would expect at least the percentage of EBITDA contributed to be at that 85% or better from both of these divisions?

That would be correct.

Okay. Then can I -- just the rationale for even keeping the CMC business. Now I understand that you've got some intercompany sales there with the creosote and all that. But is that really the rationale for keeping that as it becomes so small? Could you possibly sell it and get contracts locked in that would be advantageous to you for your supplier, creosote?

Yes. So good question, right? Complicated answer, long complicated answer.

No, no.

No. I mean, because it is a significant component of our supply chain. So there's no question there's that component of it, right, which can -- I think you can probably work through that potential complication. You end up having to deal with it whatever contract you put in place ultimately ends up coming to an end, which it will at some point in time. But in terms of -- initially, yes, that can probably be overcome. I'd say you got issues around a descaling of the entire organization as a result of that and stranded costs that would come. The environmental footprint around that would probably be somewhat restrictive in terms of what you might be able to get in terms of an attraction for an individual wanting to come into the market.

Consolidation opportunities are really limited because there's only a few folks that are really doing it in our in our geographies that we serve. So there's just a whole host of constraints around that. And so -- but look, I mean, I continue to say, and it's not just bluster. I mean we continue to look at our business portfolio actively. And if you've looked over the 11 years that I've been doing this job, our portfolio has shifted dramatically in terms of businesses that we've gotten into, businesses we've gotten out to -- out of operations that have been rationalized, those sorts of things. And so we're constantly looking at that. Where we see opportunities to improve by peeling back in some of our lower-value areas, we'll look to do that. So nothing is off the table. And that's something that we'll continue to look at as we do regularly.

The next question is from David Marsh with Singular Research.

So I just wanted to start, if I could, with a couple of kind of housekeeping type items. First, I noticed that the D&A went up about $2 million sequentially versus Q3. I was hoping maybe you guys can give a little bit of clarification around that and kind of what the expectation would be going forward. I didn't know if maybe that was because of the sale of the business.

So I don't have those details handy. I'll say that we're -- again, as part of what we're doing relative to keeping costs in check. There's a lot of work and initiatives that continue to be in process around SG&A and operating costs in general. Any particular...

I'm sorry, Leroy. If I said SG&A, I meant D&A.

D&A, thank you.

D&A bumped up a couple of million sequentially. I was confused...

Okay. No problem. I'll turn that over to Brad maybe and ask him to comment on the D&A.

Yes. So I think the D&A obviously is going to change as we close projects and begin to depreciate them. So I think it's really just probably a combination of some timing, right? We came off a couple of years of some higher capital spending, and that is now moved into depreciation phase. And what can also be coming through depreciation might be some impacts for asset retirement obligations. And we've been -- as you know, we closed our phthalic operation in 2025, and some of those charges might be coming through for that.

One thing I'll say, David, is I referenced, we are expecting D&A to drop by a couple of million, I think, in 2026 and would expect some further moderation as we basically have certainly the next several year run rate at a more normalized CapEx number that's below that current D&A run rate. So I would expect that to improve as the years -- at least over the next several years.

Got it. And then you talked about Catalyst perhaps driving as much as $20 million to $40 million in savings in 2026. I mean how would that break out in terms of the split between like cost of goods sold and SG&A? Would it have kind of a little -- maybe a little heavier impact on the COGS side? Or is it kind of equally split? Or how does that play out? Because I noticed the gross margin in the quarter was really nice. It was up really nicely.

Yes. It will be heavier on the COGS side. I mean we've got a lot of the low-hanging fruit on SG&A. There's still more we think we can do there, but it will be heavier on the COGS side, COGS and commercial benefits as well. There's pieces to it. So we tend to default and sort of think of Catalyst as it relates to the cost side, but there's a heavy component about this that is about putting ourselves in a position to win more profitable business.

And so when I mentioned PC as an example, 2026, most of our Catalyst initiatives were centered around commercial, and it was about being able to win additional business, take some additional market share. And we've achieved that, right? So that's going to come through in the form of some of the market share penetration and increased revenues as well as the profits that will come from that.

Got it. Very helpful. And then your interest expense in the fourth quarter was down a good bit sequentially on a percentage basis. But the overall debt wasn't really down a lot. Like is there -- can you talk about what's at play there? I noticed it did look like you guys put some swaps back on in terms of the derivatives contracts coming back on the balance sheet. Maybe just give us a little bit of color around that.

I'm sorry, interest expense? Yes.

Yes. It was down sequentially.

Yes. Well, yes, I mean, we're obviously getting some benefit on lower rates coming through as well as, again, just lower overall borrowing. That did have an impact. Our swap profile where we've converted some of our variable into fixed, that has not changed over the past year.

The last question comes from Michael Mathison with Sidoti & Company.

Congratulations on all the margin improvement.

Thank you, Michael.

So in particular, the adjusted EBITDA margin in PC was up 370 basis points sequentially, so quite an achievement. Can you comment on what drove the upswing? And is that the new normal? Is that margin level sustainable?

So there's things that move around if you will, right? So it's not always clean quarters, I would say. We did have a benefit of an asset sale that I think helped their results for the quarter and probably added a little bit of that, that is something that is not repeatable. But overall, I'd say the margin profile, I was really pleased with what they were able to do through a challenging sales year. And I think with what we're doing moving forward, we certainly expect that we're going to be able to generate margins that are in that range on a go-forward basis. I won't necessarily commit to getting back up above the 20% profile at this point. There's just still too many moving parts.

And as Brad talked about relative to copper and things like that, those sorts of things, we try to insulate ourselves from, but there's always some level of exposure. We have -- sometimes we're more successful at getting greater discounts than others. And so there's a whole bunch of factors that come into play there. I guess the main point I would say is -- we were pleased with the overall margin performance, not just in Q4, but for the full year for PC and expect that we'll be able to continue to generate in that range and obviously targeting to do a little bit better than that. But we think we've done a pretty good job of putting that business in a position to still consistently generate on the high end of the margin profile spectrum.

