Koppers Holdings Inc.
11/06/2026 | Press release | Distributed by Public on 11/06/2026 11:05
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report and any documents incorporated herein by reference contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and may include, but are not limited to, statements about sales levels, acquisitions, restructuring, declines in the value of Koppers assets and the effect of any related impairment charges, profitability and anticipated synergies, expenses and cash outflows. All forward-looking statements involve risks and uncertainties. All statements contained herein that are not clearly historical in nature are forward-looking, and words such as "outlook," "guidance," "forecast," "believe," "anticipate," "expect," "estimate," "may," "will," "should," "continue," "plan," "potential," "intend," "likely," or other similar words or phrases are generally intended to identify forward-looking statements. Any forward-looking statement contained herein, in press releases, written statements or documents filed with the Securities and Exchange Commission, regarding future dividends, expectations with respect to sales, earnings, cash flows, operating efficiencies, restructurings, cost reduction efforts, transformation initiatives, product introductions or expansions, the benefits of acquisitions and divestitures, or other matters as well as financings and debt reduction, are subject to known and unknown risks, uncertainties and contingencies. Many of these risks, uncertainties and contingencies are beyond our control, and may cause actual results, performance or achievements to differ materially from anticipated results, performance or achievements. Factors that might affect such forward-looking statements, include, among other things, availability of and fluctuations in the prices of key raw materials, including coal tar, lumber and scrap copper; the impact of changes in commodity prices, such as oil, copper and chemicals, on product margins; the successful implementation of multi-year cost mitigation programs; the extent of the dependence of certain of our businesses on certain market sectors and customers; economic, political and environmental conditions in domestic and international markets, including governmental changes, tariffs, restrictions on trade and restrictions on the ability to transfer capital across countries; geopolitical events (including the current conflicts in the Middle East); current and potential future tariffs or duties; the ratings on our debt and our ability to repay or refinance our outstanding indebtedness as it matures; our ability to operate within the limitations of our debt covenants; capital market and banking market conditions, including interest rates, borrowing costs, foreign currency rate fluctuations, and general volatility; general economic and business conditions, including labor shortages, increased employee turnover and demand for our goods and services; disruptions and inefficiencies in the supply chain; unexpected business disruptions (including, but not limited to, labor disputes, natural disasters, weather conditions, fires, explosions, unscheduled or unplanned downtime, transportation interruptions, certain regional and world events or economic conditions and public health crises) and technology-related disruptions or failures (including, but not limited to, cyber attacks or other events) related to our technology infrastructure, or at key vendors which could impact our supply chain, or at key customers which could impact their operations and cause them to curtail or pause orders; potential difficulties in protecting our intellectual property; potential delays in timing or changes to expected benefits from cost reduction efforts; timing and results of any transformation initiatives, including estimates and assumptions related to the cost and the anticipated benefits of the transformation initiatives; potential impairment of our goodwill and/or long-lived assets; demand for our goods and services; the effects of competition in the industries in which we operate, including locations of competitors and operating and market competition; changes in laws, their interpretation, and their enforcement, including tax regulations, environmental regulations or accounting standards, third-party relations and approvals, and decisions of courts, regulators and governmental bodies; the impact of environmental laws and regulations and compliance therewith; parties who are obligated to indemnify us for liabilities, including legal and environmental liabilities, fail to perform under their legal obligations; and unfavorable resolution of litigation or other legal proceedings against us, as well as those discussed more fully elsewhere in this report and in documents filed with the Securities and Exchange Commission by Koppers, particularly our latest annual report on Form 10-K and subsequent filings. We caution you that the foregoing list of important factors may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this report and the documents incorporated by reference herein may not in fact occur. Any forward-looking statements in this report speak only as of the date of this report, and we undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited financial statements and related notes included in Item 1 of this Part I as well as the audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2025.
Overview
We are a leading integrated global provider of treated wood products, wood preservation chemicals and carbon compounds. Our products and services are used in a variety of niche applications in a diverse range of end-markets, including the railroad, specialty chemical, utility, residential lumber, agriculture, aluminum, steel, rubber and construction industries. We serve our customers through a comprehensive global manufacturing and distribution network, with manufacturing capabilities in North America, South America, Australasia and Europe. We operate three principal businesses: RUPS, PC and CMC.
