Koppers Holdings Inc
For the period ended Dec 31, 2024. Filed Feb 27, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 27, 2025
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-K
Period ended 2023-12-31; filed 2024-02-28.
0000950170-24-021787
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-27.
0000950170-25-028542
Item 7. 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 87 previous paragraphs and 86 current paragraphs.
36 unchanged; 31 reworded; 19 added; 18 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 4 previous and 4 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 (19)
Current report
After considering the current intensely competitive environment, global economic conditions, as well as ongoing uncertainty associated with geopolitical and supply chain challenges, we anticipate taking measures to streamline our organization to support an increasingly cost-conscious customer base. These actions, some of which are one-time savings and some of which are expected to be permanent savings, are intended to ensure that we extend our decade-long growth in profitability and support a higher margin profile by leveraging a smaller global team highly focused on serving customer preferences.
Current report
For our PC segment, our focus is to (i) acquire new customers in our residential preservatives markets to offset certain customer market share losses, (ii) expand market share in our industrial preservatives markets and (iii) align and improve our cost structure.
Current report
For our CMC segment, our focus is to (i) execute on domestic plant restructuring projects, (ii) optimize and develop markets for enhanced carbon products and (iii) implement global tar and pitch strategies.
Current report
Market demand for utilities poles is expected to grow in 2025 with most of the growth concentrated in the second half of the year, while demand in the first half is expected to remain relatively flat. Key drivers include aging pole infrastructure, the expansion of renewable energy, vehicle electrification, grid-hardening measures and extreme weather protection. Recently, the realization of potential productivity gains from artificial intelligence (AI) has significantly increased the demand for electricity. Technology companies are now securing power supplies for data centers to fuel AI, resulting in higher volume demand for both distribution and transmission wood poles. We will continue to focus on expanding our presence in the western and midwestern United States and Canada along with improving our efficiency and capturing new customers to increase our market share.
Current report
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 year-over-year spending for annual homeowner renovation and maintenance expenditures is expected to grow by 1.2 percent in 2025. While the LIRA projects a mild increase in 2025, our PC business expects flat or lower volumes as a result of customer market share shifts.
Current report
For the external markets served by our CMC business, we have experienced a slowdown in the near-term in manufacturing overall, including 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, investing in projects to increase distillation yields and balancing raw material supply and cost with customer demand and pricing.
Current report
Seasonality and Effects of Weather on Operations
Current report
Our quarterly operating results fluctuate due to a variety of factors that are outside of our control, including inclement weather conditions, which in the past have affected operating results. Operations at some of our facilities have at times been reduced during the winter months. Moreover, demand for some of our products declines during periods of inclement weather. As a result of the foregoing, we anticipate that we may experience material fluctuations in quarterly operating results. Historically, our operating results have been significantly lower in the first and fourth calendar quarters as compared to the second and third calendar quarters.
Current report
RUPS net sales increased largely due to $29.5 million of pricing increases for crossties and utility poles, along with higher volumes for these products and an increase in activity in our railroad bridge services business, partly offset by lower activity in our crosstie recovery business. Volumes in our domestic utility pole business increased 6.9 percent primarily as a result of our acquisition of Brown Wood and was partly offset by a decrease in our legacy utility pole business due to temporary customer overstock and budget realignment.
Current report
PC net sales decreased due primarily to sales to the recently acquired Brown Wood of approximately $9 million no longer being included in our reported sales beginning April 1, 2024, lower volumes of our industrial non-copper based preservatives and lower pricing of $3.1 million in the Americas.
Current report
CMC net sales decreased largely due to $81.4 million of lower sales prices across most products, especially carbon pitch where prices were down approximately 20 percent globally, along with $25.0 million of lower volumes of carbon pitch. 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 and other products.
Current report
Depreciation and amortization expenses were $10.5 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 RUPS facility in North Little Rock, Arkansas and the yield enhancement project at our CMC facility in Nyborg, Denmark, as well as the acquisition of Brown Wood. Additionally, asset retirement obligations in our European CMC operations and its related depreciation expense increased during 2024 when compared to the prior year period.
