What changed in this filing

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Item 1. Financial Statements

2024-11-08 compared with 2024-08-08 · 118 added, 68 removed, 566 unchanged (25% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

Nine Months Ended

September 30,

(Dollars in millions, except share and per share amounts)

2 unchanged sentences

Selling, general and administrative expenses

(Gain) on sale of assets

Loss (gain) on sale of assets

Operating profit

2 unchanged sentences

Income before income taxes

Income tax provision

Net income (loss) attributable to noncontrolling interests

Income tax expense

Net (loss) income attributable to noncontrolling interests

Net income attributable to Koppers

4 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

Nine Months Ended

September 30,

(Dollars in millions)

6 unchanged sentences

Comprehensive income

Comprehensive income (loss) attributable to

Comprehensive (loss) income attributable to

noncontrolling interests

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEET

September 30,

(Dollars in millions, except share and per share amounts)

38 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended

September 30,

(Dollars in millions)

5 unchanged sentences

Non-cash interest expense

(Gain) on sale of assets

Loss (gain) on sale of assets

Insurance proceeds

6 unchanged sentences

Other working capital

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Cash (used in) provided by investing activities:

24 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

Nine Months Ended

September 30,

(Dollars in millions, except per share amounts)

22 unchanged sentences

Balance at beginning of period

Net income (loss) attributable to noncontrolling interests

Net (loss) income attributable to noncontrolling interests

Currency translation adjustment

2 unchanged sentences

Total equity – end of period

(1) Amounts reclassified from accumulated other comprehensive income to net income related to derivative financial instruments, net of tax, were $ 5.2 million and $ 0.6 million during the three months ended June 30, 2024 and 2023, respectively, and $ 6.3 million and $ 2.3 million during the six months ended June 30, 2024 and 2023 , respectively.

(1) Amounts reclassified from accumulated other comprehensive income to net income related to derivative financial instruments, net of tax, were $ 3.3 million and $ 0.2 million during the three months ended September 30, 2024 and 2023, respectively, and $ 9.6 million and $ 2.5 million during the nine months ended September 30, 2024 and 2023 , respectively.

(2) Amounts reclassified from accumulated other comprehensive income to net income consist of amounts shown for pension adjustments.

28 unchanged sentences

We are currently evaluating this ASU to determine its impact on our disclosures.

In November 2024, the FASB issued ASU No.

2024-03, Income Statement - Reporting Comprehensive Income (Topic 220):

Expense Disaggregation Disclosures.

This ASU requires the disaggregation of certain expenses into specific categories, such as purchases of inventory, employee compensation, deprecation and intangible asset amortization.

Additionally, the amendments require disclosure of the total amount of selling expenses and an annual disclosure of the definition of selling expenses.

2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted.

The amendments should be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any and all prior periods presented in the financial statements.

We are currently evaluating this ASU to determine its impact on our disclosures.

Acquisition and Loss on Sale of Assets

On April 1, 2024, we completed our acquisition of substantially all of the assets of Brown Wood Preserving Company, Inc.

and certain of its affiliates (Brown Wood) for approximately $ 100 million in cash, subject to a post-closing working capital adjustment to be determined.

and certain of its affiliates (Brown Wood) for approximately $ 100 million in cash, after post-closing working capital adjustments.

We financed the acquisition with cash and available borrowings under our Credit Facility (as defined in Note 11 – Debt).

2 unchanged sentences

We believe the acquisition, which is included in our RUPS segment, increased our presence in existing markets and offers an attractive entry point to new geographic markets for our utility pole business.

Transaction costs, revenue and profit related to the acquisition were not material for the three months ended June 30, 2024.

Transaction costs, revenue and profit related to the acquisition were not material for the three and nine months ended September 30, 2024.

We accounted for the transaction as a business combination.

19 unchanged sentences

Recognized goodwill is attributable to the expected synergies and other intangible assets that do not qualify for separate recognition.

Loss on Sale of Assets

Koppers (China) Carbon & Chemical Company Limited (KCCC), which ceased operations in 2015, is owned 60 percent by a wholly owned subsidiary of Koppers and 40 percent by Tangshan Iron & Steel Group Co.

In July 2024, Koppers and TISCO signed an agreement to effectuate the ultimate liquidation of KCCC later in 2024 whereby TISCO will assume the remaining assets, including land, and liabilities of KCCC.

As a result, we recorded a loss of approximately $ 6 million, net of non-controlling interest, during the three months ending September 30, 2024.