Through our RUPS business, we believe that we are the largest supplier of railroad crossties to the Class I railroads in North America and the second largest producer of utility poles in the United States. Our utility poles are used in the electric, telephone, and broadband industries in the United States and Australia and construction pilings in the United States. In addition, we provide untreated wood products and rail joint bars to the railroad markets. We also operate a business related to the recovery of used crossties, serving the same customer base as our North American railroad business.
Through our PC business, we believe that we are the global leader in developing, manufacturing and marketing wood preservation chemicals and wood treatment technologies for use in the pressure treating of lumber for residential, industrial and agricultural applications.
Our CMC business processes coal tar into a variety of products, including creosote, carbon pitch, carbon black feedstock and naphthalene, which are intermediate materials necessary in the pressure treatment of wood, and the production of aluminum, steel, carbon black and high-strength concrete. See Note 2 - Restructuring for further discussion of the discontinuation of distillation and chemical manufacturing operations in Stickney, Illinois.
Non-GAAP Financial Measures
We utilize certain financial measures that are not in accordance with U.S. GAAP to analyze and manage the performance of our business. 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. Adjusted EBITDA is the 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 prior to 2026.
Adjusted EBITDA is a non-GAAP financial measure defined as income before interest expense, income taxes, depreciation, amortization and other adjustments. These other adjustments are items that we believe are not representative of underlying business performance. Adjusted items typically include LIFO inventory effects, impairment, restructuring and plant closure costs, significant gains and losses on asset disposals or business combinations, mark-to-market commodity hedging, acquisition-related charges, cloud-computing amortization expenses and other unusual items. The LIFO (benefit) expense adjustment removes the entire impact of LIFO and effectively reflects the results as if we were on a FIFO inventory basis. An adjusted EBITDA reconciliation is presented in the Segment Results section and reconciles net income to adjusted EBITDA on a consolidated basis.
Although we believe adjusted EBITDA enhances investors' understanding of our business and performance, this non-GAAP financial measure should not be considered an alternative to GAAP financial measures and should be read in conjunction with the relevant GAAP financial measures. Other companies in a similar industry may define or calculate this measure differently than we do, limiting its usefulness as a comparative measure. Because of these limitations, this non-GAAP financial measure should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.
Outlook
Forward-looking statements, including the significant market indicators described below, are based upon current expectations and are subject to factors that could cause actual results to differ materially from those set forth below. Please see the "forward-looking statements" disclaimer in the above section for more information.
We continue to operate in a highly competitive environment characterized by uncertain global economic conditions, supply chain challenges and increasingly cost-conscious customers. During 2025, we developed a multi-year transformation roadmap with initiatives across our businesses and functions designed to improve profitability, modernize processes and optimize our portfolio. These initiatives are intended to position Koppers by the end of 2028 as a higher-margin business with stronger free cash flow and higher returns on capital. Our strategy is to invest in businesses where we see attractive growth and returns while reducing our exposure to lower-margin, capital-intensive activities. We believe this will grow earnings per share, lower our maintenance and capital requirements and consistently generate higher margins.
Significant areas of focus include:
•For our RUPS segment, our focus is to continue to (i) maximize opportunities for increased volumes, including expanding our customer base in the midwestern and western utility pole markets and (ii) optimizing our network to better align capacity with demand and reduce operating costs.
•For our PC segment, our focus is to continue to (i) acquire new customers and grow organic market share in our residential preservatives markets, (ii) expand market share in our industrial preservatives markets and (iii) align and improve our cost structure.
•For our CMC segment, our focus is to continue to (i) complete the transition following the October 2026 discontinuation of distillation and chemical manufacturing operations at our Stickney, Illinois plant (see Note 2 - Restructuring), (ii) optimize and develop markets for enhanced carbon products and (iii) develop and implement global tar and pitch strategies to mitigate raw material cost increases.
Significant market indicators for our businesses include:
•The Railway Tie Association's estimate of total crosstie purchases in 2026 is approximately 19.8 million ties, with approximately 13.2 million for Class I railroads, which is below the 2025 estimate of crosstie purchases. Over the past few years, North American demand for crossties has been in the range of 18 million to 22 million crossties annually. We expect the crosstie market to remain stable and within this range. However, volumes for our business in any year can be affected by individual customer demands, logistics and business conditions.
•Market demand for utility poles is expected to grow over the next few years. The main driver for growth is the construction of data centers that support artificial intelligence development. The data centers that are being constructed nationwide consume large amounts of electricity which will require infrastructure expansion including utility poles. Other drivers of pole demand include aging pole infrastructure, the expansion of renewable energy, vehicle electrification, grid-hardening measures, extreme weather protection and increased manufacturing. Our Utility Products business continues to focus on expanding its presence in the midwestern and western United States.
