What changed in this filing

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Item 1. Financial Statements

2021-05-07 compared with 2020-11-04 · 172 added, 354 removed, 531 unchanged (50% of the section changed)

1 unchanged sentence

KOPPERS HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

Three Months Ended September 30,

Nine Months Ended September 30,

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

Three Months Ended March 31,

(Dollars in millions, except per share amounts)

1 unchanged sentence

Depreciation and amortization

Gain on sale of assets

Impairment and restructuring charges

3 unchanged sentences

Interest expense

Income from continuing operations before income

Income tax provision

Income from continuing operations before income taxes

Income tax provision (benefit)

Income from continuing operations

(Loss) income from discontinued operations, net of

tax benefit (expense) of $ 0.4 , $( 0.7 ), $ 1.4 , and $( 1.8 )

Gain on sale of discontinued operations, net of tax

expense of $ 8.3

Net (loss) income attributable to noncontrolling

Net income attributable to Koppers

Earnings per common share attributable to

Koppers common shareholders:

Loss from discontinued operations, net of

tax benefit of $ 0.1 and $ 0.8

Net income (loss)

Net loss attributable to noncontrolling interests

Net income (loss) attributable to Koppers

Earnings (loss) per common share attributable to Koppers

common shareholders:

Continuing operations

Discontinued operations

Earnings per basic common share

Earnings (loss) per basic common share

Continuing operations

Discontinued operations

Earnings per diluted common share

Comprehensive income

Comprehensive (loss) income attributable to

noncontrolling interests

Comprehensive income attributable to Koppers

Earnings (loss) per diluted common share

Comprehensive income (loss)

Comprehensive loss attributable to noncontrolling

Comprehensive income (loss) attributable to Koppers

Weighted average shares outstanding (in thousands):

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEET

September 30,

(Dollars in millions, except per share amounts)

1 unchanged sentence

Accounts receivable, net of allowance of $ 3.1 and $ 2.6

Income tax receivable

Inventories, net

Assets of discontinued operations held for sale

Derivative contracts

Other current assets

4 unchanged sentences

Deferred tax assets

Non-current assets of discontinued operations held for sale

Non-current derivative contracts

Accounts payable

2 unchanged sentences

Current maturities of long-term debt

Liabilities of discontinued operations held for sale

Total current liabilities

3 unchanged sentences

Operating lease liabilities

Non-current liabilities of discontinued operations held for sale

Other long-term liabilities

17 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in millions)

Cash provided by (used in) operating activities:

Net income (loss)

Adjustments to reconcile net cash provided by (used in) operating activities:

1 unchanged sentence

Stock-based compensation

Change in derivative liability

Change in derivative contracts

Non-cash interest expense

(Gain) on sale of discontinued operations and loss on disposal of

assets and investment

Insurance proceeds

Gain on sale of assets

Deferred income taxes

5 unchanged sentences

Other working capital

Net cash provided by operating activities

Cash provided by (used in) investing activities:

Net cash used in operating activities

Cash (used in) provided by investing activities:

Capital expenditures

Insurance proceeds received

Net cash provided by sale of discontinued operations and asset sales

Net cash provided by (used in) investing activities

Cash (used in) provided by financing activities:

Net decrease in credit facility borrowings

Net cash provided by sale of assets

Net cash used in investing activities

Cash provided by (used in) financing activities:

Net increase in credit facility borrowings

Repayments of long-term debt

2 unchanged sentences

Payment of debt issuance costs

Net cash used in financing activities

Net cash provided by financing activities

Effect of exchange rate changes on cash

34 unchanged sentences

and measurement of cash incentive plans.

In consideration of COVID-19, we evaluated our financial position and determined that a goodwill impairment evaluation triggering event did not occur during the three months ended September 30, 2020 and, therefore, an interim review of impairment was not required.

Events and changes in circumstances arising after September 30, 2020, including those resulting from the impacts of COVID-19, will be reflected in management’s estimates for future periods.

Events and changes in circumstances arising after March 31, 2021, including those resulting from the impacts of COVID-19, will be reflected in management’s estimates for future periods.

New Accounting Pronouncements

1 unchanged sentence

Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

This update provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as the London Interbank Offered Rate (“LIBOR”).

This ASU includes practical expedients for contract modifications due to reference rate reform.

Generally, contract modifications related to reference rate reform may be considered an event that does not require remeasurement or reassessment of a previous accounting determination at the modification date.

This ASU is effective March 12, 2020 through December 31, 2022.

This update provides temporary optional expedients and exceptions to U.S.

GAAP on contract modifications, hedging relationships, and other transactions affected by reference rate reform to ease entities' financial reporting burdens as the market transitions from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates.

The guidance was effective upon issuance and may be applied prospectively to contract modifications made, hedging relationships entered into, and other transactions affected by reference rate reform, evaluated on or before December 31, 2022, beginning during the reporting period in which the guidance has been elected.

The Company’s debt agreements include the use of alternate rates when LIBOR is not available.

We do not expect the change from LIBOR to an alternate rate will have a material impact to our financial statements and, to the extent we enter into modifications of agreements that are impacted by the LIBOR phase-out, we will apply such guidance to those contract modifications.

In January 2020, the FASB issued ASU No.

2020-01, “Investments – Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) – Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” This ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

Early adoption is permitted.

The Company does not expect the adoption of ASU No.

2020-01 to have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-14, “Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans,” which amends ASC 715-20, Compensation – Retirement Benefits – Defined Benefit Plans.

The ASU modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.

The disclosure requirements to be removed include the amounts in accumulated other comprehensive income expected to be recognized in net periodic benefit costs over the next fiscal year and the effect of a one percentage point change in assumed health care cost trend rates on the aggregate service cost and benefit obligation for postretirement health care benefits.

The new disclosure requirements include an explanation of significant gains and losses related to changes in benefit obligations.

This guidance is effective for fiscal years ending after December 15, 2020 and is not expected to have a material impact on the Company’s financial statements and disclosures.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820-10):

Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which changes the fair value measurement disclosure requirements of ASC Topic 820, Fair Value Measurements and Disclosures.

Under this ASU, certain disclosure requirements for fair value measurements are eliminated, amended or added.