Fair Value Measurements

The following table presents the estimated fair values and the related carrying amounts of our financial instruments:

June 30, 2024

September 30, 2024

December 31, 2023

10 unchanged sentences

The following table presents changes in common stock and treasury stock:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

Nine Months Ended

September 30,

(Shares in thousands)

10 unchanged sentences

The following table sets forth the computation of basic and diluted earnings per common share:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

Nine Months Ended

September 30,

(Dollars in millions, except share and per share amounts)

6 unchanged sentences

of diluted earnings per common share

On August 8, 2024 , we declared a quarterly dividend of $ 0.07 per common share, payable on September 16, 2024 to shareholders of record as of August 30, 2024 .

On November 7, 2024 , we declared a quarterly dividend of $ 0.07 per common share, payable on December 16, 2024 to shareholders of record as of November 29, 2024 .

Stock-based Compensation

23 unchanged sentences

Credited from dividends

Non-vested at June 30, 2024

Non-vested at September 30, 2024

The following table shows a summary of the status and activity of stock options:

6 unchanged sentences

Outstanding at December 31, 2023

Outstanding at June 30, 2024

Exercisable at June 30, 2024

Outstanding at September 30, 2024

Exercisable at September 30, 2024

The following table presents total stock-based compensation expense recognized in the condensed consolidated statement of operations:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

Nine Months Ended

September 30,

(Dollars in millions)

18 unchanged sentences

Phthalic anhydride is used in the production of plasticizers, polyester resins and alkyd paints.

Our primary measure of segment profitability is adjusted earnings before interest, income taxes, depreciation, amortization and certain non-cash and/or non-recurring items that do not contribute directly to management’s evaluation of our operating results (as defined by us, adjusted EBITDA).

Our primary measure of segment profitability is adjusted EBITDA which we define as income before interest, income taxes, depreciation, amortization and certain non-cash and/or non-recurring items that do not contribute directly to management’s evaluation of our operating results.

These items include impairment, restructuring and plant closure costs, mark-to-market commodity hedging, gain or loss on sale of assets and LIFO inventory effects.

7 unchanged sentences

The timing of revenue recognition results in both billed accounts receivable and unbilled receivables, both classified as accounts receivable, net of allowance within the condensed consolidated balance sheet.

Contract assets of $ 3.0 million and $ 7.8 million are recorded within accounts receivable, net of allowance within the condensed consolidated balance sheet as of June 30, 2024 and December 31, 2023, respectively.

Contract assets of $ 4.0 million and $ 7.8 million are recorded within accounts receivable, net of allowance within the condensed consolidated balance sheet as of September 30, 2024 and December 31, 2023, respectively.

The following table sets forth revenues for significant product lines, net of all intersegment transactions, for our segments:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

Nine Months Ended

September 30,

(Dollars in millions)

17 unchanged sentences

The following table sets forth certain operating data, net of all intersegment transactions, for our segments:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

Nine Months Ended

September 30,

(Dollars in millions)

9 unchanged sentences

segment profit:

LIFO expense (1)

LIFO (expense) benefit (1)

Impairment, restructuring and plant closure costs

Gain on sale of assets

(Loss) gain on sale of assets

Mark-to-market commodity hedging gains

2 unchanged sentences

Depreciation and amortization

Income tax provision

Income tax expense

(1) The LIFO expense adjustment removes the entire impact of LIFO and effectively reflects the results as if we were on a FIFO inventory basis .

The following table sets forth assets and goodwill allocated to each of our segments:

September 30,

(Dollars in millions)

5 unchanged sentences

Performance Chemicals

(1) See Note 2 - Acquisition for increase in goodwill due to business acquisition.

(1) See Note 2 - Acquisition and Loss on Sale of Assets for increase in goodwill due to business acquisition.

Effective Tax Rate

5 unchanged sentences

federal statutory tax rate due to:

September 30,

Federal income tax rate

5 unchanged sentences

Estimated annual effective income tax rate

Income taxes as a percentage of pretax income were 27.6 percent and 26.8 percent for the three and six months ended June 30, 2024, and 28.9 percent and 28.1 percent for the three and six months ended June 30, 2023, respectively.

The effective income tax rates for the three and six months ended June 30, 2024 and the three months ended June 30, 2023 were slightly different than their respective estimated annual effective income tax rates due to various discrete items, which were not material in the aggregate or individually.

Income taxes as a percentage of pretax income were 35.8 percent and 30.0 percent for the three and nine months ended September 30, 2024 , respectively, and 24.1 percent and 26.8 percent for the three and nine months ended September 30, 2023, respectively.

The effective income tax rates for the three and nine months ended September 30, 2024 were higher than the 2024 estimated annual effective income tax rate due to the loss on the sale of KCCC's assets.

This loss has no corresponding tax benefit since KCCC will not have future income to offset this loss.

The effective income tax rates for the three and nine months ended September 30, 2023 were slightly different than the 2023 estimated annual effective income tax rate due to various discrete items, which were not material in the aggregate or individually.

During the year, management regularly updates estimates of pre-tax income and income tax expense based on changes in pre-tax income projections by taxable jurisdiction, repatriation of foreign earnings, unrecognized tax benefits and other tax matters.

2 unchanged sentences

We do not expect these Pillar Two rules to materially impact our annual effective rate in 2024.

To the extent that actual results vary from these estimates, the actual annual effective income tax rate at the end of the year could be materially different from the estimated annual effective income tax rate for the six months ended June 30, 2024.

Unrecognized Tax Benefits

7 unchanged sentences

income tax examinations by tax authorities for years prior to 2017.

As of June 30, 2024 and December 31, 2023 , unrecognized tax benefits of $ 1.6 million and $ 1.5 million, respectively, would affect the effective tax rate if recognized.

As of September 30, 2024 and December 31, 2023 , unrecognized tax benefits of $ 1.6 million and $ 1.5 million, respectively, would affect the effective tax rate if recognized.

We do not anticipate material changes to the amount of unrecognized tax benefits within the next twelve months.

Inventories, net

September 30,

(Dollars in millions)

5 unchanged sentences

We maintain a number of defined benefit and defined contribution plans to provide retirement benefits for employees in the United States, as well as employees outside the United States.

We have commenced with a plan to terminate our United States qualified pension plan and are targeting the completion of this effort in the first quarter 2025.

We have commenced with a plan to terminate our United States qualified pension plan and are targeting the completion of this effort in the first quarter of 2025.

We estimate that a termination will require additional cash funding of $ 25 million in 2025 and will result in an estimated settlement loss of $ 40 million, before tax, subject to changes to certain assumptions including the discount rate, which could have a material impact on the settlement loss.

4 unchanged sentences

The data cleansing effort has been substantially completed and we expect to recognize a pre-tax pension settlement loss of approximately $ 20 million upon the pension obligation becoming irrevocably settled.

The timing of the conversion to a buy-out policy may be impacted by a ruling from the High Court of Justice in the United Kingdom in the case of Virgin Media Limited v NTL Pension Trustees II Limited and Others related to certain amendments to UK pension plans.

The timing of the conversion to a buy-out policy and related recognition of the estimated pension settlement loss may be impacted by a ruling from the High Court of Justice in the United Kingdom in the case of Virgin Media Limited v NTL Pension Trustees II Limited and Others related to certain amendments to UK pension plans.

On July 25, 2024, the Court of Appeal dismissed the appeal of the ruling from the High Court of Justice.

We are currently waiting to see if there is a further appeal to the Supreme Court of the United Kingdom or if there will be legislative intervention.

We are currently waiting to see if there will be legislative intervention or further guidance on the application of the ruling.

The following table provides the components of net periodic benefit cost for the pension plans:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

Nine Months Ended

September 30,

(Dollars in millions)

6 unchanged sentences

Interest Rate

September 30,

(Dollars in millions)

Credit Facility

Less short-term debt and current maturities of long-term debt

Less current maturities of long-term debt

Less unamortized debt issuance costs

11 unchanged sentences

and its restricted subsidiaries to meet certain financial ratios.

As of June 30, 2024, we had approximately $ 277.0 million of unused revolving credit availability after restrictions from certain letter of credit commitments and other covenants.

As of June 30, 2024, $ 7.8 million of commitments were utilized by outstanding letters of credit.

As of September 30, 2024, we had approximately $ 287.4 million of unused revolving credit availability after restrictions from certain letter of credit commitments and other covenants.

As of September 30, 2024, $ 7.8 million of commitments were utilized by outstanding letters of credit.

In April 2023, a class of senior secured term loans under the Credit Facility (the Term Loan B) was issued at 97 percent of face value, resulting in $ 388.0 million of net proceeds, before debt financing costs.

23 unchanged sentences

The fair value associated with these swap contracts are not designated as hedges, and the related unrealized gain or loss on the derivative is reported in current earnings.

These amounts are classified in cost of sales in the consolidated statement of operations.

As of June 30, 2024 and December 31, 2023 , we had contracts totaling 2.8 million and 1.5 million gallons, respectively.

These amounts are classified in cost of sales in the condensed consolidated statement of operations.

As of September 30, 2024 and December 31, 2023 , we had contracts totaling 3.2 million and 1.5 million gallons, respectively.

We enter into foreign currency forward contracts to manage foreign currency risk associated with our receivable and payable balances in addition to foreign-denominated sales.

7 unchanged sentences

The fair value of the outstanding derivative contracts recorded in the balance sheet are as follows:

September 30,

Heating Oil Contracts

20 unchanged sentences

Accumulated other comprehensive gain (loss),

W e estimate that unrealized gains, net of tax, for commodity price hedging and interest rate swaps of $ 6.7 million and $ 2.7 million, respectively, will be reclassified from other comprehensive income into earnings over the next twelve months .

We estimate that unrealized gains, net of tax, for commodity price hedging of $ 6.0 million and unrealized losses, net of tax, for interest rate swaps of $ 0.4 million, respectively, will be reclassified from other comprehensive income into earnings over the next twelve months .

Copper Swap Contracts

2 unchanged sentences

Net Fair Value – Asset

September 30,

(Amounts in millions)

2 unchanged sentences

The unrealized gain from copper swap contracts where hedge accounting was not elected is as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

Nine Months Ended

September 30,

(Dollars in millions)

Gain (loss) from contracts where hedge accounting

Gain from contracts where hedge accounting

was not elected

1 unchanged sentence

The net currency units outstanding for contracts were:

September 30,

(In millions)

6 unchanged sentences

The ultimate resolution of these contingencies is subject to significant uncertainty and should we fail to prevail in any of these legal matters or should several of these legal matters be resolved against us in the same reporting period, these legal matters could, individually or in the aggregate, be material to the condensed consolidated financial statements.

Legal Proceedings

Coal Tar Pitch Cases .

is one of several defendants in lawsuits filed in the Court of Common Pleas of Allegheny County, Pennsylvania in which the plaintiffs claim they suffered a variety of illnesses (including cancer) as a result of exposure to coal tar pitch sold by the defendants and have sought compensatory and punitive damages.

There were 50 plaintiffs in 26 cases pending as of June 30, 2024.

Given the current status, we no longer consider these cases to be material.

Environmental and Other Litigation Matters

64 unchanged sentences

is a de minimis party at this site.

We have accrued the estimated costs of participating in the PRP group at the Portland Harbor and Newark Bay CERCLA sites and estimated de minimis contributor settlement amounts at the sites totaling $ 3.9 million as of June 30, 2024.

The actual cost could be materially higher as there has not been a determination of how those costs will be allocated among the PRPs at the sites.

1 unchanged sentence

There are two plant sites related to the Performance Chemicals business and one plant site related to the Utility and Industrial Products business in the United States where we have recorded environmental remediation liabilities for soil and groundwater contamination which occurred prior to our acquisition of the businesses.

As of June 30, 2024, our estimated environmental remediation liability for these acquired sites totals $ 3.7 million.

As of September 30, 2024, our estimated environmental remediation liability for these acquired sites totals $ 3.7 million.

In June 2024, Koppers Inc.

7 unchanged sentences

There is one plant site related to the Performance Chemicals business located in Australia where we have recorded an environmental remediation liability for soil and groundwater contamination which occurred prior to the acquisition of the business.

As of June 30, 2024 , our estimated environmental remediation liability for the acquired site totals $ 1.2 million.

As of September 30, 2024 , our estimated environmental remediation liability for the acquired site totals $ 1.3 million.

Environmental Reserves Rollforward.

The following table reflects changes in the accrual for environmental remediation.

A total of $ 2.2 million was classified as current liabilities as of June 30, 2024 and December 31, 2023.

As of September 30, 2024 and December 31, 2023, $ 2.3 million and $ 2.2 million, respectively, were classified as current liabilities .

September 30,

(Dollars in millions)

4 unchanged sentences

Subsequent Events

As a result, we will record a loss of approximately $ 6 million, net of non-controlling interest, in the three months ending September 30, 2024.

On November 8, 2024, we committed to a workforce reduction program across selected U.S.

locations, which is intended to streamline operations and reduce costs.

This workforce reduction program will result in the reallocation of people and resources, which will include voluntary and involuntary reductions in employees.

The first stage of reductions will be carried out through a voluntary exit program that will give eligible employees the option of taking a separation package that will include enhanced severance benefits consisting of cash and health and welfare coverage.

The voluntary program will first be offered to approximately 90 employees in the U.S.

The voluntary program is expected to reduce the number of involuntary separations.

At this time, we have not fully defined all of the specific cost reduction actions that may be taken.

As such, while the charges and associated cash payments are expected to be material in the aggregate, we are unable at this time to make a good faith determination of the cost estimates, or ranges of cost estimates, associated with actions to be implemented.

We expect to incur pre-tax restructuring charges including but not limited to employee severance and related benefit costs.

We also expect to incur consulting and other professional service fees to help execute these actions as well as for the design and implementation of the future structures and processes.

These cost reduction initiatives are expected to be substantially complete by the end of the first quarter of 2025.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements