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What changed in Koppers Holdings Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Koppers Holdings Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+271 added−343 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-27)

Top changes in Koppers Holdings Inc.'s 2023 10-K

271 paragraphs added · 343 removed · 210 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

49 edited+6 added−7 removed45 unchanged
Biggest changeOur employee resource groups, LINKWomen, which was launched in 2018, and LINKParents, which was launched in 2021, provide an important development forum for employees and serve as a model for future initiatives. 9 Koppers Holdings Inc. 2022 Annual Report Governance We believe our corporate governance structure is designed to assure accountability to our stakeholders and to make certain that we conduct business in a responsible, ethical way.
Biggest changeGovernance We believe our corporate governance structure is designed to assure accountability to our stakeholders and to make certain that we conduct business in a responsible, ethical way. We maintain a comprehensive Code of Conduct that details the expectations and requirements we have as an organization for our employees.
We believe our North American utility pole business is the second largest producer of utility poles in the United States, and we believe our Australian utility pole business is the largest producer of utility poles in Australia. Utility poles are produced mainly from pine species in the United States and the eucalyptus species in Australia.
We believe our North American utility pole business is the second largest producer of utility poles in the United States, and we believe our Australian utility pole business is the largest producer of utility poles in Australia. Utility poles are produced mainly from pine species in the United States and eucalyptus species in Australia.
We believe another competitive advantage is provided by our strategic sourcing group, which procures scrap copper and other raw materials, such as chromic acid, tebuconazole, arsenic trioxide, colorants, dispersants and various biocides and co-biocides through the global market. 5 Koppers Holdings Inc. 2022 Annual Report Carbon Materials and Chemicals Our CMC business manufactures its primary products and sells them directly to our global customer base under long-term contracts or through purchase orders negotiated by our regional sales personnel and coordinated through our regional marketing groups.
We believe another competitive advantage is provided by our strategic sourcing group, which procures scrap copper and other raw materials, such as chromic acid, tebuconazole, arsenic trioxide, colorants, dispersants and various biocides and co-biocides through the global market. 5 Koppers Holdings Inc. 2023 Annual Report Carbon Materials and Chemicals Our CMC business manufactures its primary products and sells them directly to our global customer base under long-term contracts or through purchase orders negotiated by our regional sales personnel and coordinated through our regional marketing groups.
Risk Factors – Risks Related to Our Business – Demand for our products is cyclical and we may experience prolonged depressed market conditions for our products.” Non-U.S. Operations Koppers has a significant investment in non-U.S. operations.
Risk Factors – Risks Related to Our Business – Demand for our products is cyclical and we may experience prolonged depressed market conditions for our products. Non-U.S. Operations Koppers has a significant investment in non-U.S. operations.
Our RUPS business manufactures its primary products and sells them directly to our customers through long-term contracts and purchase orders negotiated by our regional sales personnel and coordinated through our marketing group at corporate headquarters. 4 Koppers Holdings Inc. 2022 Annual Report Hardwoods, such as oak and other species, are the major raw materials in wood crossties.
Our RUPS business manufactures its primary products and sells them directly to our customers through long-term contracts and purchase orders negotiated by our regional sales personnel and coordinated through our marketing group at corporate headquarters. 4 Koppers Holdings Inc. 2023 Annual Report Hardwoods, such as oak and other species, are the major raw materials in wood crossties.
Key to this effort is delivering a consistent onboarding experience, as well as communications and safety training in all of our facilities across the globe. 7 Koppers Holdings Inc. 2022 Annual Report Talent Attraction and Retention Our talented employees are a critical element to make our business successful, so it is essential that we position them for success.
Key to this effort is delivering a consistent onboarding experience, as well as communications and safety training in all of our facilities across the globe. 7 Koppers Holdings Inc. 2023 Annual Report Talent Attraction and Retention Our talented employees are a critical element to make our business successful, so it is essential that we position them for success.
For our U.S.-based employees, we also offer four weeks of paid time-off for mothers and fathers who have a birth or adoption as part of our parental bonding leave program. Additionally, we offer work schedule flexibility including the opportunity to work remotely when conditions allow. We work with a Zero Harm approach to every employee’s health and safety.
For our U.S.-based employees, we also offer four weeks of paid time-off for mothers and fathers who have a birth, adoption or foster children as part of our parental bonding leave program. Additionally, we offer work schedule flexibility including the opportunity to work remotely when conditions allow. We work with a Zero Harm approach to every employee’s health and safety.
Hardwood prices, which account for approximately 73 percent of a finished crosstie’s cost, fluctuate with the demand from other hardwood lumber markets, such as oak flooring, pallets and other specialty lumber products. Weather conditions can be a factor in the supply of raw material, as unusually wet or inclement conditions may make it difficult to harvest timber.
Hardwood prices, which account for approximately 70 percent of a finished crosstie’s cost, fluctuate with the demand from other hardwood lumber markets, such as oak flooring, pallets and other specialty lumber products. Weather conditions can be a factor in the supply of raw material, as unusually wet or inclement conditions may make it difficult to harvest timber.
The program gives our employees the opportunity to buy shares at a discount through payroll deductions during defined quarterly offering periods. 8 Koppers Holdings Inc. 2022 Annual Report Health and Safety We believe a robust wellness program that encourages employee participation is key to promoting healthy lifestyles and decision-making.
The program gives our employees the opportunity to buy shares at a discount through payroll deductions during defined quarterly offering periods. 8 Koppers Holdings Inc. 2023 Annual Report Health and Safety We believe a robust wellness program that encourages employee participation is key to promoting healthy lifestyles and decision-making.
Our RUPS business carries significant amounts of untreated crosstie inventory, which typically requires air-seasoning for a period of six- to nine-months. 6 Koppers Holdings Inc. 2022 Annual Report Seasonality Demand for residential, commercial, and agricultural treated lumber may decline during winter months due to weather conditions.
Our RUPS business carries significant amounts of untreated crosstie inventory, which typically requires air-seasoning for a period of six to nine months. 6 Koppers Holdings Inc. 2023 Annual Report Seasonality Demand for residential, commercial, and agricultural treated lumber may decline during winter months due to weather conditions.
Therefore, we are subject to certain risks that are inherent to foreign operations, including complying with applicable laws relating to foreign practices, the laws of foreign countries in which we operate, political and economic conditions in international markets, the imposition of tariffs and fluctuations in foreign exchange rates. See also “Item 1A.
Therefore, we are subject to certain risks that are inherent to foreign operations, including complying with applicable laws relating to foreign practices, the laws of foreign countries in which we operate, political and economic conditions in international markets, the imposition of tariffs and fluctuations in foreign exchange rates. See also Item 1A.
In addition, we have businesses which have product life cycle management capabilities to help solve our customers’ challenge of responsibly disposing of end-of-life crossties and utility poles by repurposing used wood products, including as a fuel source. This reduces the end-of-life impact of our ties and poles, contributing to greater product sustainability.
In addition, we have businesses which have product life cycle management capabilities to help solve our customers’ challenge of responsibly disposing of end-of-life crossties by repurposing used wood products, including as a fuel source. This reduces the end-of-life impact of our ties, contributing to greater product sustainability.
Historically, our operating results have been significantly lower in the first and fourth calendar quarters as compared to the second and third calendar quarters. Segment Information Please see “Note 9 – Segment Information,” under Item 8 of this Form 10-K for financial information relating to business segments and geographic areas. See also “Item 1A.
Historically, our operating results have been significantly lower in the first and fourth calendar quarters as compared to the second and third calendar quarters. Segment Information Please see Note 9 – Segment Information, under Item 8 of this Form 10-K for financial information relating to business segments and geographic areas. See also Item 1A.
Environmental The circular nature of our business starts with our raw materials, the majority of which are by-products generated by other industries (including scrap copper and coal tar) and renewable resources (trees). We purchase approximately 32 million pounds of scrap copper per year which is postconsumer or post-industrial in nature.
Environmental The circular nature of our business starts with our raw materials, the majority of which are by-products generated by other industries (including scrap copper and coal tar) and renewable resources (trees). We purchase approximately 37 million pounds of scrap copper per year which is post-consumer or post-industrial in nature.
Our wellness screening program for our U.S.-based employees provides employees the opportunity to learn more about their health and daily routines. As part of this program, employees can earn financial incentives for completing a variety of wellness initiatives.
Our wellness screening program for our U.S.-based employees provides employees the opportunity to learn more about their health and daily routines. As part of this program, employees can earn financial incentives and non-monetary rewards for completing a variety of wellness and nutritional initiatives.
Business Segments and Products We operate three principal business segments: Railroad and Utility Products and Services (“RUPS”), Performance Chemicals (“PC”) and Carbon Materials and Chemicals (“CMC”). We believe our three business segments command leading market positions. Through our RUPS business, we believe that we are the largest supplier of railroad crossties to the Class I railroads in North America.
Business Segments and Products We operate three principal business segments: Railroad and Utility Products and Services (RUPS), Performance Chemicals (PC) and Carbon Materials and Chemicals (CMC). We believe our three business segments command leading market positions. Through our RUPS business, we believe that we are the largest supplier of railroad crossties to the Class I railroads in North America.
Our recent filings on Forms 10-K, 10-Q and 8-K and any amendments to those documents can be accessed without charge on our website under Investor Relations – Financials & Filings – SEC Filings as soon as reasonably practicable after such filings are made with the Securities and Exchange Commission.
Our recent filings on Forms 10-K, 10-Q and 8-K and any amendments to those documents can be accessed without charge on our website under Investor Relations – Financials & Filings – SEC Filings or from the Securities and Exchange Commission at its website, www.sec.com , as soon as reasonably practicable after such filings are made with the Securities and Exchange Commission.
Our RUPS business’ largest customer base is the North American Class I railroad market, which buys approximately 78 percent of all crossties produced in the United States and Canada. Approximately 74 percent of our North American RUPS sales are under long-term contracts and we currently supply all North American Class I railroads.
Our RUPS business’ largest customer base is the North American Class I railroad market, which buys approximately 80 percent of all crossties produced in the United States and Canada. Approximately 75 percent of our North American Railroad Products and Services sales are under long-term contracts, and we currently supply all North American Class I railroads.
We believe this places Koppers in the center of what is known as the “circular economy” that emphasizes the “reduce, reuse, recycle” mentality that continues to frame global conservation efforts. Our wood-treatment solutions, while supporting an important role in our global infrastructure across multiple industries, also support an important role in the carbon cycle.
We believe this places Koppers in the center of what is known as the circular economy that emphasizes the reduce, reuse, recycle mentality that continues to frame global conservation efforts. Our wood-treatment solutions, while supporting an important role in our global infrastructure across multiple industries, also support an important role in the carbon cycle.
A portion of the chromated copper arsenate we produce in North America and Australia is sold internally to our RUPS business for treating poles and pilings.
A portion of the CCA and DCOI we produce in North America and a portion of the CCA we produce in Australia is sold internally to our RUPS business for treating poles and pilings.
We believe that being vertically integrated in copper manufacturing provides PC with an important competitive advantage and also provides our customers with the security of a supply of copper-based wood preservatives.
We utilize swap contracts to hedge our exposure to copper prices. We believe that being vertically integrated in copper manufacturing provides PC with an important competitive advantage and also provides our customers with the security of a supply of copper-based wood preservatives.
The labor contracts at three of our facilities covering approximately 126 employees are scheduled to expire during 2023. Human Capital Management Our ability to positively affect our communities starts with investing in our people. We put the health, safety and well-being of our employees at the forefront of everything we do as part of our Zero Harm culture.
The labor contract at one of our facilities covering 59 employees is scheduled to expire during 2024. Human Capital Management Our ability to positively affect our communities starts with investing in our people. We put the health, safety and well-being of our employees at the forefront of everything we do as part of our Zero Harm culture.
Trademarks relating to our PC business, such as “MicroPro®”, “FlamePro®”, “Protim” and “Solignum” are important in this segment of our business, and as long as we continue to use the name “Koppers” and the trademarks associated with our wood preservation business and comply with applicable registration requirements, our right to use the name “Koppers” and the other trademarks should continue without expiration.
Trademarks relating to our PC business, such as MicroPro®, FlamePro®, Protim and Solignum are important in this segment of our business, and as long as we continue to use the name Koppers and the trademarks associated with our wood preservation business and comply with applicable registration requirements, our right to use the name Koppers and the other trademarks should continue without expiration.
Among its duties and responsibilities, the Board oversees management’s direction of the legal, ethical and socially responsible behavior of the company, such as developing effective performance measurement systems, reviewing the company's long-term strategy and overseeing risk management processes.
There are five board committees, including: Audit; Nominating and Corporate Governance; Management Development and Compensation; Strategy and Risk; and Sustainability. Among its duties and responsibilities, the board oversees management’s direction of the legal, ethical and socially responsible behavior of the company, such as developing effective performance measurement systems, reviewing the company's long-term strategy and overseeing risk management processes.
Risk Factors – Risks Related to Our Business – We are subject to risks inherent in foreign operations, including additional legal regulation, changes in social, political and economic conditions.” Environmental Matters Our operations and properties are subject to extensive federal, state, local and foreign environmental laws and regulations relating to protection of the environment and human health and safety, including those concerning the treatment, storage and disposal of wastes, the investigation and remediation of contaminated soil and groundwater, the discharge of effluents into waterways, the emission of substances into the air, as well as various health and safety matters.
Environmental Matters Our operations and properties are subject to extensive federal, state, local, and foreign environmental laws and regulations relating to protection of the environment and human health and safety, including those concerning the treatment, storage and disposal of wastes, the investigation and remediation of contaminated soil and groundwater, the discharge of effluents into waterways, the emission of substances into the air, as well as various health and safety matters.
B USINESS General In this report, unless otherwise noted or the context otherwise requires, (i) the term “Koppers”, “Koppers Holdings”, the “Company”, “we” or “us” refers to Koppers Holdings Inc. and its consolidated subsidiaries, (ii) the term “KH” refers to Koppers Holdings Inc. and not any of its subsidiaries and (iii) the term “KI” refers to Koppers Inc. and not any of its subsidiaries.
B USINESS General In this report, unless otherwise noted or the context otherwise requires, (i) the term Koppers, Koppers Holdings, the Company, we or us refers to Koppers Holdings Inc. and its consolidated subsidiaries, (ii) the term KH refers to Koppers Holdings Inc. and not any of its subsidiaries and (iii) the term KI refers to Koppers Inc. and not any of its subsidiaries.
Management provides direction through its Leadership Council, chaired by the CEO. Our Sustainability Steering Committee provides guidance on goals and programs designed to improve our performance against those expectations.
We have established a governance structure to support and develop our sustainability practices. The Sustainability Committee of the board of directors provides oversight of our programs. Management provides direction through its Leadership Council, chaired by the CEO. Our Sustainability Steering Committee provides guidance on goals and programs designed to improve our performance against those expectations.
Pricing under these contracts is either formula-based or negotiated on a quarterly or semi-annual basis. Our primary European tar supply contract has a remaining term of approximately two years, extending indefinitely thereafter unless terminated by a one-year advance notice, and contains formula-based tar pricing.
Our primary European tar supply contract has a remaining term of approximately one year, extending indefinitely thereafter unless terminated by a one-year advance notice, and contains formula-based tar pricing. Finally, our primary Australian supply contracts have remaining terms up to four years and contain formula-based pricing which is adjusted on an annual or semi-annual basis.
Railroad and Utility Products and Services Our RUPS business sells treated and untreated wood products, rail joint bars and services primarily to the railroad markets in the United States and Canada and treated wood products and services to the utility markets in the United States and Australia.
