UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter)
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 7.01 Regulation FD Disclosure.
On November 19, 2020 we issued a press release announcing our regularly scheduled monthly business update. A copy of the press release is included in this Current Report on Form 8-K as Exhibit 99.1 and is furnished herewith.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits. The following exhibit is furnished herewith:
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99.1 |
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Press Release dated November 19, 2020
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: November 19, 2020
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KOPPERS HOLDINGS INC. |
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By: |
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/s/ Michael J. Zugay |
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Michael J. Zugay |
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Chief Financial Officer |
Exhibit 99.1
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Koppers Holdings Inc. 436 Seventh Avenue |
News Release
FOR IMMEDIATE RELEASE
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For Information: |
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Michael J. Zugay, Chief Financial Officer |
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412 227 2231 |
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ZugayMJ@koppers.com
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Koppers Holdings Inc. Provides October 2020 Business Update; Reaffirms 2020 Outlook
PITTSBURGH, November 19, 2020 – Koppers Holdings Inc. (NYSE: KOP), an integrated global provider of treated wood products, wood treatment chemicals and carbon compounds, today provided its monthly business update as part of the company’s ongoing communications to the investment community.
October Sales by Business Segment
For October 2020, consolidated sales were $135.2 million compared to $141.0 million in the prior year period, representing a decrease of $5.8 million, or 4.1 percent, which were consistent with the company’s expectations. Compared to prior year, the decrease was driven by lower contributions from Carbon Materials and Chemicals (CMC), while Railroad and Utility Products and Services (RUPS) reported sales at similar levels as prior year and Performance Chemicals (PC) continued to see strong demand for residential wood treatment preservatives in most geographic regions.
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Sales for RUPS of $60.3 million increased by $0.3 million, compared to sales of $60.0 million in the prior year month. Crosstie treating volumes were higher than prior year, consistent with the trend for most of 2020. The maintenance-of-way businesses benefited from increased projects in bridge repair and engineering, and saw improved demand for crosstie disposal services, partially offset by continued weakness in rail joints. The utility pole business in Australia and the U.S., on a combined basis, reported slightly lower year-over-year volumes due to normal month-to-month fluctuations. |
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Sales for CMC of $27.9 million decreased by $10.9 million, or 28.1 percent, compared to sales of $38.8 million in the prior year month. The year-over-year decline was driven by the timing of sales between periods and lower average pricing associated with ongoing weakness in industrial production markets, such as aluminum, steel, energy and construction. In 2020, Koppers (Jiangsu) Carbon Chemical Company Limited (KJCC) results are classified as discontinued operations for the current year, as well as the comparable period in 2019 due to its divestiture. |
President and CEO Leroy Ball said, “There were no surprises in October as we were able to maintain consistent production levels and continue to serve our essential customer base. The positive trends that we experienced in the third quarter have thus far carried into the early part of the fourth quarter, and are expected to persist for the remainder of the year.”
2020 Outlook
Koppers continues to expect 2020 sales to be approximately $1.6 billion, compared with sales of $1.65 billion (excluding KJCC) in 2019. The company anticipates that adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in 2020 will be in the range of $204 million to $210 million, compared with $201.1 million in the prior year. Adjusted earnings per share (EPS) is projected to be in the range of $3.65 to $3.90 in 2020, compared with $3.18 in the prior year.
Capital expenditures for October 2020 were $10.2 million, compared with $3.7 million in October 2019. For the year-to-date period ended October 31, 2020, capital expenditures were $53.9 million compared with $30.6 million for the prior year period. Koppers is now on track to invest $60 million to $70 million in capital expenditures in 2020, compared with a prior forecast of $55 million to $60 million. The capital spending is primarily related to improving the safety and reliability of its existing infrastructure as well as a major treating expansion project.
Koppers continues to anticipate approximately $125 million of debt reduction in 2020. Based upon current adjusted EBITDA and debt reduction estimates, net leverage is projected to be at 3.5 to 3.6 at December 31, 2020, compared with 4.3 at December 31, 2019.
Mr. Ball commented on the outlook, “I remain comfortable with achieving our current earnings guidance for the year which would represent our highest recorded annual adjusted earnings per share. Our capital investment projections have increased for this year primarily due to the timing of spending on our North Little Rock treating plant expansion, but we still expect to achieve our debt reduction targets due to stronger cash flow and better working capital management.”
Koppers does not provide reconciliations of guidance for adjusted EBITDA, adjusted EPS, net debt or net leverage ratio to comparable GAAP measures, in reliance on the unreasonable efforts exception. Koppers is unable, without unreasonable efforts, to forecast certain items required to develop meaningful comparable GAAP financial measures. These items include restructuring, impairment, non-cash LIFO charges, acquisition-related costs, and non-cash mark-to-market commodity hedging that are difficult to predict in advance in order to include in a GAAP estimate and may be significant.
Monthly Business Update
As previously announced, Koppers will report monthly sales by business segment for October 2020 and November 2020 via a press release without an accompanying conference call. For the remaining month in 2020, the company plans to provide details of its November 2020 sales on December 17, 2020.
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About Koppers
Koppers, with corporate headquarters in Pittsburgh, Pennsylvania, is an integrated global provider of treated wood products, wood treatment chemicals and carbon compounds. Our products and services are used in a variety of niche applications in a diverse range of end-markets, including the railroad, specialty chemical, utility, residential lumber, agriculture, aluminum, steel, rubber, and construction industries. We serve our customers through a comprehensive global manufacturing and distribution network, with facilities located in North America, South America, Australasia and Europe. 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 Michael Zugay at 412-227-2231 or Quynh McGuire at 412-227-2049.
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This press release contains certain non-GAAP financial measures. Koppers believes that adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share, net debt and net leverage ratio provide information useful to investors in understanding the underlying operational performance of the company, its business and performance trends, and facilitate 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. In addition, the Board of Directors and executive management team use adjusted EBITDA as a performance measure under the company’s annual incentive plans.
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 and should be read in conjunction with the relevant GAAP financial measure. Other companies in a similar industry may define or calculate these measures differently than the company, 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.
See the attached tables for the following reconciliations of non-GAAP financial measures included in this press release: Unaudited Reconciliation of Net Income to EBITDA and Adjusted EBITDA; Unaudited Reconciliation of Net Income Attributable to Koppers and Adjusted Net Income; Unaudited Reconciliation of Diluted Earnings Per Share and Adjusted Earnings Per Share; and Unaudited Reconciliation of Total Debt to Net Debt and Net Leverage Ratio.
Safe Harbor Statement
Certain statements in this press release are “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 resulting 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 “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 other press releases, written statements or other 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 expectations with respect to sales, earnings, cash flows, operating efficiencies, restructurings, the benefits of acquisitions, divestitures, joint ventures 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; existing and future adverse effects as a result of the coronavirus (COVID-19) pandemic; disruption in the U.S. and global financial markets; potential difficulties in protecting our intellectual property; the ratings on our debt and our ability to repay or refinance our outstanding indebtedness as it matures; our ability to operate within the limitations of our debt covenants; potential impairment of our goodwill and/or long-lived assets; demand for Koppers goods and services; competitive conditions; interest rate and foreign currency rate fluctuations; availability and costs of key raw materials; unfavorable resolution of claims against us, as well as those discussed more fully elsewhere in this release and in documents filed with the Securities and Exchange Commission by Koppers, particularly our latest annual report on Form 10-K and any subsequent filings by Koppers with the Securities and Exchange Commission. Any forward-looking statements in this release speak only as of the date of this release, 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.
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UNAUDITED RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA
(In millions)
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Year Ended |
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December 31, 2019 |
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Net income |
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$ |
67.4 |
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Interest expense |
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61.9 |
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Depreciation and amortization |
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51.4 |
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Depreciation in impairment and restructuring charges |
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3.2 |
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Loss from discontinued operations |
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(3.7 |
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EBITDA |
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180.2 |
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Unusual items impacting net income |
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Impairment, restructuring and plant closure costs |
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20.4 |
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Non-cash LIFO benefit |
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4.5 |
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Mark-to-market commodity hedging |
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(4.0 |
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Total adjustments |
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20.9 |
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Adjusted EBITDA |
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$ |
201.1 |
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UNAUDITED RECONCILIATION OF NET INCOME ATTRIBUTABLE TO KOPPERS AND ADJUSTED NET INCOME
(In millions)
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Year Ended |
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December 31, 2019 |
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Net income attributable to Koppers |
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$ |
66.6 |
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Unusual items impacting net income |
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Impairment, restructuring and plant closure costs |
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25.3 |
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Non-cash LIFO expense |
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4.5 |
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Mark-to-market commodity hedging |
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(4.0 |
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Total adjustments |
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25.8 |
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Adjustments to income tax and noncontrolling interests |
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Income tax on adjustments to pre-tax income |
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(22.7 |
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Noncontrolling interests |
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0.8 |
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Effect on adjusted net income |
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3.9 |
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Adjusted net income including discontinued operations |
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70.5 |
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Loss from discontinued operations |
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(3.7 |
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Adjusted net income attributable to Koppers |
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$ |
66.8 |
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UNAUDITED RECONCILIATION OF DILUTED EARNINGS PER SHARE AND
ADJUSTED EARNINGS PER SHARE
(In millions except share amounts)
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Year Ended |
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December 31, 2019 |
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Net income attributable to Koppers |
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$ |
66.6 |
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Adjusted net income attributable to Koppers |
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$ |
66.8 |
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Denominator for diluted earnings per share (in thousands) |
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21,068 |
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Earnings per share: |
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Diluted earnings per share |
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$ |
3.16 |
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Adjusted earnings per share |
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$ |
3.18 |
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UNAUDITED RECONCILIATION OF TOTAL DEBT TO NET DEBT AND NET LEVERAGE RATIO
(In millions)
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Twelve months ended |
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December 31, 2019 |
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Total Debt |
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$ |
901.2 |
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Less: Cash |
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32.3 |
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Net Debt |
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$ |
868.9 |
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Adjusted EBITDA |
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$ |
201.1 |
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Net Leverage Ratio |
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4.3 |
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5