These changes aim to improve the overall usefulness of disclosures to financial statement users and reduce unnecessary costs to companies when preparing the disclosures.

This guidance is effective for fiscal years ending after December 15, 2020 and is not expected to have a material impact on the Company’s financial statements and disclosures.

In June 2016, the FASB issued ASU No.

2016-13, “Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments,” which has subsequently been amended by ASU No.

2019-04 and ASU No.

2016-13 replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses.

The update is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.

We adopted ASU No.

2016-13 as of January 1, 2020 and ASU No.’s 2019-04 and 2020-03 as of July 1, 2020 and there was no material impact on our financial statements.

Plant Closures and Divestitures

Over the past six years, we have been restructuring our Carbon Materials and Chemicals (“CMC”) segment in order to concentrate our facilities in regions where we believe we hold key competitive advantages to better serve our global customers.

These closure activities include:

In September 2020, we sold Koppers (Jiangsu) Carbon Chemical Company Limited (“KJCC”) to Fangda Carbon New Material Co., Ltd and C-Chem Co., Ltd., a subsidiary of Nippon Steel Chemical & Material Co., Ltd.

as discussed in “Note 4 – Discontinued Operations” .

In the fourth quarter of 2018, we ceased naphthalene refining activities at our Follansbee, West Virginia coal tar distillation facility subsequent to the commissioning of a new naphthalene refining plant in Stickney, Illinois.

In August 2019, we ceased remaining production activities at the Follansbee plant.

In September 2018, we sold our UK-based specialty chemicals business.

In November 2016, we sold our 30 -percent interest in Tangshan Kailuan Koppers Carbon Chemical Company Limited (“TKK”) located in the Hebei Province in China.

In July 2016, we discontinued coal tar distillation activities at our CMC plant located in Clairton, Pennsylvania.

In October 2018, we sold the facility and as part of the transaction, we transferred cash to the buyer and the buyer assumed decommissioning, demolition and site restoration responsibilities.

In March 2016, we discontinued production at our 60 -percent owned CMC plant located in Tangshan, China.

In February 2016, we ceased coal tar distillation and specialty pitch operations at both of our United Kingdom CMC facilities.

In July 2016, we sold substantially all of our CMC tar distillation properties and assets in the United Kingdom.

In April 2014, we ceased coal tar distillation activities at our CMC facility located in Uithoorn, the Netherlands.

Over the past seven years, we have been restructuring our Carbon Materials and Chemicals (“CMC”) segment in order to concentrate our facilities in regions where we believe we hold key competitive advantages to better serve our global customers.

Recent closure activities include:

In February 2021, we sold our Follansbee, West Virginia coal tar distillation facility and we recorded a gain on sale of $ 5.7 million, consisting of $ 2.6 million from cash proceeds in addition to the assumption of certain liabilities by the buyer.

In September 2020, we sold Koppers (Jiangsu) Carbon Chemical Company Limited (“KJCC”) .

Refer to Note 4 – “Discontinued Operations” for more details.

In October 2018, we sold our Clairton, Pennsylvania coal tar distillation facility.

In the first quarter of 2021, certain post-sale conditions were achieved and the buyer of the property released cash held in escrow to us resulting in a gain on sale of $ 1.8 million.

Other closure and divestiture activity relates to our Railroad Utility Products and Services (“RUPS”) segment.

These acti vities include:

In June 2020, we announced the closure of a crosstie treating plant located in Denver, Colorado and in the third quarter of 2020 we discontinued production activities at this location.

In August 2019, we sold our utility pole treatment plant located in Blackstone, Virginia.

In August 2015, we closed a crosstie treating plant located in Green Spring, West Virginia.

In July 2015, we sold the assets of our 50 percent interest in KSA Limited Partnership, a concrete crosstie manufacturer.

In addition, in 2011, we ceased carbon black production at our CMC facility located in Kurnell, Australia.

Costs associated with this closure are included in (loss) income from discontinued operations on the Condensed Consolidated Statement of Operations and Comprehensive Income.

Most recently, we discontinued production activities at our crosstie treating plant located in Denver, Colorado in the third quarter of 2020.

Details of the restructuring activities and related reserves are as follows:

9 unchanged sentences

Reversal of accrued charges

Reserve at September 30, 2020

Reserve at March 31, 2021

Discontinued Operations

1 unchanged sentence

KJCC was located in Pizhou, Jiangsu Province, China and was a 75 percent-owned coal tar distillation company which was part of our CMC segment.

The sales price was $ 107.0 million, subject to adjustments for cash, debt and working capital as defined in the sale and purchase agreement.

The pre-tax gain on the sale of KJCC was $ 44.1 million and the after tax gain on the sale was $ 35.8 million.

The net cash proceeds to Koppers was $ 65.2 million, after noncontrolling interest, Chinese capital gain taxes, transaction costs and estimated working capital adjustments.

Included in the cash proceeds is restricted cash of $ 2.3 million which is being held in an escrow account to cover potential customary indemnity claims by the buyers for a period of 18 months.

We have previously elected to include proceeds received from the sale of a subsidiary that is separately reported as a discontinued operation within cash flows from continuing operations on the Condensed Consolidated Statement of Cash Flows.

The sale of KJCC represents a strategic shift that has a major effect on our operations and financial results and was, therefore, classified as discontinued operations in our condensed consolidated financial statements and notes, which have been restated accordingly.

Net sales and operating (loss) profit from discontinued operations for the three and nine months ended September 30, 2020 and 2019 consist of the following amounts:

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in millions)

Operating (loss) profit

The cash flows related to KJCC have not been restated in the Condensed Consolidated Statement of Cash Flows.

Net cash inflows and outflows from discontinued operations for the nine months ended September 30, 2020 and 2019 consist of the following amounts:

Nine Months Ended September 30,

(Dollars in millions)

Net cash provided by operating activities

Net cash used in investing activities

Net cash used in financing activities

Effect of exchange rate changes on cash

Net (decrease) increase in cash and cash equivalents

Assets of Discontinued Operations Held for Sale

Assets and liabilities (the “disposal group”) are classified as held for sale when, among other items, the sale of the asset is probable and the completed sale is expected to occur within one year.

Upon classification as held for sale, such assets are no longer depreciated or depleted, and a measurement for impairment is performed to determine if there is any excess of carrying value over fair value less costs to sell.

