Koppers Holdings Inc
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
KOP$29.97-24.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-03.
0000950170-24-052678
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0000950170-24-093561
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 74 previous paragraphs and 89 current paragraphs.
47 unchanged; 24 reworded; 10 added; 3 removed; 0 previous and 8 current paragraphs rearranged.
Tables are not compared: 3 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
sales of approximately $2.15 billion,
Current report
PC net sales decreased primarily as a result of equal parts lower volumes and pricing decreases globally. A $3.5 million decrease in volumes in the Americas was driven primarily by sales to the recently acquired Brown Wood no longer being included in our reported sales beginning April 1, 2024. This decrease was partly offset by higher volumes in Australasia.
Current report
CMC net sales decreased due to reduced market demand, especially in Europe where sales decreased by $22.0 million due to equal parts pricing and volumes, primarily driven by carbon pitch markets. Globally, prices were down $25.3 million. These decreases were partly offset by volume increases for phthalic anhydride and carbon black feedstock.
Current report
Depreciation and amortization expenses were $3.8 million higher when compared to the prior year period as a result of recent capital expenditures including growth projects such as the expansion of our facility in North Little Rock, Arkansas, as well as the acquisition of Brown Wood, both within our RUPS segment. We also recognized accelerated depreciation of $1.5 million for certain decommissioned assets at our North Little Rock, Arkansas facility.
Current report
RUPS adjusted EBITDAwas essentially flat as net sales price increases, $3.9 million from improved plant utilization and higher volumes for crossties and utility poles, were offset by $13.8 million of higher raw material, operating and selling, general and administrative expenses and lower activity in our crosstie recovery business.
Current report
PC adjusted EBITDA increased as a result of lower raw material costs offsetting lower sales prices and volumes. Lower raw material costs were favorably impacted by timing, including an increase in gains realized from our copper-hedging program, net of an increase in the cost of scrap copper recognized to date.
Current report
Consolidated Results
Current report
PC net sales were essentially flat with the prior year as lower pricing of $5.4 million in the current year period was mostly offset by a 2.0 percent volume increase in the Americas for our copper-based preservatives. Sales to the recently acquired Brown Wood are no longer included in our reported sales beginning April 1, 2024, which negatively impacted volumes compared to the prior year.
Current report
Interest expense was $3.4 million higher when compared to the prior year period due to higher interest rates and borrowings, partly offset by the write-off of debt issuance costs in 2023.
Current report
PC adjusted EBITDA increased primarily as a result of lower raw material costs offsetting lower sales prices and higher selling, general and administrative costs. Lower raw material costs were favorably impacted by timing, including an increase in gains realized from our copper-hedging program, net of an increase in the cost of scrap copper recognized to date.
Removed paragraphs (3)
Previous report
sales of approximately $2.25 billion,
Previous report
PC net sales increased as a result of volume increases of $6.8 million in the current year period, including a 6.1 percent volume increase in the Americas, primarily for our copper-based preservatives. These increases were partly offset by $3.3 million of lower prices in the Americas and Australasia. Foreign currency changes compared to the prior year period had an unfavorable impact on sales in the current year period of $0.2 million.
Previous report
PC adjusted EBITDA increased primarily as a result of higher volumes. Lower sales prices were offset by raw material price decreases.
Reworded paragraphs (24)
Previous wording
capital expenditures, including capitalized interest but excluding acquisitions, of approximately $80 million to $90 million with approximately $23 million to $33 million of the total allocated to discretionary projects.
Current wording
capital expenditures, including capitalized interest but excluding acquisitions, of approximately $80 million to $85 million with approximately $22 million to $27 million of the total allocated to discretionary projects.
Previous wording
For our PC segment, we need to (i) increase market share for certain newer product lines and (ii) improve gross margin by maintaining volumes and reducing operating costs.
Current wording
For our PC segment, we need to (i) increase market share for certain newer product lines, (ii) maintain volumes and margin and (iii) reduce operating costs.
Previous wording
The Railway Tie Association’s estimate of total crosstie installations in 2024 is approximately 18.6 million ties, with approximately 14.7 million for Class I railroads. This is consistent with 2023 crosstie installations of approximately 18.5 million crossties with the small increase expected to be from the commercial market.