Current report
Impairment and restructuring charges were $16.9 million in 2024 due primarily to the decision to discontinue phthalic anhydride production at our facility in Stickney, Illinois and our workforce reduction program across selected U.S. locations to streamline operations and reduce costs. See Note 3 – Acquisitions, Divestitures and Discontinued Operations.
Current report
Loss on pension settlementwas $4.0 million in 2024. See Note 14 – Pensions and Post-Retirement Benefit Plans.
Current report
Income tax expense decreased by $14.1 million when compared to the prior year period due primarily to lower income before income taxes. See Note 10 – Income Taxes.
Current report
PC adjusted EBITDA increased despite lower sales, as a result of lower raw material and logistics costs offsetting lower sales prices. 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
CMC adjusted EBITDA decreased as a result of lower sales prices, lower plant utilization and higher operating expenses, partly offset by a $56.5 million reduction in raw material costs, particularly in Europe, as well as lower allocated selling, general and administrative costs and higher volumes of phthalic anhydride.
Current report
Net cash provided by operating activitiesfor the year ended December 31, 2024 was $119.4 million compared to $146.1 million in the prior year. For both periods, the primary source of cash was net income, excluding non-cash items, less working capital usage which was higher in the current year primarily as a result of the timing of purchases and payments.
Current report
On February 27, 2025, we announced that the board of directors approved a $100 million share repurchase program. The repurchase program has no expiration date and replaces our previous share repurchase program of $100 million, which was approved in August 2021 and had approximately $11 million remaining.
Removed paragraphs (18)
Previous report
We remain committed to expanding and optimizing our business and making continued progress towards our long-term financial goals. After considering global economic conditions, as well as ongoing uncertainty associated with geopolitical and supply chain challenges, the following summarizes our 2024 financial goals:
Previous report
sales of approximately $2.25 billion,
Previous report
adjusted EBITDA of approximately $275 million, and
Previous report
capital expenditures of approximately $100 million, including capitalized interest, with approximately $29 million of the total allocated to discretionary projects.
Previous report
For our PC segment, we need to (i) increase market share for certain newer product lines and (ii) improve gross margin by reducing costs.
Previous report
For our CMC segment, we need to (i) optimize production from our yield enhancement project at our facility in Nyborg, Denmark, (ii) push acceptance of petroleum-blended products, which mitigates reductions in coal tar volumes and (iii) execute on domestic plant optimization projects.
Previous report
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, a need to add larger poles to support continued electrification and expansion of broadband access.
Previous report
The Leading Indicator of Remodeling Activity (LIRA) reported by the Joint Center for Housing Studies of Harvard University, predicts a moderate 6.5 percent decrease in annual homeowner renovation and maintenance expenditures through the fourth quarter of 2024 with annual spending on home improvements and repairs expected to drop from $481 billion to $450 billion over the next four quarters.
Previous report
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 December 2023 S&P Global Mobility forecast saw global light-vehicle sales increasing by 2.8 percent from the prior year and reaching 88.3 million units globally in 2024.
Previous report
RUPS net sales increased largely due to $83.5 million of pricing increases across multiple markets, particularly for crossties and utility poles. Volume increases for Class I crossties and higher activity in our crosstie recovery business also contributed to the increase. These increases were partly offset by lower activity in our other maintenance of way businesses and a 2.5 percent volume decrease in our utility pole businesses. Foreign currency changes compared to the prior year period had an unfavorable impact on sales in the current year period of $2.0 million, mainly from our Australian utility pole business.
Previous report
PC net sales increased as a result of global price increases of $75.5 million, or 13 percent in the current year period, particularly in the Americas for our copper-based preservatives. Volumes increased by 3.6 percent globally, including a 7.7 percent increase in the Americas, partly offset by volume decreases in Australasia and Europe. Foreign currency changes compared to the prior year period had an unfavorable impact on sales in the current year period of $4.3 million.
Previous report
CMC net sales decreased due mainly to $27.3 million of volume decreases, primarily phthalic anhydride and carbon pitch, partly offset by volume increases for refined tar. Pricing had a minimal impact on sales for the year as higher prices for carbon pitch in the first half of the year were offset by lower prices for chemical products. Foreign currency changes compared to the prior year period from our international markets had a favorable impact on sales in the current year period of $0.7 million.