Railroad and Utility Products and Services Our RUPS business primarily sells pressure-treated railroad ties to the railroad industry in the United States and Canada and treated utility poles to utility markets in the eastern United States and Australia.
The majority of the creosote we produce in North America and Europe is sold internally to our RUPS business and consumed in the treating process. Our RUPS and PC operations are also vertically integrated. Through our PC business, we produce a variety of products, including chromated copper arsenate, which is used in the pressure treatment of utility poles and pilings.
The majority of the creosote we produce in North America and Europe is sold internally to our RUPS business and consumed in the treating process. Our RUPS and PC operations are also vertically integrated.
We maintain a comprehensive Code of Conduct that details the expectations and requirements we have as an organization for our employees. This Code of Conduct applies to all employees, whether we are engaging in peer-to-peer interactions, working to comply with complex regulations, marketing our products, purchasing materials, creating new products, managing our finances or interacting with our communities.
This Code of Conduct applies to all employees, whether we are engaging in peer-to-peer interactions, working to comply with complex regulations, marketing our products, purchasing materials, creating new products, managing our finances or interacting with our communities. Our board of directors is broadly responsible for contributing to the strategic direction and oversight of the company.
All Koppers employees take part in safety training programs and provide direct feedback to leadership as part of the company’s annual engagement survey. ▪ Inclusion and Diversity – We are committed to supporting inclusion and diversity in process and practice. Our Culture and Engagement team ensures that a diverse slate of candidates is considered for open positions.
All Koppers employees take part in safety training programs and provide direct feedback to leadership as part of the company’s annual engagement survey. 9 Koppers Holdings Inc. 2023 Annual Report ▪ Inclusion and Diversity – We are committed to supporting inclusion and diversity in process and practice.
Our network of plants is strategically located near timber suppliers to enable us to access raw materials and service customers effectively. In addition, our crosstie treating plants are typically adjacent to our largest railroad customers’ rail lines.
The RUPS business operates 18 wood treating plants and one rail joint bar manufacturing facility located throughout the United States, Canada and Australia. Our network of plants is strategically located near timber suppliers to enable us to access raw materials and service customers effectively. In addition, all of our crosstie treating plants are on our largest railroad customers’ rail lines.
The association of the name with the chemical, building, wood preservation and coke industries is beneficial to our company, as it represents long-standing, high quality products.
These advantages provide for security of supply and logistics advantages for our customers. Technology and Licensing In 1988, we acquired the Koppers trademark from Koppers Company, Inc. The association of the name with the chemical, building, wood preservation and coke industries is beneficial to our company, as it represents long-standing, high quality products.
In addition, we have been and could in the future be subject to suit by private parties in connection with alleged violations of, or liabilities under, environmental laws and regulations.
In addition, we have been, and could in the future be, subject to suit by private parties in connection with alleged violations of, or liabilities under, environmental laws and regulations. Additional information on environmental matters is available in Item 1A under Risks Related to Our Business and Note 17 of the Notes to Consolidated Financial Statements, Commitments and Contingent Liabilities.
Environmental, Social and Governance Matters Corporate social responsibility, which we view as our obligations to people and the environment and our commitment to maintaining good corporate governance processes, has been a part of our culture for many years.
Environmental, Social and Governance Matters Corporate social responsibility, which we view as our obligations to people, the environment and corporate governance, has been a part of our culture for many years. We believe this culture, supported by a spirit of collaboration and innovation, allows us to decrease our impact on the environment and create value for all of our stakeholders.
In 2014, we embarked on a plan to restructure our CMC operating footprint that reduced our global number of coal tar distillation facilities from the 11 that existed as of January 1, 2014 to three in total as of December 31, 2022.
In response, we embarked on a global restructuring plan in 2014 and reduced our global number of coal tar distillation facilities to three as of December 31, 2023.
For much of the past decade, the coal tar distillation industry has operated in an excess capacity mode, which further increased the competition for a limited amount of coal tar in North America and Europe.
During the distillation process, heat and vacuum are utilized to separate coal tar into three primary components: chemical oils, distillate and carbon pitch. For years, the coal tar distillation industry has operated in an excess capacity mode, which further increased the competition for a limited amount of coal tar in North America and Europe.
In North America, our PC business is vertically integrated through the manufacturing of copper compounds for our copper-based wood preservatives. We purchase over 30 million pounds of scrap copper, in addition to other compounds containing copper, our key raw material, which we process to meet the annual demand of this major market.
We purchase approximately 37 million pounds of scrap copper, our key raw material, in addition to other compounds containing copper which we process to meet the annual demand of this major market. When we purchase scrap copper, it is shipped to our manufacturing plants in Hubbell, Michigan and Millington, Tennessee for further processing into other copper compounds.
The contents of our corporate website are not incorporated by reference in this Annual Report on Form 10-K or in any other report or document we file with the Securities and Exchange Commission. We have established a governance structure to support and develop our sustainability practices. The Sustainability Committee of the board of directors provides oversight of our programs.
We published our first Corporate Social Responsibility report (CSR) in 2008 and our historical CSR reports are available on www.koppers.com/pages/sustainability . The contents of our corporate website are not incorporated by reference in this Annual Report on Form 10-K or in any other report or document we file with the Securities and Exchange Commission.
Business Salaried Non-Salaried Total Railroad and Utility Products and Services 362 785 1,147 Performance Chemicals 231 168 399 Carbon Materials and Chemicals 222 198 420 Administration 146 7 153 Total Employees 961 1,158 2,119 Approximately 378 of our employees are represented by a number of different labor unions and are covered under numerous labor agreements.
Business Salaried Non-Salaried Total Railroad and Utility Products and Services 348 802 1,150 Performance Chemicals 233 122 355 Carbon Materials and Chemicals 232 204 436 Administration 158 9 167 Total Employees 971 1,137 2,108 Approximately 500 of our employees are represented by a number of different labor unions and are covered under numerous labor agreements.
We also have relationships with many of the approximately 630 short-line and regional rail lines. This also forms the customer base for our rail joint bar products. The railroad crosstie market trended lower in 2022, with approximately 18.5 million replacement crossties purchased during the year, compared to 18.8 million and 18.7 million purchased during 2021 and 2020, respectively.
We also have relationships with many of the approximately 615 short-line and regional rail lines. This also forms the customer base for our rail joint bar products.
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. Railroad products also include manufacturing and selling rail joint bars, which are steel bars used to join rails together for railroads.
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. Utility products include the pressure treatment of transmission and distribution poles for electric and telephone utilities.
The primary applications for these products include decking, fencing, utility poles, construction lumber and timbers, and various agricultural uses. Additionally, we are a leading supplier of fire-retardant chemicals (“FlamePro®”) for pressure treatment of wood, primarily in commercial construction, where applicable.
Additionally, we are a leading supplier of fire-retardant chemicals (FlamePro®) for pressure treatment of wood, primarily in commercial construction, where applicable. Because we are a global supplier of wood preservatives, we face various competitors in all the geographic regions in which we participate.
Because we are a global supplier of wood preservatives, we face various competitors in all the geographic regions in which we participate. PC supplies nine of the ten largest lumber treating companies in the United States, the largest treated wood market in the world, in addition to the three largest lumber treating companies in Canada.
PC supplies all of the ten largest lumber treating companies in the United States, the largest treated wood market in the world, in addition to the three largest lumber treating companies in Canada. In North America, our PC business is vertically integrated through the manufacturing of copper compounds for our copper-based wood preservatives.
Additional information on environmental matters is available in Item 1A under “Risks Related to Our Business” and Note 19 of the Notes to Consolidated Financial Statements, “Commitments and Contingent Liabilities.” Employees and Employee Relations As of December 31, 2022, we had 961 salaried employees and 1,158 non-salaried employees. Listed below is a breakdown of employees by our businesses, including administration.
Employees and Employee Relations As of December 31, 2023, we had 971 salaried employees and 1,137 non-salaried employees. Listed below is a breakdown of employees by our businesses, including administration.
During the distillation process, heat and vacuum are utilized to separate coal tar into three primary components: chemical oils, distillate and carbon pitch. In the United States, our primary coal tar raw material supply contracts generally have terms ranging from three to ten years, and most provide options for renewal.
In the United States, our primary coal tar raw material supply contracts have remaining terms ranging from one to three years, and most provide options for renewal. Pricing under these contracts is either formula-based or negotiated on a quarterly or semi-annual basis.
We treat poles with a variety of preservatives, including chromated copper arsenate and creosote, which we produce internally and purchase from PC and CMC. We also operate a business related to the recovery of used utility poles and a business related to the inspection of utility poles.
We treat poles with a variety of preservatives, including CCA, DCOI and creosote, which we produce internally and purchase from PC and CMC. Performance Chemicals Our PC business maintains sales and manufacturing capabilities in the United States, Canada, Europe, South America, Australia and New Zealand.
The smelting of aluminum requires significant amounts of energy, which is a major cost component for the aluminum industry.
See Note 3 – Acquisitions, Divestitures and Discontinued Operations for a discussion of the sale of our Chinese distillation facility, Koppers (Jiangsu) Carbon Chemical Company Limited (KJCC) in 2020 as part of this plan. The smelting of aluminum requires significant amounts of energy, which is a major cost component for the aluminum industry.
Removed
Utility products, located in the United States and Australia, include the pressure treatment of transmission and distribution poles for electric and telephone utilities. The RUPS business operates 18 wood treating plants and one rail joint bar manufacturing facility located throughout the United States, Canada and Australia.
Added
Through our PC business, we produce a variety of products, including chromated copper arsenate (CCA) and dichloro-octyl-isothiazolinone (DCOI), which is used in the pressure treatment of utility poles and pilings.
Removed
Performance Chemicals Our PC business maintains sales and manufacturing capabilities in the United States, Canada, Europe, South America, Australia and New Zealand. The primary products supplied by PC are copper-based wood preservatives, including micronized copper azole (“MicroPro®”), micronized pigments (“MicroShades®”), alkaline copper quaternary, amine copper azole, dichloro-octyl-isothiazolinone (DCOI) and chromated copper arsenate.
Added
In addition, we provide untreated wood products and rail joint bars, which are steel bars used to join rails together for railroads, to the railroad markets and inspection services to the utility markets.
Removed
When we purchase scrap copper, it is shipped to our manufacturing plants in Hubbell, Michigan and Millington, Tennessee for further processing into other copper compounds. We utilize swap contracts to hedge our exposure to copper prices.
Added
The primary products supplied by PC are copper-based wood preservatives, including micronized copper azole (MicroPro®), micronized pigments (MicroShades®), alkaline copper quaternary, amine copper azole, DCOI and CCA. The primary applications for these products include decking, fencing, utility poles, construction lumber and timbers, and various agricultural uses.
Removed
In September 2020, we sold our remaining Chinese distillation facility in operation, Koppers (Jiangsu) Carbon Chemical Company Limited (“KJCC”) located in Pizhou, Jiangsu Province as discussed in Note 5 – “Discontinued Operations”. Our CMC business has experienced challenges over the past several years due to the closure of aluminum smelters that has occurred in North America, Western Europe and Australia.
Added
We believe we are the largest global supplier of creosote to the North American railroad industry. We have one principal competitor, Rain Carbon Inc., in the North American and European markets, in addition to several smaller regional competitors. We believe we have a competitive advantage due to our vertically integrated RUPS and CMC operations.
Removed
Finally, our primary Australian supply contracts have terms up to ten years and contain formula-based pricing which is adjusted on an annual or semi-annual basis. Technology and Licensing In 1988, we acquired the “Koppers” trademark from Koppers Company, Inc.
Added
Risk Factors – Risks Related to Our Business – We are subject to risks inherent in foreign operations, including additional legal regulation and changes in social, political and economic conditions.
Removed
We believe this culture, supported by a spirit of collaboration and innovation, allows us to decrease our impact on the environment and create value for all of our stakeholders. We published our first Corporate Social Responsibility report (CSR) in 2008 and our historical CSR reports are available on www.koppers.com/pages/sustainability .
Added
Our Culture and Engagement team ensures that a diverse slate of candidates is considered for open positions. Our employee resource groups, LINKWomen, which was launched in 2018, LINKParents, which was launched in 2021, and LINKUp (young professionals), which was launched in 2024, provide an important development forum for employees and serve as a model for future initiatives.
Removed
Our board of directors is broadly responsible for contributing to the strategic direction and oversight of the company. There are five board committees, including: Audit; Nominating and Corporate Governance; Management Development and Compensation; Strategy and Risk; and Sustainability.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

73 edited+19 added−8 removed127 unchanged
Biggest changeFinally, the Indemnity does not afford us indemnification against environmental costs and liabilities attributable to acts or omissions occurring after the closing of the acquisition of assets from Beazer East under the asset purchase agreement, nor is the Indemnity applicable to liabilities arising in connection with other acquisitions by us after that closing.
Biggest changeFinally, the Indemnity does not afford us indemnification against environmental costs and liabilities attributable to acts or omissions occurring after the closing of the acquisition of assets from Beazer East under the asset purchase agreement, nor is the Indemnity applicable to liabilities arising in connection with other acquisitions by us after that closing. 16 Koppers Holdings Inc. 2023 Annual Report Litigation and other proceedings against us could be costly and time-consuming to defend, and due to the nature of our business and products, we may be liable for damages arising out of our acts or omissions, which may have a material adverse effect on us.
The July 2004 amendment did not change the provisions of the Indemnity with respect to indemnification for non-environmental claims, such as product liability claims, which claims may continue to be asserted after July 2019. Qualified expenditures under the Indemnity are not subject to a monetary limit.
The July 2004 amendment did not change the provisions of the Indemnity with respect to indemnification for non-environmental claims, such as product liability claims, which may continue to be asserted after July 2019. Qualified expenditures under the Indemnity are not subject to a monetary limit.
Geopolitical events, such as systemic political or economic instability, civil unrest, outbreak of war or expansion of hostilities or acts of terrorism, whether occurring in the United States or abroad, could disrupt our operations or the operations of one or more of our raw material suppliers or customers, or could severely damage or destroy one or more of our facilities located in the affected areas, which could in turn adversely affect our ability to obtain raw materials from our suppliers or transport products to our customers.
In addition, geopolitical events, such as systemic political or economic instability, civil unrest, outbreak of war or expansion of hostilities or acts of terrorism, whether occurring in the United States or abroad, could disrupt our operations or the operations of one or more of our raw material suppliers or customers, or could severely damage or destroy one or more of our facilities located in the affected areas, which could in turn adversely affect our ability to obtain raw materials from our suppliers or transport products to our customers.
For example, some of our operations are subject to the United Kingdom’s and European Union’s General Data Protection Regulation (“GDPR”). The GDPR imposes a range of compliance obligations for companies that process personal data of United Kingdom and European Union residents and includes financial penalties for non-compliance.
For example, some of our operations are subject to the United Kingdom’s and European Union’s General Data Protection Regulation (GDPR). The GDPR imposes a range of compliance obligations for companies that process personal data of United Kingdom and European Union residents and includes financial penalties for non-compliance.
Although the global aluminum industry has experienced growth on a long-term basis, the aluminum industry has experienced a shift in primary aluminum production from the mature geographies, where we have historically enjoyed high market shares, to emerging economies. ▪ The principal use of our phthalic anhydride product is in the manufacture of plasticizers and flexible vinyl, which are used mainly in the housing and automobile industries.
Although the global aluminum industry has experienced growth on a long-term basis, the aluminum industry has experienced a shift in primary aluminum production from the mature geographies, where we have historically enjoyed high market shares, to emerging economies, where we have less of a presence. ▪ The principal use of our phthalic anhydride product is in the manufacture of plasticizers and flexible vinyl, which are used mainly in the housing and automobile industries.