Current wording
The Railway Tie Association’s estimate of total crosstie installations in 2024 is approximately 18.9 million ties, with approximately 14.6 million for Class I railroads. This is slightly higher than 2023 crosstie installations of approximately 18.5 million crossties with the small increase expected to be from the commercial market. We expect the crosstie market to remain stable.
Previous wording
According to BMO Capital Markets, market demand for utility poles is expected to remain high throughout 2024 as a result of aging pole infrastructure, efforts to strengthen poles against larger and more frequent storms, and a need to add larger poles to support continued electrification and expansion of broadband access. In the first quarter of 2024, we experienced a decrease in volumes as a result of temporary customer overstock and budget realignment. We expect demand to return to normal levels in 2024.
Current wording
According to BMO Capital Markets, market demand for utility poles is expected to remain high throughout 2024 as a result of aging pole infrastructure, efforts to strengthen poles against larger and more frequent storms, and a need to add larger poles to support continued electrification and expansion of broadband access.
Previous wording
Product demand for our PC business has historically been closely associated with consumer spending on home repair and remodeling projects in North America. The Leading Indicator of Remodeling Activity (LIRA) reported by the Joint Center for Housing Studies of Harvard University projects that annual homeowner renovation and maintenance expenditures will decline by over seven percent in the third quarter of 2024 before easing to just a 2.6 percent decline through the first quarter of 2025. Spending on home improvements and repairs are expected to drop from $463 billion to $451 billion over the next four quarters. While the LIRA projects a decrease in 2024, the outlook for our PC business remains relatively positive driven by improvements in the industrial markets and expected flat volumes for our residential business.
Current wording
Product demand for our PC business has historically been associated with consumer spending on home repair and remodeling projects in North America. The Leading Indicator of Remodeling Activity (LIRA) reported by the Joint Center for Housing Studies of Harvard University projects that declines in annual homeowner renovation and maintenance expenditures will ease to just -0.5 percent through the second quarter of 2025. Annual spending on home improvements and repairs is expected to reach $466 billion through the second quarter of 2025, on par with spending over the past four quarters. While the LIRA projects a decrease in 2024, the outlook for our PC business remains relatively positive driven by improvements in the industrial markets we serve and expected flat volumes for our residential business.
Previous wording
For the external markets served by our CMC business, we anticipate a slowdown in the near-term in manufacturing overall as well as in the steel, aluminum and carbon black industries. The availability of coal tar, the primary raw material for our CMC business, is linked to levels of metallurgical coke production. As the global steel industry, excluding Asia, has reduced the production of steel using metallurgical coke, the volumes of coal tar have been reduced. We are actively working to mitigate the impacts of long-term decline of coal tar supply by gaining market acceptance for petroleum-blended products. We are also investing in projects to increase distillation yields and balance raw material supply and cost with customer demand and pricing.
Current wording
For the external markets served by our CMC business, we have experienced a slowdown in the near-term in manufacturing overall as well as in the steel, aluminum and carbon black industries. The availability of coal tar, the primary raw material for our CMC business, is linked to levels of metallurgical coke production. As the global steel industry, excluding Asia, has reduced the production of steel using metallurgical coke, the volumes of coal tar have been reduced. We are actively working to mitigate the impacts of the long-term decline of coal tar supply by gaining market acceptance for petroleum-blended products. We are also investing in projects to increase distillation yields and balance raw material supply and cost with customer demand and pricing.
Previous wording
Cost of sales as a percentage of net sales was 81 percent, compared to 80 percent in the prior year period as the market driven reduction in CMC pricing, primarily carbon pitch, more than offset lower CMC raw material costs, particularly in North America and Australia. Significant items impacting cost of sales in individual operating segments are discussed as part of "Segment adjusted EBITDA and adjusted EBITDA margin" herein.
Current wording
Cost of sales as a percentage of net sales was 78 percent, compared to 81 percent in the prior year period as lower raw material costs were partly offset by the market driven reduction in sales. Significant items impacting cost of sales in individual operating segments are discussed as part of "Segment adjusted EBITDA and adjusted EBITDA margin" herein.
Previous wording
Interest expense was $3.1 million higher when compared to the prior year period due primarily to higher interest rates.
Current wording
Interest expense was $0.3 million higher when compared to the prior year period due to higher interest rates and borrowings, offset by the write-off of debt issuance costs in 2023.