Previous report
Income tax expense increased by $3.2 million when compared to the prior year period due to higher income from continuing operations before income taxes. This increase was partially offset by a lower effective income tax rate when compared to the prior year period. The lower effective income tax rate is due mainly to the geographical mix of earnings as shown in the effective income tax reconciliation in Note 10 – Income Taxes.
Previous report
PC adjusted EBITDA increased as revised customer pricing enabled us to partly recapture the higher raw material and operating costs that significantly impacted results in 2022, along with a 7.7 percent volume increase in the Americas for wood treatment preservatives. The price increases were partly offset by $46.0 million of higher raw material and selling, general and administrative costs.
Previous report
CMC adjusted EBITDA decreased due to an increase of $43.6 million in raw material and selling, general and administrative costs, a $2.8 million bad debt reserve and volume decreases, partly offset by lower operating costs in North America compared to the prior year period as well as $2.3 million of insurance proceeds recognized in the current year period. Foreign currency changes from our international markets had an unfavorable impact on profitability in the current year period of $1.2 million. CMC’s near-term profitability may be negatively affected by customers associated with bad debt reserve activity, but this is not expected to have a material effect on the Company’s overall profitability in 2024.
Previous report
Net cash provided by operating activities for the year ended December 31, 2023 was $146.1 million compared to $102.3 million in the prior year. The increase was primarily the result of higher net sales and improved collection of accounts receivable, partly offset by higher costs and an increase in inventory consistent with restocking crosstie inventory in our RUPS segment.
Previous report
Liquidity
Previous report
As of December 31, 2023, the maximum amount available under the Credit Facility considering restrictions from debt covenants was approximately $386 million. The maximum amount available under the Credit Facility is increased by the amount of cash held by certain subsidiaries under the terms of the Credit Facility.
Reworded paragraphs (31)
Previous wording
We utilize certain financial measures that are not in accordance with U.S. generally accepted accounting principles (U.S. GAAP) to analyze and manage the performance of our business. We believe that adjusted EBITDA provides information useful to investors in understanding the underlying operational performance of the company, our business and performance trends, and facilitates comparisons between periods. The exclusion of certain items permits evaluation and a comparison between periods of results for business operations, and it is on this basis that our management internally assesses our performance. Adjusted EBITDA is the primary measure of profitability we use to evaluate our businesses. In addition, adjusted EBITDA is the primary measure used to determine the level of achievement of management's short-term incentive goals and related payout, as well as one of the measures used to determine performance and related payouts for certain performance share units granted to management.
Current wording
We utilize certain financial measures that are not in accordance with U.S. generally accepted accounting principles (U.S. GAAP) to analyze and manage the performance of our business. We believe that adjusted EBITDA provides information useful to investors in understanding the underlying operational performance of the company, our business and performance trends, and facilitates comparisons between periods. The exclusion of certain items permits evaluation and a comparison between periods of results for business operations, and it is on this basis that our management internally assesses our performance. Adjusted EBITDA is the measure of profitability we use to evaluate our businesses. In addition, adjusted EBITDA is the primary measure used to determine the level of achievement of management's short-term incentive goals and related payout, as well as one of the measures used to determine performance and related payouts for certain performance share units granted to management.
Previous wording
Adjusted EBITDA is a non-GAAP financial measure defined as income from continuing operations before interest, income taxes, depreciation, amortization and other adjustments. These other adjustments are items that we believe are not representative of underlying business performance. Adjusted items typically include certain expenses associated with impairment, restructuring and plant closure costs, significant gains and losses on asset disposals or business combinations, LIFO, mark-to-market commodity hedging and other unusual items. The LIFO expense adjustment removes the entire impact of LIFO and effectively reflects the results as if we were on a FIFO inventory basis. An Adjusted EBITDA Reconciliation is presented in the Segment Results section and reconciles net income to adjusted EBITDA on a consolidated basis.