(now known as Beazer East, Inc.) upon the formation of Koppers Inc. in 1988, subject to certain limitations, Beazer East and Beazer Limited assumed the liability for and indemnified us against, among other things, certain clean-up liabilities for contamination occurring prior to the purchase date at sites acquired from Beazer East and certain third-party claims arising from such contamination (the “Indemnity”).
(now known as Beazer East, Inc.) upon the formation of Koppers Inc. in 1988, subject to certain limitations, Beazer East and Beazer Limited assumed the liability for and indemnified us against, among other things, certain clean-up liabilities for contamination occurring prior to the purchase date at sites acquired from Beazer East and certain third-party claims arising from such contamination (the Indemnity).
We cannot predict the extent to which investor interest in our company will continue to support an active trading market for our common stock on the New York Stock Exchange (the “NYSE”) or otherwise or how liquid that market will continue to be.
We cannot predict the extent to which investor interest in our company will continue to support an active trading market for our common stock on the New York Stock Exchange (the NYSE) or otherwise or how liquid that market will continue to be.
Adverse developments in an audit, examination or litigation related to previously filed tax returns, or in the relevant jurisdiction’s tax laws, regulations, administrative practices, principles and interpretations could have a material effect on our results of operations and cash flows in the period or periods for which that development occurs, as well as for subsequent periods. 21 Koppers Holdings Inc. 2022 Annual Report Our strategy to selectively pursue complementary acquisitions may present unforeseen obstacles, risks or costs.
Adverse developments in an audit, examination or litigation related to previously filed tax returns, or in the relevant jurisdiction’s tax laws, regulations, administrative practices, principles and interpretations could have a material effect on our results of operations and cash flows in the period or periods for which that development occurs, as well as for subsequent periods. 22 Koppers Holdings Inc. 2023 Annual Report Our strategy to selectively pursue complementary acquisitions may present unforeseen obstacles, risks or costs.
If one or more analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline. 22 Koppers Holdings Inc. 2022 Annual Report Future sales, or the perception of future sales, of a substantial amount of our common stock may depress the price of the shares of our common stock .
If one or more analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline. 23 Koppers Holdings Inc. 2023 Annual Report Future sales, or the perception of future sales, of a substantial amount of our common stock may depress the price of the shares of our common stock .
A high level of indebtedness could have other adverse consequences to us, including: ▪ making it more difficult for us to make payments on our debt; ▪ increasing our vulnerability to general economic and industry conditions; ▪ exposing us to the risk of increased interest rates as certain of our borrowings under our Credit Facility are at variable rates; ▪ restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; ▪ limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions, and general corporate or other purposes; and ▪ limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors who may be less highly leveraged.
A high level of indebtedness could have other adverse consequences to us, including: ▪ making it more difficult for us to make payments on our debt; ▪ increasing our vulnerability to general economic and industry conditions; ▪ exposing us to the risk of increased interest rates as certain of our borrowings under our Credit Facility are at variable rates; ▪ restricting us from making strategic acquisitions or causing us to make non-strategic divestitures; ▪ limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions, and general corporate or other purposes; and 11 Koppers Holdings Inc. 2023 Annual Report ▪ limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors who may be less highly leveraged.
We are indemnified for certain product liability exposures under the Indemnity with Beazer East related to products sold prior to the closing of the acquisition of assets from Beazer East. Beazer East and Beazer Limited may not continue to meet their indemnification obligations.
We are indemnified for certain product liability exposures under the Indemnity with Beazer East related to products sold prior to the closing of the acquisition of assets from Beazer East. Beazer East and Beazer Limited may cease to meet their indemnification obligations.
We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness, including the 2025 Notes.
We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.
Although no one customer accounted for more than six percent of our net sales for the year ended December 31, 2022, our top ten customers accounted for approximately 39 percent of our net sales in the aggregate. The loss of a significant customer could have a material adverse effect on our business, cash flow and financial condition.
Although no one customer accounted for more than six percent of our net sales for the year ended December 31, 2023, our top ten customers accounted for approximately 33 percent of our net sales in the aggregate. The loss of a significant customer could have a material adverse effect on our business, cash flow and financial condition.
We have operations in the United States, Australia, Denmark, the United Kingdom, New Zealand and Canada, among others, and sell our products in many foreign countries. For the year ended December 31, 2022, net sales from products sold by our foreign subsidiaries accounted for approximately 33 percent of our total net sales.
We have operations in the United States, Australia, Denmark, the United Kingdom, New Zealand and Canada, among others, and sell our products in many foreign countries. For the year ended December 31, 2023, net sales from products sold by our foreign subsidiaries accounted for approximately 29 percent of our total net sales.
Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk associated with our variable rate debt and prevent us from meeting our obligations under the Senior Notes due 2025 (the “2025 Notes”) and the Credit Facility as described in Note 15 of the Notes to Consolidated Financial Statements.
Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk associated with our variable rate debt and prevent us from meeting our obligations under the Credit Facility as described in Note 15 of the Notes to Consolidated Financial Statements.
We may be required to recognize impairment charges for our long-lived assets. At December 31, 2022, the net carrying value of long-lived assets (property, plant and equipment, operating lease right-of-use assets, goodwill and other intangible assets) totaled $1,053.7 million. In accordance with generally accepted accounting principles, we periodically assess these assets to determine if they are impaired.
We may be required to recognize impairment charges for our long-lived assets. At December 31, 2023, the net carrying value of long-lived assets (property, plant and equipment, operating lease right-of-use assets, goodwill and other intangible assets) totaled $1,118.8 million. In accordance with generally accepted accounting principles, we periodically assess these assets to determine if they are impaired.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, delay payments to vendors, sell assets, seek additional capital, or restructure or refinance our indebtedness, including the 2025 Notes.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, delay payments to vendors, sell assets, seek additional capital, or restructure or refinance our indebtedness.
Total environmental reserves at December 31, 2022 were $10.9 million, which include provisions primarily for environmental remediation. In addition, we incur significant annual operating expenses related to environmental matters and significant capital expenditures related to environmental control facilities.
Total environmental reserves at December 31, 2023 were $10.6 million, which include provisions primarily for environmental remediation. In addition, we incur significant annual operating expenses related to environmental matters and significant capital expenditures related to environmental control facilities.
Management expects that any future obligations under our post-retirement benefit plans that are not currently funded will be funded from our future cash flow from operations.
For normal plan operations, management expects that any future obligations under our post-retirement benefit plans that are not currently funded will be funded from our future cash flow from operations.
These covenants limit our ability and the ability of our restricted subsidiaries to, among other things: ▪ incur additional debt; ▪ pay dividends or distributions on our capital stock or repurchase our capital stock; 11 Koppers Holdings Inc. 2022 Annual Report ▪ issue stock of subsidiaries; ▪ make certain distributions; ▪ make certain investments; ▪ create liens on our assets to secure debt; ▪ enter into transactions with affiliates; ▪ modify material documents (including organizational documents); ▪ make certain acquisitions; ▪ merge or consolidate with another company; and ▪ sell or otherwise transfer assets.
These covenants limit our ability and the ability of our restricted subsidiaries to, among other things: ▪ incur additional debt; ▪ pay dividends or distributions on our capital stock or repurchase our capital stock; ▪ issue stock of subsidiaries; ▪ make certain distributions; ▪ make certain investments; ▪ create liens on our assets to secure debt; ▪ enter into transactions with affiliates; ▪ modify material documents (including organizational documents); ▪ make certain acquisitions; ▪ merge or consolidate with another company; and ▪ sell or otherwise transfer assets.
Capital expenditures related to environmental control facilities in 2023 are expected to total approximately $16 million and are expected to be funded by operations. Contamination has been identified and is being investigated and remediated at many of our sites by us or other parties.
Capital expenditures related to environmental control facilities in 2024 are expected to total approximately $9.5 million and are expected to be funded by operations. Contamination has been identified and is being investigated and remediated at many of our sites by us or other parties.
This could cause a material increase to our inventory carrying costs and, in the event of falling market prices for our end products, result in significant charges to write-down inventory to market prices. Health concerns arising from the outbreak of a health epidemic or pandemic may have an adverse effect on our business, operating results and financial condition.
This could cause a material increase to our inventory carrying costs and, in the event of falling market prices for our end products, result in significant charges to write-down inventory to market prices. 21 Koppers Holdings Inc. 2023 Annual Report Health concerns arising from the outbreak of a health epidemic or pandemic may have an adverse effect on our business, operating results and financial condition.
We may be required to make significant cash payments to our pension and other post-retirement plans, which will reduce the cash available for our business. As of December 31, 2022, our benefit obligation under our defined benefit pension plans exceeded the fair value of plan assets by $29.6 million.
We may be required to make significant cash payments to our pension and other post-retirement plans, which will reduce the cash available for our business. As of December 31, 2023, our benefit obligation under our defined benefit pension plans exceeded the fair value of plan assets by $26.2 million.
Our pension asset funding to total pension obligation ratio was 81 percent as of December 31, 2022. The underfunding was caused, in large part, by fluctuations in the financial markets that impacted the value of the assets in our defined benefit pension plans and by fluctuations in interest rates which decreased the discounted pension liabilities.
Our pension asset funding to total pension obligation ratio was 83 percent as of December 31, 2023. The underfunding was caused, in large part, by fluctuations in the financial markets that impacted the value of the assets in our defined benefit pension plans and by fluctuations in interest rates which increased the discounted pension liabilities.
We also are involved in various litigation and proceedings relating to environmental matters and toxic tort claims. Future climate change regulation could result in increased operating costs and reduced demand for our products. Increasing societal concerns about climate change have resulted in international efforts to limit greenhouse gas (GHG) emissions.
We also are involved in various litigation and proceedings relating to environmental matters and toxic tort claims. 14 Koppers Holdings Inc. 2023 Annual Report Future climate change regulation could result in increased operating costs and reduced demand for our products. Increasing societal concerns about climate change have resulted in international efforts to limit greenhouse gas (GHG) emissions.
Furthermore, we are a holding company with no operations, and unless we receive dividends, distributions, advances, transfers of funds or other payments from our subsidiaries, we will be unable to pay dividends on our common stock. Provisions of our charter documents may inhibit a takeover, which could negatively affect our stock price.
Furthermore, we are a holding company with no operations, and unless we receive dividends, distributions, advances, transfers of funds or other payments from our subsidiaries, we will be unable to pay dividends on our common stock. 20 Koppers Holdings Inc. 2023 Annual Report Provisions of our charter documents may inhibit a takeover, which could negatively affect our stock price.
We may not be able to generate sufficient cash to service all of our indebtedness, including the 2025 Notes, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
We bear the cost of compliance with the GDPR and are subject to fines and penalties in the event of a breach of the GDPR, which could have an adverse impact on our business, financial condition or results of operations. Political and financial instability can lead to economic uncertainty and may adversely impact our business.
We bear the cost of compliance with the GDPR and are subject to fines and penalties in the event of a breach of the GDPR, which could have an adverse impact on our business, financial condition or results of operations. 18 Koppers Holdings Inc. 2023 Annual Report Political and financial instability can lead to economic uncertainty and may adversely impact our business.
In the future, we may not be able to obtain coverage at current levels, and our premiums may increase significantly on coverage that we maintain. Adverse weather conditions or natural disasters, including conditions associated with or exacerbated by climate change, may reduce our operating results.
In the future, we may not be able to obtain coverage at current levels, and our premiums may increase significantly on coverage that we maintain. 15 Koppers Holdings Inc. 2023 Annual Report Adverse weather conditions or natural disasters, including conditions associated with or exacerbated by climate change, may reduce our operating results.
Our products are sold primarily into markets which historically have been cyclical, such as wood preservation, aluminum and specialty chemicals. ▪ The principal use of our wood preservation chemicals is in the manufacture of treated lumber, which is used mainly for residential applications, such as wood decking, and also industrial applications, such as the treating of railroad crossties and utility poles.
Our products are sold primarily into markets that historically have been cyclical, such as wood preservation, aluminum and specialty chemicals. 12 Koppers Holdings Inc. 2023 Annual Report ▪ The principal use of our wood preservation chemicals is in the manufacture of treated lumber, which is used mainly for residential applications, such as wood decking, and also industrial applications, such as the treating of railroad crossties and utility poles.
Our Amended and Restated Articles of Incorporation (our “Articles of Incorporation”) and our Second Amended and Restated Bylaws (our “Bylaws”) provide for various procedural and other requirements that could make it more difficult for shareholders to effect certain corporate actions.
Our Amended and Restated Articles of Incorporation (our Articles of Incorporation) and our Third Amended and Restated Bylaws (our Bylaws) provide for various procedural and other requirements that could make it more difficult for shareholders to effect certain corporate actions.
Impairment charges would also reduce our shareholders’ equity and could affect compliance with the covenants in our debt agreements. We are subject to risks inherent in foreign operations, including additional legal regulation, and changes in social, political and economic conditions.
Impairment charges would also reduce our shareholders’ equity and could affect compliance with the covenants in our debt agreements. 17 Koppers Holdings Inc. 2023 Annual Report We are subject to risks inherent in foreign operations, including additional legal regulation and changes in social, political and economic conditions.
In addition, our obligations for other post-retirement benefit obligations are unfunded and total $6.0 million at December 31, 2022. During the years ended December 31, 2022 and December 31, 2021, we contributed $1.6 million and $2.8 million, respectively, to our post-retirement benefit plans.
In addition, our obligations for other post-retirement benefits are unfunded and total $6.2 million at December 31, 2023. During the years ended December 31, 2023 and December 31, 2022, we contributed $2.7 million and $1.6 million, respectively, to our post-retirement benefit plans.
Like other companies involved in environmentally sensitive businesses, our operations and properties are subject to extensive federal, state, local and foreign environmental laws and regulations, including those concerning the following, among other things: ▪ the treatment, storage and disposal of wastes; ▪ the investigation and remediation of contaminated soil and groundwater; ▪ the discharge of effluents into waterways; 13 Koppers Holdings Inc. 2022 Annual Report ▪ the emission of substances into the air; ▪ the marketing, sale, use and registration of our chemical products, such as creosote, chromated copper arsenate and MicroPro®; ▪ the U.S.
Like other companies involved in environmentally sensitive businesses, our operations and properties are subject to extensive federal, state, local and foreign environmental laws and regulations, including those concerning the following, among other things: ▪ the treatment, storage and disposal of wastes; ▪ the investigation and remediation of contaminated soil and groundwater; ▪ the discharge of effluents into waterways; ▪ the emission of substances into the air; ▪ the marketing, sale, use and registration of our chemical products, such as creosote, CCA, DCOI and MicroPro®; ▪ the U.S.
Therefore, a decline in remodeling and construction could reduce demand for wood preservation chemicals for residential applications and a decline in the capital spending practices for railroads and utility companies could reduce demand for wood preservation chemicals for industrial applications. 12 Koppers Holdings Inc. 2022 Annual Report ▪ The principal consumers of our carbon pitch are primary aluminum smelters.
Therefore, a decline in remodeling and construction could reduce demand for wood preservation chemicals for residential applications, and a decline in the capital spending practices for railroads and utility companies could reduce demand for wood preservation chemicals for industrial applications. ▪ The principal consumers of our carbon pitch are primary aluminum smelters.
Our ability to pay dividends is also limited by the indenture governing the 2025 Notes as well as Pennsylvania law and may in the future be limited by the covenants of any future outstanding indebtedness we or our subsidiaries incur.
Our ability to pay dividends is also limited by Pennsylvania law and may in the future be limited by the covenants of any future outstanding indebtedness we or our subsidiaries incur.
We have pledged substantially all of our assets as collateral under our Credit Facility. If the lenders under our Credit Facility accelerate the repayment of borrowings, we cannot assure you that we will have sufficient assets to repay our Credit Facility, as well as our unsecured indebtedness, including the 2025 Notes.
If the lenders under our Credit Facility accelerate the repayment of borrowings, we cannot assure you that we will have sufficient assets to repay our Credit Facility, as well as our unsecured indebtedness.
We and our subsidiaries may be able to incur substantial additional indebtedness in the future, subject to the restrictions contained in our Credit Facility and the indenture governing the 2025 Notes. If new indebtedness is added to our current debt levels, the related risks that we now face could intensify.
We and our subsidiaries may be able to incur substantial additional indebtedness in the future, subject to the restrictions contained in our Credit Facility. If new indebtedness is added to our current debt levels, the related risks that we now face could intensify. Our debt agreements contain restrictions that limit our flexibility in operating our business.
Upon the occurrence of an event of default under our Credit Facility, the lenders could elect to declare all amounts outstanding under our Credit Facility to be immediately due and payable and terminate all commitments to extend further credit. Such a declaration by the lenders under our Credit Facility would also constitute an event of default under our 2025 Notes.
Upon the occurrence of an event of default under our Credit Facility, the lenders could elect to declare all amounts outstanding under our Credit Facility to be immediately due and payable and terminate all commitments to extend further credit.
Proprietary protection of our processes, apparatuses and other technology is important to our business, particularly in our PC business. Consequently, we may have to rely on judicial enforcement of our patents and other proprietary rights, which is generally a time consuming and expensive process.
Consequently, we may have to rely on judicial enforcement of our patents and other proprietary rights, which is generally a time consuming and expensive process.
If our contributions to our post-retirement benefit plans are insufficient to fund the post-retirement benefit plans adequately to cover our future obligations, the performance of the assets in our pension plans does not meet our expectations or other actuarial assumptions or mandatory funding laws are modified, our contributions to our post-retirement benefit plans could be materially higher than we expect, thus reducing the cash available for our business. 18 Koppers Holdings Inc. 2022 Annual Report We may incur significant charges in the event we close all or part of a manufacturing plant or facility.
If our contributions to our post-retirement benefit plans are insufficient to fund the post-retirement benefit plans adequately to cover our future obligations, the performance of the assets in our pension plans does not meet our expectations or other actuarial assumptions or mandatory funding laws are modified, our contributions to our post-retirement benefit plans could be materially higher than we expect, thus reducing the cash available for our business.
Interruptions in such freight services could impair our ability to receive raw materials and ship finished products in a timely manner. We are also exposed to price and quality risks associated with raw material purchases.
We are also dependent on specialized ocean-going transport vessels that we lease to deliver raw materials to our facilities and finished goods to our customers. Interruptions in such freight services could impair our ability to receive raw materials and ship finished products in a timely manner. We are also exposed to price and quality risks associated with raw material purchases.
Labor disputes could disrupt our operations and divert the attention of our management and may cause a decline in our production and a reduction in our profitability. Many of our employees are represented by a number of different labor unions and are covered under numerous labor agreements. Typically, a number of our labor agreements are scheduled to expire each year.
Labor disputes, labor shortages and increased turnover or increases in employee and employee-related costs could disrupt our operations, divert the attention of our management and may cause a decline in our production and a reduction in our profitability. Many of our employees are represented by a number of different labor unions and are covered under numerous labor agreements.
Furthermore, we could be required to record a contingent liability on our balance sheet with respect to such matters, which could result in us having significant negative net worth. Intellectual property rights are important to our business. If our patents are declared invalid or our trade secrets become known to our competitors, our ability to compete may be adversely affected.
Furthermore, we could be required to record a contingent liability on our balance sheet with respect to such matters, which could result in us having a significant negative net worth. Intellectual property rights are important to our business.
The Green Deal, which was approved by the EU Parliament in 2020, has set a goal of a 55 percent reduction in emissions by 2030 and carbon neutrality by 2050.
The Green Deal, which was approved by the EU Parliament in 2020, has set a goal of a 55 percent reduction in emissions by 2030 and carbon neutrality by 2050. This will include revising and possibly expanding the EU ETS and setting targets for sectors outside the EU ETS.
This will include revising and possibly expanding the EU ETS and setting targets for sectors outside the EU ETS. 14 Koppers Holdings Inc. 2022 Annual Report In Australia, the National Greenhouse and Energy Reporting Scheme requires large volume emitters (such as Koppers) to report carbon emissions and energy use to the government annually and, if they exceed certain thresholds, the ‘Safeguard Mechanism’ requires facilities to set an emissions baseline and purchase certificates if they exceed that baseline.
In Australia, the National Greenhouse and Energy Reporting Scheme requires large volume emitters (such as Koppers) to report carbon emissions and energy use to the government annually and, if they exceed certain thresholds, the ‘Safeguard Mechanism’ requires facilities to set an emissions baseline and purchase certificates if they exceed that baseline.
The development of new technologies or changes in our customers’ products could reduce the demand for our products. Our products are used for a variety of applications by our customers. Changes in our customers’ products or processes may enable our customers to reduce consumption of the products we produce or make our products unnecessary.
Our products are used for a variety of applications by our customers. Changes in our customers’ products or processes may enable our customers to reduce consumption of the products we produce or make our products unnecessary. Customers may also find alternative materials or processes that no longer require our products.
Our income tax provision and income tax liabilities could be adversely affected by the jurisdictional mix of earnings, changes in valuation of deferred tax assets and liabilities and changes in tax laws and regulations. In the ordinary course of our business, we are also subject to continuous examinations of our income tax returns by tax authorities.
Our income tax provision and income tax liabilities could be adversely affected by the jurisdictional mix of earnings, changes in valuation of deferred tax assets and liabilities and changes in tax laws and regulations.
We (or our customers) receive claims under these warranties or other claims relating to alleged failures of treated-wood products. Our profitability could be adversely affected if the amount of warranty claims against us or our customers significantly increase. Hazards associated with chemical manufacturing may cause suspensions or interruptions of our operations.
Our profitability could be adversely affected if the amount of warranty claims against us or our customers significantly increases. Hazards associated with chemical manufacturing may cause suspensions or interruptions of our operations.
Information technology systems failures could disrupt our operations by impeding our processing of transactions, our ability to protect customer or company information and our financial reporting. System failures include risks associated with upgrading our systems, integrating information technology and other systems in connection with the integration of businesses we acquire, network disruptions and breaches of data security.
System failures include risks associated with upgrading our systems, integrating information technology and other systems in connection with the integration of businesses we acquire, network disruptions and breaches of data security.
We may not be able to reach new agreements without union action or on terms satisfactory to us. Any future labor disputes with any such unions could result in strikes or other labor protests, which could disrupt our operations and divert the attention of our management from operating our business.
Any future labor disputes with any such unions could result in strikes or other labor protests, which could disrupt our operations and divert the attention of our management from operating our business.
These limited warranties cover treated-wood products that are produced by certain of our customers who use wood preservatives supplied by us. The limited warranties generally provide for replacement of properly treated-wood (treated-wood only) or refund of the purchase price for the treated-wood product that prematurely fails due to fungal decay or termite attack.
The limited warranties generally provide for replacement of properly treated wood (treated-wood only) or refund of the purchase price for the treated-wood product that prematurely fails due to fungal decay or termite attack. We (or our customers) receive claims under these warranties or other claims relating to alleged failures of treated-wood products.
At the state level in Australia, the New South Wales Environment Protection Authority released its draft Climate Change Policy and Action Plan, which proposes to introduce greenhouse gas emission targets and limits on environment protection licenses – this is currently in an industry/public consultation phase.
The government is undertaking public consultation on the draft, with a current proposed start date for the legislation and reporting requirements of July 1, 2024. At the state level in Australia, the New South Wales Environment Protection Authority released its Climate Change Policy and Action Plan, which proposes to introduce greenhouse gas emission targets and limits on environment protection licenses.
Customers may also find alternative materials or processes that no longer require our products. As a producer of wood preservatives, we may incur additional costs under our warranties or otherwise for claims related to treated-wood products. We provide limited warranties on certain treated-wood products.
As a producer of wood preservatives, we may incur additional costs under our warranties or otherwise for claims related to treated-wood products. We provide limited warranties on certain treated-wood products. These limited warranties cover treated-wood products that are produced by certain of our customers who use wood preservatives supplied by us.
The government and other third parties may have the right under applicable environmental laws to seek relief directly from us for any and all such costs and liabilities. 15 Koppers Holdings Inc. 2022 Annual Report In July 2004, we entered into an agreement with Beazer East to amend the December 29, 1988 asset purchase agreement to provide, among other things, for the continued tender of pre-closing environmental liabilities to Beazer East under the Indemnity through July 2019.
In July 2004, we entered into an agreement with Beazer East to amend the December 29, 1988 asset purchase agreement to provide, among other things, for the continued tender of pre-closing environmental liabilities to Beazer East under the Indemnity through July 2019.
The growth of our business also depends on our ability to develop new intellectual property rights, including patents, and the successful implementation of innovation initiatives.
The growth of our business also depends on our ability to develop new intellectual property rights, including patents, and the successful implementation of innovation initiatives. There can be no assurance that our efforts to do so will be successful, and the failure to do so could negatively impact our results of operations.
Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant. 19 Koppers Holdings Inc. 2022 Annual Report The ability of Koppers Inc. and its subsidiaries to pay dividends or make other payments or distributions to us will depend on our operating results and may be restricted by, among other things, the covenants in our Credit Facility.
Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant.
Risks Related to Our Business Fluctuations in the price, quality and availability of our primary raw materials could reduce our profitability. Our operations depend on an adequate supply of quality raw materials being available on a timely basis. The loss of a key source of supply or a delay in shipments could cause a significant increase in our operating expenses.
Our operations depend on an adequate supply of quality raw materials being available on a timely basis. The loss of a key source of supply or a delay in shipments could cause a significant increase in our operating expenses. For example, our operations are highly dependent on a relatively small number of freight transportation services.
Labor shortages and increased turnover or increases in employee and employee-related costs could have adverse effects on our profitability. We have recently experienced increased labor shortages at some of our production facilities and other locations.
We have recently experienced increased labor shortages at some of our production facilities and other locations.
We periodically assess our manufacturing operations in order to manufacture and distribute our products in the most efficient manner.
We may incur significant charges in the event we close all or part of a manufacturing plant or facility. We periodically assess our manufacturing operations in order to manufacture and distribute our products in the most efficient manner.
Although Koppers does not currently exceed the threshold for the Safeguard Mechanism (100,000 TCO2e scope 1 emissions), it is foreseeable that the government could lower the threshold in the future.
Although Koppers does not currently exceed the threshold for the Safeguard Mechanism (100,000 TCO2e scope 1 emissions), it is foreseeable that the government could lower the threshold in the future. The Australian government has released draft legislation that seeks to introduce mandatory requirements for large businesses and financial institutions to disclose their climate-related risks and opportunities.
These hazards, among others, may cause personal injury and loss of life, damage to property and contamination of the environment, which could lead to government fines or work stoppage injunctions, cleanup costs and lawsuits by injured persons.
Other hazards include the following: ▪ piping and storage tank leaks and ruptures; ▪ mechanical failure; ▪ exposure to hazardous substances; and ▪ chemical spills and other discharges or releases of toxic or hazardous wastes, substances or gases. 13 Koppers Holdings Inc. 2023 Annual Report These hazards, among others, may cause personal injury and loss of life, damage to property and contamination of the environment, which could lead to government fines or work stoppage injunctions, cleanup costs and lawsuits by injured persons.
Our debt agreements contain restrictions that limit our flexibility in operating our business. Our Credit Facility and the indenture governing the 2025 Notes contain various covenants that limit our ability to engage in specified types of transactions.
Our Credit Facility contains various covenants that limit our ability to engage in specified types of transactions.
Furthermore, we are also exposed to risks associated with changes in the laws and policies governing foreign investments in countries where we have operations as well as changes in U.S. laws and regulations relating to foreign trade and investment. 17 Koppers Holdings Inc. 2022 Annual Report Geopolitical events and the risk of related government actions affecting our business and our customers or raw material suppliers may adversely impact our business, results of operations and cash flows.
Furthermore, we are also exposed to risks associated with changes in the laws and policies governing foreign investments in countries where we have operations, as well as changes in U.S. laws and regulations relating to foreign trade and investment.
We may be subject to information technology systems failures, network disruptions and breaches of data security, which could harm our relationships with our customers and third-party business partners, subject us to negative publicity and litigation and cause substantial harm to our business. We depend on integrated information systems to conduct our business.
The actual costs to close a manufacturing facility may exceed our original cost estimate and may have a material adverse effect on our financial condition, cash flow from operations and results from operations. 19 Koppers Holdings Inc. 2023 Annual Report We may be subject to information technology systems failures, network disruptions and breaches of data security, which could harm our relationships with our customers and third-party business partners, subject us to negative publicity and litigation and cause substantial harm to our business.
Our ability to fund our liquidity needs and working capital requirements could be impacted in the event that disruptions in the credit markets result in the banks being unable to lend to us under our Credit Facility. 20 Koppers Holdings Inc. 2022 Annual Report Global economic issues could prevent us from accurately forecasting demand for our products, which could have a material adverse effect on our results of operations and our financial condition.
Our ability to fund our liquidity needs and working capital requirements could be impacted in the event that disruptions in the credit markets result in the banks being unable to lend to us under our Credit Facility.
There can be no assurance that our efforts to do so will be successful and the failure to do so could negatively impact our results of operations. 16 Koppers Holdings Inc. 2022 Annual Report We also rely upon unpatented proprietary know-how and continuing technological innovation and other trade secrets to develop and maintain our competitive position, particularly in our PC business.
We also rely upon unpatented proprietary know-how and continuing technological innovation and other trade secrets to develop and maintain our competitive position, particularly in our PC business.
If the costs of raw materials increase significantly and we are unable to offset the increased costs with higher selling prices, our profitability will decline. We face risks related to our substantial indebtedness.
Geopolitical events further impacting these countries, or other countries from which we source raw materials or where our facilities or customers are located, could adversely affect the impacted business segments. If the costs of raw materials increase significantly and we are unable to offset the increased costs with higher selling prices, our profitability will decline.
Although we have converted a substantial number of customers to alternative treatment systems, we may lose market share if some of our customers select, or subsequently switch to, a treatment system that we do not offer. 10 Koppers Holdings Inc. 2022 Annual Report ▪ The primary raw material used by our CMC business is coal tar, a by-product of coke production.
We may not be able to obtain scrap copper at prices that match underlying pricing commitments to our customers. 10 Koppers Holdings Inc. 2023 Annual Report ▪ The primary raw material used by our CMC business is coal tar, a by-product of coke production.
The maturity date of the Credit Facility is currently June 17, 2027; however that could be accelerated if the 2025 Notes are not repurchased, redeemed or refinanced prior to November 15, 2024. If we were unable to repay those amounts, the lenders under our Credit Facility could proceed against the collateral granted to them to secure such indebtedness.
If we were unable to repay those amounts, the lenders under our Credit Facility could proceed against the collateral granted to them to secure such indebtedness. We have pledged substantially all of our assets as collateral under our Credit Facility.
Any disruption could reduce the productivity and profitability of a particular manufacturing facility or of our Company as a whole. Other hazards include the following: ▪ piping and storage tank leaks and ruptures; ▪ mechanical failure; ▪ exposure to hazardous substances; and ▪ chemical spills and other discharges or releases of toxic or hazardous wastes, substances or gases.
Any disruption could reduce the productivity and profitability of a particular manufacturing facility or of our Company as a whole.
As of December 31, 2022, we had total outstanding debt of $825.3 million, and approximately $412.0 million of additional unused borrowing capacity under our $800.0 million revolving credit agreement (the "Credit Facility") with a consortium of banks which replaced our previous $600.0 million senior secured revolving credit facility and $100.0 million secured term loan facility (the latter having been fully repaid as of March 31, 2022).
As of December 31, 2023, we had total outstanding debt of $849.4 million, and approximately $330.0 million of additional unused borrowing capacity under our credit agreement (the Credit Facility) with a consortium of banks, which includes an $800.0 million revolving credit facility, a $50.0 million swingline facility and provides for the ability to incur one or more uncommitted incremental revolving or term loan facilities in an aggregate amount of at least $730.0 million, subject to applicable financial covenants.
Geopolitical events further impacting these countries, or other countries from which we source raw materials or where our facilities or customers are located, could adversely affect the impacted business segments. Any such occurrence could have a material adverse effect on our operating results, financial condition, cash flows and liquidity.
Any such occurrence could have a material adverse effect on our operating results, financial condition, cash flows and liquidity. We face risks related to our substantial indebtedness.
Removed
For example, our operations are highly dependent on a relatively small number of freight transportation services. We are also dependent on specialized ocean-going transport vessels that we lease to deliver raw materials to our facilities and finished goods to our customers.
Added
Risks Related to Our Business Fluctuations in the price, quality and availability of our primary raw materials could reduce our profitability. In addition, geopolitical events and the risk of related government actions affecting our business and our customers or raw material suppliers may adversely impact our business, results of operations and cash flows.
Removed
We may not be able to obtain scrap copper at prices that match underlying pricing commitments to our customers. ▪ Pentachlorophenol had a significant market share for the treatment of utility poles in the United States and was a treatment preservative, in addition to chromated copper arsenate and creosote, that we used to treat utility poles.
Added
For example, the potential for regional conflict between China and Taiwan could result in disruptions of raw materials that our CMC and KPC businesses source from China and Taiwan.
Removed
In 2021, the only North American manufacturer of pentachlorophenol ceased production. End-users of treated utility poles who required the use of pentachlorophenol-treated utility poles have adopted or are in the process of adopting other available treatment systems for their electrical transmission and distribution networks.
Added
We may not be able to implement price increases sufficient to compensate for increased operating costs and raw material costs in our businesses. We have experienced and may experience further increased operating costs and raw material costs in our businesses.
Removed
For example, in the third and fourth quarters of 2021, our PC and utility and industrial products businesses were negatively impacted when late deliveries of chromic acid, which is used in a key wood treatment chemical, resulted in lost sales and higher costs to serve customers with limited supply.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changePrimary Product Line Location Description of Property Interest Railroad and Utility Products and Services Railroad crossties Ashcroft, British Columbia, Canada Owned Utility poles Bunbury, Western Australia, Australia Owned/Leased Railroad crossties Camden, Arkansas Owned/Leased Railroad crosstie materials recovery Domino, Texas Leased Utility poles Eutawville, South Carolina Owned Railroad crossties Florence, South Carolina Owned Railroad crossties Galesburg, Illinois Leased Utility poles Grafton, New South Wales, Australia Owned Railroad crossties Guthrie, Kentucky Owned Rail joint bars Huntington, West Virginia Leased Railroad crosstie materials recovery L’Anse, Michigan Leased Utility poles Leland, North Carolina Owned Utility poles Longford, Tasmania, Australia Owned Railroad structures Madison, Wisconsin Owned Railroad crossties Muncy, Pennsylvania Owned Utility poles Newsoms, Virginia Owned Utility poles North, South Carolina Owned Railroad crossties North Little Rock, Arkansas Owned Railroad crossties Roanoke, Virginia Owned Railroad crossties and utility poles Somerville, Texas Owned Utility poles Takura, Queensland, Australia Leased Utility poles Vance, Alabama Leased Utility poles Vidalia, Georgia Owned Railroad crossties Williamsville, Missouri Owned Performance Chemicals Wood preservation chemicals Auckland, New Zealand Owned Wood preservation chemicals Darlington, United Kingdom Owned Wood preservation chemicals Geelong, Victoria, Australia Owned Intermediate copper products Hubbell, Michigan Leased Wood preservation chemicals Millington, Tennessee Owned Wood preservation chemicals Mt.
Biggest changePrimary Product Line Location Description of Property Interest Railroad and Utility Products and Services Rail joint bars Huntington, West Virginia Leased Railroad crosstie materials recovery Domino, Texas Leased Railroad crosstie materials recovery L’Anse, Michigan Leased Railroad crossties Ashcroft, British Columbia, Canada Owned Railroad crossties Camden, Arkansas Owned/Leased Railroad crossties Florence, South Carolina Owned Railroad crossties Galesburg, Illinois Leased Railroad crossties Guthrie, Kentucky Owned Railroad crossties Muncy, Pennsylvania Owned Railroad crossties North Little Rock, Arkansas Owned Railroad crossties Roanoke, Virginia Owned Railroad crossties Williamsville, Missouri Owned Railroad crossties and utility poles Somerville, Texas Owned Railroad structures Madison, Wisconsin Owned Utility poles Bunbury, Western Australia, Australia Owned/Leased Utility poles Eutawville, South Carolina Owned Utility poles Grafton, New South Wales, Australia Owned Utility poles Leesville, Louisiana Owned Utility poles Leland, North Carolina Owned Utility poles Longford, Tasmania, Australia Owned Utility poles Newsoms, Virginia Owned Utility poles North, South Carolina Owned Utility poles Takura, Queensland, Australia Leased Utility poles Vance, Alabama Leased Utility poles Vidalia, Georgia Owned Performance Chemicals Intermediate copper products Hubbell, Michigan Leased Wood preservation chemicals Auckland, New Zealand Owned Wood preservation chemicals Darlington, United Kingdom Owned Wood preservation chemicals Geelong, Victoria, Australia Owned Wood preservation chemicals Millington, Tennessee Owned Wood preservation chemicals Mt.
Gambier, South Australia, Australia Owned Wood preservation chemicals Rock Hill, South Carolina Owned Carbon Materials and Chemicals Carbon products Mayfield, New South Wales, Australia Owned Carbon products Nyborg, Denmark Owned/Leased Carbon products, phthalic anhydride Stickney, Illinois Owned Our corporate offices are located in leased office space in Pittsburgh, Pennsylvania. The lease term expires on December 31, 2028.
Gambier, South Australia, Australia Owned Wood preservation chemicals Rock Hill, South Carolina Owned Carbon Materials and Chemicals Carbon products Mayfield, New South Wales, Australia Owned Carbon products Nyborg, Denmark Owned/Leased Carbon products and phthalic anhydride Stickney, Illinois Owned Our corporate offices are located in leased office space in Pittsburgh, Pennsylvania. The lease term expires on December 31, 2028.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe information related to legal matters set forth in Note 19 to the Consolidated Financial Statements of Koppers Holdings Inc. included in Item 8 of Part II of this report is incorporated herein by reference.
Biggest changeThe information related to legal matters set forth in Note 17 to the Consolidated Financial Statements of Koppers Holdings Inc. included in Item 8 of Part II of this report is incorporated herein by reference.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeBall has served as President and Chief Executive Officer of Koppers Holdings Inc. and Koppers Inc. since January 2015. Mr. Ball has served as a Director of Koppers Holdings Inc. since February 2015 and as a Director of Koppers Inc. since May 2013. Mr. Dowd has served as Global Vice President, Zero Harm, Koppers Inc. since January 2020.
Biggest changeBall has served as a Director of Koppers Holdings Inc. since February 2015 and as a Director of Koppers Inc. since May 2013. Mr. Dowd has served as Global Vice President, Zero Harm, Koppers Inc. since January 2020. From January 2016 to December 2019, Mr. Dowd served as Global Vice President, Safety, Health, Environmental, and Process Excellence, Koppers Inc. Ms.
Our executive officers hold their positions until the annual meeting of the board of directors or until their respective successors are elected and qualified. Name Age Position Stephanie L. Apostolou 42 General Counsel and Secretary, Koppers Holdings Inc. and Koppers Inc., and Director of Koppers Inc. Leroy M.
Our executive officers hold their positions until the annual meeting of the board of directors or until their respective successors are elected and qualified. Name Age Position Stephanie L. Apostolou 43 General Counsel and Secretary, Koppers Holdings Inc. and Koppers Inc., and Director of Koppers Inc. Leroy M.
Kevin Washington 54 Vice President, External Affairs, Koppers Inc. Ms. Apostolou has served as General Counsel and Secretary of Koppers Holdings Inc. and Koppers Inc. since March 2020. From January 2019 to February 2020, Ms. Apostolou served as Deputy General Counsel and Assistant Secretary of Koppers Holdings Inc. and Koppers Inc. From January 2018 to December 2018, Ms.
Kevin Washington 55 Vice President, External Affairs, Koppers Inc. Ms. Apostolou has served as General Counsel and Secretary of Koppers Holdings Inc. and Koppers Inc. since March 2020. From January 2019 to February 2020, Ms. Apostolou served as Deputy General Counsel and Assistant Secretary of Koppers Holdings Inc. and Koppers Inc. Mr.
ITEM 4. M INE SAFETY DISCLOSURES Not applicable. 24 Koppers Holdings Inc. 2022 Annual Report INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following table sets forth the names, ages and positions of our and Koppers Inc.’s executive officers as of February 27, 2023.
ITEM 4. M INE SAFETY DISCLOSURES Not applicable. 26 Koppers Holdings Inc. 2023 Annual Report INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following table sets forth the names, ages and positions of our and Koppers Inc.’s executive officers as of February 28, 2024.
Ball 54 President, Chief Executive Officer, and Director of Koppers Holdings Inc. and Koppers Inc. Joseph P. Dowd 62 Global Vice President, Zero Harm, Koppers Inc. Leslie S. Hyde 62 Senior Vice President and Chief Sustainability Officer, Koppers Inc. Stephen G. Lucas 57 Vice President, Culture and Engagement, Koppers Inc. Bradley A.
Ball 55 Chief Executive Officer, and Director of Koppers Holdings Inc. and Koppers Inc. Joseph P. Dowd 63 Global Vice President, Zero Harm, Koppers Inc. Leslie S. Hyde 63 Senior Vice President and Chief Sustainability Officer, Koppers Inc. Stephen G. Lucas 58 Vice President, Culture and Engagement, Koppers Inc. Bradley A.
Smith has served as a Director of Koppers Inc. since January 2022. Prior to joining Koppers, from November 2018 to August 2019, Ms. Smith served as Senior Vice President and Chief Financial Officer of EQT Corporation (“EQT”), a publicly traded natural gas production company. Ms. Smith served as Chief Accounting Officer of EQT from September 2016 to October 2018. Ms.
Smith served as Vice President, Finance and Treasurer of Koppers Holdings Inc. and Koppers Inc. Ms. Smith has served as a Director of Koppers Inc. since January 2022. Prior to joining Koppers, from November 2018 to August 2019, Ms. Smith served as Senior Vice President and Chief Financial Officer of EQT Corporation (EQT), a publicly traded natural gas production company.
Skrovanek has served as Vice President, Growth and Innovation, Koppers Inc. since March 2022. From January 2020 to March 2022, Mr. Skrovanek served as Vice President, Purchasing and Strategic Marketing, Koppers Inc. From April 2018 to December 2019, Mr. Skrovanek served as Vice President, Railroad Maintenance of Way. From December 2016 to March 2018, Mr.
Pearce served as Director, Corporate Control and Taxes, Koppers Inc. Mr. Skrovanek has served as Vice President, Growth and Innovation, Koppers Inc. since March 2022. From January 2020 to March 2022, Mr. Skrovanek served as Vice President, Purchasing and Strategic Marketing, Koppers Inc. From April 2018 to December 2019, Mr. Skrovanek served as Vice President, Railroad Maintenance of Way. Ms.
Lucas served as Vice President, Human Resources of AMETEK, Inc., a publicly traded manufacturer of electronic instruments and electromechanical devices. Mr. Pearce has served as Chief Accounting Officer, Koppers Holdings Inc. and Koppers Inc. since May 2019. From April 2008 to April 2019, Mr. Pearce served as Director, Corporate Control and Taxes, Koppers Inc. Mr.
Prior to joining Koppers, from July 2014 to April 2022, Mr. Lucas served as Vice President, Human Resources of AMETEK, Inc., a publicly traded manufacturer of electronic instruments and electromechanical devices. Mr. Pearce has served as Chief Accounting Officer, Koppers Holdings Inc. and Koppers Inc. since May 2019. From April 2008 to April 2019, Mr.
Washington served as Head of Government Affairs of Illinois Tool Works Inc., a publicly traded manufacturer of industrial products and equipment. P ART II
Washington served as Head of Government Affairs of Illinois Tool Works Inc., a publicly traded manufacturer of industrial products and equipment. 27 Koppers Holdings Inc. 2023 Annual Report P ART II
Sullivan served as Senior Vice President, Global Carbon Materials and Chemicals of Koppers Inc. from April 2014 to May 2018. Mr. Washington has served as Vice President, External Affairs, Koppers Inc. since June 2022. Prior to joining Koppers, from October 2012 to June 2022, Mr.
Sullivan served as Senior Vice President, Railroad Products and Services and Global Carbon Materials and Chemicals, Koppers Inc. Mr. Washington has served as Vice President, External Affairs, Koppers Inc. since June 2022. Prior to joining Koppers, from October 2012 to June 2022, Mr.
Skrovanek served as Head of Strategic Initiatives, Koppers Inc. Ms. Smith has served as Chief Financial Officer and Treasurer of Koppers Holdings Inc. and Koppers Inc. since January 2022. From February 2020 to December 2021, Ms. Smith served as Vice President, Finance and Treasurer of Koppers Holdings Inc. and Koppers Inc. Ms.
Smith has served as Chief Financial Officer of Koppers Holdings Inc. and Koppers Inc. since February 2022. From January 2022 to February 2022, Ms. Smith served as Chief Financial Officer and Treasurer of Koppers Holdings Inc. and Koppers Inc. From February 2020 to December 2021, Ms.
Pearce 56 Chief Accounting Officer, Koppers Holdings Inc. and Koppers Inc. Daniel J. Skrovanek 61 Vice President, Growth and Innovation, Koppers Inc. Jimmi Sue Smith 50 Chief Financial Officer, Koppers Holdings Inc. and Koppers Inc., and Director of Koppers Inc. James A. Sullivan 59 Executive Vice President and Chief Operating Officer, Koppers Holdings Inc. and Koppers Inc.
Pearce 57 Chief Accounting Officer, Koppers Holdings Inc. and Koppers Inc. Daniel J. Skrovanek 62 Vice President, Growth and Innovation, Koppers Inc. Jimmi Sue Smith 51 Chief Financial Officer, Koppers Holdings Inc. and Koppers Inc., and Director of Koppers Inc. James A. Sullivan 60 President and Chief Operating Officer, Koppers Holdings Inc. and Koppers Inc.
From January 2016 to December 2019, Mr. Dowd served as Global Vice President, Safety, Health, Environmental, and Process Excellence, Koppers Inc. Ms. Hyde has served as Senior Vice President and Chief Sustainability Officer, Koppers Inc. since January 2020. From November 2017 to December 2019, Ms. Hyde served as Vice President, Corporate Strategy and Risk Management, Koppers Inc.
Hyde has served as Senior Vice President and Chief Sustainability Officer, Koppers Inc. since January 2020. From November 2017 to December 2019, Ms. Hyde served as Vice President, Corporate Strategy and Risk Management, Koppers Inc. Mr. Lucas has served as Vice President, Culture and Engagement, Koppers Inc. since April 2022.
Sullivan has served as Executive Vice President and Chief Operating Officer of Koppers Holdings Inc. and Koppers Inc. since January 2020. From May 2018 to December 2019, Mr. Sullivan served as Senior Vice President, Railroad Products and Services and Global Carbon Materials and Chemicals, Koppers Inc. Prior to that, Mr.
Mr. Sullivan has served as President and Chief Operating Officer of Koppers Holdings Inc. and Koppers Inc. since January 2024. Mr. Sullivan served as Executive Vice President and Chief Operating Officer of Koppers Holdings Inc. and Koppers Inc. from January 2020 to December 2023. From May 2018 to December 2019, Mr.
Apostolou served as Assistant General Counsel and Assistant Secretary of Koppers Holdings Inc. and Koppers Inc. From December 2014 to December 2017, Ms. Apostolou served as Assistant General Counsel of Koppers Inc. Ms. Apostolou has served as a Director of Koppers Inc. since May 2020. Mr.
Ball has served as Chief Executive Officer of Koppers Holdings Inc. and Koppers Inc. since January 2024. Mr. Ball served as President and Chief Executive Officer of Koppers Holdings Inc. and Koppers Inc. from January 2015 to December 2023. Mr.
Removed
From January 2016 to October 2017, Ms. Hyde served as Vice President, Risk Management and Deputy General Counsel of Koppers Inc. Mr. Lucas has served as Vice President, Culture and Engagement, Koppers Inc. since April 2022. Prior to joining Koppers, from July 2014 to April 2022, Mr.
Removed
Smith also served as Chief Accounting Officer of the general partners of EQM Midstream Partners, LP and EQGP Holdings, LP from September 2016 to October 2018, and served as Chief Accounting Officer of the general partner of RM Partners, LP, from November 2017 to July 2018. 25 Koppers Holdings Inc. 2022 Annual Report Mr.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSee “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Restrictions on Dividends to Koppers Holdings.” Issuer Purchases of Equity Securities The following table sets forth information regarding Koppers Holdings’ repurchases of shares of its common stock during the three months ended December 31, 2022: Period Total Number of Common Shares Purchased (1) Average Price paid per Common Share Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Common Shares that May Yet be Purchased Under the Plans or Programs (Dollars in Millions) October 1 – October 31 0 $ 0.00 0 $ 76.9 November 1 – November 30 172,721 $ 28.87 172,721 $ 71.9 December 1 – December 31 0 $ 0.00 0 $ 71.9 Total 172,721 $ 28.87 172,721 $ 71.9 (1) On August 6, 2021, we announced the board of directors approved a $100 million share repurchase program.
Biggest changeIssuer Purchases of Equity Securities The following table sets forth information regarding Koppers Holdings’ repurchases of shares of its common stock during the three months ended December 31, 2023: Period Total Number of Common Shares Purchased (1) Average Price Paid per Common Share Total Number of Common Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Common Shares that May Yet be Purchased Under the Plans or Programs (Dollars in Millions) October 1 – October 31 0 $ 0.00 0 $ 64.4 November 1 – November 30 180,389 $ 42.02 180,389 $ 56.8 December 1 – December 31 236,100 $ 48.57 236,100 $ 54.1 Total 416,489 416,489 (1) On August 6, 2021, we announced that the board of directors approved a $100 million share repurchase program.
ITEM 5. M ARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our shares of common stock are listed and traded on the NYSE under the symbol “KOP”. The number of registered holders of Koppers common stock at January 31, 2023 was 79.
ITEM 5. M ARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our shares of common stock are listed and traded on the NYSE under the symbol KOP. The number of registered holders of Koppers common stock at January 31, 2024 was 58.
On February 15, 2023, the board of directors declared a quarterly dividend of $0.06 cents per common share, payable on March 27, 2023 to shareholders of record as of March 10, 2023. Prior to February 2022, we had not declared a dividend since November 2014.
On February 14, 2024, the board of directors declared a quarterly dividend of $0.07 cents per common share, payable on March 25, 2024 to shareholders of record as of March 8, 2024. Prior to February 2022, we had not declared a dividend since November 2014.
Our ability to pay dividends is restricted by limitations on the ability of our only direct subsidiary, Koppers Inc., to pay dividends, as a result of limitations imposed by the Credit Facility, the indenture governing the 2025 Notes and by Pennsylvania law.
Our ability to pay dividends is restricted by limitations on the ability of our only direct subsidiary, Koppers Inc., to pay dividends, as a result of limitations imposed by the Credit Facility and by Pennsylvania law. See Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Restrictions on Dividends to Koppers Holdings.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

57 edited+36 added−113 removed7 unchanged
Biggest changeYear Ended December 31, (amounts in millions) 2022 2021 2020 Net income $ 63.2 $ 84.9 $ 121.0 Interest expense 44.8 40.5 48.9 Depreciation and amortization 56.1 57.7 54.1 Depreciation in impairment and restructuring charges 0.0 0.7 2.0 Income taxes 31.6 34.5 21.0 Discontinued operations 0.6 0.2 (31.9 ) Sub-total 196.3 218.5 215.1 Adjustments to arrive at adjusted EBITDA: Impairment, restructuring and plant closure costs (1) 1.1 4.2 15.7 (Gain) on sale of assets (2.5 ) (31.2 ) 0.0 LIFO expense (benefit) 25.6 28.2 (13.7 ) Mark-to-market commodity hedging losses (gains) 6.5 3.8 (9.2 ) Inventory adjustment (2) 1.1 0.0 0.0 Pension settlement 0.0 0.0 0.1 Discretionary incentive (3) 0.0 0.0 3.0 Total adjustments 31.8 5.0 (4.1 ) Adjusted EBITDA $ 228.1 $ 223.5 $ 211.0 (1) Includes costs associated with restructuring, sales and closures of certain RUPS and CMC facilities as described in Note 4 – “Plant Closures and Divestitures”.
Biggest changeGAAP, to adjusted EBITDA on a consolidated basis: Year Ended December 31, (Dollars in millions) 2023 2022 Net income $ 89.8 $ 63.2 Interest expense 71.0 44.8 Depreciation and amortization 57.0 56.1 Income taxes 34.8 31.6 Discontinued operations 0.0 0.6 Sub-total 252.6 196.3 Adjustments to arrive at adjusted EBITDA: LIFO expense (1) 6.0 25.6 Impairment, restructuring and plant closure costs 0.1 1.1 (Gain) on sale of assets (1.8 ) (2.5 ) Mark-to-market commodity hedging (gains) losses (0.5 ) 6.5 Inventory adjustment 0.0 1.1 Total adjustments 3.8 31.8 Adjusted EBITDA $ 256.4 $ 228.1 (1) The LIFO expense adjustment removes the entire impact of LIFO and effectively reflects the results as if we were on a FIFO inventory basis.
Pension and Post-retirement Benefits . Accounting for pension and other post-retirement benefit obligations involves numerous assumptions, the most significant of which relate to the following: ▪ the discount rate for measuring the present value of future plan obligations; and ▪ the expected long-term return on plan assets.
Accounting for pension and other post-retirement benefit obligations involves numerous assumptions, the most significant of which relate to the following: ▪ the discount rate for measuring the present value of future plan obligations; and ▪ the expected long-term return on plan assets.
Outlook Trend Overview Our businesses and results of operations are affected by various competitive and other factors including (i) the impact of global economic conditions on demand for our products, including the impact of imported products from competitors in certain regions where we operate; (ii) raw material pricing and availability, in particular the cost and availability of hardwood lumber for railroad crossties and softwood lumber for utility poles, scrap copper prices, and the cost and amount of coal tar available in global markets, which is negatively affected by reductions in blast furnace steel production; (iii) volatility in oil prices, which impacts the cost of coal tar and certain other raw materials, as well as selling prices and margins for certain of our products including carbon black feedstock, phthalic anhydride, and naphthalene; (iv) competitive conditions in global carbon pitch markets; and (v) changes in foreign exchange rates.
Our businesses and results of operations are affected by various competitive and other factors including (i) the impact of global economic conditions on demand for our products, including the impact of imported products from competitors in certain regions where we operate; (ii) raw material pricing and availability, in particular the cost and availability of hardwood lumber for railroad crossties, softwood lumber for utility poles, scrap copper prices, and the cost and amount of coal tar available in global markets, which is negatively affected by reductions in blast furnace steel production; (iii) volatility in oil prices, which impacts the cost of coal tar and certain other raw materials, as well as selling prices and margins for certain of our products including carbon black feedstock, phthalic anhydride, and naphthalene; (iv) competitive conditions in global carbon pitch markets; and (v) changes in foreign exchange rates.
ITEM 7. M ANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview See description of the segments in “Item 1 – Business”. Non-GAAP Financial Measures We utilize certain financial measures that are not in accordance with U.S. generally accepted accounting principles (U.S. GAAP) to analyze and manage the performance of our business.
ITEM 7. M ANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview See description of the segments in Item 1 – Business. Non-GAAP Financial Measures We utilize certain financial measures that are not in accordance with U.S. generally accepted accounting principles (U.S. GAAP) to analyze and manage the performance of our business.
In determining the assumed discount rates at December 31, 2022, we used our third-party actuary’s discount rate model. This model calculates an equivalent single discount rate for the projected benefit plan cash flows using a hypothetical bond portfolio to match expected cash flows under our benefit plans.
In determining the assumed discount rates at December 31, 2023, we used our third-party actuary’s discount rate model. This model calculates an equivalent single discount rate for the projected benefit plan cash flows using a hypothetical bond portfolio to match expected cash flows under our benefit plans.
We may also incur costs as a result of governmental or third-party claims, or otherwise incur costs, relating to cleanup of, or for injuries resulting from, contamination at sites associated with past and present operations. We accrue for environmental liabilities when a determination can be made that they are probable and reasonably estimable.
We may also incur costs as a result of governmental or third-party claims, or other requirements, relating to cleanup of, or for injuries resulting from, contamination at sites associated with past and present operations. We accrue for environmental liabilities when a determination can be made that they are probable and reasonably estimable.
Our Railroad Products and Services reporting unit and our Utility Products reporting unit have headroom at the low-end of that range and could experience impairment in the future if we do not achieve our profitability projections, there is a change in key assumptions underlying the valuation or if we experience a substantial decrease in our stock price.
Our Railroad Products and Services reporting unit is at the low-end of that range and could experience impairment in the future if we do not achieve our profitability projections, there is a change in key assumptions underlying the valuation or if we experience a substantial decrease in our stock price.
Adjusted EBITDA is a non-GAAP financial measure defined as net income from continuing operations before interest, income taxes, depreciation and amortization along with other adjustments. These adjustments are items that we believe are not representative of underlying business performance.
Adjusted EBITDA is a non-GAAP financial measure defined as income from continuing operations before interest, income taxes, depreciation, amortization and other adjustments. These other adjustments are items that we believe are not representative of underlying business performance.
Although we believe 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 measures.
Although we believe that these non-GAAP financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP financial measures and should be read in conjunction with the relevant GAAP financial measures.
As discussed under Environmental Matters in “Item 1 – Business”, we are subject to federal, state, local and foreign laws and regulations and potential liabilities relating to the protection of the environment and human health and safety. We expect to incur substantial costs for ongoing compliance with such laws and regulations.
As discussed under Environmental Matters in Item 1 – Business, we are subject to federal, state, local, and foreign laws and regulations, and potential liabilities relating to the protection of the environment and human health and safety. We expect to incur substantial costs for ongoing compliance with such laws and regulations.
The bonds used are rated AA or higher by a recognized rating agency and only non-callable bonds are included with the exception of those with a “make-whole call” feature. The actuary limited the selection to those bonds with a minimum of 100,000 outstanding issues.
The bonds used are rated AA or higher by a recognized rating agency, and only non-callable bonds are included with the exception of those with a make-whole call feature. The actuary limited the selection to those bonds with a minimum of 100,000 outstanding issues.
Outlier bonds whose yields exceeded two standard deviations from the yield curve derived from similar quality bonds were excluded. 37 Koppers Holdings Inc. 2022 Annual Report Of the assumptions used to measure the year-end obligations and estimated annual net periodic benefit cost, the discount rate has the most significant effect on the periodic benefit cost reported for the plans.
Outlier bonds whose yields exceeded two standard deviations from the yield curve derived from similar quality bonds were excluded. Of the assumptions used to measure the year-end obligations and estimated annual net periodic benefit cost, the discount rate has the most significant effect on the periodic benefit cost reported for the plans.
Goodwill is not amortized but is assessed for impairment annually, using a quantitative goodwill impairment test, or more frequently if a change in circumstances or the occurrence of events indicate the carrying value may not be recoverable.
Goodwill is assessed for impairment annually, using a quantitative goodwill impairment test, or more frequently if a change in circumstances or the occurrence of events indicates the carrying value may not be recoverable.
Financial Statements and Supplementary Data – Note 14 includes detailed information about the assumptions used to calculate the components of our annual defined benefit pension and other post-retirement plan expense, as well as the obligations and accumulated other comprehensive loss reported on the year-end balance sheets. Environmental Liabilities .
See Note 14 – Pensions and Post-Retirement Benefit Plans for detailed information about the assumptions used to calculate the components of our annual defined benefit pension and other post-retirement plan expense, as well as the obligations and accumulated other comprehensive loss reported on the year-end balance sheets. Environmental Liabilities .
Based on our evaluation performed, we determined the fair value of each of the reporting units exceeded its respective carrying amount, and therefore, we determined that goodwill was not impaired at any of our reporting units as of December 31, 2022.
We determined the fair value of each of the reporting units exceeded its respective carrying amount; therefore, we determined that goodwill was not impaired at any of our reporting units as of December 31, 2023.
The asset rate of return assumption considers the asset mix of the plans (currently targeted at approximately 30 to 40 percent equity securities and 60 to 70 percent fixed income securities for the funded U.S. pension plan), past performance and other factors, including expected re-allocations of asset mix occurring within a reasonable period of time.
The asset rate of return assumption considers the asset mix of the plans (currently targeted at 100 percent fixed income securities and cash equivalents for the funded U.S. pension plan), past performance and other factors, including expected re-allocations of asset mix occurring within a reasonable period of time.
Because of the high degree of uncertainty regarding the timing of future cash outflows associated with these liabilities, we are unable to estimate the years in which settlement will occur with the respective taxing authorities.
Because of the high degree of uncertainty regarding the timing of future cash outflows associated with these liabilities, we are unable to estimate the years in which settlement will occur with the respective taxing authorities. Additional information regarding taxes is disclosed in Note 10 – Income Taxes.
Recently Issued Accounting Guidance Information regarding recently issued accounting guidance is contained in Note 2 – “Summary of Significant Accounting Policies.” Critical Accounting Policies The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to use judgment in making estimates and assumptions that affect the reported amounts of revenues and expenses, assets and liabilities, and the disclosure of contingent liabilities.
Critical Accounting Policies The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to use judgment in making estimates and assumptions that affect the reported amounts of revenues and expenses, assets and liabilities, and the disclosure of contingent liabilities.
See Note 10 – "Income Taxes." Debt Covenants at December 31, 2022 The covenants that affect availability of the Credit Facility and which may restrict the ability of Koppers Inc. to pay dividends include the following financial ratios: ▪ The total net leverage ratio, calculated as of the last day of each fiscal quarter, is not permitted to exceed 5.0.
Bank Debt Covenants at December 31, 2023 The bank debt covenants that affect availability of the Credit Facility and which may restrict the ability of Koppers Inc. to pay dividends include the following financial ratios: ▪ The total net leverage ratio is calculated as of the last day of each fiscal quarter in accordance with the Credit Facility definitions of consolidated total net debt divided by consolidated EBITDA and is not permitted to exceed 5.0.
Our asset rate of return assumption is 4.65 percent for 2022 defined benefit pension expense. Decreasing the asset rate of return assumption by 0.25 percent would increase our defined benefit pension expense by $0.4 million. Item 8.
Our asset rate of return assumption is 5.62 percent for 2023 defined benefit pension expense. Decreasing the asset rate of return assumption by 0.25 percent would increase our defined benefit pension expense by $0.3 million.
Debt will fluctuate throughout any operating period based upon the timing of receipts from customers and payments to vendors. As of December 31, 2022, approximately 80 percent of accounts payable was current and 20 percent was 1-30 days past due.
The amount of our outstanding debt and our overall cash flows will fluctuate throughout any operating period based upon, among other things, the timing of receipts from customers and payments to vendors. As of December 31, 2023, approximately 85 percent of accounts payable was current and 15 percent was 1-30 days past due.
Liquidity and Capital Resources Our Credit Facility is described in Note 15 – “Debt.” Restrictions on Dividends to Koppers Holdings Koppers Holdings depends on the dividends from the earnings of Koppers Inc. and its subsidiaries to generate the funds necessary to meet its financial obligations, including the payment of any declared dividend of Koppers Holdings.
Restrictions on Dividends to Koppers Holdings Koppers Holdings depends on the dividends from the earnings of Koppers Inc. and its subsidiaries to generate the funds necessary to meet its financial obligations, including the payment of any declared dividend of Koppers Holdings.
At the date a reasonable estimate of the ultimate settlement can be made, we will record an asset retirement obligation and such amounts may be material to the consolidated financial statements in the period in which they are recorded. Item 8. Financial Statements and Supplementary Data – Note 2 includes information on expense recognized during the past two years.
At the date a reasonable estimate of the ultimate settlement amount and timing can be made, we will record an asset retirement obligation, and such amounts may be material to the consolidated financial statements in the period in which they are recorded.
Decreasing the discount rates by 0.25 percent for our pension plans and 0.25 percent for our other post-retirement benefit plans would increase pension obligations and other post-retirement benefit plan obligations by $4.0 million. Increasing the discount rates would decrease defined benefit pension expense and other post-retirement benefit plan expense by $0.1 million.
Decreasing the discount rates by 0.25 percent for our pension plans and 0.25 percent for our other post-retirement benefit plans would increase pension obligations and other post-retirement benefit plan obligations by $3.9 million. Increasing the discount rates by the same amount would not have a material effect on defined benefit pension expense and other post-retirement benefit plan expense.
Additionally, disruptions to our business such as prolonged recessionary periods or unexpected significant declines in operating results of the relevant reporting units could result in charges for goodwill and other asset impairments in future periods. Deferred Tax Assets .
Additionally, disruptions to our business such as prolonged recessionary periods or unexpected significant declines in operating results of the relevant reporting units could result in charges for goodwill and other asset impairments in future periods. An estimate of the sensitivity to changes in our assumptions is not practicable given the numerous assumptions that can materially affect our estimates.
Inherent uncertainties exist in such evaluations primarily due to unknown conditions and other circumstances, changing governmental regulations and legal standards regarding liability, and evolving technologies. Item 8. Financial Statements and Supplementary Data – Note 19 includes information about environmental liabilities. 38 Koppers Holdings Inc. 2022 Annual Report
Inherent uncertainties exist in such estimates primarily due to unknown conditions and other circumstances, changing governmental regulations and legal standards regarding liability, and evolving technologies. See Note 17 – Commitments and Contingent Liabilities for information about environmental liabilities. 35 Koppers Holdings Inc. 2023 Annual Report
Liquidity As of December 31, 2022, the maximum amount available under the Credit Facility considering restrictions from debt covenants was approximately $412 million. The maximum amount available under the Credit Facility is increased by the amount of cash held by certain subsidiaries as defined by the Credit Facility.
Liquidity As of December 31, 2023, the maximum amount available under the Credit Facility considering restrictions from debt covenants was approximately $386 million.
Adjusted items typically include certain expenses associated with impairment, restructuring and plant closure costs, significant gains and losses on asset disposals or business combinations, LIFO and mark-to-market commodity hedging and other unusual items. Adjusted EBITDA is the primary measure of profitability we use to evaluate our businesses.
Adjusted items typically include certain expenses associated with impairment, restructuring and plant closure costs, significant gains and losses on asset disposals or business combinations, LIFO, mark-to-market commodity hedging and other unusual items. The LIFO expense adjustment removes the entire impact of LIFO and effectively reflects the results as if we were on a FIFO inventory basis.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.
Deferred Tax Assets . See Note 10 – Income Taxes for information on deferred tax activity. Our deferred tax assets and liabilities are predominantly related to our domestic entities. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.
Capital expenditures in 2023, excluding acquisitions, if any, are expected to total approximately $105 million and are expected to be funded by cash from operations. We anticipate that our liquidity will continue to be adequate to fund our cash requirements for the next twelve months. We manage our working capital to increase our flexibility to pay down debt.
We anticipate that our liquidity will continue to be adequate to fund our cash requirements for at least the next twelve months. We manage our working capital to increase our flexibility to pay down debt.
Foreign currency changes compared to the prior year period had an unfavorable impact on sales in the current year period of $3.3 million, mainly from our Australian utility pole business. PC net sales for the year ended December 31, 2022 increased by $76.6 million, or 15 percent, compared to the prior year.
Foreign currency changes compared to the prior year period had an unfavorable impact on sales in the current year period of $2.0 million, mainly from our Australian utility pole business. PC net sales increased as a result of global price increases of $75.5 million, or 13 percent in the current year period, particularly in the Americas for our copper-based preservatives.
Foreign currency transaction gains and losses result from transactions denominated in a currency which is different from the currency used by the entity to prepare its financial statements. Foreign currency transaction (losses) gains were $(0.8) million, $(0.7) million and $2.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Foreign currency transaction gains and losses result from transactions denominated in a currency that is different from the currency used by the entity to prepare its financial statements.
At December 31, 2021, the maximum amount available under the previous credit agreement which contained different covenants was approximately $300 million. 34 Koppers Holdings Inc. 2022 Annual Report Our need for cash in the next twelve months relates primarily to contractual obligations which include potential acquisitions, debt service, pension plan funding, purchase commitments and operating leases, as well as working capital, capital programs, the funding of plant consolidation and rationalizations, dividends and share repurchases.
The maximum amount available under the Credit Facility is increased by the amount of cash held by certain subsidiaries under the terms of the Credit Facility. 32 Koppers Holdings Inc. 2023 Annual Report Our need for cash in the next twelve months relates primarily to contractual obligations which includes debt service, pension plan funding, purchase commitments and operating leases, as well as working capital, capital spending, dividends and share repurchases.
In evaluating the need for a valuation allowance, management considers various factors, including the expected level of future taxable income, available tax planning strategies and reversals of existing taxable temporary differences. The realization of a majority of our deferred tax assets is not subject to any expiration and is dependent upon the reversal of the underlying temporary differences.
In evaluating the need for a valuation allowance, management considers various factors, including the expected level of future taxable income, available tax planning strategies and reversals of existing taxable temporary differences, all of which are subject to change based on business conditions and changes in tax law and regulations.
Adjusted EBITDA is reconciled to net income on a consolidated basis, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP.
The following table reconciles net income, the most directly comparable financial measure determined and reported in accordance with U.S.
The total net leverage ratio as of December 31, 2022 was 3.3. ▪ The cash interest coverage ratio, calculated as of the last day of each fiscal quarter, is not permitted to be less than 2.0. The cash interest coverage ratio as of December 31, 2022 was 5.5. We are currently in compliance with all covenants governing the Credit Facility.
The total net leverage ratio as of December 31, 2023 was 2.9. Effective during the first quarter of 2024, the total net leverage ratio is not permitted to exceed 4.75. ▪ The cash interest coverage ratio, calculated as of the last day of each fiscal quarter, is not permitted to be less than 2.0.
Net cash provided by operating activities was $103.0 million for the year ended December 31, 2021 as compared to net cash provided by operating activities of $127.1 million for the year ended December 31, 2020.
Cash Flow Net cash provided by operating activities for the year ended December 31, 2023 was $146.1 million compared to $102.3 million in the prior year.
We believe that adjusted EBITDA provides information useful to investors in understanding the underlying operational performance of the company, our business and performance trends, and facilitates comparisons between periods and with other corporations in similar industries.
We believe that adjusted EBITDA provides information useful to investors in understanding the underlying operational performance of the company, our business and performance trends, and facilitates comparisons between periods. The exclusion of certain items permits evaluation and a comparison between periods of results for business operations, and it is on this basis that our management internally assesses our performance.
Net cash provided by financing activities was $4.8 million for the year ended December 31, 2022 as compared to net cash used in financing activities of $4.0 million for the year ended December 31, 2021.
Net cash used in investing activities for the year ended December 31, 2023 was $116.0 million compared to $114.8 million in the prior year driven primarily by capital expenditures.
Pension and other employee benefit plan funding obligations (for defined benefit plans) are not included in the contractual obligation table. We expect defined benefit plan contributions to total approximately $7.0 million in 2023.
Pension and other employee benefit plan funding contributions (for defined benefit plans) are expected to total approximately $7.6 million in 2024, for normal plan operations.
We measure asset retirement obligations based upon the applicable accounting guidance, using certain assumptions including estimates regarding the recovery of residues in storage tanks. In the event that operational or regulatory issues vary from our estimates, we could incur additional significant charges to income and increases in cash expenditures related to the disposal of those residues.
In the event that the amount of residue, the effort required to remove the residue or regulatory requirements vary from our estimates, we could incur additional significant charges to income and increases in cash expenditures related to the disposal of those residues.
Selling, general and administrative expenses for the year ended December 31, 2022 were $4.4 million higher when compared to the prior year period due mainly to an increase of $5.8 million in travel, entertainment and advertising expenses and $1.9 million for consulting and other professional services, partially offset by favorable insurance claims and compensation related costs during the current year.
Selling, general and administrative expenses were $20.8 million higher when compared to the prior year period due mainly to an increase in compensation related costs along with an increase in bank fees and travel expenses. These increases were partly offset by a reduction in professional services and insurance costs.
We recognize revenue upon the completion of performance obligations under contracts with our customers and when control of a good or service is transferred to the customer. Substantially all of our contracts with our customers are ship and invoice arrangements where revenue is recognized when we complete our performance obligations and transfer control to the customer.
Revenue is recognized upon the completion of performance obligations under our contracts with customers and when control of a good or service is transferred to the customer. See Note 2 – Summary of Significant Accounting Policies for our revenue recognition policy. Goodwill and Intangible Assets .
Results of Operations – Comparison of Years Ended December 31, 2021 and December 31, 2020 Consolidated Results Net sales for the years ended December 31, 2021 and 2020 are summarized by segment in the following table: Year Ended December 31, 2021 2020 Net Change (Dollars in millions) Railroad and Utility Products and Services $ 729.9 $ 759.1 -4 % Performance Chemicals 503.3 526.3 -4 % Carbon Materials and Chemicals 445.4 383.7 16 % $ 1,678.6 $ 1,669.1 1 % RUPS net sales for the year ended December 31, 2021 decreased by $29.2 million, or four percent, compared to the prior year.
Results of Operations – Comparison of Years Ended December 31, 2023 and December 31, 2022 Consolidated Results Net sales for the years ended December 31, 2023 and 2022 are summarized by segment in the following table: Year Ended December 31, 2023 2022 Change % Change (Dollars in millions) Railroad and Utility Products and Services $ 897.9 $ 788.3 $ 109.6 14 % Performance Chemicals 671.6 579.9 91.7 16 % Carbon Materials and Chemicals 584.7 612.3 (27.6 ) -5 % $ 2,154.2 $ 1,980.5 $ 173.7 9 % RUPS net sales increased largely due to $83.5 million of pricing increases across multiple markets, particularly for crossties and utility poles.
To the extent future taxable income projections are not achieved, we could be required to record a valuation allowance against certain deferred tax assets. Item 8. Financial Statements and Supplementary Data – Note 10 includes information on deferred tax activity during the past two years. Asset Retirement Obligations .
To the extent future taxable income projections are not achieved, we could be required to record a valuation allowance against certain deferred tax assets, which would result in additional income tax expense. 34 Koppers Holdings Inc. 2023 Annual Report Asset Retirement Obligations .
The increases were offset, in part, by volume decreases for preservatives within our European markets. Foreign currency changes compared to the prior year period had an unfavorable impact on sales in the current year period of $10.1 million.
Volumes increased by 3.6 percent globally, including a 7.7 percent increase in the Americas, partly offset by volume decreases in Australasia and Europe. Foreign currency changes compared to the prior year period had an unfavorable impact on sales in the current year period of $4.3 million.
We may also use cash to pursue other potential strategic acquisitions or voluntary pension plan contributions. In addition, we continually monitor debt and capital markets.
We may also use cash to pursue other potential strategic acquisitions or voluntary pension plan contributions, including pension plan settlements. Capital expenditures in 2024, excluding acquisitions, if any, are expected to total approximately $100 million and are expected to be funded by cash from operations.
Gain on sale of assets for the year ended December 31, 2022 was related to the sale of our utility pole treating facility in Sweetwater, Tennessee while the gain on sale of assets for the prior year period was related to the sales of two previously decommissioned plants as described in Note 4 – “Plant Closures and Divestitures”.
Gain on sale of assets for 2023 was related to the demolition of our closed coal tar distillation facility located in China, while the prior year gain was related to the sale of our utility pole treating facility in Sweetwater, Tennessee.
This increase in the estimated annual effective income tax rate is attributable to a shift in the geographical mix of earnings from domestic to foreign sources in 2022. 30 Koppers Holdings Inc. 2022 Annual Report Segment Results Segment adjusted EBITDA and adjusted EBITDA margin for the years ended December 31, 2022 and 2021 are summarized in the following table: Year Ended December 31, (amounts in millions) 2022 2021 % Change Adjusted EBITDA: Railroad and Utility Products and Services $ 53.6 $ 45.4 18 % Performance Chemicals 75.5 101.8 -26 % Carbon Materials and Chemicals 99.0 76.3 30 % Total Adjusted EBITDA $ 228.1 $ 223.5 2 % Adjusted EBITDA margin as a percentage of GAAP sales: Railroad and Utility Products and Services 6.8 % 6.2 % 0.6 % Performance Chemicals 13.0 % 20.2 % -7.2 % Carbon Materials and Chemicals 16.2 % 17.1 % -1.0 % Total Adjusted EBITDA margin 11.5 % 13.3 % -1.8 % RUPS adjusted EBITDA increased by $8.2 million compared to the prior year period.
Segment Results Segment adjusted EBITDA and adjusted EBITDA margin for the years ended December 31, 2023 and 2022 are summarized in the following table: Year Ended December 31, (Dollars in millions) 2023 2022 Change % Change Adjusted EBITDA: Railroad and Utility Products and Services $ 84.0 $ 53.6 $ 30.4 57 % Performance Chemicals 123.1 75.5 47.6 63 % Carbon Materials and Chemicals 49.3 99.0 (49.7 ) -50 % Total Adjusted EBITDA $ 256.4 $ 228.1 $ 28.3 12 % Adjusted EBITDA margin as a percentage of GAAP sales: Railroad and Utility Products and Services 9.4 % 6.8 % 2.6 % 38 % Performance Chemicals 18.3 % 13.0 % 5.3 % 41 % Carbon Materials and Chemicals 8.4 % 16.2 % -7.8 % -48 % RUPS adjusted EBITDA increased due primarily to net sales price increases and $19.9 million from improved plant utilization, which combined to more than offset higher raw material, operating and selling, general and administrative expenses of $69.4 million.
The cash provided by financing activities in the year ended December 31, 2022 reflected net borrowings of $36.3 million partly offset by repurchases of common stock, dividends paid and payments of debt issuance costs.
In the prior year, the primary source of financing cash flows was net borrowings of $36.3 million and the primary uses of financing cash flows were repurchases of common stock, payments of debt issuance costs and dividends paid. Liquidity and Capital Resources Our Credit Facility is described in Note 15 – Debt.
Foreign currency changes compared to the prior year period from our international markets had a favorable impact on sales in 2021 of $7.2 million. 31 Koppers Holdings Inc. 2022 Annual Report CMC net sales for the year ended December 31, 2021 increased by $61.7 million, or 16 percent, compared to the prior year due mainly to higher sales prices for carbon pitch, distillates and chemicals in 2021.
Foreign currency changes compared to the prior year period from our international markets had a favorable impact on sales in the current year period of $0.7 million. 30 Koppers Holdings Inc. 2023 Annual Report Cost of sales as a percentage of net sales was 80 percent, compared to 83 percent in the prior year period as global price increases helped offset increased raw material and operating costs incurred in 2022 and 2023 on a consolidated basis and across most of our businesses.
Capital expenditures for both periods include maintenance projects and increased investment in growth projects, primarily in our crosstie business, such as the expansion of our RUPS facility in North Little Rock, Arkansas.
Capital expenditures for both periods include increased investment in growth projects, such as the expansion of our RUPS facility in North Little Rock, Arkansas and a yield enhancement project at our CMC facility in Nyborg, Denmark. Net cash provided by financing activities for the year ended December 31, 2023 was $2.6 million compared to $4.8 million in the prior year.
Adjusted EBITDA as a percentage of net sales decreased to 16.2 percent from 17.1 percent in the prior year period due to an increase in raw material and other operating costs partly offset by a favorable pricing environment compared to the prior year period.
CMC adjusted EBITDA decreased due to an increase of $43.6 million in raw material and selling, general and administrative costs, a $2.8 million bad debt reserve and volume decreases, partly offset by lower operating costs in North America compared to the prior year period as well as $2.3 million of insurance proceeds recognized in the current year period.
We annually evaluate the remaining useful life of the intangible asset being amortized to determine whether events or circumstances warrant a revision to the remaining period of amortization. If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying amount of the intangible asset will be amortized prospectively over that revised remaining useful life.
We annually evaluate the remaining useful life of the intangible asset being amortized to determine whether events or circumstances warrant a revision to the remaining period of amortization. See Note 13 – Goodwill and Intangible Assets for our goodwill and intangible assets accounting policy. We utilize the work of third-party specialists to assist in the fair value estimates.
During the fourth quarter of 2022, we performed an impairment test for goodwill for each of our reporting units using the quantitative approach.
Discount rates may be impacted by adverse changes in macroeconomic environment, volatility in the equity and debt markets or other factors. Our key assumptions are materially consistent with prior year. During the fourth quarter of 2023, we performed an impairment test for goodwill for each of our reporting units using the quantitative approach.
As of December 31, 2021, approximately 75 percent of accounts payable was current, 20 percent was 1-30 days past due and five percent was greater than 30 days past due. Schedule of Certain Contractual Obligations The following table details our projected payments for our significant contractual obligations as of December 31, 2022.
As of December 31, 2022, approximately 80 percent of accounts payable was current and 20 percent was 1-30 days past due. Purchase Commitments and Contractual Obligations Purchase commitments consist primarily of raw materials purchase contracts. These are typically not fixed price arrangements; the prices are based on prevailing market prices.
Foreign currency changes from our international markets had an unfavorable impact on profitability in the current year period of $10.0 million. In addition, the prior year period margin was favorably impacted by a $2.9 million insurance recovery.
Foreign currency changes from our international markets had an unfavorable impact on profitability in the current year period of $1.2 million. CMC’s near-term profitability may be negatively affected by customers associated with bad debt reserve activity, but this is not expected to have a material effect on the Company’s overall profitability in 2024. See Item 7.
Removed
The exclusion of certain items permits evaluation and a comparison of results for business operations, and it is on this basis that our management internally assesses our performance. In addition, our board of directors and executive management team use adjusted EBITDA as a performance measure under the company’s annual incentive plans.
Added
Adjusted EBITDA is the primary measure of profitability we use to evaluate our businesses. In addition, adjusted EBITDA is the primary measure used to determine the level of achievement of management's short-term incentive goals and related payout, as well as one of the measures used to determine performance and related payouts for certain performance share units granted to management.
Removed
Refer to “Note 9 – Segment Information” for reconciliations from net income to adjusted EBITDA on a consolidated basis.
Added
An Adjusted EBITDA Reconciliation is presented in the Segment Results section and reconciles net income to adjusted EBITDA on a consolidated basis. We do not provide reconciliations of guidance for adjusted EBITDA and adjusted EPS to comparable GAAP measures, in reliance on the unreasonable efforts exception.
Removed
Railroad and Utility Products and Services Historically, North American demand for crossties had been in the range of 18 million to 22 million crossties annually. However, the crosstie replacement market has been significantly lower in recent years.
Added
We are unable, without unreasonable efforts, to forecast certain items required to develop meaningful comparable GAAP financial measures. These items include, but are not limited to, restructuring and impairment charges, acquisition-related costs, mark-to-market commodity hedging, and LIFO adjustments that are difficult to forecast for a GAAP estimate and may be significant.
Removed
According to the Railway Tie Association (“RTA”), the estimated total crosstie installations in 2022 were approximately 18.6 million, of which 14.3 million were for Class I railroads. Throughout the pandemic, some sawmills were operating at 50 percent or less of their production capacity.
Added
Outlook We remain committed to expanding and optimizing our business and making continued progress towards our long-term financial goals.
Removed
Sawmills provide raw materials to several industries beyond the wood crosstie market and as demand and pricing for pallet and flooring lumber increased significantly during the beginning of 2021, overall crosstie production output was lower than forecasted. Crosstie prices increased significantly as a result of limited supply and railroad customers were deferring their purchases.
Added
After considering global economic conditions, as well as ongoing uncertainty associated with geopolitical and supply chain challenges, the following summarizes our 2024 financial goals: • sales of approximately $2.25 billion, • adjusted EBITDA of approximately $275 million, and • capital expenditures of approximately $100 million, including capitalized interest, with approximately $29 million of the total allocated to discretionary projects.
Removed
Given continuing economic uncertainties, the RTA is forecasting a modest increase of 1.1 percent, or 18.8 million crossties, in 2023, primarily from the commercial market while Class I volumes are expected to remain at relatively similar demand levels. 27 Koppers Holdings Inc. 2022 Annual Report According to the Association of American Railroads (“AAR”), rail traffic in 2022 was lower than in 2021 for most categories.
Added
Our keys to success for 2024 are the following: • For our RUPS segment, we need to (i) recoup cost increases, including the value of our creosote preservative in the market, (ii) ensure our facilities run uninterrupted to serve customer demand and (iii) maximize opportunities for increased volumes, including expanding our customer base into the Texas utility pole market. • For our PC segment, we need to (i) increase market share for certain newer product lines and (ii) improve gross margin by reducing costs. • For our CMC segment, we need to (i) optimize production from our yield enhancement project at our facility in Nyborg, Denmark, (ii) push acceptance of petroleum-blended products, which mitigates reductions in coal tar volumes and (iii) execute on domestic plant optimization projects. 29 Koppers Holdings Inc. 2023 Annual Report Significant market indicators for our businesses include: • The Railway Tie Association’s estimate of total crosstie installations in 2024, which is approximately 18.5 million ties, with 14.7 million for Class I railroads.
Removed
Compared to prior year, total U.S. carload traffic for 2022 was down 0.3 percent, and intermodal units were down 4.9 percent. For 2022, total combined U.S. traffic decreased by 2.8 percent compared to last year. According to the AAR, rail markets are ever evolving.
Added
This is consistent with 2023 crosstie installations of approximately 18.4 million crossties with the small increase expected to be from the commercial market. • According to BMO Capital Markets, market demand for utility poles is expected to remain high throughout 2024 as a result of aging pole infrastructure, efforts to strengthen poles against larger and more frequent storms, a need to add larger poles to support continued electrification and expansion of broadband access. • The Leading Indicator of Remodeling Activity (LIRA) reported by the Joint Center for Housing Studies of Harvard University, predicts a moderate 6.5 percent decrease in annual homeowner renovation and maintenance expenditures through the fourth quarter of 2024 with annual spending on home improvements and repairs expected to drop from $481 billion to $450 billion over the next four quarters. • For the external markets served by our CMC business, we anticipate a slowdown in the near-term in manufacturing overall as well as in the steel, aluminum and carbon black industries.
Removed
There was solid growth in coal carloads in 2022, largely because higher natural gas prices made coal-fired electricity generation more competitive. However, higher natural gas prices, along with other market disruptors, negatively impacted rail chemical volumes since natural gas is a key raw material for chemical manufacturing.
Added
The December 2023 S&P Global Mobility forecast saw global light-vehicle sales increasing by 2.8 percent from the prior year and reaching 88.3 million units globally in 2024.
Removed
Also, grain carloads were slightly higher in 2022 than the annual average over the past decade, but decreased year-over-year from 2021, which was the best year for grain carloads since 2008. Meanwhile, intermodal volumes in 2022 were relatively strong, but down from an even stronger 2021.
Added
Any or all of these factors could impact our actual results for 2024.
Removed
With respect to our utility products business, the installed base for wood distribution poles in the United States is approximately 150 million and nearly half are 40 years old. Industry demand has historically been in the range of approximately two to four million poles annually.
Added
Volume increases for Class I crossties and higher activity in our crosstie recovery business also contributed to the increase. These increases were partly offset by lower activity in our other maintenance of way businesses and a 2.5 percent volume decrease in our utility pole businesses.
Removed
On an overall basis, we believe that the rate at which utilities purchase utility poles will grow as they continue replacement programs within their service territories. As a whole, the key factors that drive growth in the utility pole market include growing global energy consumption as well as expansion of the global telecommunication industry.
Added
CMC net sales decreased due mainly to $27.3 million of volume decreases, primarily phthalic anhydride and carbon pitch, partly offset by volume increases for refined tar. Pricing had a minimal impact on sales for the year as higher prices for carbon pitch in the first half of the year were offset by lower prices for chemical products.
Removed
Now more than ever, utilities need to maintain their infrastructure to avoid interruptions in service as portions of the population work remotely. As long as there are not any extended supply chain disruptions, we anticipate that 2023 demand for pole replacements will be higher, as the overall industry is trending toward expanded and upgraded transmission networks.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+0 added−3 removed5 unchanged
Biggest changeHolding other variables constant, if there were a 10 percent reduction in the December 31, 2022 market price of copper, the fair value of these contracts would be a loss of $7.1 million. This hypothetical loss would be allocated $5.4 million to other comprehensive income and $1.7 million would be recognized in income, before tax.
Biggest changeSee Note 5 – Derivative Financial Instruments for quantities and the financial statement impact of these contracts as of December 31, 2023. Holding other variables constant, if there were a 10 percent reduction in the December 31, 2023 market price of copper, the fair value of these contracts would be a loss of $11.7 million.
The range of changes chosen for these analyses reflects our view of changes which are reasonably possible over a one-year period. Market values are the present values of projected future cash flows based on the interest rate, exchange rate and copper price assumptions.
The range of changes chosen for these analyses reflects our view of changes which are reasonably possible over a one-year period. Market values are the present values of projected future cash flows based on copper price, interest rate and exchange rate assumptions.
The objective of our financial risk management is to minimize the negative impact of commodity price, interest rate and foreign exchange rate fluctuations on our earnings, cash flows and equity. To manage commodity price risk, we enter into swap contracts for future forecasted purchases of copper. This reduces the impact of commodity price volatility on gross profit.
The objective of our financial risk management is to minimize the volatility of commodity price, interest rate and foreign exchange rate fluctuations on our earnings, cash flows and equity. To manage commodity price risk, we enter into swap contracts for future forecasted purchases of copper. This reduces the impact of commodity price volatility on gross profit.
To manage the interest rate risks, we use a combination of fixed and variable rate debt. This reduces the impact of short-term fluctuations in interest rates.
To manage interest rate risks, we use a combination of fixed and variable rate debt and interest rate swaps. This reduces the impact of short-term fluctuations in interest rates.
The following analyses present the sensitivity of the market value, earnings and cash flows of our financial instruments and foreign operations to hypothetical changes in interest and exchange rates and market prices for copper as if these changes occurred at December 31, 2022.
The following analyses present the sensitivity of the market value, earnings and cash flows of our financial instruments and foreign operations to hypothetical changes in interest and exchange rates and market prices for copper as if these changes occurred at December 31, 2023.
Holding other variables constant, if there were a 10 percent reduction in all relevant exchange rates, the effect on our earnings, based on actual earnings from foreign operations for the year ended December 31, 2022, would be a reduction of approximately $7.5 million. 39 Koppers Holdings Inc. 2022 Annual Report
Holding other variables constant, if there were a ten percent reduction in all relevant exchange rates, the effect on our earnings, based on actual earnings from foreign operations for the year ended December 31, 2023, would be a reduction of approximately $5.4 million. 36 Koppers Holdings Inc. 2023 Annual Report
The earnings and cash flows for the year ending December 31, 2022, assuming a one percentage point increase in interest rates, would have decreased approximately $3.2 million, holding other variables constant for variable rate debt. Exchange Rate Sensitivity Analysis .
A one percentage point increase in interest rates would have decreased earnings and cash flows by approximately $4.6 million over a twelve-month period, holding other variables constant inclusive of interest rate swap effects. Exchange Rate Sensitivity Analysis .
For variable rate debt, interest rate changes generally do not affect the fair market value but do impact future earnings and cash flows, assuming other factors are held constant.
See Note 15 – Debt for discussion of the changes in debt and our interest rate swap agreements. For variable rate debt, interest rate changes impact earnings and cash flows, assuming other factors are held constant.
Interest Rate and Debt Sensitivity Analysis . Our exposure to market risk for changes in interest rates relates primarily to our debt obligations. We have fixed and variable rate debt and the ability to incur variable rate debt under the Koppers Inc. Credit Facility.
This hypothetical loss would be allocated $9.5 million to other comprehensive income and $2.2 million recognized in income, before tax. Interest Rate and Debt Sensitivity Analysis . Our exposure to market risk for changes in interest rates relates primarily to our interest payments on our variable rate debt obligations.
Removed
As of December 31, 2022, we had outstanding copper swap contracts totaling 27.3 million pounds and the fair value of these contracts resulted in an unrealized gain of $3.1 million.
Removed
A portion of the gain totaling $2.5 million, before tax, is recognized in other comprehensive income and a portion of the gain totaling $0.6 million is recognized in income, before tax.
Removed
At December 31, 2022, we had $500.0 million of fixed rate debt and $325.3 million of variable rate debt. For fixed rate debt, interest rate changes affect the fair market value but do not impact earnings or cash flows.

Other KOP 10-K year-over-year comparisons