And turning to the CMC business. You've spoken previously about potentially reducing the footprint at Stickney to a single column. Are you still planning to go ahead with that? And what would that mean for CMC margins? Is there any revenue impact from lost business?

Yes. So it's a good question. There's a high likelihood that we will be heading in that direction because we think that there's a whole host of benefits that come about as a result of that. And in terms of what impact that would have on the revenues and profitability, nothing as it relates to '26 because of raw material that we already have in inventory that we need to run through and things of that nature. So that wouldn't be something that would be realized until we kind of really move out into '27, the '27 time frame.

The fact that we're -- we have less raw material to work with obviously means that we'll be generating less sales as a result of that. But if we move down to a single column, we think we can certainly cut costs as part of that. And as long as pricing remains stable, improve our overall margin profile for that business. So that's part of the Catalyst initiatives that we're continuing to do some work around. And as I have more information on that, we'll talk about that and potentially in upcoming quarters.

Great. And looking at your utility pole business, I didn't see a press release about the Douglas Fir acquisition. So could you just give us a little bit more color about where they're located? Will that help with your effort to -- for geographic expansion?

Yes, yes. So yes, small business. It's out in Oregon. And it just -- it really secures up a Doug Fir supply chain for us that we were beginning to access out over the last 12 to 18 months, but there was a level of risk that could potentially put us in a spot where we would be dependent upon a source that could move away from us at any point in time. And so we saw it as an opportunity to lock that in, secure that source of supply and assets and capabilities and bring that into our portfolio, which actually we think helps improve our opportunities in some of our traditional markets where we might have been shut out of bids that would require some Doug Fir component that we couldn't offer, we would need to try and work with others to be able to provide that.

So right now, it's more geared towards helping us in markets that we're already in and trying to grow -- and -- but it could be an initial jumping off point at some point in the future if we want to think more aggressively about expanding out further west.

We have an additional question from Liam Burke with B. Riley Securities.

Leroy, on PC, we talked about the puts and takes on residential. But are you making significant enough headway on the commercial side of the business where it's actually moving the needle and contributing to this anticipated revenue growth?

I mean, we believe so. I mean, I think if you, again, go back to our '26 projections, I think that we're happy with the commercial wins that the team generated in the back half of '25 that will carry into this year, and it's all good business and it certainly helps us on the throughput side as well in our plants. So we're a manufacturer, right? I mean the more we can put through our plants, the better we're going to do.

And so you're always balancing those things out against any potential price trade-off that you have. But throughput is king in our world. And so it's important to be able to have that volume. And so the team -- again, the team came back strong in -- our team came back strong in '25 with a sort of a really a refocused effort on ensuring that we were making sure that our customer base understood that we value what they do for us, and we want to do everything we can to not just meet their needs but exceed their needs and expectations. And I think we were able to regain some confidence in some areas.

And we already had confidence in others that I think ultimately resulted in additional business coming our way, again, as certain customers consolidated their own production activities. So real happy and pleased with the efforts our PC team did in '25 coming back from a tough year.

Great. And in the past, you've talked about adding to the utility pole business by tucking in a pretty fragmented area. Is that -- do you see opportunities there? Or has pricing got out of hand with the bigger or increasing demand for infrastructure build?

I think that we're always open to those opportunities and always looking and -- but wanting to make sure that, again, we're disciplined in that process and how we go about it. So there are opportunities there, Liam. It's tough to say if and when any of them could shake loose. But in the meantime, we think we still have capacity to fill, and that opens up enough opportunities for us to continue to grow our business with the existing capacity that we have on hand.

And so that's -- '25, there is a tremendous amount of effort in terms of sort of upping our sales skills, if you will, and technology, right? So we've added technology. We've added new sales leadership. We've added more boots on the ground, and we've gone hard in areas that we feel were underrepresented and provided opportunities for us. And so again, also pleased with the efforts of our leadership and team on the UIP side. And I think we'll continue to see those benefits come through in '26 as well.

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 thank everybody for participating on today's call and for your continued interest in Koppers. Look forward to connecting with you again next quarter. Take care.

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

And paper and packaging sectors at Bank of America and have the pleasure of hosting a fireside chat with Koppers. And we have with us this morning is Jimmy Sue Smith, CFO; and Quynh McGuire, Vice President of Investor Relations.

As a reminder, we are webcasting this event. Kopper reports in three segments: Performance Chemicals or what they call PC, which Kopper sells wood treatment protection chemicals, E.G. wood preservatives, mainly for residential applications like decking, the railroad and utility products services or RUPS, where Kopper sells treated and untreated wood products to railroads such as crossties and also sells utility poles. And the third segment is Carbon Materials and Chemicals or

CMC, where Koppers is a leader in coal tar distillation, manufacturing a number of products, including carbon pitch used to make aluminum anodes, clear salt used in wood treatment and as carbon black feedstocks and naphthalene among other products.

So with that introduction, again, if you have any questions, just raise your hand. In particular, since we're webcasting this, if you mind waiting for the microphone, so everyone on the line can hear as well.

But with that, I'll start off. Again, thank you for coming this morning. Thank you for coming to the conference.

Great to be here.

So I just want to start off with what every analyst wants to know is cash flow items. So how should we -- what's your latest guidance? Or what can you tell us starting with sort of 2025 cash interest?

Cash interest for 2025. Yes, we are in the probably $65 million range, I think, if you sort of annualize where we were at the third quarter. And so that's we benefited a lot from some rate changes as well as some repricings that we were able to do on the Term Loan B.

We'll get another full year of the one we did last year when we move into 2026. So we're looking at -- based on the curve now it being down even below that for '26. And overall, the cash flow goal -- free cash flow goal over the sort of our strategic plan period as we look out from 2026 to 2028 is going to be having $100 million of free cash flow annually over that period.

Got it. And I would sort of think about cash taxes as either a figure or an amount or a percent of, say, EBITDA or however you want to -- what kind of guidance can you tell us?