Current wording
Adjusted EBITDA is a non-GAAP financial measure defined as income from continuing operations before interest, income taxes, depreciation, amortization and other adjustments. These other adjustments are items that we believe are not representative of underlying business performance. Adjusted items typically include certain expenses associated with impairment, restructuring and plant closure costs, significant gains and losses on asset disposals or business combinations, LIFO, mark-to-market commodity hedging, cloud-computing amortization expenses and other unusual items. The LIFO expense adjustment removes the entire impact of LIFO and effectively reflects the results as if we were on a FIFO inventory basis. An Adjusted EBITDA Reconciliation is presented in the Segment Results section and reconciles net income to adjusted EBITDA on a consolidated basis.
Previous wording
We do not provide reconciliations of guidance for adjusted EBITDA and adjusted EPS to comparable GAAP measures, in reliance on the unreasonable efforts exception. We are unable, without unreasonable efforts, to forecast certain items required to develop meaningful comparable GAAP financial measures. These items include, but are not limited to, restructuring and impairment charges, acquisition-related costs, mark-to-market commodity hedging, and LIFO adjustments that are difficult to forecast for a GAAP estimate and may be significant.
Current wording
We do not provide reconciliations of guidance for adjusted EBITDA and adjusted EPS to comparable GAAP measures, in reliance on the unreasonable efforts exception. We are unable, without unreasonable efforts, to forecast certain items required to develop meaningful comparable GAAP financial measures. These items include, but are not limited to, restructuring and impairment charges, acquisition-related costs, mark-to-market commodity hedging, and LIFO adjustments that are difficult to forecast for a GAAP estimate and may be significant. Forward-looking statements, including the guidance below, are based upon current expectations and are subject to factors that could cause actual results to differ materially from those set forth below. Please see “Forward-Looking Statements” for more information.
Previous wording
Our keys to success for 2024 are the following:
Current wording
Our keys to success in 2025 include:
Previous wording
For our RUPS segment, we need to (i) recoup cost increases, including the value of our creosote preservative in the market, (ii) ensure our facilities run uninterrupted to serve customer demand and (iii) maximize opportunities for increased volumes, including expanding our customer base into the Texas utility pole market.
Current wording
For our RUPS segment, our focus is to (i) recoup cost increases, including the value of our creosote preservative in the market, (ii) maximize opportunities for increased volumes, including expanding our customer base into the Texas, western and midwestern utility pole markets and (iii) lower operating and selling, general and administrative expenses.
Previous wording
The Railway Tie Association’s estimate of total crosstie installations in 2024, which is approximately 18.5 million ties, with 14.7 million for Class I railroads. This is consistent with 2023 crosstie installations of approximately 18.4 million crossties with the small increase expected to be from the commercial market.
Current wording
The Railway Tie Association’s estimate of total crosstie purchases in 2025 is approximately 19.5 million ties, with approximately 13.3 million for Class I railroads. This is slightly lower than the estimated 2024 crosstie purchases of approximately 19.6 million crossties with the small decrease expected to be from Class I railroads. We expect the crosstie market to remain stable.
Previous wording
Our businesses and results of operations are affected by various competitive and other factors including (i) the impact of global economic conditions on demand for our products, including the impact of imported products from competitors in certain regions where we operate; (ii) raw material pricing and availability, in particular the cost and availability of hardwood lumber for railroad crossties, softwood lumber for utility poles, scrap copper prices, and the cost and amount of coal tar available in global markets, which is negatively affected by reductions in blast furnace steel production; (iii) volatility in oil prices, which impacts the cost of coal tar and certain other raw materials, as well as selling prices and margins for certain of our products including carbon black feedstock, phthalic anhydride, and naphthalene; (iv) competitive conditions in global carbon pitch markets; and (v) changes in foreign exchange rates. Any or all of these factors could impact our actual results for 2024.
Current wording
Our businesses and results of operations are affected by various competitive and other factors including (i) the impact of global economic conditions on demand for our products, including the impact of imported products from competitors in certain regions where we operate; (ii) raw material pricing and availability, in particular the cost and availability of hardwood lumber for railroad crossties, softwood lumber for utility poles, scrap copper prices, and the cost and amount of coal tar available in global markets, which is negatively affected by reductions in blast furnace steel production; (iii) volatility in oil prices, which impacts the cost of coal tar and certain other raw materials, as well as selling prices and margins for certain of our products including carbon black feedstock, phthalic anhydride, and naphthalene; (iv) competitive conditions in our performance chemicals business and global carbon pitch markets; (v) changes in foreign exchange rates; and (vi) the other factors set forth in the section titled "Forward-Looking Statements." Any or all of these or other factors could impact our actual results for 2025.
