The Company's sales for the second quarter ended June 30, 2007, increased 21 percent, or $62.1 million, to $360.0 million, as compared to $297.9 million for the prior year quarter. This increase was a result of higher sales in the Carbon Materials & Chemicals (CM&C) segment, which increased 29 percent, or $52.5 million, combined with higher sales in the Railroad & Utility Products segment, which increased 8 percent, or $9.6 million. The improvement in sales in CM&C was due mainly to increased pricing for most product lines due in large part to higher raw material costs and strong product demand. Sales for Railroad & Utility Products increased due mainly to higher prices and demand for treated crossties to commercial customers as well as higher treating services for the Class 1 railroads. Sales for the six months ended June 30, 2007, were $681.1 million, representing an increase of $118.6 million, or 21 percent over the prior fiscal year. Year-to-date June sales were positively impacted by $24.3 million of first quarter sales from the Reilly transaction and increased pricing for most product lines as noted above, and higher volumes of treated crossties and treating services to the railroads.
Net income for the quarter ended June 30, 2007, increased to $22.3 million as compared to $5.0 million in the prior year quarter. Net income for the quarter benefited as a result of increased profits from higher sales to commercial railroads, higher chemicals pricing, synergies related to the Reilly transaction, and a lower effective tax rate due primarily to $1.7 million of non-conventional fuel tax credits. Net income for the second quarter of 2006 included pre-tax charges of $2.1 million, consisting of $0.6 million related to restructuring charges for non-operating plants and $1.5 million related to the sale of the Alorton, Illinois facility. Adjusted net income, after excluding such charges, was $6.3 million for the quarter ended June 30, 2006. A reconciliation of net income to adjusted net income is attached to this press release.
EBITDA for the quarter ended June 30, 2007, was $54.2 million compared to adjusted EBITDA, excluding charges totaling $2.1 million, of $32.6 million in the second quarter of 2006. The increase was primarily from higher product prices due primarily to higher raw material prices, strong product demand, and efficiencies realized from the integration of the Reilly coal tar assets. A reconciliation of adjusted EBITDA to EBITDA and EBITDA to net income is attached to this press release.
Net income for the six months ended June 30, 2007, increased to $32.8 million as compared to a loss of $1.0 million in the prior year. Adjusted net income for the six months ended June 30, 2006, after excluding $20.7 million of pre-tax charges relating primarily to the Company's initial public offering (IPO), plant and benefit restructuring, and the loss on sale of Alorton, was $11.7 million. A reconciliation of net income to adjusted net income is attached to this press release.
EBITDA for the six months ended June 30, 2007, amounted to $90.7 million compared to adjusted EBITDA, after excluding $6.3 million of restructuring and IPO-related charges, of $60.8 million in the prior year. The increase was primarily from increased sales to commercial railroads, higher product pricing due primarily to higher raw materials prices, strong product demand and the integration of the Reilly coal tar assets. A reconciliation of adjusted EBITDA to EBITDA and EBITDA to net income is attached to this press release.
Commenting on the quarter, President and CEO Walter W. Turner said, "We are very pleased with our second quarter results which we attribute to the synergies derived from the Reilly transaction and the strong product demand that we experienced in our key end markets. We expect that the positive momentum in our end markets and our core businesses will continue for the balance of the year. We are optimistic about the remainder of 2007 as we expect to continue to benefit from strong demand within our primary end markets, aluminum and railroads, our focus on enhancing cash flow and our strict adherence to safety, health and environmental regulations."
Guidance
Mr. Turner concluded, "Based on the strength of our second quarter results and the outlook for the remainder of 2007, we are increasing our guidance. Our revised expectations for 2007, excluding the impact of the sale of Koppers Arch, are that sales should increase in the 13 to 16 percent range, up from previous guidance of 10 percent to 13 percent, while adjusted EBITDA should increase in the 20 to 23 percent range, up from previous guidance of 11 percent to 14 percent."
Investor Conference Call and Web Simulcast
Koppers management will conduct a conference call this morning, August 9, 2007, beginning at 11:00 a.m. EDT to discuss the company's performance. Interested parties may access the live audio broadcast by dialing 888 810 0248 in the US/Canada or 706 643 9697 for International, Conference ID number 6801828. Investors are requested to access the call at least five minutes before the scheduled start time in order to complete a brief registration. An audio replay will be available two hours after the call's completion at 800 642 1687 or 706 645 9291, Conference ID number 6801828. The recording will be available for replay through August 23, 2007.
The live broadcast of Koppers' conference call will be available online: http://phx.corporate-ir.net/phoenix.zhtml?p=irol- eventDetails&c=194019&eventID=1598869. (Due to the length of this URL, it may be necessary to copy and paste this hyperlink into your Internet browser's URL address field.)
If you are unable to participate during the live webcast, the call will be archived on www.koppers.com, www.streetevents.com and www.earnings.com, shortly after the live call and continuing through August 23, 2007.
About Koppers
Koppers, with corporate headquarters and a research center in Pittsburgh, Pennsylvania, is a global integrated producer of carbon compounds and treated wood products. Including its joint ventures, Koppers operates facilities in the United States, United Kingdom, Denmark, Australia and China. The stock of Koppers Holdings Inc. is publicly traded on the New York Stock Exchange under the symbol "KOP". For more information, visit us on the Web: www.koppers.com. Questions concerning investor relations should be directed to Brian H. McCurrie at 412 227 2153 or Michael W. Snyder at 412 227 2131.
Safe Harbor Statement
This news release may contain forward-looking statements based on management's current expectations, estimates and projections. All statements that address expectations or projections about the future, including statements about the company's strategy for growth, product development, market position, expected expenditures and financial results are forward- looking statements. Some of the forward-looking statements may be identified by words like "expects," "anticipates," "plans," "intends," "projects," "indicates," and similar expressions. These statements are not guarantees of future performance and involve a number of risks, uncertainties and assumptions. Many factors, including those discussed more fully elsewhere in this release and in documents filed with the Securities and Exchange Commission by Koppers, particularly its latest annual report on Form 10-K and quarterly report on Form 10-Q, as well as others, could cause results to differ materially from those stated. These factors include, but are not limited to, changes in the laws, regulations, policies and economic conditions, including inflation, interest and foreign currency exchange rates, of countries in which the Company does business; competitive pressures; the loss of one or more key customer or supplier relationships; customer insolvencies; successful integration of structural changes, including restructuring plans, acquisitions, divestitures and alliances; cost and availability of raw materials; and other economic, business, competitive, regulatory and/or operational factors affecting the business of Koppers generally.
Koppers Holdings Inc.
Consolidated Statement of Operations
(In millions except share and per share amounts)
Three Months Six Months
Ended Ended
June 30, June 30,
2007 2006 2007 2006
(Unaudited) (Unaudited)
Net sales $360.0 $297.9 $681.1 $562.5
Operating expenses:
Cost of sales 285.9 251.3 553.6 473.0
Depreciation and
amortization 8.2 8.2 16.5 16.0
Selling, general and
administrative 19.9 16.7 36.9 35.8
Total operating
expenses 314.0 276.2 607.0 524.8
Operating profit 46.0 21.7 74.1 37.7
Other income - 0.6 0.1 0.8
Income before interest
expense, income taxes
and minority interest 46.0 22.3 74.2 38.5
Interest expense 12.0 11.6 23.7 38.5
Income from operations
before income taxes and
minority interest 34.0 10.7 50.5 -
Income taxes 10.9 4.9 15.9 -
Minority interest 0.8 0.8 1.8 1.0
Net income (loss) $22.3 $5.0 $32.8 $(1.0)
Earnings (loss) per
common share:
Basic $1.08 $0.24 $1.58 $(0.06)
Diluted $1.07 $0.24 $1.57 $(0.06)
Weighted average shares
outstanding (in
thousands):
Basic 20,741 20,654 20,736 17,622
Diluted 20,865 20,821 20,854 17,622
Dividends declared per
common share $0.17 $0.17 $0.34 $0.96
Koppers Holdings Inc.
Condensed Consolidated Balance Sheet
(In millions except share and per share amounts)
June 30, December 31,
2007 2006
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $26.2 $24.4
Accounts receivable, net of $0.4 and $0.3 168.6 142.1
Inventories, net 182.7 156.4
Deferred tax benefit 15.1 15.1
Other current assets 9.4 11.5
Total current assets 402.0 349.5
Equity in non-consolidated investments 2.8 2.7
Property, plant and equipment, net 156.6 159.3
Goodwill 64.0 62.6
Deferred tax benefit 45.1 45.6
Other assets 28.7 29.7
Total assets $699.2 $649.4
Liabilities
Current liabilities:
Accounts payable $110.6 $100.5
Dividends payable 3.5 3.5
Accrued liabilities 69.7 63.6
Short-term debt and current portion
of long-term debt 22.2 19.6
Total current liabilities 206.0 187.2
Long-term debt 454.8 456.3
Other long-term liabilities 82.7 86.1
Total liabilities 743.5 729.6
Commitments and contingent liabilities
Minority interest 14.1 12.2
Stockholders' Deficit
Senior Convertible Preferred Stock,
$0.01 par value per share;
10,000,000 shares authorized;
0 shares issued - -
Common Stock, $0.01 par value per share;
40,000,000 shares authorized;
20,867,979 shares issued 0.2 0.2
Additional paid-in capital 122.9 122.4
Receivable from Director for purchase
of Common Stock (0.6) (0.6)
Retained deficit (180.9) (206.5)
Accumulated other comprehensive income (loss) 1.4 (6.5)
Treasury stock, at cost; 120,158 shares (1.4) (1.4)
Total stockholders' deficit (58.4) (92.4)
Total liabilities and
stockholders' deficit $699.2 $649.4
Segment Information
The following tables set forth certain sales and operating data, net of
all intersegment transactions, for the Company's businesses for the periods
indicated.
Three Months Six Months
Ended Ended
June 30, June 30,
2007 2006 2007 2006
(Dollars in millions)
Net sales:
Carbon Materials &
Chemicals $236.3 $183.8 $436.0 $339.0
Railroad & Utility
Products 123.7 114.1 245.1 223.5
Total $360.0 $297.9 $681.1 $562.5
Operating profit:
Carbon Materials &
Chemicals $33.9 $16.1 $49.6 $26.8
Railroad & Utility
Products 13.0 5.8 25.7 11.0
All Other (0.9) (0.2) (1.2) (0.1)
Total $46.0 $21.7 $74.1 $37.7
Adjusted operating
profit (1):
Carbon Materials &
Chemicals $33.9 $16.4 $49.6 $28.6
Railroad & Utility
Products 13.0 7.6 25.7 15.5
All Other (0.9) (0.2) (1.2) (0.1)
Total $46.0 $23.8 $74.1 $44.0
Adjusted operating margin:
Carbon Materials &
Chemicals 14.3% 8.9% 11.4% 8.4%
Railroad & Utility
Products 10.5% 6.7% 10.5% 6.9%
Total 12.8% 8.0% 10.9% 7.8%
(1) For the second quarter of 2006, excludes $1.5 million for Railroad &
Utility Products for the loss on sale of Alorton and $0.3 million for
restructuring and related charges associated with Railroad & Utility
Products plant closures and asset impairments; also excludes S,G&A of
$0.3 million for severance charges for Carbon Materials & Chemicals.
For the six months ended June 30, 2006, excludes $1.5 million for
Railroad & Utility Products for the loss on sale at Alorton, $1.0
million for restructuring and related charges associated with plant
closures and asset impairments for Railroad & Utility Products and
$0.2 million for Railroad & Utility Products for the Grenada judgment.
For the six months ended June 30, 2006, also excludes S,G&A of $1.5
million for each of Carbon Materials & Chemicals and Railroad &
Utility Products for the buyout of the Saratoga advisory services
contract, $0.4 million of severance charges for Railroad & Utility
Products and $0.3 million of severance charges for Carbon Materials &
Chemicals.
KOPPERS HOLDINGS INC.
RECONCILIATION OF NET INCOME AND ADJUSTED NET INCOME
(In millions)
Three Months Six Months
Ended Ended
June 30, June 30,
2007 2006 2007 2006
Net Income (loss) $22.3 $5.0 $32.8 $(1.0)
Charges impacting pre-
tax income (1)
Plant closings and
restructuring - 0.6 - 1.6
Grenada judgment - - - 0.2
Saratoga advisory services
contract buyout - - - 3.0
Call premium on bonds - - - 10.1
Bond consent fees and
deferred financing
write-off - - - 4.3
Loss on sale of Alorton - 1.5 - 1.5
Total charges above
impacting pre-tax
income 22.3 2.1 32.8 20.7
Charges impacting net
income, net of tax
benefit at 39% - 1.3 - 12.7
Impact on minority
interest - - - -
Adjusted net income $22.3 $6.3 $32.8 $11.7
(1) Cost of sales for the second quarter of 2006 includes $1.5 million for
the loss on sale of Alorton and $0.3 million for restructuring and
related charges associated with plant closures and asset impairments.
S,G&A for the three months ended June 30, 2006 includes $0.3 million
for severance charges. Cost of sales for the six months ended June
30, 2006 includes $1.5 million for the loss on sale at Alorton, $1.0
million for restructuring and related charges associated with plant
closures and asset impairments and $0.2 million for the Grenada
judgment. S,G&A for the six months ended June 30, 2006 includes $3.0
million for the buyout of the Saratoga advisory services contract and
$0.6 million for severance charges. Interest expense for the six
months ended June 30, 2006 includes $10.1 million for call premium,
$1.1 million for bond consent fees and $3.2 million for write-off of
deferred financing costs.
KOPPERS HOLDINGS INC.
RECONCILIATION OF BASIC EARNINGS PER SHARE AND ADJUSTED BASIC EARNINGS PER
SHARE
(In millions except share amounts)
Three Months Six Months
Ended Ended
June 30, June 30,
2007 2006 2007 2006
Net Income (loss) $22.3 $5.0 $32.8 $(1.0)
Adjusted net income
(from above) $22.3 $6.3 $32.8 $11.7
Denominator for basic
earnings per share
(000s) 20,741 20,654 20,736 17,622
Denominator for adjusted
basic earnings per share
(000s)(1) 20,741 20,643 20,736 20,643
Earnings (loss) per
share:
Basic earnings (loss)
per share $1.08 $0.24 $1.58 $(0.06)
Adjusted basic earnings
per share $1.08 $0.31 $1.58 $0.56
(1) Shares for 2007 are based upon weighted-average shares outstanding,
while shares for 2006 are based upon actual shares outstanding at June
30, 2006.
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(In millions)
Three Months Six Months
Ended Ended
June 30, June 30,
2007 2006 2007 2006
Net Income $22.3 $5.0 $32.8 $(1.0)
Interest expense 12.0 11.6 23.7 38.5
Depreciation and
amortization 8.2 8.2 16.5 16.0
Income tax provision 10.9 4.9 15.9 0.0
EBITDA 53.4 29.7 88.9 53.5
Minority interest 0.8 0.8 1.8 1.0
EBITDA with minority
interest 54.2 30.5 90.7 54.5
Unusual items impacting
net income (1)
Plant closings and
restructuring - 0.6 - 1.6
Grenada judgment - - - 0.2
Saratoga advisory
services contract buyout - - - 3.0
Loss on sale of Alorton - 1.5 - 1.5
Adjusted EBITDA with
minority interest $54.2 $32.6 $90.7 $60.8
(1) Cost of sales for the second quarter of 2006 includes $1.5 million for
the loss on sale of Alorton and $0.3 million for restructuring and
related charges associated with plant closures and asset impairments.
S,G&A for the second quarter of 2006 includes $0.3 million for
severance charges. Cost of sales for the six months ended June 30,
2006 includes $1.5 million for the loss on sale at Alorton, $1.0
million for restructuring and related charges associated with plant
closures and asset impairments and $0.2 million for the Grenada
judgment. S,G&A for the six months ended June 30, 2006 includes
$3.0 million for the buyout of the Saratoga advisory services contract
and $0.6 million for severance charges.
Koppers believes that adjusted net income and adjusted EBITDA provide
information useful to investors in understanding the underlying
operational performance of the company, its business and performance
trends and facilitates comparisons between periods and with other
corporations in similar industries. The exclusion of certain items permits
evaluation and a comparison of results for ongoing business operations,
and it is on this basis that Koppers management internally assesses the
company's performance.
Although Koppers believes that these non-GAAP financial measures enhance
investors' understanding of its business and performance, these non-GAAP
financial measures should not be considered an alternative to GAAP basis
financial measures.
SOURCE Koppers Holdings Inc.
Brian H. McCurrie, Vice President and Chief Financial Officer, Koppers Holdings Inc., +1-412-227-2153, McCurrieBH@koppers.comhttp://www.koppers.com