So I think about that as being -- as taking sort of where we expect to be this year, which is in that $15 million to $20 million range. And then as the business grows about incremental EBITDA, 25% to 30% on top of that as well is how we think about modeling it.

Incrementally [ good ].

Use the 15% to 20% as a base.

Great. I'm sorry, you say 15% to 20% or 25% to 30%?

15% to 20% is the base and the incremental piece.

And then working capital inflow or outflow, what are your expectations?

So working capital, we had some big recently. And some of that's growth in the business, but some of it's been a little bit of growth in inventories, quite frankly. So I don't think we're going to see it flip to a substantial inflow just because I think as the business grows, there will be natural growth in working capital, but we do have are some catalyst initiatives.

And I know Leroy talked about that on the last call in terms of $40 million this year and $40 million by the end of 2027 in terms of EBITDA. But we do have some working capital initiatives as part of that, they're not included in there, but they are in that $40 million, $50 million range over that time period, mostly in inventories. And I think what that will do will be mitigate the cash flow draw from the growth of the business. So probably smallish usages, but not usage in the -- we've seen $50 million a year or recently, not.

Got it. And normalized CapEx, should we think of that in the $55 million range or some other number?

So I think this year, we're guiding to around $55 million. We've said in the past it's up to $75 million. I think shutting down [ methalic ] plant helps with that a lot. I think I think in that $50 million to $60 million is probably like a normalized maintenance level. And I wouldn't expect to see it go over $75 million for any growth projects or anything like that, that might come up.

Got it. I would have -- I thought the sticky, the line shut would have...

Going to be closer. It's going to be more in the $50 million range. You could see some years where it gets to be $70 million if we have some significant think it's...

And that plant was set up two lines. It has two -- or at least has two lines now and you're shutting down one line.

So we had 2 distillation pumps. So a couple of things. One, we shut down the -- so we stopped producing there early in the second quarter. That's been usage it had some rate. So that line has been shut down. We do have two distillation columns.

And we -- there's some additional to coming out of the market in North America this year because there's been a conversion from a from blast furnace to electric arc and which doesn't move the needle coke. So there'll be more coal tar coming out of the market. So we are looking at shutting down one of those columns as well and continuing to streamline those operations, rightsize them for the market that we're in and get the cost to where we need it to be.

I'm not sure I thought you were definitely shutting down of cums. You're saying down Okay. And I guess the question I had is, since it was set up as a 2 line -- distillation columns for coal distillation 1 line instead of 2 line does -- presumably, you can't cut 50% of the fixed cost. What I'm saying is it costs more to presumably run just one line on a fixed cost basis that you have to absorb.

Things that we currently studying, but the way that the plant we saw significant improvement in our margins this year from shutting down the phthalic anhydride, eliminating some of those costs. We think based on how you -- which column you operate, how you set up the operations, we...

Excellent. And both Q4 '25 and 2026 again, guidance, are there any other cash items or pension capital or any other things we should be thinking about?

Yes. So the pension is substantially funded at this point. There's -- we do have -- that's the North American pension. We did almost all of it this year. There were two small pieces for union plants that were -- didn't opt into that. So we may have those to come off as the contracts roll up, but they're not significant. They're not significant. We also have been in the process of trying to close out the pension in Europe for several years. There was a court case in Europe that complicated that for everybody who had pension plans there. It looks like that's going to get resolved, but that's just a couple of million dollars. It's not significant.

Europe correct me if I'm wrong, the pension sort of pay-as-you-go kind of situation.

You can buy.

All right. Interesting. And then starting in on the three segments, Performance Chemicals, your guidance for '25 is down $41 million to $43 million versus 2024. Is most of this volume reduction to lose market share to one of your main competitors? And how much did unfavorable fixed cost absorptions impact this EBITDA reduction guidance?

Yes. The most significant piece of that decrease in EBITDA from PC business is related to the market share reductions that we had. We had a couple of major customers that were sole sourced to us who have elected to split their sourcing. And that did drive -- it was most -- there's some fixed cost impact to that, but a lot of it is just the EBITDA loss not the volume.

So you didn't lose any customers. What you did is they decided to dual source the supply. And only price, but what was their motivation to suddenly change the way they were doing it to dual sourcing and sole sourcing.

But a lot of companies, us included after what we experienced in the supply chain disruptions during COVID, have looked at their operations and said we can't afford to be sole-sourced for have some things that we just have no choice, but we -- it's kind of a policy, we don't sole source because you just -- there's too much risk.

Got it. And was it all to that -- like there's two other main players. Was it all to the one and Right. And why didn't the other one -- the other one has some -- the parent -- the parent of the other one has some administration issues. I don't know if that impacted.

The product that is used to treat residential lumber in the U.S. is the gold standard is called MicroPro. That's a product that we have on. And the reason it's the gold standard is it is rated for ground contact. So you can put it directly in your deck, you can put it directly in the ground. It will not, right? Our main competitor in this space licenses that technology from us. That was a -- that's a structure that we inherited when we purchased the PC business. So they are selling the same sort of formulation and they are able to sell ground contact. The third player in this space does not have ground contact.

Okay. That explains it. I realize that. All right. Kopper. How was that -- I would have thought that would be a big impact. But you're mainly saying it's fine has been the impact, not -- has Kopper impacted?

So we had some impact from Kopper this year, but that was because there was some dislocation in the market. So we generally hedge our copper costs at least a year out, if not more, and then reprice our customer contracts in line with where the Kopper is. What happened to us in 2025 is we have historically hedged our Kopper at LME because it's a more liquid market than which is actually like sort of the U.S. Kopper market.

So we would hedge we purchased the PEMEX. Those like always moved in concert with each other, and that was fine. When we started -- when the U.S. started talking about putting tariffs on Kopper , those 2 indices dislocated COMEX went up, LME did not, which obviously impacted the effectiveness of our hedges. We were able to mitigate most of that because of some supply-demand dynamics that happened here where people sort of shipped a lot of copper into like to get rid of the potential tariffs.