Previous wording
Cost of sales as a percentage of net sales was 80 percent, compared to 83 percent in the prior year period as global price increases helped offset increased raw material and operating costs incurred in 2022 and 2023 on a consolidated basis and across most of our businesses. 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 80 percent for both periods as lower raw material costs were 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
Selling, general and administrative expenses were $20.8 million higher when compared to the prior year period due mainly to an increase in compensation related costs along with an increase in bank fees and travel expenses. These increases were partly offset by a reduction in professional services and insurance costs.
Current wording
Selling, general and administrative expenses were $5.2 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 and insurance expenses.
Previous wording
Gain on sale of assets for 2023 was related to the demolition of our closed coal tar distillation facility located in China, while the prior year gain was related to the sale of our utility pole treating facility in Sweetwater, Tennessee.
Current wording
Loss (gain) on sale of assets was primarily related to the liquidation of our former coal tar distillation facility located in China while the gain on sale of assets for 2023 was related to a sale of assets at that same facility. See Note 3 – Acquisitions, Divestitures and Discontinued Operations.
Previous wording
Interest expense was $26.2 million higher when compared to the prior year period, due primarily to higher interest rates and an increase in the write-off of debt issuance costs of $1.6 million related to the repayment of the 2025 Notes as described in Note 15 – Debt.
Current wording
Interest expense was $5.2 million higher when compared to the prior year period due to higher borrowings and interest rates, partly offset by the write-off of debt issuance costs in 2023.
Previous wording
Segment adjusted EBITDA and adjusted EBITDA margin for the years ended December 31, 2023 and 2022 are summarized in the following table:
Current wording
Segment adjusted EBITDA and adjusted EBITDA margin is summarized in the following table:
Previous wording
RUPS adjusted EBITDA increased due primarily to net sales price increases and $19.9 million from improved plant utilization, which combined to more than offset higher raw material, operating and selling, general and administrative expenses of $69.4 million. The domestic utility pole business's increased sales, operating profit and adjusted EBITDA drove the improved results.
Current wording
RUPS adjusted EBITDA decreased due primarily to $50.3 million of higher raw material, operating and allocated selling, general and administrative expenses, which combined to more than offset net sales increases and $11.8 million from improved plant utilization.
Previous wording
See Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2022, which is incorporated herein by reference, for discussion and analysis of consolidated results of operations and cash flows for the year ended December 31, 2021.
Current wording
The discussion and analysis of our consolidated results of operations and cash flows for the years ended December 31, 2023 compared to December 31, 2022 was included in our Annual Report on Form 10-K for the year ended December 31, 2023 under Item 7. Management's Discussion and Analysis of Financial Conditions and Results of Operations which was previously filed with the SEC.
Previous wording
Net cash used in investing activities for the year ended December 31, 2023 was $116.0 million compared to $114.8 million in the prior year driven primarily by capital expenditures. Capital expenditures for both periods 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.
Current wording
Net cash used in investing activitiesfor the year ended December 31, 2024 was $173.3 million compared to $116.0 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 year ended December 31, 2023 was $2.6 million compared to $4.8 million in the prior year. The sources of financing cash flows were net borrowings of $23.1 million and $9.9 million from issuances of common stock, primarily due to the exercise of stock options. This was offset by repurchases of common stock, payments of debt issuance costs and dividends paid. In the prior year, the primary source of financing cash flows was net borrowings of $36.3 million and the primary uses of financing cash flows were repurchases of common stock, payments of debt issuance costs and dividends paid.
Current wording
Net cash provided by financing activities for the year ended December 31, 2024 was $35.7 million compared to $2.6 million in the prior year. The primary source of financing cash flows for the year ended December 31, 2024 was net borrowings of $88.7 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 sources of financing cash flows were net borrowings of $23.1 million and issuances of common stock due to the exercise of stock options and the primary uses of financing cash flows were repurchases of common stock, payments of debt issuance costs and dividends paid.
Previous wording
Our Credit Facility is described in Note 15 – Debt.