Subsequent changes to estimated fair value less the cost to sell will impact the measurement of assets held for sale if the fair value is determined to be less than the carrying value of the assets.

The agreement to sell KJCC met all of the criteria to classify its assets and liabilities as held for sale in the first quarter of 2020 and as part of the required evaluation under the held for sale guidance, we determined that the approximate fair value less costs to sell the operations exceeded the carrying value of the net assets and no impairment charge was recorded.

The below amounts are excluded from the respective balance sheet footnotes as of December 31, 2019.

We have incurred aggregated transactions costs related to this divestiture of $ 3.7 million and $ 4.9 million during the three and nine months ended September 30, 2020, respectively, which are included in (loss) income from discontinued operations and gain on the sale of discontinued operations on the Condensed Consolidated Statement of Operations and Comprehensive Income.

The following represents the carrying amount of assets and liabilities, by major class, classified as held for sale on the Condensed Consolidated Balance Sheet as of December 31, 2019:

Included in the cash proceeds is restricted cash of $ 2.3 million which is being held in an escrow account and is recorded within cash and cash equivalents as of March 31, 2021 to cover potential customary indemnity claims by the buyers for a remaining period of 12 months.

In addition, an amount of $ 5.6 million is recorded in accrued liabilities as of March 31, 2021 and December 31, 2020 in anticipation of final post-closing working capital adjustments payable to the buyers.

The sale of KJCC represented a strategic shift that had a major effect on our operations and financial results in 2020 and were, therefore, classified as discontinued operations in our condensed consolidated financial statements and notes, which were restated accordingly in the prior year.

Net sales and operating loss from discontinued operations for the three months ended March 31, 2020 consisted of the following amounts:

Three Months Ended March 31,

(Dollars in millions)

Cash and cash equivalents

Accounts receivable

Income tax receivable

Inventories, net

Other current assets

Total current assets held for sale

Property, plant and equipment, net

Operating lease right-of-use assets

Total non-current assets held for sale

Total assets held for sale

Accounts payable

Accrued liabilities

Current operating lease liabilities

Total current liabilities held for sale

Deferred tax liabilities

Operating lease liabilities

Other long-term liabilities

Total non-current liabilities held for sale

Total liabilities held for sale

Operating loss

In addition, we ceased carbon black production at our CMC facility located in Kurnell, Australia during 2011.

Costs associated with this closure are also included in loss from discontinued operations on the condensed consolidated statement of operations and comprehensive income (loss).

Fair Value Measurements

Carrying amounts and the related estimated fair values of our financial instruments as of September 30, 2020 and December 31, 2019 are as follows:

September 30, 2020

Carrying amounts and the related estimated fair values of our financial instruments as of March 31, 2021 and December 31, 2020 are as follows:

March 31, 2021

December 31, 2020

1 unchanged sentence

Financial assets:

Cash and cash equivalents, including restricted cash

Investments and other assets (a)

Investments and other assets

Financial liabilities:

Excludes equity method investments.

Cash and cash equivalents – The carrying value approximates fair value because of the short maturity of those instruments.

Long-term debt (including current portion)

Investments and other assets – Represents the broker-quoted cash surrender value on universal life insurance policies.

2 unchanged sentences

The fair value of our Credit Facility approximates carrying value due to the variable rate nature of this instrument.

Comprehensive Income and Equity

Total comprehensive income for the three and nine months ended September 30, 2020 and 2019 is summarized in the table below:

Three Months Ended September 30,

Nine Months Ended September 30,

Comprehensive Income (Loss) and Equity

Total comprehensive income (loss) for the three months ended March 31, 2021 and 2020 is summarized in the table below:

Three Months Ended March 31,

(Dollars in millions)

Net income (loss)

Changes in other comprehensive income (loss):

Currency translation adjustment

Unrealized gain (loss) on cash flow hedges, net

of tax (expense) benefit of $( 5.3 ), $ 1.7 ,

$( 6.9 ) and $ 0.6

Unrealized gains and losses on cash flow hedges, net

of tax (expense) benefit of $( 4.5 ) and $ 11.3

Unrecognized pension net loss, net of tax

expense of $( 0.1 ) and $( 0.1 )

Total comprehensive income

Comprehensive (loss) income attributable to

Total comprehensive income (loss)

Comprehensive loss attributable to

noncontrolling interests

Comprehensive income attributable to Koppers

Comprehensive income (loss) attributable to Koppers

Amounts reclassified from accumulated other comprehensive loss to net income consist of amounts shown for changes in or amortization of unrecognized pension net loss.

This component of accumulated other comprehensive loss is included in the computation of net periodic pension cost as disclosed in “Note 13 – Pensions and Post-Retirement Benefit Plans.” Other amounts reclassified from accumulated other comprehensive loss related to derivative financial instruments, net of tax, of $ 1.3 million and $ 2.1 million for the three and nine months ended September 30, 2020, respectively, and $ 1.8 million and $ 3.3 million for the three and nine months ended September 30, 2019, respectively.

Additionally, $ 2.5 million was reclassified from cumulative translation adjustment to net income attributable to Koppers for the three and nine months ended September 30, 2020.

The following tables present the change in equity for the three months ended September 30, 2020 and 2019, respectively:

(Dollars in millions)

Additional Paid-In Capital

Retained Earnings

Accumulated Other Comprehensive Loss

Treasury Stock

Noncontrolling

Balance at June 30, 2020

Issuance of common stock

Employee stock plans

Sale of discontinued

Other comprehensive

Currency translation

Unrealized gain on cash

Unrecognized pension

Balance at September 30,

(Dollars in millions)

Additional Paid-In Capital

Retained Earnings

Accumulated Other Comprehensive Loss

Treasury Stock

Noncontrolling

Balance at June 30,

Issuance of common stock

Employee stock plans

Other comprehensive

Currency translation

Unrealized loss on

cash flow hedges

Unrecognized pension

Balance at September 30,

The following tables present the change in equity for the nine months ended September 30, 2020 and 2019, respectively:

This component of accumulated other comprehensive loss is included in the computation of net periodic pension cost as disclosed in Note 13 – “Pensions and Post-Retirement Benefit Plans.” Other amounts reclassified from accumulated other comprehensive loss related to derivative financial instruments, net of tax, of $ 7.2 million for the three months ended March 31, 2021, and $ 1.1 million for the three months ended March 31, 2020.

The following tables present the change in equity for the three months ended March 31, 2021 and 2020, respectively:

(Dollars in millions)

5 unchanged sentences

Balance at December 31,

Net income (loss)

Issuance of common stock

Employee stock plans

Sale of discontinued

Other comprehensive

(loss) income

Currency translation

2 unchanged sentences

Repurchases of common

Balance at September 30,

Balance at March 31,

(Dollars in millions)

8 unchanged sentences

Other comprehensive

(loss) income

Currency translation

3 unchanged sentences

Repurchases of common

Balance at September 30,

Balance at March 31,

Earnings per Common Share

3 unchanged sentences

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in millions, except share amounts, in thousands)

Net income attributable to Koppers

(Loss) income from discontinued operations

Gain on sale of discontinued operations

Non-controlling (loss) income

Net income (loss) attributable to Koppers

Loss from discontinued operations, net of tax

Loss from noncontrolling interests

Income from continuing operations attributable to Koppers

9 unchanged sentences

The 2005 LTIP, the 2018 LTIP and the 2020 LTIP are collectively referred to as the “LTIP”.

On May 6, 2020, the 2020 LTIP was approved by our shareholders and the 2018 LTIP was frozen.

Similar to the 2018 LTIP, the 2020 LTIP provides for the grant to eligible persons of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares , performance awards, dividend equivalents and other stock-based awards, which are collectively referred to as the “awards.”

The LTIP provides for the grant to eligible persons of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares , performance awards, dividend equivalents and other stock-based awards, which are collectively referred to as the “awards.” On May 6, 2021, the shareholders approved an amendment to our 2020 LTIP to increase the number of shares available for grant by 1,500,000 .

Restricted Stock Units and Performance Stock Units

11 unchanged sentences

We calculated the fair value of the performance stock unit awards on the date of grant using the assumptions listed below:

January 2021 Grant

March 2020 Grant

1 unchanged sentence

May 2018 Grant

March 2018 Grant

Grant date price per share of

9 unchanged sentences

There are special vesting provisions for the stock units related to a change in control.

The following table shows a summary of the performance stock units as of September 30, 2020:

The following table shows a summary of the performance stock units as of March 31, 2021:

Performance Period

Performance stock units for the 2017 – 2019 performance period vested in March 2020 at 100 percent of the target share amount of 110,168 .

The following table shows a summary of the status and activity of non-vested stock units for the nine months ended September 30, 2020:

Performance stock units granted in March 2018 for the 2018 – 2020 performance period did not meet the minimum performance criteria and did not vest in March 2021.

The following table shows a summary of the status and activity of non-vested stock units for the three months ended March 31, 2021:

Weighted Average

2 unchanged sentences

Non-vested at December 31, 2020

Non-vested at September 30, 2020

Non-vested at March 31, 2021

Stock Options

6 unchanged sentences

We calculated the fair value of stock options on the date of grant using the Black-Scholes-Merton model and the assumptions listed below:

March 2020 Grant

January 2021 Grant

March 2020 Grant

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Treasury bill rates for the expected life of the option.

The following table shows a summary of the status and activity of stock options for the nine months ended September 30, 2020:

The following table shows a summary of the status and activity of stock options for the three months ended March 31, 2021:

Weighted Average

5 unchanged sentences

Outstanding at December 31, 2020

Outstanding at September 30, 2020

Exercisable at September 30, 2020

Outstanding at March 31, 2021

Exercisable at March 31, 2021

Stock Compensation Expense

Total stock-based compensation expense recognized under our LTIP and employee stock purchase plan for the three and nine months ended September 30, 2020 and 2019 is as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Total stock-based compensation expense recognized under our LTIP and employee stock purchase plan for the three months ended March 31, 2021 and 2020 is as follows:

Three Months Ended March 31,

(Dollars in millions)

3 unchanged sentences

Decrease in net income attributable to Koppers

Intrinsic value of exercised stock options

Cash received from the exercise of stock options

As of September 30, 2020 , total future compensation expense related to non-vested stock-based compensation arrangements totaled $ 17.7 million and the weighted-average period over which this expense is expected to be recognized is approximately 27 months .

As of March 31, 2021 , total future compensation expense related to non-vested stock-based compensation arrangements totaled $ 24.7 million and the weighted-average period over which this expense is expected to be recognized is approximately 32 months .

Segment Information

5 unchanged sentences

Railroad products and services include procuring and treating items such as crossties, switch ties and various types of lumber used for railroad bridges and crossings and the manufacture of rail joint bars.

The segment also manufactures treated wood utility transmission and distribution poles for utility and cooperative utility companies and treated wood pilings used for construction applications.

In addition, RUPS operates a railroad services business that conducts engineering, design, repair and inspection services for railroad bridges as well as a business related to the recovery of used crossties.

Utility products include transmission and distribution poles and pilings.

The segment also operates a railroad services business that conducts engineering, design, repair and inspection services for railroad bridges and a business related to the recovery of used crossties.

Our PC segment develops, manufactures, and markets wood preservation chemicals and wood treatment technologies and services a diverse range of end-markets including infrastructure, residential and commercial construction, and agriculture.

4 unchanged sentences

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

We evaluate performance and determine resource allocations based on a number of factors, including operating profit or loss from operations and earnings before interest, taxes, depreciation and amortization (“EBITDA”).

We evaluate performance and determine resource allocations based on a number of factors, including earnings before interest, taxes, depreciation and amortization (“EBITDA”) and operating profit or loss from operations.

Operating profit does not include other loss, interest expense, income taxes or operating costs of Koppers Holdings Inc.

2 unchanged sentences

Contract Balances

The timing of revenue recognition in accordance with ASC 606, “Revenue from Contracts with Customers”, 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 $ 4.2 million and $ 5.1 million are recorded within accounts receivable in our RUPS segment, net of allowance within the Condensed Consolidated Balance Sheet as of September 30, 2020 and December 31, 2019, respectively.

The timing of revenue recognition in accordance with ASC 606 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 $ 7.8 million and $ 5.8 million are recorded within accounts receivable, net of allowance within the condensed consolidated balance sheet as of March 31, 2021 and December 31, 2020, respectively.

The following table sets forth certain sales and operating data, net of all intersegment transactions, for our segments for the periods indicated:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in millions)

14 unchanged sentences

Carbon Materials and Chemicals (c)

Revenue excludes KJCC discontinued operations of $ 8.8 million and $ 40.7 million for the three months ended September 30, 2020 and 2019, respectively, and $ 31.6 million and $ 124.7 million for the nine months ended September 30, 2020 and 2019, respectively.

Depreciation and amortization expense excludes KJCC discontinued operations of $ 0.1 million and $ 1.0 million for the three months ended September 30, 2020 and 2019, respectively, and $ 0.6 million and $ 2.9 million for the nine months ended September 30, 2020 and 2019, respectively.

Operating profit (loss) excludes KJCC discontinued operations of $ 0.3 million and $ 3.1 million for the three months ended September 30, 2020 and 2019, respectively, and $( 5.0 ) million and $ 7.5 million for the nine months ended September 30, 2020 and 2019, respectively.

Revenue excludes KJCC discontinued operations of $ 9.9 million for the three months ended March 31, 2020.

Depreciation and amortization expense excludes KJCC discontinued operations of $ 1.0 million for the three months ended March 31, 2020.

Operating profit (loss) excludes KJCC discontinued operations of $( 5.1 ) million for the three months ended March 31, 2020.

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in millions)

12 unchanged sentences

Other products

The following table sets forth tangible and intangible assets allocated to each of our segments as of the dates indicated:

September 30,

The following table sets forth assets and goodwill allocated to each of our segments as of the dates indicated:

(Dollars in millions)

2 unchanged sentences

Performance Chemicals

Carbon Materials and Chemicals (a)

Carbon Materials and Chemicals

Railroad and Utility Products and Services

Performance Chemicals

The Carbon Materials and Chemicals segment includes $ 76.4 million of assets of discontinued operations held for sale related to our KJCC business at December 31, 2019.

Effective Tax Rate

The income tax provision for interim periods is comprised of an estimated annual effective income tax rate applied to current year ordinary income and tax associated with discrete items.

These discrete items generally relate to excess stock compensation deductions, changes in tax laws, adjustments to unrecognized tax benefits and changes of estimated tax liability to the actual liability determined upon filing tax returns.

To determine the annual effective tax rate, management is required to make estimates of annual pretax income in each domestic and foreign jurisdiction in which we conduct business.

Entities that have historical pre-tax losses and current year estimated pre-tax losses that are not projected to generate a future benefit are excluded from the estimated annual effective income tax rate.

The estimated annual effective income tax rate, excluding discrete items discussed above, was 25.8 percent and 31.6 percent for the nine months ended September 30, 2020 and 2019, respectively.

The estimated annual effective income tax rate, excluding discrete items discussed above, was 25.8 percent and 30.7 percent for the three months ended March 31, 2021 and 2020, respectively.

The estimated annual effective income tax rate differs from the U.S.

federal statutory tax rate due to:

September 30,

Federal income tax rate

4 unchanged sentences

Change in tax contingency reserves

Interest expense deduction limitation

Estimated annual effective income tax rate

In reaction to the economic effects of the COVID-19 pandemic, on March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law.

This legislation provides stimulus and relief for affected entities and individuals, broadly provides tax payment relief and significant business incentives, and makes certain technical corrections to the 2017 Tax Cuts and Jobs Act.

Among its many provisions, the CARES Act modifies the limitation on the interest expense deduction for tax years beginning in 2019 and 2020.

This modification increases the allowable business interest expense deduction from 30 percent of adjusted taxable income to 50 percent of adjusted taxable income .

To determine adjusted taxable income, taxpayers compute their taxable income and then add or subtract specified adjustments, including, for taxable years beginning before 2022, adding back depreciation and amortization.

On July 28, 2020, the Internal Revenue Service released finalized regulations and proposed new regulations that modify the calculation of adjusted taxable income.

The finalized regulations provide that any depreciation, amortization, or depletion capitalized to inventory and included in cost of goods sold may be added back in the year capitalized.

These modifications and finalized regulations impact both our 2019 and 2020 income tax provisions and we have included the net impact as discrete items in the nine months ended September 30, 2020.

We have recorded a benefit of $ 4.0 million for changes to our 2019 tax provision and a benefit of $ 2.4 million for the release of a valuation allowance that was recorded for interest expense deduction limitations that were previously not expected to be realized.

Income taxes as a percentage of pretax income were 18.0 percent for the three months ended September 30, 2020.

This is lower than the estimated annual effective income tax rate due to discrete items, which were a net benefit of $ 3.1 million for the three months ended September 30, 2020.

Discrete items were primarily related to the legislative changes and finalized regulations regarding the limitation on the interest expense deduction and a benefit due to an amended tax return.

Income taxes as a percentage of pretax income were 13.7 percent for the three months ended September 30, 2019.

This is lower than the estimated annual effective income tax rate due to discrete items, which were a net benefit of $ 3.0 million for the three months ended September 30, 2019.

Discrete items were primarily related to favorable provision-to-return adjustments that were recorded as a result of filing the Company’s 2018 U.S.

These favorable adjustments were predominately due to various tax return positions which enabled us to increase our U.S.

taxable income and therefore decrease the limitation on our interest expense deduction as originally estimated.

Income taxes as a percentage of pretax income were 17.4 percent for the nine months ended September 30, 2020.

This is lower than the estimated annual effective income tax rate due to discrete items, which were a net benefit of $ 7.3 million for the nine months ended September 30, 2020.

Discrete items were primarily related to the legislative changes and finalized regulations regarding the limitation on the interest expense deduction and a benefit due to an amended tax return .

These discrete items were offset by a tax deduction reduction for vested stock awards.

Income taxes as a percentage of pretax income were 18.7 percent for the nine months ended September 30, 2019.

This is lower than the estimated annual effective income tax rate due to discrete items, which were a net benefit of $ 6.7 million for the nine months ended September 30, 2019.

Discrete items were primarily related to the reversal of various unrecognized tax benefits due to the closure of the Company’s U.S.

tax audit and favorable provision-to-return adjustments that were recorded as a result of filing the Company’s 2018 U.S.

These favorable adjustments were predominately due to various tax return positions which enabled us to increase our U.S.

taxable income and therefore decrease the limitation on our interest expense deduction as originally estimated .

Income taxes as a percentage of pretax income were 24.5 percent for the three months ended March 31, 2021.

This is lower than the estimated annual effective income tax rate due to discrete items , principally an excess tax deduction for vested stock awards.

Income taxes as a percentage of pretax income for the three months ended March 31, 2020 were lower than the estimated annual effective income tax rate due to discrete items, which were a net benefit of $ 1.8 million.

Discrete items included the tax benefit due to the enactment of the CARES Act which is discussed below.

This benefit was offset by a reduction of our tax deduction for vested stock awards.

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted and a provision of the CARES Act temporarily increased the allowable business interest expense deduction from 30 percent of adjusted taxable income to 50 percent of adjusted taxable income, retroactively to January 1, 2019.

Any such limitation that is disallowed in a year could be carried forward to future years.

Due to the temporary change to the limitation, in the three months ended March 31, 2020, we recorded a tax benefit of $ 2.9 million to reverse a portion of a previously recorded valuation allowance for carryforward amounts that we determined would be utilized.

Effective January 1, 2021, the limitation on the deduction was restored to 30 percent.

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.

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 nine months ended September 30, 2020.

Unrecognized Tax Benefits

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income tax examinations by tax authorities for years prior to 2016.

Unrecognized tax benefits totaled $ 1.9 million and $ 2.1 million as of September 30, 2020 and December 31, 2019, respectively.

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate, was approximately $ 1.9 million and $ 2.0 million as of September 30, 2020 and December 31, 2019, respectively.

Unrecognized tax benefits totaled $ 2.5 million as of March 31, 2021 and December 31, 2020.

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate, was approximately $ 2.4 million as of March 31, 2021 and December 31, 2020.

We recognize interest expense and any related penalties from unrecognized tax benefits in income tax expense.

As of September 30, 2020 and December 31, 2019, we had accrued approximately $ 0.8 million and $ 0.8 million for interest and penalties, respectively.

As of March 31, 2021 and December 31, 2020, we had accrued approximately $ 0.9 million and $ 0.8 million for interest and penalties, respectively.

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

Net inventories as of September 30, 2020 and December 31, 2019 are summarized in the table below:

September 30,

Net inventories as of March 31, 2021 and December 31, 2020 are summarized in the table below:

(Dollars in millions)

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Less revaluation to LIFO

Net inventories excludes $ 10.6 million of assets of discontinued operations held for sale related to our KJCC business as of December 31, 2019.

Property, Plant and Equipment

Property, plant and equipment as of September 30, 2020 and December 31, 2019 are summarized in the table below:

September 30,

Property, plant and equipment as of March 31, 2021 and December 31, 2020 are summarized in the table below:

(Dollars in millions)

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Less accumulated depreciation

Net property, plant, and equipment excludes $ 56.6 million of assets of discontinued operations held for sale related to our KJCC business as of December 31, 2019.

Pensions and Post-Retirement Benefit Plans

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Pension plans are funded except for three domestic non-qualified defined benefit pension plans for certain key executives.

In the United States, all qualified and two of the non-qualified defined benefit pension plans for salaried and hourly employees have been closed to new participants and have been frozen.

In the United States, all qualified and two of the non-qualified defined benefit pension plans for salaried and hourly employees have been frozen and are closed to new participants.

Accordingly, these pension plans no longer accrue additional years of service or recognize future increases in compensation for benefit purposes.

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For salaried employees, the retiree medical and retiree insurance plans have been closed to new participants.

The following table provides the components of net periodic benefit cost for the pension plans for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended September 30,

Nine Months Ended September 30,

The following table provides the components of net periodic benefit cost for the pension plans for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

(Dollars in millions)

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Defined contribution plan expense

Debt as of September 30, 2020 and December 31, 2019 was as follows:

Debt as of March 31, 2021 and December 31, 2020 was as follows:

Interest Rate

September 30,

(Dollars in millions)

Revolving Credit Facility and other

Revolving Credit Facility

Senior Notes due 2025

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and its restricted subsidiaries to meet certain financial ratios.

As of September 30, 2020, we had $ 307.3 million of unused revolving credit availability for working capital purposes after restrictions from certain letter of credit commitments and other covenants.

As of September 30, 2020, $ 7.0 million of commitments were utilized by outstanding letters of credit.

As of March 31, 2021, we had $ 283.7 million of unused revolving credit availability for working capital purposes after restrictions from certain letter of credit commitments and other covenants.

As of March 31, 2021, $ 7.7 million of commitments were utilized by outstanding letters of credit.

Senior Notes due 2025

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The 2025 Notes pay interest semi-annually in arrears on February 15 and August 15 and will mature on February 15, 2025 unless earlier redeemed or repurchased.

On or after February 15, 2020, we are entitled to redeem all or a portion of the 2025 Senior Notes at a redemption price of 104.5 percent of principal value, declining to a redemption price of 101.5 percent on or after February 15, 2022 until the redemption price is equivalent to the principal value on April 15, 2023.

We are entitled to redeem all or a portion of the 2025 Senior Notes at a redemption price of 104.5 percent of principal value, declining to a redemption price of 101.5 percent on or after February 15, 2022 until the redemption price is equivalent to the principal value on April 15, 2023.

The indenture governing the 2025 Senior Notes includes customary covenants that restrict, among other things, the ability of Koppers Inc.

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cleaning and dismantling costs for owned railcars;

cleaning costs for leased railcars and barges;

cleaning costs for leased rail cars and barges;

and site demolition, when required by governmental authorities or by contract.

The following table reflects changes in the carrying values of asset retirement obligations:

September 30,

(Dollars in millions)

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Balance at end of period

We adopted the provisions of ASU 2016-02 and ASU 2018-10 on January 1, 2019 and recognized lease obligations and associated right-of-use assets for existing non-cancelable leases.

We recognize lease obligations and associated right-of-use assets for existing non-cancelable leases.