So there were bigger discounts off of COE, which brought those more in line with each other. It did have an impact on the year in the $5 million to $10 million range for the year, but we were able to mitigate a little bit.

Moving forward, we're looking at ways to -- with new risk unlocked there that they may not move in concert with each other. So we've looked at hedging COMEX, which you can do in sort of like the short to medium term, right? It's not quite as liquid as LME is. actually purchasing in the U.S. from our scrap dealers like LME, and we've seen some who are willing to do that as well as just entering fixed price physical contracts.

So instead of doing it with a financial doing it with a physical transaction. So we kind of executed on all of those. We're using kind of like a little menu approach there, but trying to mitigate that risk because there was a provision when they actually came out with the rule on the copper tariffs, which did exempt the product that we buy, but that it would be revisited next year. So there's a little bit of risk that we can see again in 2026. So we're sure that we are responding to that.

And for next year, copper prices have moved around. But will you be able to basically go to your customers and say, look, here's the price, but here's the Kopper. And so we're just passing that through to you. We're not taking risk.

Those contracts are generally 2-year contracts, and we have contracts from that were '25 and '26. '26 will be another big contracting year for. So we generally lock in those prices in concert with the copper. We are a little Kopper for 2026 compared to where we would normally be at this time of the year. We're 75-ish percent, but we would probably be done in a normal year. But given the dislocation in the market this year, there were some.

So when you say '26 contract year, do you mean that a lot of the contracts from '26 to 2027?

2027 and 2028.

Okay. And then when you go from '26 to '27, the plan is [indiscernible] Great. to RUPS EBITDA guidance for '25 is up 28% to 30% versus '24. So what was the -- when you step back, what is the key driver of this improvement? Was it price cost spread? Was it volume plus acquisition a little bit?

Yes. So it's primarily on the rail side of the business. And there's been a big -- we've been talking for a couple of years that, that business did not have a margin where we thought it should be. We thought it should be a low double-digit 12% margin business and it was not there.

And we from like the cost structure had gotten out with where the pricing structure was from our customers. So we did a lot of work in 2024 and 2025, a lot of it being part of the catalyst to get the cost structure right. So we've taken a tremendous amount of really operating that business, operating SG&A to get that where we want to see.

And now we're seeing that be a 12% margin business, which we're really excited about. We think think the rate change there is going to become challenging because we've done a lot already, and it's harder and harder to make those improvements, but I still think there are opportunities there. I think that's the biggest piece.

I think there's also been some improvement in our kind of the smaller maintenance away business on the rail side. Our rail tire recovery business has moved to just only doing a piece of that business, and that's become much more profitable. And we have some pricing increases this year...

Great. And then was the -- so was maintenance away. Main thing was you took cost out for your Class 1 route crossties, it sounds like -- and then did utility poles, any change there that helped out?

So utility poles have been interesting. a little closer in terms of demand over the last few years and saw some significant destocking that was we are finally seeing some green shoots in that business where we're seeing some -- that's sort of the one area.

I would say, in general, across all of our markets, it's just very much a cautionary tone, like everybody is a little -- like there's a lot of on the sidelines. And everybody is waiting for the signal that things are going to take off. I think utility poles is the one area where we started to see a little bit of that in terms of like volume of quoting activity and some cases getting approved and just positive signs there that, that market may be picking up a little bit.

And we're seeing it both in the rep segment where we sell utility poles, but also in the PC segment where 1/3 of that segment is industrial and to service that market as well. So that's been the good news story there. But I don't think we've seen a tremendous amount of pickup there yet, but if we do kind of like that's the one where we see.

And then obviously, we think the even bigger opportunity in that business is the opportunity to move because we've historically only competed in east of Mississippi. We started building the infrastructure to -- like in terms of sales force staffing to go west in terms of the -- also in terms of the supply chain, procuring [indiscernible] for poles, which you need to go out West.

The Brown acquisition that we did in April of 2024 and the plant that we got in Alabama really enable us to reach the margins. So that for us is a growth opportunity in that area in excess of whatever happens organically in that space, right? Like that's a GDP plus market growth area or a little bit better than that, we think it's better than that for us because we can market penetration in a new geographic area.

And do you keep for the inventory on the Chewy poles, do you keep -- which most of your inventory? Is it untreated poles treated poles? Is it some of both and you're just waiting for demand to come?

So some of those, although I think in normal times, it's more untreated than treated. But the bigger inventory that we hold is on the rail because rail is to drive for 6 months generally. So there's a bit of inventory there. And quite frankly, we have more inventory than we probably need in the PC business right now. Given the step down in volumes there, the inventory there. It's all part of catalyst, all part of what we're kind of doing everybody.

Got it. And then the CMC business, guidance up $8 million to $9 million versus 2 Again, what was the main sort of driver there? Was it price cost? Was it volumes, cost reductions?

So I think it's been a lot of cost reductions. We've seen a little bit of pricing improvement, but not much. Honestly, that market continues to just languish and be -- it's driven by industrial demand. And so it's just very -- everything is very cautious there right now.

But we -- again, a lot of focus on improving the cost structure there, taking out the phthalic anhydride unit and sticky and has really been done without those operating costs. So it's just -- overall, the company as a whole recognizes where we are in the business cycle. We recognize what happened in our PC business and the challenge of losing the market share, and we are very focused on controlling what we can control, which is the cost structure.

And where these businesses sit in terms of that cost structure, which we think enables us to kind of weather this cycle, but also sets us up for when demand turns. -- turn. And when it does, we're going to be sitting here with a really improved cost structure and the business that functions better and ready to take off with that -- with the demand. And so we're excited about that. Waiting for it.

How would you describe the aluminum anode demand right now? I mean, aluminum prices, you would think anode demand would be strong.

Yes. But that entire business is just -- it feels like everybody is sitting on the sidelines.