Previous wording
RUPS net sales increased largely due to $9.6 million of volume increases for crossties and a net $8.1 million of pricing increases across multiple markets, particularly for crossties and domestic utility poles. These increases were partly offset by lower activity in our maintenance of way businesses and a 4.2 percent volume decrease in our domestic utility pole business due to temporary customer overstock and budget realignment. Foreign currency changes compared to the prior year period had an unfavorable impact on sales in the current year period of $0.6 million, mainly from our Australian utility pole business.
Current wording
RUPS net sales increased largely due to $23.6 million of pricing increases across multiple markets, particularly for crossties and utility poles and $15.0 million of volume increases for crossties, partly offset by lower activity in our maintenance of way businesses. Sales volumes in our domestic utility pole business were flat with the prior year as increases from our acquisition of Brown Wood were offset by a decrease in our legacy utility pole business due to temporary customer overstock and budget realignment. Foreign currency changes compared to the prior year period had an unfavorable impact on sales in the current year period of $0.8 million, mainly from our Australian utility pole business.
Previous wording
CMC net sales decreased mainly due to $28.6 million of lower sales prices across most products, including carbon pitch where prices were down 24.6 percent globally, along with $11.5 million of lower volumes of carbon pitch and carbon black feedstock. The decreases in carbon pitch prices and volumes were driven by reduced market demand in the current year period. These decreases were partly offset by volume increases for phthalic anhydride. Foreign currency changes compared to the prior year period from our international markets had an unfavorable impact on sales in the current year period of $1.7 million.
Current wording
CMC net sales decreased mainly due to $53.6 million of lower sales prices across most products, especially carbon pitch where prices were down approximately 24 percent globally, along with $21.5 million of lower volumes of carbon pitch and carbon black feedstock. The decreases in carbon pitch prices and volumes were driven by reduced market demand in the current year period. These decreases were partly offset by volume increases for phthalic anhydride. Foreign currency changes compared to the prior year period from our international markets had an unfavorable impact on sales in the current year period of $2.0 million.
Previous wording
Depreciation and amortization expenses were $2.1 million higher when compared to the prior year period as recent capital expenditures include increased investment in growth projects, such as the expansion of our RUPS facility in North Little Rock, Arkansas and a yield enhancement project at our CMC facility in Nyborg, Denmark. Additionally, asset retirement obligations in our European CMC operations increased during the first quarter of 2024 when compared to the prior year period.
Current wording
Depreciation and amortization expenses were $5.9 million higher when compared to the prior year period as a result of recent capital expenditures including growth projects such as the expansion of our facility in North Little Rock, Arkansas, as well as the acquisition of Brown Wood, both within our RUPS segment. We also recognized accelerated depreciation of $1.5 million for certain decommissioned assets at our North Little Rock, Arkansas facility. Additionally, asset retirement obligations in our European CMC operations and the related depreciation expense increased during the first quarter of 2024 when compared to the prior year period.
Previous wording
Selling, general and administrative expenses were $3.9 million higher when compared to the prior year period due mainly to an increase in compensation-related costs along with an increase in professional service expenses.
Current wording
Selling, general and administrative expenses were $6.1 million higher when compared to the prior year period due mainly to an increase in compensation-related costs along with an increase in professional service expenses.
Previous wording
Gain on sale of assets for the quarter ended March 31, 2023 was related to a sale of assets of our former coal tar distillation facility located in China.
Current wording
Gain on sale of assets for the six months ended June 30, 2023 was related to a sale of assets of our former coal tar distillation facility located in China.
Previous wording
Income tax expense decreased by $5.5 million when compared to the prior year period primarily due to lower income before income taxes. See Note 8 – Income Taxes.
Current wording
Income tax expense decreased by $5.2 million when compared to the prior year period due primarily to lower income before income taxes. See Note 8 – Income Taxes.
Previous wording
RUPS adjusted EBITDA increased due primarily to net sales price increases and $3.7 million from improved plant utilization, which combined to more than offset $10.6 million of higher operating, raw material and selling, general and administrative expenses.
Current wording
RUPS adjusted EBITDA increased due primarily to net sales price increases and $7.9 million from improved plant utilization, which combined to more than offset $25.3 million of higher raw material, operating and selling, general and administrative expenses and lower activity in our crosstie recovery business.
Previous wording
CMC adjusted EBITDA decreased due to price and volume decreases along with lower North American plant utilization primarily due to a plant outage in January, partly offset by an $18.6 million reduction in raw material costs, particularly in Europe and North America.
Current wording
CMC adjusted EBITDA decreased due to price and volume decreases along with higher operating expenses and lower North American plant utilization due primarily to a plant outage in January, partly offset by a $31.6 million reduction in raw material costs, particularly in Europe.
Previous wording
Net cash used in operating activitiesfor the three months ended March 31, 2024 was $12.3 million compared to $15.3 million in the prior year. The improvement was primarily the result of lower working capital usage in the current year which more than offset the cash impact of lower net income in the current year period the reasons for which are discussed under results of operations.
Current wording
Net cash provided by operating activitiesfor the six months ended June 30, 2024 was $14.9 million compared to net cash used in operating activities of $2.1 million in the prior year. The improvement was primarily the result of lower working capital usage in the current year which more than offset the cash impact of lower net income in the current year period the reasons for which are discussed under results of operations.
Previous wording
Net cash used in investing activitiesfor the three months ended March 31, 2024 was $25.8 million compared to $28.5 million in the prior year driven primarily by capital expenditures. Capital expenditures were higher in the prior year period due to investment in growth projects, such as the expansion of our RUPS facility in North Little Rock, Arkansas which was completed in the fourth quarter of 2023 and a yield enhancement project at our CMC facility in Nyborg, Denmark which was completed in the first quarter of 2024.
Current wording
Net cash used in investing activitiesfor the six months ended June 30, 2024 was $141.6 million compared to $60.6 million in the prior year. The increase was due to cash paid for the Brown Wood acquisition, partly offset by lower capital expenditures. Capital expenditures were higher in the prior year period due to investment in growth projects, such as the expansion of our RUPS facility in North Little Rock, Arkansas which was completed in the fourth quarter of 2023 and a yield enhancement project at our CMC facility in Nyborg, Denmark which was completed in the first quarter of 2024.
Previous wording
Net cash provided by financing activities for the three months ended March 31, 2024 was $23.0 million compared to $56.8 million in the prior year. The primary source of financing cash flows was net borrowings of $27.9 million and the primary uses of financing cash flows were payments related to taxes withheld under stock-based compensation plans and dividends paid. In the prior year, the primary source of financing cash flows was net borrowings of $63.5 million and the primary uses of financing cash flows were repurchases of common stock and dividends paid.
Current wording
Net cash provided by financing activities for the six months ended June 30, 2024 was $111.6 million compared to $78.6 million in the prior year. The primary source of financing cash flows was net borrowings of $150.6 million and the primary uses of financing cash flows were repurchases of common stock including payments related to taxes withheld under stock-based compensation plans and dividends paid. In the prior year, the primary source of financing cash flows was net borrowings of $90.1 million and the primary uses of financing cash flows were repurchases of common stock, payments of debt issuance costs and dividends paid.
Previous wording
Koppers Holdings depends on the dividends from the earnings of Koppers Inc. and its subsidiaries to generate the funds necessary to meet its financial obligations, including the payment of any declared dividend of Koppers Holdings. The Credit Facility permits Koppers Inc. to make dividend payments to Koppers Holdings if certain conditions are met, including, among other permitted dividend payments, the ability to fund the payment of regularly scheduled dividends on and repurchases of Koppers Holdings common stock, in an aggregate amount per year not to exceed the greater of (a) $50.0 million in any fiscal year, with unused amounts in any fiscal year being carried over to the succeeding fiscal year, and (b) 6.0 percent of market capitalization.
Current wording
Koppers Holdings depends on the dividends from the earnings of Koppers Inc. and its subsidiaries to generate the funds necessary to meet its financial obligations, including the payment of any declared dividend of Koppers Holdings. The Credit Facility permits Koppers Inc. to make dividend payments to Koppers Holdings if certain conditions are met, including, among other permitted dividend payments, the ability to fund the payment of regularly scheduled dividends on Koppers Holdings common stock and repurchases of Koppers Holdings common stock, in an aggregate amount per year not to exceed the greater of (a) $50.0 million in any fiscal year, with unused amounts in any fiscal year being carried over to the succeeding fiscal year, and (b) 6.0 percent of market capitalization.
Previous wording
As of March 31, 2024, liquidity was approximately $340 million.
Current wording
As of June 30, 2024, liquidity was approximately $325 million.
Previous wording
Our need for cash in the next twelve months relates primarily to capital spending, purchase commitments, operating leases, working capital, debt service, pension plan funding, dividends and share repurchases. We may also use cash to pursue other potential strategic acquisitions or voluntary pension plan contributions, including pension plan settlements. Capital expenditures in 2024, excluding acquisitions, if any, are expected to total approximately $80 million to $90 million and are expected to be funded by cash from operations. We anticipate that our liquidity will continue to be adequate to fund our cash requirements for at least the next twelve months, and based on our current expectations, for the foreseeable future.
Current wording
Our need for cash in the next twelve months relates primarily to capital spending, purchase commitments, operating leases, working capital, debt service, pension plan funding, dividends, share repurchases and voluntary pension plan contributions, including pension plan settlements. We may also use cash to pursue other potential strategic acquisitions. Capital expenditures in 2024, excluding acquisitions, are expected to total approximately $80 million to $85 million and are expected to be funded by cash from operations. We anticipate that our liquidity will continue to be adequate to fund our cash requirements for at least the next twelve months, and based on our current expectations, for the foreseeable future.
Previous wording
We manage our working capital to increase our flexibility to pay down debt. Debt will fluctuate throughout any operating period based upon the timing of receipts from customers and payments to vendors. As of March 31, 2024, approximately 90 percent of accounts payable was current and ten percent was 1-30 days past due. As of December 31, 2023, approximately 85 percent of accounts payable was current and 15 percent was 1-30 days past due.
Current wording
We manage our working capital to increase our flexibility to pay down debt. The amount of our outstanding debt and our overall cash flows will fluctuate throughout any operating period based upon, among other things, the timing of receipts from customers and payments to vendors. As of June 30, 2024, approximately 90 percent of accounts payable was current and ten percent was 1-30 days past due. As of December 31, 2023, approximately 85 percent of accounts payable was current and 15 percent was 1-30 days past due.
Previous wording
The total net leverage ratio is calculated as of the last day of each fiscal quarter in accordance with the Credit Facility definitions of consolidated total net debt divided by consolidated EBITDA and is not permitted to exceed 4.75. The total net leverage ratio as of March 31, 2024 was 3.2. In connection with the completion of the Brown Wood acquisition as described in Note 14 – Subsequent Events, the total net leverage ratio will not be permitted to exceed 5.00 from the second quarter of 2024 through the first quarter of 2025.
Current wording
The total net leverage ratio is calculated as of the last day of each fiscal quarter in accordance with the Credit Facility definitions of consolidated total net debt divided by consolidated EBITDA and is not permitted to exceed 5.0. The total net leverage ratio as of June 30, 2024 was 3.5. Effective during the second quarter of 2025, the total net leverage ratio will not be permitted to exceed 4.75.
Rearranged current paragraphs (8)
Current report — wording carried from elsewhere
RUPS net sales increased largely due to $12.7 million of pricing increases across multiple markets, particularly for crossties, and $9.4 million of volume increases for crossties and utility poles. Sales in our domestic utility pole business increased 2.3 percent as increases from our acquisition of Brown Wood were partly offset by lower sales volumes in our legacy utility pole business due to temporary customer overstock and budget realignment. In addition, lower activity in our maintenance of way businesses negatively impacted sales.
Current report — wording carried from elsewhere
Selling, general and administrative expenses were $2.2 million higher when compared to the prior year period due mainly to an increase in compensation-related costs, insurance and other administrative expenses.
Current report — wording carried from elsewhere
Income tax expense increased by $0.3 million when compared to the prior year period due primarily to higher income before income taxes. See Note 8 – Income Taxes.
Current report — wording carried from elsewhere
CMC adjusted EBITDA decreased due to price decreases globally and volume decreases in Europe, partly offset by a $16.3 million reduction in raw material costs, particularly in Europe, and higher volumes of phthalic anhydride.
Current report — wording carried from elsewhere
Results of Operations – Comparison of Six Months Ended June 30, 2024 and 2023
Current report — wording carried from elsewhere
Net sales are summarized by segment in the following table:
Current report — wording carried from elsewhere
Cost of sales as a percentage of net sales was 79 percent, compared to 80 percent in the prior year period as lower raw material costs were partly offset by the market driven reduction in sales. Significant items impacting cost of sales in individual operating segments are discussed as part of "Segment adjusted EBITDA and adjusted EBITDA margin" herein.
Current report — wording carried from elsewhere
Segment adjusted EBITDA and adjusted EBITDA margin is summarized in the following table: