What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-09 compared with 2024-11-08 · 101 added, 138 removed, 112 unchanged (68% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report and any documents incorporated herein by reference contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and may include, but are not limited to, statements about sales levels, acquisitions, restructuring, declines in the value of Koppers assets and the effect of any related impairment charges, profitability and anticipated expenses and cash outflows.

All forward-looking statements involve risks and uncertainties.

All statements contained herein that are not clearly historical in nature are forward-looking, and words such as “believe,” “anticipate,” “expect,” “estimate,” “may,” “will,” “should,” “continue,” “plans,” “potential,” “intends,” “likely,” or other similar words or phrases are generally intended to identify forward-looking statements.

All statements contained herein that are not clearly historical in nature are forward-looking, and words such as “outlook,” "guidance,” “forecast,” “believe,” “anticipate,” “expect,” “estimate,” “may,” “will,” “should,” “continue,” “plan,” “potential,” “intend,” “likely,” or other similar words or phrases are generally intended to identify forward-looking statements.

Any forward-looking statement contained herein, in press releases, written statements or documents filed with the Securities and Exchange Commission, or in Koppers communications and discussions with investors and analysts in the normal course of business through meetings, phone calls and conference calls, regarding future dividends, expectations with respect to sales, earnings, cash flows, operating efficiencies, restructurings, cost reduction efforts, product introduction or expansion, the benefits of acquisitions and divestitures, or other matters as well as financings and debt reduction, are subject to known and unknown risks, uncertainties and contingencies.

Many of these risks, uncertainties and contingencies are beyond our control, and may cause actual results, performance or achievements to differ materially from anticipated results, performance or achievements.

Factors that might affect such forward-looking statements, include, among other things, the impact of changes in commodity prices, such as oil and copper, on product margins;

general economic and business conditions;

potential difficulties in protecting our intellectual property;

Factors that might affect such forward-looking statements, include, among other things, availability of and fluctuations in the prices of key raw materials, including coal tar, lumber and scrap copper;

the impact of changes in commodity prices, such as oil, copper and chemicals, on product margins;

the extent of the dependence of certain of our businesses on certain market sectors and customers;

economic, political and environmental conditions in international markets, including governmental changes, tariffs, restrictions on trade and restrictions on the ability to transfer capital across countries;

current and potential future tariffs;

the ratings on our debt and our ability to repay or refinance our outstanding indebtedness as it matures;

our ability to operate within the limits of our debt covenants;

unexpected business disruptions;

our ability to operate within the limitations of our debt covenants;

capital market and banking market conditions, including interest rates, borrowing costs, foreign currency rate fluctuations, and general volatility;

general economic and business conditions, including labor shortages, increased employee turnover and demand for our goods and services;

disruptions and inefficiencies in the supply chain;

unexpected business disruptions (including, but not limited to, labor disputes, natural disasters, weather conditions, fires, explosions, unscheduled or unplanned downtime, transportation interruptions, certain regional and world events or economic conditions and public health crises) and technology-related disruptions or failures (including, but not limited to, cyber attacks or other events) related to our technology infrastructure, or at key vendors which could impact our supply chain, or at key customers which could impact their operations and cause them to curtail or pause orders;

potential difficulties in protecting our intellectual property;

potential delays in timing or changes to expected benefits from cost reduction efforts;

potential impairment of our goodwill and/or long-lived assets;

demand for Koppers goods and services;

competitive conditions;

capital market conditions, including interest rates, borrowing costs and foreign currency rate fluctuations;

availability of and fluctuations in the prices of key raw materials, such as coal tar, lumber and scrap copper;

disruptions and inefficiencies in the supply chain;

economic, political and environmental conditions in international markets;

changes in laws;

demand for our goods and services;

the effects of competition in the industries in which we operate, including locations of competitors and operating and market competition;

changes in laws, their interpretation, and their enforcement, including tax regulations or accounting standards, third-party relations and approvals, and decisions of courts, regulators and governmental bodies;

the impact of environmental laws and regulations;

and unfavorable resolution of claims against us, as well as those discussed more fully elsewhere in this report and in documents filed with the Securities and Exchange Commission by Koppers, particularly our latest annual report on Form 10-K and subsequent filings.

parties who are obligated to indemnify us for liabilities, including legal and environmental liabilities, fail to perform under their legal obligations;

and unfavorable resolution of litigation or other legal proceedings against us, as well as those discussed more fully elsewhere in this report and in documents filed with the Securities and Exchange Commission by Koppers, particularly our latest annual report on Form 10-K and subsequent filings.

We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you.

In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this report and the documents incorporated by reference herein may not in fact occur.

Any forward-looking statements in this report speak only as of the date of this report, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.

Any forward-looking statements in this report speak only as of the date of this report, and we undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited financial statements and related notes included in Item 1 of this Part I as well as the audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2024.

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RUPS, PC and CMC.

Through our RUPS business, we believe that we are the largest supplier of railroad crossties to the Class I railroads in North America.

Through our RUPS business, we believe that we are the largest supplier of railroad crossties to the Class I railroads in North America and the second largest producer of utility poles in the United States.

Our other treated wood products include utility poles for the electric, telephone, and broadband utility industries in the United States and Australia and construction pilings in the United States.

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Our CMC business processes coal tar into a variety of products, including creosote, carbon pitch, carbon black feedstock, naphthalene and phthalic anhydride, which are intermediate materials necessary in the pressure treatment of wood, and the production of aluminum, steel, carbon black, high-strength concrete, plasticizers and specialty chemicals.

Our CMC segment ceased primary production of phthalic anhydride in April 2025.

See Note 2 – Acquisitions and Restructuring .

Non-GAAP Financial Measures

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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.

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.

Although we believe that these non-GAAP financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP financial measures and should be read in conjunction with the relevant GAAP financial measures.

Other companies in a similar industry may define or calculate these measures differently than we do, limiting their usefulness as comparative measures.

Because of these limitations, these non-GAAP financial measures should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP.

Adjusted EBITDA is a non-GAAP financial measure defined as income before interest, income taxes, depreciation, amortization and other adjustments.

Although we believe that this non-GAAP financial measure enhances investors’ understanding of our business and performance, this non-GAAP financial measure should not be considered an alternative to GAAP financial measures and should be read in conjunction with the relevant GAAP financial measures.

Other companies in a similar industry may define or calculate this measure differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, this non-GAAP financial measure should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.

Adjusted EBITDA is a non-GAAP financial measure defined as income before interest expense, 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.

Adjusted items typically include LIFO inventory effects, impairment, restructuring and plant closure costs, significant gains and losses on asset disposals, mark-to-market commodity hedging, acquisition-related charges, 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.

See Adjusted EBITDA reconciliation in the below section for the reconciliation from net income to adjusted EBITDA on a consolidated basis.

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.

An adjusted EBITDA reconciliation is presented in the Segment Results section and reconciles net income to adjusted EBITDA on a consolidated basis.

Forward-looking statements, including the significant market indicators described 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 the “forward-looking statements” disclaimer above for more information.

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 will 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.

The following summarizes our 2024 financial goals, which are supported by these actions:

• sales of approximately $2.1 billion,

• adjusted EBITDA of approximately $270 million to $275 million, and

• capital expenditures, including capitalized interest but excluding acquisitions, of approximately $80 million with approximately $20 million of the total allocated to discretionary projects.

Our keys to success for 2024 include streamlining the organization in addition to our original 2024 objectives, which are:

• 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, (iii) maximize opportunities for increased volumes, including expanding our customer base into the Texas utility pole market, (iv) lower costs and (v) successfully integrate the Brown Wood asset acquisition with our domestic utility pole business.

• 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.

• For our CMC segment, we need to (i) optimize production from our yield enhancement project 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.

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 continue our growth in profitability and support a higher margin profile by leveraging a smaller global team highly focused on serving customer preferences.

Trade Tariff Uncertainties

Our 2025 outlook reflects plans to substantially offset costs related to import and export tariffs, where possible, but due to the continued uncertainty regarding the implementation dates and scope of potential additional tariffs, as well as potential retaliatory trade policy, our outlook may vary as a result.

See also Item 1A.

Risk Factors.

Our keys to success for 2025 include:

• 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.

• 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) improve our cost structure.

• 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.

Significant market indicators for our businesses include:

• The Railway Tie Association’s estimate of total crosstie installations in 2024 is approximately 19.6 million ties, with approximately 13.4 million for Class I railroads.

This is slightly higher than 2023 crosstie installations of approximately 19.2 million crossties with the small increase expected to be from Class I railroads.

• The Railway Tie Association’s estimate of total crosstie purchases in 2025 is approximately 19.9 million ties, with approximately 13.6 million for Class I railroads.

This is slightly lower than the estimated 2024 crosstie purchases of approximately 20.0 million crossties with the small decrease expected to be from the commercial market.

We expect the crosstie market to remain stable.

• 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 2024, we have experienced a decrease in our legacy utility pole business due to temporary customer overstock and budget realignment.

• 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 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.

• 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 reported a mild pullback in 2024 compared to the prior year;

however, annual homeowner renovation and maintenance expenditures are expected to grow by 1.2 percent through the third quarter of 2025.

Volumes may also be impacted by customer market share shifts as contracts are negotiated for 2025.

While the LIRA projects a decrease in 2024, the outlook for our PC business for the remainder of the year remains relatively positive driven by improvements in the industrial markets we serve and expected flat volumes for our residential business, inclusive of any market share changes in 2024.

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 2.5 percent to reach a record $526 billion by the first quarter of 2026.

While the LIRA projects an increase in 2025, our PC business expects flat or lower volumes as a result of customer market share shifts.

• 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.

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We are also investing in projects to increase distillation yields and balance raw material supply and cost with customer demand and pricing.

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;

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(iv) competitive conditions in our performance chemicals business and global carbon pitch markets;

and (v) changes in foreign exchange rates.

Any or all of these or other factors could impact our actual results for 2024.

(v) the effectiveness of our commodity hedging programs;

(vi) changes in foreign exchange rates;

and (vii) the other factors set forth in the "forward-looking statements" disclaimer.

Any or all of these or other factors, including those set forth in our Annual Report on Form 10-K, could impact our actual results for 2025.

Seasonality and Effects of Weather on Operations

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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.

As a result of the foregoing, we anticipate that we may experience material fluctuations in quarterly operating

Historically, our operating results have been significantly lower in the first and fourth calendar quarters as compared to the second and third calendar quarters.

Results of Operations – Comparison of Three Months Ended September 30, 2024 and 2023

Results of Operations – Comparison of Three Months Ended March 31, 2025 and 2024

Consolidated Results

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Three Months Ended

September 30,

(Dollars in millions)

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Carbon Materials and Chemicals

RUPS net sales increased largely due to $10.0 million of price increases, mainly for domestic crossties and utility poles in Australia, an 11 percent increase in the volume of domestic utility poles sold driven by our acquisition of Brown Wood and an increase in activity in our railroad bridge services business.

These increases were partly offset by lower activity in our crosstie recovery business.

PC net sales decreased primarily as a result of sales to the recently acquired Brown Wood no longer being included in our reported sales beginning April 1, 2024.

Slightly higher volumes, excluding Brown Wood, were offset by lower sales prices.

CMC net sales decreased mainly due to $16.6 million of lower sales prices across most products, especially carbon pitch where prices were down approximately 20 percent globally, along with lower volumes of carbon black feedstock.

The decreases in carbon pitch prices were driven by market dynamics in the current year period, particularly in Europe.

These decreases were partly offset by volume increases for carbon pitch and phthalic anhydride.

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 $1.8 million.

Cost of sales as a percentage of net sales was 78 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 prices.

RUPS net sales increased largely due to higher volumes in our Class I crosstie business, $4.6 million of price increases across most products, a nine percent increase in the volume of domestic utility poles sold driven by our acquisition of Brown Wood and an increase in activity in our railroad bridge services business.

These increases were partly offset by lower volumes in our commercial crosstie business.

PC net sales decreased primarily due to 21.5 percent lower volumes of residential and industrial preservatives in the Americas due mostly to a shift in United States market share along with reduced volumes due to weather.

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 $2.4 million.

CMC net sales decreased mainly due to $10.8 million of volume decreases for phthalic anhydride and lower sales prices for carbon pitch where prices were down approximately eight percent globally.

The decreases in carbon pitch prices were driven by market dynamics in the current year period, particularly in Australasia.

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 $2.3 million.

Cost of sales as a percentage of net sales was 77 percent, compared to 81 percent in the prior year period as lower freight costs, operating expenses and raw material costs were partly offset by lower sales volumes.

Significant items impacting cost of sales in individual operating segments are discussed as part of "Segment adjusted EBITDA and adjusted EBITDA margin" herein.

Depreciation and amortization expenses were $3.6 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.

Loss on sale of assets for the three months ended September 30, 2024 was related to the liquidation of our former coal tar distillation facility located in China.

See Note 2 – Acquisition and Loss on Sale of Assets.

Interest expense was $1.2 million higher when compared to the prior year period due to higher borrowings.

Income tax expense increased by $2.3 million when compared to the prior year period due primarily to higher income before income taxes.

The income excludes the loss on the sale of KCCC's assets, which does not have a corresponding tax benefit.

Depreciation and amortization expenses were $1.9 million higher when compared to the prior year period primarily as a result of our acquisition of Brown Wood.

Selling, general and administrative expenses were $4.4 million lower when compared to the prior year period due mainly to a decrease in compensation-related costs, professional service fees and other administrative expenses.

See Note 6 - Stock-based Compensation for changes related to our long-term incentive plan.

Impairment and restructuring charges in the current year period represent costs associated with discontinuing 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 2 - Acquisitions and Restructuring.

Other income in the current year period primarily relates to the sale of our office space in Griffin, Georgia.

Interest expense was $0.5 million lower when compared to the prior year period due to lower interest rates.

Loss on pension settlement in the current year period represents the settlement loss recorded as a result of the termination of our United States qualified pension plan as discussed in Note 10 - Pensions and Post-Retirement Benefit Plans.

Income tax provision decreased by $7.7 million when compared to the prior year period due primarily to the loss on pension settlement and lower income before income taxes.

See Note 8 - Income Taxes.

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Three Months Ended

September 30,

(Dollars in millions)

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Carbon Materials and Chemicals

RUPS adjusted EBITDA was essentially flat as net sales increases and $3.4 million from improved plant utilization were offset by $14.1 million of higher raw material, operating and selling, general and administrative expenses.

PC adjusted EBITDA increased despite the net decrease in sales, on lower raw material and logistics costs, which were favorably impacted by timing.

CMC adjusted EBITDA increased due to $9.2 million of lower raw material costs, particularly in Europe, lower selling, general and administrative costs and higher volumes of carbon pitch and phthalic anhydride.

These favorable drivers were partly offset by price decreases and higher operating expenses.

Results of Operations – Comparison of Nine Months Ended September 30, 2024 and 2023

Consolidated Results

Net sales are summarized by segment in the following table:

Nine Months Ended

September 30,

(Dollars in millions)

Railroad and Utility Products and Services

Performance Chemicals

Carbon Materials and Chemicals

RUPS net sales increased largely due to $28.8 million of pricing increases primarily for crossties and utility poles, along with higher volumes for crossties and utilities poles 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 3.2 percent as an increase from our acquisition of Brown Wood was partly offset by a decrease in our legacy utility pole business due to temporary customer overstock and budget realignment.

PC net sales decreased due primarily to sales to the recently acquired Brown Wood of approximately $6 million no longer being included in our reported sales beginning April 1, 2024 and lower pricing of $4.8 million in the Americas, partly offset by a 1.5 percent volume increase in the Americas for our copper-based preservatives.

CMC net sales decreased largely due to $72.7 million of lower sales prices across most products, especially carbon pitch where prices were down approximately 24 percent globally, along with $12.9 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.

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.

Depreciation and amortization expenses were $9.5 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.

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.

Selling, general and administrative expenses were $6.2 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.

Loss on sale of assets for the nine months ended September 30, 2024 was related to the liquidation of our former coal tar distillation facility located in China while the gain on sale of assets for the nine months ended September 30, 2023 was related to a sale of assets at that same facility.

See Note 2 – Acquisition and Loss on Sale of Assets.

Interest expense was $4.6 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.

Income tax expense decreased by $2.9 million when compared to the prior year period due primarily to lower income before income taxes.

See Note 8 – Income Taxes.

Segment Results

Segment adjusted EBITDA and adjusted EBITDA margin is summarized in the following table:

Nine Months Ended

September 30,

(Dollars in millions)

Adjusted EBITDA:

Railroad and Utility Products and Services

Performance Chemicals

Carbon Materials and Chemicals

Total Adjusted EBITDA

Adjusted EBITDA margin as a percentage of GAAP sales:

Railroad and Utility Products and Services

Performance Chemicals

Carbon Materials and Chemicals

RUPS adjusted EBITDA increased due primarily to net sales increases and $11.2 million from improved plant utilization, which combined to more than offset $39.8 million of higher raw material, operating and selling, general and administrative expenses.

PC adjusted EBITDA increased despite lower sales, 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.

CMC adjusted EBITDA decreased as a result of lower sales prices, which were partly offset by a $42.6 million reduction in raw material costs, particularly in Europe, as well as higher operating expenses and lower plant utilization, partly offset by lower selling, general and administrative costs and higher volumes of phthalic anhydride.

RUPS adjusted EBITDA increased due to net sales volume and price increases and $2.2 million from lower operating expenses in our crossties business, partly offset by $2.5 million of higher raw material and allocated selling, general and administrative expenses.

PC adjusted EBITDA decreased due to a net decrease in sales and higher raw material costs, partly offset by $3.7 million of lower logistics and selling, general and administrative expenses, particularly in North America.

CMC adjusted EBITDA increased due to $7.0 million of lower raw material and allocated selling, general and administrative expenses, particularly in North America, along with a favorable sales mix and improved plant performance as a result of an outage in North America in the prior year period, partly offset by price decreases.

Adjusted EBITDA Reconciliation.

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Three Months Ended

Nine Months Ended

September 30,

(Dollars in millions)

Net (loss) income

Interest expense

Depreciation and amortization

Income tax expense

Income tax provision

Adjustments to arrive at adjusted EBITDA:

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Impairment, restructuring and plant closure costs (2)

Loss (gain) on sale of assets

(Gain) on sale of assets

Mark-to-market commodity hedging gains

Acquisition inventory step-up amortization

Amortization of cloud-based software implementation costs

Loss on pension settlement

Total adjustments

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(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.

Net cash provided by operating activities for the nine months ended September 30, 2024 was $44.7 million compared to $79.5 million in the prior year.

For both periods, the primary source of cash was net income, excluding non-cash items, less working capital usage.

Higher working capital usage in the current year was primarily driven by a reduction in accounts payable as a result of the timing of inventory purchases and vendor payments.

Net cash used in investing activities for the nine months ended September 30, 2024 was $154.4 million compared to $88.3 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.

Net cash provided by financing activities for the nine months ended September 30, 2024 was $88.4 million compared to $31.6 million in the prior year.

The primary source of financing cash flows for the nine months ended September 30, 2024 was net borrowings of $138.9 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 $46.9 million and the primary uses of financing cash flows were repurchases of common stock, payments of debt issuance costs and dividends paid.

(2) See Note 2 - Acquisitions and Restructuring.

Net cash used in operating activities for the three months ended March 31, 2025 was $22.7 million compared to $12.3 million in the prior year.

For both periods, the primary source of cash was net income, excluding non-cash items, principally depreciation and in 2025, the pension settlement loss.

This was offset by working capital usage which was higher in the current year primarily as a result of the timing of purchases and payments of raw material inventory and pension funding of approximately $14 million in connection with the settlement.

Net cash used in investing activities for the three months ended March 31, 2025 was $17.6 million compared to $25.8 million in the prior year due primarily to lower capital expenditures.

Capital expenditures were higher in the prior year period due to investment in growth projects, such as the yield enhancement project at our CMC facility in Nyborg, Denmark which was completed in the first quarter of 2024.

Additionally, during the three months ended March 31, 2025,

we paid approximately $7.6 million for a land transfer associated with our agreement to liquidate Koppers (China) Carbon & Chemical Company Limited (KCCC) with Koppers and Tangshan Iron & Steel Group Co.

Net cash provided by financing activities for the three months ended March 31, 2025 was $28.7 million compared to $23.0 million in the prior year.

The primary source of financing cash flows for the three months ended March 31, 2025 was net borrowings of $49.1 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 $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.

Liquidity and Capital Resources

As of September 30, 2024, liquidity was approximately $332 million.

As of March 31, 2025, liquidity from our Credit Facility and cash on hand was approximately $320 million.

Our Credit Facility is described in Note 11 – Debt.

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, voluntary pension plan contributions, including pension plan terminations, and to fund cost savings initiatives.

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.

Capital expenditures in 2024, excluding acquisitions, are expected to total approximately $80 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.

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.

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 September 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.

As of March 31, 2025 and December 31, 2024, approximately 85 percent of accounts payable was current and 15 percent was 1-30 days past due.

Restrictions on Dividends to Koppers Holdings

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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.

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.

Bank Debt Covenants

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• 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 September 30, 2024 was 3.3.

The total net leverage ratio as of March 31, 2025 was 3.34.

Effective during the second quarter of 2025, the total net leverage ratio will not be permitted to exceed 4.75.

• 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 September 30, 2024 was 4.0.

The cash interest coverage ratio as of March 31, 2025 was 4.0.

We are currently in compliance with all covenants governing the Credit Facility.

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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 2. Management’s Discussion and Analysis