•Product demand for our PC business has historically been associated with consumer spending on home repair and remodeling projects in North America. The Leading Indicator of Remodeling Activity (LIRA) reported by the Joint Center for Housing Studies of Harvard University expects year-over-year growth in home renovation and repair spending to remain relatively flat through late 2027. Year-over-year growth in renovation and repair spending is expected to reach just 1.5 percent by the third quarter of 2027. Our PC business expects higher volumes through market share growth and acquiring new customers, including international expansion.
•For the external markets served by our CMC business, we have experienced lower volumes in carbon pitch due to lower availability of coal tar. The availability of coal tar, the primary raw material for our CMC business, is linked to levels of metallurgical coke production. As the global steel industry, excluding Asia, has reduced the production of steel using metallurgical coke, the volumes of coal tar have been reduced. We are actively working to mitigate the impacts of the long-term decline of coal tar supply by gaining market acceptance for petroleum-blended products. We have invested in projects to increase distillation yields and balance raw material supply and cost with customer demand and pricing.
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 as well as tariffs and international trade policy; (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, logistics costs and selling prices and margins for certain of our products including carbon black feedstock and naphthalene; (iv) competitive conditions in our performance chemicals business and global carbon pitch markets; (v) the effectiveness of our commodity hedging programs; (vi) changes in foreign exchange rates; and (vii) the other factors set forth in the "forward-looking statements" disclaimer. Any or all of these or other factors, including those set forth in our Annual Report on Form 10-K, could impact our actual results for 2026.
Trade Tariff Uncertainties
Our outlook reflects plans to substantially offset costs related to import and export tariffs, where possible, but there is continued uncertainty regarding the implementation dates and scope of potential additional tariffs, as well as potential retaliatory trade policy. As a result of these items, our outlook may vary. See also Item 1A. Risk Factors in our Form 10-K for the year ended December 31, 2025.
Seasonality and Effects of Weather on Operations
Our quarterly operating results fluctuate due to a variety of factors that are outside of our control, including inclement weather conditions, which in the past have affected operating results. Operations at some of our facilities have at times been reduced during the winter months. Moreover, demand for some of our products declines during periods of inclement weather. As a result of the foregoing, we anticipate that we may experience material fluctuations in quarterly operating results. Historically, our operating results have been significantly lower in the first and fourth calendar quarters as compared to the second and third calendar quarters.
Results of Operations - Comparison of Three Months Ended September 30, 2026 and 2025
Consolidated Results
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | Change | % Change | ||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||
| Net sales: | |||||||||||||||||||||||
| Railroad and Utility Products and Services | $ | 232.8 | $ | 232.7 | $ | 0.1 | 0.0 | % | |||||||||||||||
| Performance Chemicals | 161.5 | 144.3 | 17.2 | 11.9 | % | ||||||||||||||||||
| Carbon Materials and Chemicals | 104.8 | 108.3 | (3.5) | (3.2) | % | ||||||||||||||||||
| Total | $ | 499.1 | $ | 485.3 | $ | 13.8 | 2.8 | % | |||||||||||||||
Net sales increased $13.8 million or 2.8 percent in the third quarter of 2026 as compared to the prior year quarter. Excluding the net unfavorable impact of 2025 acquisitions, divestitures, and product line rationalizations of $5.4 million and the favorable currency conversion effect of $6.1 million, net sales increased $13.1 million or 2.7 percent primarily driven by volume increases in PC, Class I crossties and our domestic utility pole business. The volume-driven increases were offset in part by unfavorable pricing for Class I crossties in our RUPS segment when compared to the prior year quarter.
RUPS net sales slightly increased due primarily to higher volumes for crossties and a five percent volume increase in our domestic utility pole business, including our acquisition of a western U.S. pole procurement business. These increases were mostly offset by approximately $6.3 million related to the sale of our railroad services business during the third quarter of 2025 and price decreases across multiple markets, particularly for crossties. Foreign currency changes had a favorable impact on sales in the current year period of $0.9 million compared to the prior year period, mainly from our Australian utility pole business.
PC net sales increased due to a ten percent volume increase, primarily in the Americas, related to market share gains and inventory restocking. Lower prices in Europe were mostly offset by higher prices in the Americas and Australasia. Foreign currency changes from our international markets had a favorable impact on sales in the current year period of $2.6 million compared to the prior year period.