Current wording
As of December 31, 2024, liquidity from our Credit Facility and cash on hand was approximately $381 million. Our Credit Facility is described in Note 15 – Debt.
Previous wording
Our need for cash in the next twelve months relates primarily to contractual obligations which includes debt service, pension plan funding, purchase commitments and operating leases, as well as working capital, capital spending, 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 $100 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.
Current wording
Our need for cash in the next twelve months relates primarily to contractual obligations which includes debt service, pension plan funding, purchase commitments and operating leases, as well as working capital, capital spending, 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 2025, excluding acquisitions, if any, are expected to total approximately $65 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.
Previous 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 December 31, 2023, approximately 85 percent of accounts payable was current and 15 percent was 1-30 days past due. As of December 31, 2022, approximately 80 percent of accounts payable was current and 20 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 December 31, 2024 and 2023, approximately 85 percent of accounts payable was current and 15 percent was 1-30 days past due.
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 fiscal year not to exceed the greater of $50.0 million, with unused amounts in any fiscal year being carried over to the succeeding fiscal year, and 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 fiscal year not to exceed the greater of $50.0 million, with unused amounts in any fiscal year being carried over to the succeeding fiscal year, and 6.0 percent of market capitalization.
Previous wording
Pension and other employee benefit plan funding contributions (for defined benefit plans) are expected to total approximately $7.6 million in 2024, for normal plan operations. Estimated funding obligations are determined by asset performance, workforce and retiree demographics, tax and employment laws and other actuarial assumptions, which may change the annual funding obligations in addition to decisions to fund in excess of statutorily required amounts. In addition, we are evaluating the termination of our US qualified pension plan, which would be targeted for completion by late 2024. If we proceed with the termination, the additional funding requirement is estimated to be approximately $25 million. The funded status of our defined benefit plans is disclosed in Note 14 – Pensions and Post-Retirement Benefit Plans.
Current wording
Pension and other employee benefit plan funding contributions (for defined benefit plans) are expected to total approximately $4.0 million in 2025, for normal plan operations. Estimated funding obligations are determined by asset performance, workforce and retiree demographics, tax and employment laws and other actuarial assumptions, which may change the annual funding obligations in addition to decisions to fund in excess of statutorily required amounts. In addition, we terminated our largest United States qualified defined benefit plan through a funding payment of $14 million in February 2025. The funded status of our defined benefit plans is disclosed in Note 14 – Pensions and Post-Retirement Benefit Plans.
Previous wording
Federal tax payments related to the transition tax in accordance with the Tax Cuts and Jobs Act of 2017 (the Tax Act) are expected to be $1.5 million in the next two years. As of December 31, 2023, there was $1.5 million of tax liabilities related to unrecognized tax benefits. Because of the high degree of uncertainty regarding the timing of future cash outflows associated with these liabilities, we are unable to estimate the years in which settlement will occur with the respective taxing authorities. Additional information regarding taxes is disclosed in Note 10 – Income Taxes.
Current wording
See Note 10 – Income Taxes for discussion of unrecognized tax benefits. Because of the high degree of uncertainty regarding the timing of future cash outflows associated with these liabilities, we are unable to estimate the years in which settlement will occur with the respective taxing authorities.
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 5.0. The total net leverage ratio as of December 31, 2023 was 2.9. Effective during the first quarter of 2024, the total net leverage ratio is not permitted to exceed 4.75.
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 December 31, 2024 was 3.20. Effective during the second quarter of 2025, the total net leverage ratio will not be permitted to exceed 4.75.
Previous wording
The cash interest coverage ratio, calculated as of the last day of each fiscal quarter, is not permitted to be less than 2.0. The cash interest coverage ratio as of December 31, 2023 was 3.9.
Current wording
The cash interest coverage ratio, calculated as of the last day of each fiscal quarter, is not permitted to be less than 2.0. The cash interest coverage ratio as of December 31, 2024 was 3.95.
Previous wording
We are subject to foreign currency translation fluctuations due to our foreign operations. See the Consolidated Statement of Comprehensive Income for the impact that exchange rate fluctuations had on comprehensive income. Foreign currency transaction gains and losses result from transactions denominated in a currency that is different from the currency used by the entity to prepare its financial statements. Foreign currency transaction gains (losses) were $1.0 million, $(0.8) million and $(0.7) million for the years ended December 31, 2023, 2022 and 2021, respectively.
Current wording
We are subject to foreign currency translation fluctuations due to our foreign operations. See the Consolidated Statement of Comprehensive Income for the impact that exchange rate fluctuations had on comprehensive income. Foreign currency transaction gains and losses result from transactions denominated in a currency that is different from the currency used by the entity to prepare its financial statements. Foreign currency transaction gains (losses) were $(0.9) million, $1.0 million, and $(0.8) million for the years ended December 31, 2024, 2023 and 2022, respectively.
Previous wording
We utilize the work of third-party specialists to assist in the fair value estimates. The key assumptions for the market and income approaches we use to determine fair value of our reporting units are updated at least annually. Those key assumptions include discount rates (13.5 percent – 17.5 percent), market multiples (4.5 – 7.5 times adjusted EBITDA) and terminal growth rates (5.4 – 6.5 times adjusted EBITDA) as well as future forecasts of revenue growth and adjusted EBITDA, which are based on our strategic plan. The strategic plan is updated as part of the annual planning process and is reviewed and approved by management and the Board of Directors. The strategic plan may be revised as necessary during the fiscal year based on changes in operating or economic conditions. The actual fair value may vary from our estimate under the market approach for many reasons, including because the peer group valuation differs from how investors value our business, valuation multiples change as a result of market conditions, changes in our business assumptions and other factors. Discount rates may be impacted by adverse changes in macroeconomic environment, volatility in the equity and debt markets or other factors. Our key assumptions are materially consistent with prior year.
Current wording
We utilize the work of third-party specialists to assist in the fair value estimates. The key assumptions for the market and income approaches we use to determine fair value of our reporting units are updated at least annually. Those key assumptions include discount rates (12.0 percent – 18.0 percent), market multiples (5.1 – 7.0 times adjusted EBITDA) and terminal growth rates (5.0 – 6.5 times adjusted EBITDA) as well as future forecasts of revenue growth and adjusted EBITDA, which are based on our strategic plan. The strategic plan is updated as part of the annual planning process and is reviewed and approved by management and the Board of Directors. The strategic plan may be revised as necessary during the fiscal year based on changes in operating or economic conditions. The actual fair value may vary from our estimate under the market approach for many reasons, including because the peer group valuation differs from how investors value our business, valuation multiples change as a result of market conditions, changes in our business assumptions and other factors. Discount rates may be impacted by adverse changes in macroeconomic environment, volatility in the equity and debt markets or other factors. Our key assumptions are materially consistent with prior year.
Previous wording
During the fourth quarter of 2023, we performed an impairment test for goodwill for each of our reporting units using the quantitative approach. We determined the fair value of each of the reporting units exceeded its respective carrying amount; therefore, we determined that goodwill was not impaired at any of our reporting units as of December 31, 2023. The estimated fair value, as calculated at October 31, 2023, for the three reporting units ranged from approximately eight percent to 110 percent greater than their carrying value (six percent to 84 percent at the previous impairment assessment date). Our Railroad Products and Services reporting unit is at the low-end of that range and could experience impairment in the future if we do not achieve our profitability projections, there is a change in key assumptions underlying the valuation or if we experience a substantial decrease in our stock price.
Current wording
During the fourth quarter of 2024, we performed an impairment test for goodwill for each of our reporting units using the quantitative approach. We determined the fair value of each of the reporting units exceeded its respective carrying amount; therefore, we determined that goodwill was not impaired at any of our reporting units as of December 31, 2024. The estimated fair value, as calculated at October 31, 2024, for the three reporting units ranged from approximately 22 percent to 103 percent greater than their carrying value (eight percent to 110 percent at the previous impairment assessment date). Our reporting units could experience impairment in the future if we do not achieve our profitability projections, there is a change in key assumptions underlying the valuation or if we experience a substantial decrease in our stock price.