All right. I guess, just thinking about shutting down that state full distillation still, but what would be the likely timing? Is this a 2026 event?

Yes, we can look at that.

Okay. Were the 2 stills identically sized?

Yes, there's about 300,000 metric tons of capacity between 2, much 300,000.

300 total?

Yes. So that was like 150-inch.

Got it. Perfect. Are there any questions? So I've gone through. If not, maybe we'll just call it there.

Thank you.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Koppers' Third Quarter 2025 Earnings Conference Call and Webcast. [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 Quynh McGuire, Vice President of Investor Relations. Welcome to our third quarter 2025 earnings conference call. We issued our press release earlier today. You can 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 February 7, 2026.

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.

Also, references may 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 those most directly comparable GAAP financial measures.

Joining me for our call today are Leroy Ball, Chief Executive Officer of Koppers; and Jimmi Sue Smith, Chief Financial Officer.

At this time, I will turn the discussion over to Leroy.

Thank you, Quynh. Good morning, everyone. I'm pleased to join you this morning to provide more insight on Kopper's third quarter operating performance. Our results largely fell within our expectations despite market forces continuing to exert headwinds on top line performance.

Sales for the quarter were down by 12% compared to Q3 2024, continuing the trend we've seen throughout 2025. Our team's diligent control spending once again continued to offset much of the impact of lower sales volumes, and we were able to deliver adjusted EBITDA for the quarter of $70.9 million compared to last year's Q3 adjusted EBITDA of $77.4 million.

Adjusted EPS for Q3 2025 was $1.21 per share compared to $1.37 last year as the impact of our lower top line more than offset our cost containment for the quarter. At the same time, benefits from reducing our interest costs through lower average borrowings and lower average interest rates were essentially offset by a higher effective tax rate in Q3, driven by a geographic earnings mix more heavily tilted to outside the United States.

Moving to Page 4. I'd like to provide a little more high-level color by summarizing just a few key takeaways from our third quarter. As mentioned, we focused intently on controlling costs to weather the cyclical softness we're experiencing currently. Through 3 quarters, our SG&A was down 14% on an adjusted basis compared to prior year, which equates to over $19 million in savings on top of the millions of dollars in operating savings that we are also generating. Through Catalyst, we're developing a blueprint to make those savings permanent by further simplifying our business, upgrading our technology and advancing the skill sets of our team members.

Because of what we've been able to accomplish on the cost side of the equation for the second straight quarter, we were able to post adjusted EBITDA margins not seen in a number of years. As we capture more profit from every dollar of sales, we're also improving our rate of converting those profits to free cash flow and deploying that cash to reduce debt and return capital to shareholders through our dividend and a steady stream of share repurchases.

During Q3, we continued to simplify our portfolio by completing the sale of our Railroad Structures business, which came as part of the Performance Chemicals transaction in 2014. The Structures business had been a steady contributor for a number of years, but struggled leading up to and through the pandemic. It had begun to regain its footing recently and through the day of the sale was having one of its better years in a long time, but still was margin dilutive for the past 9 years.

Other than selling to the same customers as our crosstie business, it did not have any strong synergistic aspects. Once again, we wish that team well and thank them for their contributions over the past 11 years. Further simplification of our business occurred in April 2025 through the closure of our phthalic anhydride plant in our CM&C segment.

And next up, we're also finalizing our assessment of shifting our North American CM&C business to a single column operation. In doing so, we will further lessen our exposure to the volatility of the CM&C business, while also reducing the future capital requirements from running a 2-column operation. Later in the presentation, I'll speak further to Catalyst and what is going on in our various end markets.

For now, I'd like to provide a quick snapshot of how we're progressing on the Zero Harm front. On Page 5, you can see that we've made significant progress on safety thus far this year with leading activities up by 29%. This serves as a strong contributor to our lagging metrics of recordable injury rate and serious safety incidents showing declines of 23% and 72%, respectively.

During the quarter, we had 23 of our 41 sites work accident-free with our European businesses and our Australasian Performance Chemicals standing out with 0 recordables thus far in 2025. We can never let up on safety because exposure is all around us and one mental lapse or shortcut could lead to catastrophic consequences. I continue to be heartened by our global team being on pace for another record-setting safety year. A great big thanks to all of our team members for your efforts thus far. Keep up the great work.

Finally, turning to Page 6. I'd like to welcome our newest Board member, Laura Posadas, who was elected to our Board 2 days ago. Laura is the current CEO of Canlak Coatings, Inc., a leading formulator and manufacturer of high-quality wood coating systems. Laura's experience in innovation and strategy, in addition to our track record of leading high-performance teams is a welcome addition to our Board's broad range of experience and skill sets. Laura represents the third Board member added over the past 3 years as we continue an orderly succession process for directors reaching the Board's mandatory retirement age. We look forward to tapping into Laura's experience on a number of matters relevant to our business, and I'm enthusiastic to have her as a member of our Board.

I'll now turn things over to Jimmi Sue to speak in more detail to our quarterly financial performance.

Thanks, Leroy. Earlier today, we issued a press release detailing our third quarter 2025 results. My remarks today are based on that information. As seen on Slide 8, we reported consolidated third quarter sales of $485 million, down $69 million or 12% from the prior year. By segment, RUPS sales decreased by $15 million or 6%. PC sales were down $32 million 18%, and CM&C sales decreased by $21 million or 16% compared with the prior year quarter.

On Slide 9, adjusted EBITDA for the third quarter was $71 million with a 14.6% margin. By segment, RUPS generated adjusted EBITDA of $29 million with a 12.5% margin. PC delivered adjusted EBITDA of $26 million with an 18.1% margin, while CM&C reported adjusted EBITDA of $16 million with a 14.4% margin.

On Slide 10, our RUPS business generated third quarter sales of $233 million compared with $248 million in the prior year. The decrease in sales was driven primarily by $15.8 million of lower volumes of Class I crossties and lower activity in the maintenance-of-way business, including the sale of our railroad bridge services business. These were partly offset by higher commercial crosstie volumes, a 6.5% volume increase in domestic utility poles and $1.9 million of price increases related primarily to crossties. Untreated crosstie market remained stable. Year-to-year, crosstie procurement was down 18%, while crosstie treatment was down 5%.

RUPS delivered adjusted EBITDA of $29 million compared with $25 million in the prior year. Profitability improved despite lower sales due primarily to $7.7 million in lower SG&A and operating expenses, along with net sales price increases, partly offset by the lower sales volumes.

On Slide 11, our Performance Chemicals business reported third quarter sales of $144 million compared to $177 million in the prior year. The decline in sales was primarily the result of volumes decreasing by 19%, mostly as a result of market share shifts in the United States, but also combined with a slight net decrease in sales volume for other customers.

Adjusted EBITDA for PC came in at $26 million compared to $40 million in the prior year. Profitability was impacted by the lower sales volumes as well as $7.3 million in higher raw material and operating costs, partly offset by $1.6 million of lower logistics costs and SG&A expenses as well as higher royalty income.

Slide 12 shows third quarter CM&C sales of $108 million compared to $130 million in the prior year. This decrease was primarily driven by $19.6 million of lower volumes for phthalic anhydride as we discontinued that product in April 2025. Adjusted EBITDA for CM&C in the third quarter was $16 million compared with $13 million in the prior year. This increase in profitability was due to lower operating costs, increasing production of phthalic anhydride and $2.9 million of lower raw material costs, partly offset by lower sales prices.

Sequentially, the average pricing of major products decreased by 2% and average coal tar costs were higher by 3% compared to the second quarter. Compared to the prior year quarter, the average pricing of major products was lower by 8%, while average coal tar costs increased by 7%.

Now moving to capital allocation. As shown on Slide 14, we continue to pursue a balanced approach to capital allocation. Net of cash received from insurance proceeds and asset sales, we invested $33.7 million into our business through September 30th. We are now expecting 2025 CapEx to be approximately $52 million to $55 million, a significant reduction from $74 million last year, reflecting our focus on increasing free cash flow.

Year-to-date, we've repurchased $33.3 million of stock through share buybacks, including tax withholdings. We have approximately $71.5 million remaining on our $100 million repurchase authorization. We also returned capital to shareholders through our quarterly dividend of $0.08 per share.

At September 30th, we had $885 million of net debt comparable to where we ended 2024 and approximately $45 million lower than June 30th, reflecting our commitment to putting a significant portion of our free cash flow toward debt reduction this year as well as progress toward our continued long-term target of 2 to 3x net leverage ratio. We ended the quarter with a net leverage ratio of 3.4x and $379 million in available liquidity.

On Slide 15, total capital expenditures for the third quarter were $38.4 million gross or $33.7 million net. We spent $31 million on maintenance, $3.2 million on Zero Harm and $4.2 million on growth and productivity projects. By business segment, we spent $13.6 million in RUP, $9.6 million in PC, $13.8 million in CM&C and $1.4 million in corporate projects.

And finally, on Slide 17, our Board of Directors declared a quarterly cash dividend of $0.08 per share of Koppers common stock on November 6th. This dividend will be paid on December 16th to shareholders of record as of the close of trading on November 28th. At this quarterly dividend rate, the annual dividend is $0.32 per share for 2025, a 14% increase over the 2024 dividend.

And with that, I'll turn it back over to Leroy.

Thanks, Jimmi Sue. Now I'll do a quick review of each of the businesses, starting with our Performance Chemicals or PC business on Page 19. The third quarter saw a continuation of softer demand in North America, our largest market, as residential units pulled back even further, while industrial demand turned positive. And while both categories are down by about 3% year-to-date through September, excluding our known market share loss, residential was down by about 5% for the quarter compared to last year, while industrial was 2.5 points higher, consistent with the stronger demand we experienced in our own industrial business.

External markers such as the leading indicator of remodeling activity, existing home sales and mortgage rates are all starting to move in a positive -- more positive direction. However, customer sentiment remains muted with most looking forward to putting 2025 behind them and starting fresh in 2026.

Outside of tariff impacts, we managed to keep costs in check for the most part, which enabled us to deliver a solid 18% adjusted EBITDA margin on a sales line that was 18% lower than 2024's third quarter.

On the tariff front, we did absorb a couple of million dollars of direct impact as well as a few million dollars of impact from hedged copper rates disconnecting from the U.S. futures market. With flat pricing for the quarter and absorbing the direct and indirect impacts of tariffs, our ability to still generate margins of 18% demonstrate the success we've had in reducing our other controllable costs and the overall resiliency of the business.

Moving on to our Utility and Industrial Products business shown on Page 20. We're seeing volumes continue to move in the right direction as each successive quarter this year has seen a greater year-over-year improvement. Q3 saw volumes up over prior year by 6% as the optimism we were hearing earlier in the year is beginning to manifest itself into sales. Unfortunately, the impact of those higher volumes were offset by the damage from a fire at one of our facilities that impacted results by over $1 million. Now that we're more than 1 year out from the Brown acquisition, we're getting an even greater feel for the critical role played in our network by the Kennedy, Alabama facility that came with that acquisition.

We've allocated volume to Kennedy where it logistically makes sense and are using it as a primary site for treating the Douglas fir species that we began adding to our product portfolio at the beginning of this year. Getting into that market is opening doors for us that were previously closed in certain accounts where customers didn't want to split their Southern Yellow Pine and Doug fir business.

Now we're early in the game, but adding that species as well as adding sales talent and upgrading our CRM technology is positioning Koppers to be a stronger competitive force in our existing markets, and I believe we are starting to bear the fruit from those investments. We continue to feel good about the longer term demand outlook for the utility pole market and believe that we can participate meaningfully in meeting its pole infrastructure needs.