We have non-cancelable operating leases primarily associated with railcars, office and manufacturing facilities, storage tanks, ships, production equipment and vehicles.

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For certain asset classes such as railcars, storage tanks and ships, we have separated the lease and non-lease components based on the estimated stand-alone price for each component.

For the remaining asset classes, we have elected the practical expedient to account for these components as a single lease component.

Upon adoption, we elected other practical expedients as well, including retaining our current classification of existing leases upon adoption and excluding leases expiring within twelve months.

For the remaining asset classes, we have elected to account for these components as a single lease component.

In addition, we exclude leases expiring within twelve months from balance sheet recognition.

Many of our leases include one or more options to renew.

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Variable lease expense is recognized in the period in which the obligation for those payments is incurred.

Operating lease costs were $ 8.1 million and $ 23.2 million during the three and nine months ended September 30, 2020, respectively, and $ 7.1 million and $ 23.0 million during the three and nine months ended September 30, 2019, respectively.

Variable lease costs were $ 0.8 million and $ 2.7 million during the three and nine months ended September 30, 2020, respectively, and $ 0.8 million and $ 2.5 million during the three and nine months ended September 30, 2019, respectively.

The following table presents information about the amount and timing of cash flows arising from our operating leases as of September 30, 2020:

Operating lease costs were $ 7.7 million and $ 7.8 million and variable lease costs were $ 0.8 million and $ 1.0 million during the three months ended March 31, 2021 and 2020, respectively.

The following table presents information about the amount and timing of cash flows arising from our operating leases as of March 31, 2021:

(Dollars in millions)

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Supplemental condensed consolidated balance sheet information related to leases is as follows:

September 30,

(Dollars in millions)

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Derivative Financial Instruments

We utilize derivative instruments to manage exposures to risks that have been identified and measured and are capable of being controlled.

The primary risks managed by us by using derivative instruments are commodity price risk associated with copper and foreign currency exchange risk associated with a number of currencies, principally the U.S.

dollar, the Canadian dollar, the New Zealand dollar, the Euro and British pounds.

We utilize derivative instruments to manage exposures to risks that have been identified, measured and are capable of being mitigated.

The primary risks that we manage by using derivative instruments are commodity price risk associated with copper and foreign currency exchange risk associated with a number of currencies, principally the U.S.

dollar, the Euro and British pounds.

Swap contracts on copper are used to manage the price risk associated with forecasted purchases of materials used in our manufacturing processes.

Generally, we will not hedge cash flow exposures for durations longer than 36 months and we have hedged certain volumes of copper through 2022.

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

Generally, we will not hedge cash flow exposures for durations longer than 36 months and we have hedged certain volumes of copper through the end of 2022.

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.

Generally, we enter into master netting arrangements with the counterparties and offset net derivative positions with the same counterparties.

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Gains and losses on the derivative instruments representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

For those commodity swaps which are not designated as cash flow hedges, the fair value of the commodity swap is recognized as an asset or liability in the consolidated balance sheet and the related 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 September 30, 2020 and December 31, 2019, we had outstanding copper swap contracts of the following amounts:

For those commodity swaps where hedge accounting is not elected, the fair value of the commodity swap is recognized as an asset or liability in the consolidated balance sheet and the related gain or loss on the derivative is reported in current earnings.

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

As of March 31, 2021 and December 31, 2020, we had outstanding copper swap contracts of the following amounts:

Units Outstanding (in Pounds)

Net Fair Value - Asset (Liability)

September 30,

Net Fair Value - Asset

(Amounts in millions)

Cash flow hedges

Not designated as hedges

As of September 30, 2020 and December 31, 2019, the fair value of the outstanding copper swap contracts is recorded in the balance sheet as follows:

September 30,

Contracts where hedge accounting was not

As of March 31, 2021 and December 31, 2020, the fair value of the outstanding copper swap contracts is recorded in the balance sheet as follows:

(Dollars in millions)

Other current assets

Derivative contracts

Non-current derivative contracts

Asset on balance sheet

Accumulated other comprehensive gain, net of tax

Based upon contracts outstanding at September 30, 2020, in the next twelve months we estimate that $ 9.7 million of unrealized gains, net of tax, related to commodity price hedging will be reclassified from comprehensive income into earnings .

See “Note 6 – Comprehensive Income and Equity”, for amounts recorded in comprehensive income and for amounts reclassified from accumulated other comprehensive loss to net income for the periods specified below.

For the three and nine months ended September 30, 2020 and 2019, the gain (loss) from contracts not designated as hedges is as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

In the next twelve months , we estimate that $ 22.3 million of unrealized gains, net of tax, related to commodity price hedging will be reclassified from other comprehensive income into earnings .

See Note 6 – “Comprehensive Income (Loss) and Equity”, for amounts recorded in other comprehensive income (loss) and for amounts reclassified from accumulated other comprehensive loss into net income (loss) for the periods specified below.

For the three months ended March 31, 2021 and 2020, the unrealized gain (loss) from contracts where hedge accounting was not elected is as follows:

Three Months Ended March 31,

(Dollars in millions)

Gain (loss) from contracts not designated as hedges

Gain (loss) from contracts where hedge accounting was not elected

The fair value associated with forward contracts related to foreign currency that are not designated as hedges are immediately charged to earnings.

These amounts are classified in cost of sales in the Condensed Consolidated Statement of Operations and Comprehensive Income.

As of September 30, 2020 and December 31, 2019, the fair value of outstanding foreign currency forward contracts is recorded in the balance sheet as follows:

September 30,

These amounts are classified in cost of sales in the condensed consolidated statement of operations and comprehensive income (loss).

As of March 31, 2021 and December 31, 2020, the fair value of outstanding foreign currency forward contracts is recorded in the balance sheet as follows:

(Dollars in millions)

Other current assets

Derivative contracts

Accrued liabilities

Net asset (liability) on balance sheet

As of September 30, 2020 and December 31, 2019, the net currency units outstanding for these contracts were:

September 30,

Net (liability) asset on balance sheet

As of March 31, 2021 and December 31, 2020, the net currency units outstanding for these contracts were:

(In millions)

British Pounds

New Zealand Dollars

United States Dollars

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is one of several defendants in lawsuits filed in two states 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.

There were 64 plaintiffs in 34 cases pending as of September 30, 2020.

This is the same number of plaintiffs and cases pending as of December 31, 2019.

As of September 30, 2020, there were 33 cases pending in the Court of Common Pleas of Allegheny County, Pennsylvania, and one case pending in the Circuit Court of Knox County, Tennessee.

There were 63 plaintiffs in 33 cases pending as of March 31, 2021, compared to 64 plaintiffs in 34 cases pending as of December 31, 2020.

As of March 31, 2021, there were 32 cases pending in the Court of Common Pleas of Allegheny County, Pennsylvania, and one case pending in the Circuit Court of Knox County, Tennessee.

The plaintiffs in all 33 pending cases seek to recover compensatory damages.

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Domestic Environmental Matters.

On June 4, 2018, Koppers Inc.

received a letter from the U.S.

Environmental Protection Agency ("EPA") concerning potential violations of the Clean Water Act observed during inspections and review of Spill Prevention, Control and Countermeasure Plans and Facility Response Plans at our facilities in Follansbee, WV;

Green Spring, WV;

and Clairton, PA.

In addition, the EPA reviewed one facility’s compliance with an earlier consent order regarding above ground storage tank integrity testing.

In December 2019, the EPA presented Koppers Inc.

with a proposed penalty of $ 2.8 million regarding the alleged violations .

In October 2020, we signed a consent decree with the EPA and agreed to a total penalty of $ 1.0 million.

We expect the consent decree order will be entered and be declared effective by December 1, 2020.

Accordingly we have accrued our estimated liability of the probable penalty as of September 30, 2020.

has been named as one of the potentially responsible parties (“PRPs”) at the Portland Harbor CERCLA site located on the Willamette River in Oregon.

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The ROD does not determine who is responsible for remediation costs.

The net present value and undiscounted costs of the selected remedy as estimated in the ROD are approximately $ 1.1 billion and $ 1.7 billion, respectively.

At that time, the net present value and undiscounted costs of the selected remedy as estimated in the ROD are approximately $ 1.1 billion and $ 1.7 billion, respectively.

These costs may increase given the remedy will not be implemented for several years.

Responsibility for implementing and funding that work will be decided in the separate private allocation process which is ongoing.

Additionally, Koppers Inc.

is involved in two separate natural resource damages assessments at the Portland Harbor site.

An assessment is intended to identify damages to natural resources caused by the releases of hazardous substances to the Willamette River and to serve as the foundation to estimate liabilities for settlements of natural resource damages claims or litigation to recover from those who do not settle with the trustee groups.

One of the natural resource damage assessments was filed in January 2017 by the Yakama Nation in Oregon federal court.

Yakama Nation seeks recovery for future response costs and the costs of assessing injury to natural resources and recovery for past costs of overseeing investigations conducted on the site.

is involved in two separate matters involving natural resource damages at the Portland Harbor site.

One matter involves claims by the trustees to recover damages based upon an assessment of damages to natural resources caused by the releases of hazardous substances to the Willamette River.

The assessment serves as the foundation to estimate liabilities for settlements of natural resource damages claims or litigation to recover from those who do not settle with the trustee groups.

has been engaged in a process to resolve its natural resource damage liabilities for the assessment area.

A second matter involves a lawsuit filed in January 2017 by the Yakama Nation in Oregon federal court.

Yakama Nation seeks recovery for response costs and the costs of assessing injury to natural resources to waterways beyond the current assessment area.

Following the most recent court rulings, the Yakama Nation case has been stayed pending completion of the private allocation process for the Portland Harbor CERCLA site .

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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 settlement amounts at the sites totaling $ 2.1 million at September 30, 2020.

We have accrued the estimated costs of participating in the PRP group at the Portland Harbor and Newark Bay CERCLA sites as a de minimis contributor and estimated such settlement amounts at the sites totaling $ 3.6 million as of March 31, 2021.

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.

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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 September 30, 2020, our estimated environmental remediation liability for these acquired sites totals $ 4.3 million.

As of March 31, 2021, our estimated environmental remediation liability for these acquired sites totals $ 4.2 million.

Foreign Environmental Matters .

On October 10, 2019, the New South Wales Environment Protection Authority (“NSW EPA”) filed a proceeding against one of our Australian subsidiaries, Koppers Carbon Materials & Chemicals Pty.

(“KCMC”), in relation to an incident which occurred at our Mayfield, Australia plant on October 20, 2018.

The NSW EPA alleged that KCMC committed an offense under Australian law by failing to maintain its plant and equipment in a proper and efficient working condition.

The NSW EPA alleged that KCMC did not properly maintain a valve which failed and released heated coal tar pitch into a bunded area on our site and released fumes into the atmosphere.

The first hearing on the proceeding was held on November 22, 2019 in the Land and Environment Court of New South Wales and we entered a guilty plea with respect to the allegations.

The maximum fine for the proceeding is $ 1.0 million AUD (approximately $ 0.7 million) plus legal costs incurred by the NSW EPA.

The Land and Environment Court also has the authority to order KCMC to make certain improvements to its operations at the site of the incident.

In May 2020, the NSW EPA brought additional proceedings against KCMC related to a series of May 2019 incidents involving alleged air pollution and odor complaints.

The Company agreed to plead guilty to two of the charges and the remaining charges were dropped by the NSW EPA.

Both the October 2019 and May 2020 proceedings were procedurally joined and The Land and Environment Court is expected to enter a final order and assess a fine by the end of the year.

We have accrued our estimated liability associated with the matters as of September 30, 2020.

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 September 3 0 , 2020 , our estimated environmental remediation liability for th is acquired site total s $ 1.4 million.

As of March 31, 2021, our estimated environmental remediation liability for the site totals $ 1.5 million.

Environmental Reserves Rollforward.

The following table reflects changes in the accrued liability for environmental matters, excluding files and penalties of which $ 2.7 million and $ 2.8 million are classified as current liabilities at September 30, 2020 and December 31, 2019, respectively:

September 30,

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

A total of $ 2.8 million and $ 2.9 million are classified as current liabilities as of March 31, 2021 and December 31, 2020 respectively:

(Dollars in millions)

Balance at beginning of year

Reversal of reserves

Cash expenditures

Currency translation

Balance at end of period

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