Previous wording
Pension and Post-retirement Benefits. Accounting for pension and other post-retirement benefit obligations involves numerous assumptions, the most significant of which relate to the following:
Current wording
Pension and Post-retirement Benefits. Accounting for pension and other post-retirement benefit obligations involves numerous assumptions, the most significant of which relate to the discount rate for measuring the present value of future plan obligations and the expected long-term return on plan assets.
Previous wording
Of the assumptions used to measure the year-end obligations and estimated annual net periodic benefit cost, the discount rate has the most significant effect on the periodic benefit cost reported for the plans. Decreasing the discount rates by 0.25 percent for our pension plans and 0.25 percent for our other post-retirement benefit plans would increase pension obligations and other post-retirement benefit plan obligations by $3.9 million. Increasing the discount rates by the same amount would not have a material effect on defined benefit pension expense and other post-retirement benefit plan expense.
Current wording
Of the assumptions used to measure the year-end obligations and estimated annual net periodic benefit cost, the discount rate has the most significant effect on the periodic benefit cost reported for the plans. Decreasing the discount rates by 0.25 percent for our pension plans and 0.25 percent for our other post-retirement benefit plans would increase pension obligations and other post-retirement benefit plan obligations by $3.1 million. Increasing the discount rates by the same amount would not have a material effect on defined benefit pension expense and other post-retirement benefit plan expense.
Previous wording
The asset rate of return assumption considers the asset mix of the plans (currently targeted at 100 percent fixed income securities and cash equivalents for the funded U.S. pension plan), past performance and other factors, including expected re-allocations of asset mix occurring within a reasonable period of time. Our asset rate of return assumption is 5.62 percent for 2023 defined benefit pension expense. Decreasing the asset rate of return assumption by 0.25 percent would increase our defined benefit pension expense by $0.3 million.
Current wording
The asset rate of return assumption considers the asset mix of the plans (currently targeted at 100 percent fixed income securities and cash equivalents for the funded U.S. pension plan), past performance and other factors, including expected re-allocations of asset mix occurring within a reasonable period of time. Our asset rate of return assumption is 4.92 percent for 2024 defined benefit pension expense. Decreasing the asset rate of return assumption by 0.25 percent would increase our defined benefit pension expense by $0.3 million.
Previous wording
Environmental Liabilities. As discussed under Environmental Matters in Item 1 – Business, we are subject to federal, state, local, and foreign laws and regulations, and potential liabilities relating to the protection of the environment and human health and safety. We expect to incur substantial costs for ongoing compliance with such laws and regulations. We may also incur costs as a result of governmental or third-party claims, or other requirements, relating to cleanup of, or for injuries resulting from, contamination at sites associated with past and present operations. We accrue for environmental liabilities when a determination can be made that they are probable and reasonably estimable. The amount accrued is determined through the evaluation of various information, which could include claims, settlement offers, demands by government agencies, estimates performed by independent third parties, identification of other responsible parties and an assessment of their ability to contribute, and our prior experience. Inherent uncertainties exist in such estimates primarily due to unknown conditions and other circumstances, changing governmental regulations and legal standards regarding liability, and evolving technologies. See Note 17 – Commitments and Contingent Liabilities for information about environmental liabilities.
Current wording
Environmental Liabilities. As discussed under Environmental Matters in Item 1 – Business and Note 17 to the Consolidated Financial Statements, we are subject to federal, state, local, and foreign laws and regulations, and potential liabilities relating to the protection of the environment and human health and safety. We expect to incur substantial costs for ongoing compliance with such laws and regulations. We may also incur costs as a result of governmental or third-party claims, or other requirements, relating to cleanup of, or for injuries resulting from, contamination at sites associated with past and present operations. We accrue for environmental liabilities when a determination can be made that they are probable and reasonably estimable. The amount accrued is determined through the evaluation of various information, which could include claims, settlement offers, demands by government agencies, estimates performed by independent third parties, identification of other responsible parties and an assessment of their ability to contribute, and our prior experience. Inherent uncertainties exist in such estimates primarily due to unknown conditions and other circumstances, changing governmental regulations and legal standards regarding liability, and evolving technologies. See Note 17 – Commitments and Contingent Liabilities for information about environmental liabilities.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
the discount rate for measuring the present value of future plan obligations; and
Previous report — wording carried elsewhere
the expected long-term return on plan assets.