Our Railroad Products and Services business is summarized on Page 21. The third quarter saw another solid quarter of performance from our RPS business despite treated tie sales units being down by 7% compared to prior year. Class I units were down almost across the board, while commercial units saw a 9% increase. Aggressive cost actions and a slight improvement from pricing helped to offset the volume decline and drove a year-over-year 18% improvement in profitability for the RUPS segment. If we adjust for the sale of the KRS business, profitability was actually up over 20% compared to Q3 prior year, with an even higher increase when looking at just RPS.

Again, excluding the sale of KRS, RPS has reduced its employee base by 147 people or 19%. Within the crossties business, that number is 14%, and that's on a volume base only 2% lower than last year through September. While we expect some comparative volume improvement in Q4, our updated projection of flat year-over-year sales volumes is another drop from previously communicated customer expectations. I spoke a few times over the past 2 years of customers providing forecasts that have subsequently been pulled back, and that trend has not abated. The railroad companies are feeling more pressure than ever to reduce costs everywhere they can, including [ tie ] installations.

It's difficult to forecast how long the current trend can sustainably continue, but we expect to adjust our forecast down from whatever we are told as we head into 2026 now that we've dealt with 2 straight years of actual purchases coming in lower than customer forecasts.

The bigger message I hope everyone takes away is that we have adjusted our cost structure to fit a pullback in the market to the extent it turns out to not be temporary. That also puts plant consolidation back on the table, if necessary. But as always, we would view that as a last resort depending upon our long-term outlook with each customer.

Next on to the CMC business summarized on Page 22. Despite minimal positive movement on carbon product end markets, we still delivered a solid quarter of performance, finishing $2.9 million better than Q3 2024. Excluding the exit of our phthalic anhydride business, volumes were slightly positive compared to prior year, while average pricing was down by about 4%, consistent with what it is down year-to-date. There continues to be a lot influx in our CMC markets.

On the plus side, in early August, Century Aluminum announced that the company will be restarting idle capacity, which should result in a positive impact on our pitch sales in North America beginning in 2026. On the downside, more coal tar will be coming out of the market as one of our North American suppliers notified us that they've successfully converted to electric arc production sooner than anticipated and that we would be receiving our last shipments of raw material from this supplier by the end of the year.

Now that action further justifies our intent to simplify our U.S. distillation capacity to a single column from the 2-column operation that we run today. Doing so, we will further shrink our CMC footprint, reducing our cost structure and our required future capital outlay. Unfortunately, it is yet another step back that will put the only major U.S. producer of critical projects for the U.S. aluminum and railroad markets in further jeopardy. We're exploring various scenarios as to how to improve the supply situation, which could be simply resolved by more domestic coal tar production staying in the U.S. to support the long-term health of the industry.

As shown on Slide 23, I'd like to move on to something more positive, which is the work we're doing in Catalyst and its expected impact. Now let's start with the why. Is it why we feel we need to transform? The short answer is that in spite of our many accomplishments and the progress we've made, we still have solid potential to perform at an even higher level.

As an organization, we have no shortage of good ideas. Capturing, quantifying, prioritizing, planning, resourcing, implementing and then tracking these ideas through to completion is a different story. Frankly, it's where all but the very best organizations fall down. You need a well-developed process, the right technology and a workforce that's more financially astute to improve your chances of reaching success in a reasonable time frame. And that's what we're building with Catalyst.

So when I look at our full potential, I see an organization that should be able to deliver 15-plus percent margins on a consistent basis, an organization that should be able to drive earnings improvement of greater than 10% on average over the next 3 years, an organization that should be able to reduce leverage to the low end of our stated range below 2.5x, driven by significantly greater free cash flow generation, what we believe to be over $300 million over the next 3 years.

Part of the path to get there is a continued evolution of our portfolio that would make PC and RUPS a larger share of our top and bottom line as we focus on our more structurally sound businesses that have opportunity for growth and have proven to consistently generate higher margins with lower capital requirements.

What does that mean in tangible terms in terms of expected benefits from Catalyst? It means that we expect that Catalyst will deliver approximately $80 million of ongoing benefits by the time we exit 2028. In 2025, we're estimating our capture rate at over $40 million based on our expectation to finish this year at a similar EBITDA level as prior year, in spite of a 10% lower sales line. That means we believe we can deliver another $40 million of benefits in the next 3 years coming from all areas of the organization. Less certain are the headwinds we may experience or any potential bolstering tailwinds, which we certainly haven't had for the past 18 months.

There are still a lot of parts moving around as we try to nail down our expectations for next year. And as such, I'm going to hold off on speaking to how much of that additional $40 million benefit we expect to see in 2026 and how much of that could be potentially delivered to the bottom line until we have a more complete picture regarding all other aspects of our business. I'll speak to more detail about all this in February 2026 when we announce our year-end earnings.

Moving on to our outlook for 2025. As shown on Slide 25, we're now revising our consolidated sales guidance to $1.9 billion in 2025 compared with $2.1 billion in 2024. This reflects our sales expectation at the low end of our previously communicated range due to the soft demand environment across all markets, other than utility.

On Slide 26, we're revising our adjusted EBITDA forecast to $255 million to $260 million compared with $262 million in 2024. Both CM&C and PC are expected to be solidly within our previous range, while RUPS is being adjusted to slightly below the low point of its previous range. This is to account for lower than previously forecast crosstie demand and higher operating costs in our UIP business.

Slide 27 shows our 2025 adjusted earnings per share bridge, reflecting a range of $4 to $4.15 per share, with interest savings and benefits from a lower share count being offset by higher depreciation and amortization, a higher tax rate and lower operating contribution. That said, our range still puts us on par with 2024 EPS even with a 10% lower top line, which is not a bad outcome, all things being considered.

On Slide 28, we're now projecting capital spending for the year to fall between $52 million and $55 million compared with $74 million in 2024. While 2025 has been more challenging than we first thought, I'm encouraged by our team's resilience to step up to the challenge and fight their way through it. I find it quite remarkable that we could be looking at profitability in line with prior year in spite of the softer economic backdrop and tariff disruption we've endured throughout this year.

