UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
Commission file number
(Exact name of registrant as specified in its charter)
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(State of incorporation) |
(IRS Employer Identification No.) |
(Address of principal executive offices)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act.
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
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 pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Common Stock, par value $0.01 per share, outstanding at July 29, 2022 amounted to
1
PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KOPPERS HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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(Dollars in millions, except per share amounts) |
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(Unaudited) |
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(Unaudited) |
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(Unaudited) |
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Net sales |
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$ |
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$ |
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$ |
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$ |
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Cost of sales |
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Depreciation and amortization |
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(Gain) on sale of assets |
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( |
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( |
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Impairment and restructuring charges |
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Selling, general and administrative expenses |
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Operating profit |
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Other income, net |
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Interest expense |
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Income from continuing operations before income taxes |
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Income tax provision |
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Income from continuing operations |
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(Gain) loss on sale of discontinued operations, net of tax (expense) benefit of $ |
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Net income |
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Net loss attributable to noncontrolling interests |
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Net income attributable to Koppers |
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$ |
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$ |
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$ |
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$ |
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Earnings (loss) per common share attributable to Koppers common shareholders: |
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Basic - |
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Continuing operations |
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$ |
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$ |
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$ |
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$ |
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Discontinued operations |
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( |
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Earnings per basic common share |
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$ |
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$ |
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$ |
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$ |
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Diluted - |
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Continuing operations |
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$ |
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$ |
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$ |
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$ |
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Discontinued operations |
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( |
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Earnings per diluted common share |
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$ |
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$ |
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$ |
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$ |
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Comprehensive (loss) income |
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$ |
( |
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$ |
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$ |
( |
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$ |
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Comprehensive loss attributable to noncontrolling interests |
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( |
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( |
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Comprehensive (loss) income attributable to Koppers |
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$ |
( |
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$ |
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$ |
( |
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$ |
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Weighted average shares outstanding (in thousands): |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
KOPPERS HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEET
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June 30, 2022 |
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December 31, 2021 |
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(Dollars in millions, except per share amounts) |
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(Unaudited) |
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Assets |
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Cash and cash equivalents, including restricted cash (Note 4) |
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$ |
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$ |
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Accounts receivable, net of allowance of $ |
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Inventories, net |
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Derivative contracts |
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Other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Operating lease right-of-use assets |
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Goodwill |
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Intangible assets, net |
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Deferred tax assets |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Current operating lease liabilities |
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Current maturities of long-term debt |
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Total current liabilities |
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Long-term debt |
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Accrued postretirement benefits |
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Deferred tax liabilities |
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Operating lease liabilities |
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Other long-term liabilities |
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Total liabilities |
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Commitments and contingent liabilities (Note 18) |
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Equity |
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Senior Convertible Preferred Stock, $ shares authorized; |
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Common Stock, $ |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive loss |
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Treasury stock, at cost, |
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( |
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Total Koppers shareholders’ equity |
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Noncontrolling interests |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
KOPPERS HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
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Six Months Ended June 30, |
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2022 |
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2021 |
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(Dollars in millions) |
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(Unaudited) |
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(Unaudited) |
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Cash provided by (used in) operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net cash used in operating activities: |
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Depreciation and amortization |
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Stock-based compensation |
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Change in derivative contracts |
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Non-cash interest expense |
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(Gain) on sale of assets |
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( |
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( |
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Insurance proceeds |
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Deferred income taxes |
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Change in other liabilities |
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Other - net |
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Changes in working capital: |
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Accounts receivable |
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( |
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( |
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Inventories |
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( |
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Accounts payable |
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Accrued liabilities |
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( |
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( |
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Other working capital |
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( |
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Net cash provided by operating activities |
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Cash (used in) provided by investing activities: |
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Capital expenditures |
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Insurance proceeds received |
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Cash provided by sale of assets |
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Net cash used in investing activities |
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( |
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Cash provided by (used in) financing activities: |
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Net increase in credit facility borrowings |
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Repayments of long-term debt |
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( |
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( |
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Issuances of Common Stock |
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Repurchases of Common Stock |
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( |
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( |
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Payment of debt issuance costs |
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( |
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Dividends paid |
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Net cash provided by financing activities |
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Effect of exchange rate changes on cash |
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( |
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( |
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Net (decrease) increase in cash and cash equivalents |
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( |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Cash paid for amounts included in the measurement of lease liabilities: |
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Operating cash outflow from operating leases |
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$ |
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$ |
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Supplemental disclosure of non-cash investing and financing activities: |
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Right-of-use assets obtained in exchange for new operating lease liabilities |
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$ |
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$ |
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Supplemental disclosure of cash flow information: |
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Non-cash investing activities |
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Accrued capital expenditures |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
KOPPERS HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements and related disclosures have been prepared in accordance with accounting principles generally accepted in the United States applicable to interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of Koppers Holdings Inc.’s and its subsidiaries’ (“Koppers”, “Koppers Holdings”, the “Company”, “we” or “us”) financial position and interim results as of and for the periods presented have been included. All such adjustments are of a normal recurring nature unless disclosed otherwise. Because our business is seasonal, results for interim periods are not necessarily indicative of those that may be expected for a full year. The Condensed Consolidated Balance Sheet as of December 31, 2021 has been summarized from the audited balance sheet contained in the Annual Report on Form 10-K as of and for the year ended December 31, 2021. Certain prior period amounts in the condensed consolidated financial statements and notes to the condensed consolidated financial statements have been reclassified to conform to the current period’s presentation.
The financial information included herein should be read in conjunction with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2021.
2. New Accounting Pronouncements
In March 2022, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2022-01, “Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method.” This ASU amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in financial statements. ASU No. 2022-01 is effective for periods beginning after December 15, 2022, and earlier adoption is permitted. We are currently in the process of reviewing the effect of this ASU on our financial statements.
3. Plant Closures and Divestitures
We have restructured 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. The recent restructuring activities which had an impact on our reported results include:
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In February 2021, we sold our closed Follansbee, West Virginia coal tar distillation facility and we recorded a gain on sale of $ |
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In September 2020, we sold Koppers (Jiangsu) Carbon Chemical Company Limited (“KJCC”). Refer to Note 4 – “Discontinued Operations” for more details. |
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In October 2018, we sold our closed 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 $
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Other closure and divestiture activity relates to our Railroad and Utility Products and Services (“RUPS”) segment, including:
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In January 2022, we began curtailing operations at our utility pole treating facility in Sweetwater, Tennessee. We sold the facility in March 2022 and recorded a gain on sale of $ |
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In October 2021, we sold our closed Denver, Colorado crosstie treating facility and recorded a gain on sale of $ |
5
4. Discontinued Operations
On September 30, 2020, we sold KJCC to Fangda Carbon New Material Co., Ltd and C-Chem Co., Ltd., a subsidiary of Nippon Steel Chemical & Material Co., Ltd. (the “Buyers”). KJCC was located in Pizhou, Jiangsu Province, China and was a
The sale of KJCC represented a strategic shift that had a major effect on our operations and accordingly is classified as discontinued operations in our condensed consolidated financial statements and notes.
5. Fair Value Measurements
Carrying amounts and the related estimated fair values of our financial instruments as of June 30, 2022 and December 31, 2021 are as follows:
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June 30, 2022 |
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December 31, 2021 |
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Fair Value |
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Carrying Value |
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Fair Value |
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Carrying Value |
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(Dollars in millions) |
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Financial assets: |
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Investments and other assets |
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$ |
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$ |
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$ |
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$ |
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Financial liabilities: |
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Long-term debt (including current portion) |
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$ |
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$ |
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$ |
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$ |
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Investments and other assets – Represents the broker-quoted cash surrender value on universal life insurance policies. This asset is classified as Level 2 in the valuation hierarchy and is measured from values received from financial institutions.
Debt – The fair value of our long-term debt is estimated based on the market prices for the same or similar issuances or on the current rates offered to us for debt of the same remaining maturities (Level 2). The fair value of our Credit Facility approximates carrying value due to the variable rate nature of this instrument.
6. Comprehensive (Loss) Income and Equity
Total comprehensive (loss) income for the three and six months ended June 30, 2022 and 2021 is summarized in the table below:
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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(Dollars in millions) |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Changes in other comprehensive (loss) income: |
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Currency translation adjustment |
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( |
) |
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( |
) |
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( |
) |
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Unrealized (loss) gain on cash flow hedges, net of tax benefit (expense) of $ |
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( |
) |
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( |
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Unrecognized pension net loss, net of tax expense of $ |
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Total comprehensive (loss) income |
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( |
) |
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( |
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Comprehensive loss attributable to noncontrolling interests |
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( |
) |
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( |
) |
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( |
) |
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Comprehensive (loss) income attributable to Koppers |
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$ |
( |
) |
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$ |
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$ |
( |
) |
|
$ |
|
|
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 of $
6
The following tables present the change in equity for the three months ended June 30, 2022 and 2021, respectively:
|
(Dollars in millions) |
|
Common Stock |
|
|
Additional Paid-In Capital |
|
|
Retained Earnings |
|
|
Accumulated Other Comprehensive Loss |
|
|
Treasury Stock |
|
|
Noncontrolling Interests |
|
|
Total Equity |
|
|||||||
|
Balance at March 31, 2022 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Issuance of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchases of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
|