We set the organization up for significant improvement once economic conditions improve. We don't consider our work done, however, as we're ingraining the Catalyst mindset into the way we work every day and continuing to mine for opportunities beyond what is already in the current implementation phase. Similar to what we're hearing from many of our customers, I'm also looking forward to putting 2025 behind us and focusing on what we expect to be a brighter 2026 and beyond.

Now I'd like to open it up to questions.

[Operator Instructions] Our first question today is from Gary Prestopino with Barrington Research.

Question here, Leroy, is -- I'm looking at Slide 23, okay? You've taken some good expenses out of CMC, some out of RUPS, yet PC is the lowest expense capture there. But I mean, that's the only business that showed a down quarter really in adjusted EBITDA and down EBITDA margins. I mean, is there something inherent there that you can't take costs out or you just feel you shouldn't be taking costs out because the markets are going to eventually rebound?

Yes. Gary, it's a good question. I mean, there are costs being taken out of there. And when we look across the board, you can't view all those numbers as necessarily being only cost takeout, right? Because there's actually things that we've been able to do to improve within our operations, particularly in CM&C, which is why that's a larger overall number.

But for PC, we have taken out costs, and we've certainly taken out corporate allocations, corporate overhead costs as well, which is helping them. But look, that is the business that we are continuing to see as our future here, and we want to make sure that we're not cutting too far back in that area when we're trying to go out and win back some business, expand into some different product categories and look at continuing to build around that business.

So we don't -- that's one we want to be a little more careful about in terms of how hard we cut back. It's not in the same, if you will, commodity category as some of our other businesses where I think inherently, we just have to be really, really tight on our cost, both operating as well as overhead. So that's why you don't see it quite as much there. The opportunities that are going to come on PC as it relates to Catalyst, they're really going to be on the commercial and less so probably on the cost end.

Okay. And then just looking at your objectives with PC and RUPS being greater than 85% of sales, and I realize you're going to be focusing on that for growth. But does that entail further shrinking of CMC?

Yes, I think it's a combination of things. I think certainly, we're focused on growing UIP. We're focused on growing PC and growing around PC. And I've been pretty open about the fact that we're not going to be investing into CM&C. And I think it's on a -- it has been for a number of years on a secular downturn, right?

So I think it's certainly to be expected that, that business will continue to shrink and be a smaller part of the overall organization. So we're evaluating all kinds of different scenarios around CM&C and how it fits into the future of the company. But I would expect it will be a smaller part going forward that could play into both sides of it with maybe changes being made there as well as certainly additions being made in some of our other businesses.

The final question today is from Liam Burke with B. Riley.

Leroy, could you give us some color on -- or if there is any, on your strategy of growing the utility pole business either organically or through acquisition?

Yes. So look, we've talked about the fact that we have a pretty strong business in the traditional markets that, that business served when we acquired the Cox utility business back in 2018. So very strong in the Southwest, pretty strong in the Northeast. Not a lot of coverage in the Midwest, basically nothing done in the Southwest and nothing out West. And so, there's a lot of market opportunity for us to go after, again, in markets that we certainly serve in different geographies and know well.

So, we obviously bring to bear the wood preservative technology, the treating technology, we've been treating in industrial products for most of the company's history. And so, all of that, we think, translates pretty well to being able to expand that business model. Part of it is you need to be in species beyond just Southern Yellow Pine, which is why we're -- we've been building out a supply chain there.

The Brown acquisition and the facility that was added there with its capabilities, really also opens up the door for us in a way that we couldn't do with our existing asset base. And so, yes, we're -- we think we have great opportunity to go after share in underserved markets that, quite frankly, only one or maybe even 2 major suppliers have been able to serve. And now we can provide another option.

As I've mentioned time and time again, it is not our intent to go out and try and start a race to the bottom. We think that there's enough share to be won by just being able to provide a second source of stable supply. And so, in conversations we've had, we certainly have been encouraged to go down that route. So we'll continue to build out our sales capabilities. We'll continue to add to our technology and supply chain. And we view UIP as an important part of our growth story.

Great. Thank you. The next question is, if I'm looking at existing homes as a rough benchmark for demand -- for derived demand for PC. They've obviously come off from a very high level, but are starting to stabilize at a certain unit volume, we'll call it, $4 million. If I think about anniversarying your market share loss, do you have a sort of a baseline revenue for PC now where you could see growing off that reset base?

Yes. I mean I think that, the way we think about the business overall is this setback that we're experiencing this year, and to your point, it's beyond losing a little bit of business. It includes an overall market that has dropped by, again, 3% or so year-over-year, which is something we've not seen actually, I think, since -- well, I don't know -- actually we've seen it since we've owned the business.

So we don't think it's anything that is systemic or indicative of the start of any longer term trend. So we think it provides a base moving forward that we can expect to see more regular growth coming from, most of -- the growth that's more in line with kind of what we have seen over time, which is, again, more in that 3% to 4% year-over-year range.

All that being said, again, whether our customer base is scarred by what they're going through right now or whether they truly have visibility longer term, they're basically giving signals that they don't expect to -- they're not building in growth for next year, organic growth. I think they're setting expectations of kind of holding flat.

And maybe, again, part of that is to prepare for another year of tepid demand. And if it gets better than that, then great, but not setting expectations too high and then being disappointed as the year goes on. So I think they're expecting a better year because, again, this year is right now down about 3% overall, but they're not right now factoring in or at least telling us that they're factoring in any real growth in the market.

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 thank everybody for taking the time to listen in today. Again, I think we have a great story to tell. And despite the challenges that we faced so far in 2025, I really do think we've set ourselves up for greater success going forward. The Catalyst is actually bearing fruit. We see it in the numbers, and we expect to see more benefits coming from that, that will basically move us in the direction of being a higher margin, higher cash flow yielding, higher earnings business out over the next number of years. So, appreciate your support and patience, and thank you for joining today.

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