CMC net sales decreased due mainly to volume decreases, particularly for carbon pitch. These decreases were partly offset by price increases for carbon pitch and carbon black feedstock. Carbon pitch prices were approximately four percent higher globally driven by market dynamics in the current year period in North America and Europe. Foreign currency changes from our international markets had a favorable impact on sales in the current year period of $2.6 million compared to the prior year period.
Cost of sales as a percentage of net sales was 80 percent, compared to 76 percent in the prior year period due primarily to higher raw material and logistics costs. Significant items impacting cost of sales in individual operating segments are discussed as part of "Segment Results" herein.
Selling, general and administrative expenses were $3.4 million higher when compared to the prior year period due mainly to an increase in compensation-related costs, including higher stock-based long-term incentive plan expenses and higher technology costs. These increases were partly offset by lower professional services costs. See Note 6 - Stock-based Compensation.
Impairment and restructuring charges in the current year period represent costs associated with discontinuing production at our facility in Stickney, Illinois, the decision to idle two plants in our RUPS business and consulting services related to our multi-year business transformation activities. In the prior year period, it also includes our workforce reduction program across select U.S. locations to streamline operations and reduce costs. See Note 2 - Restructuring.
Interest expense was $1.8 million lower when compared to the prior year period due to lower interest rates as well as lower borrowings.
Income tax provision (benefit) decreased by $10.2 million when compared to the prior year period due to lower income before income taxes. See Note 8 - Income Taxes.
Segment Results
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | Change | % Change | ||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||
| Adjusted EBITDA: | |||||||||||||||||||||||
| Railroad and Utility Products and Services | $ | 22.3 | $ | 29.2 | $ | (6.9) | (23.6) | % | |||||||||||||||
| Performance Chemicals | 29.6 | 26.1 | 3.5 | 13.4 | % | ||||||||||||||||||
| Carbon Materials and Chemicals | 6.1 | 15.6 | (9.5) | (60.9) | % | ||||||||||||||||||
| Total | $ | 58.0 | $ | 70.9 | $ | (12.9) | (18.2) | % | |||||||||||||||
| Adjusted EBITDA margin as a percentage of GAAP sales: | |||||||||||||||||||||||
| Railroad and Utility Products and Services | 9.6 | % | 12.5 | % | (2.9) | % | (23.2) | % | |||||||||||||||
| Performance Chemicals | 18.3 | % | 18.1 | % | 0.2 | % | 1.1 | % | |||||||||||||||
| Carbon Materials and Chemicals | 5.8 | % | 14.4 | % | (8.6) | % | (59.7) | % | |||||||||||||||
RUPS adjusted EBITDA decreased due to lower sales pricing, particularly for crossties, higher raw material and selling, general and administrative costs of $3.7 million and approximately $0.6 million related to the sale of our railroad services business during the third quarter of 2025. These decreases were partly offset by an increase in sales volume, primarily in our Class I crossties business.
PC adjusted EBITDA increased due primarily to higher sales volume and favorable utilization, partly offset by higher raw material costs of $4.7 million. Raw material costs were unfavorably impacted primarily by increased scrap copper costs, net of the benefit realized from our copper-hedging program.
CMC adjusted EBITDA decreased due primarily to higher raw material costs of $9.0 million and lower utilization of $1.7 million due to feedstock quality issues and the accelerated closure of our Stickney facility in North America.
Results of Operations - Comparison of Nine Months Ended September 30, 2026 and 2025
Consolidated Results
| Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | Change | % Change | ||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||
| Net sales: | |||||||||||||||||||||||
| Railroad and Utility Products and Services | $ | 698.7 | $ | 718.1 | $ | (19.4) | (2.7) | % | |||||||||||||||
| Performance Chemicals | 471.8 | 416.0 | 55.8 | 13.4 | % | ||||||||||||||||||
| Carbon Materials and Chemicals | 304.0 | 312.5 | (8.5) | (2.7) | % | ||||||||||||||||||
| Total | $ | 1,474.5 | $ | 1,446.6 | $ | 27.9 | 1.9 | % | |||||||||||||||
Net sales increased $27.9 million or 1.9 percent in the nine months ended September 30, 2026 as compared to the prior year period. Excluding the net unfavorable impact of 2025 acquisitions, divestitures, and product line rationalizations of $44.0 million and the favorable currency conversion effect of $25.0 million, net sales increased $46.9 million or 3.2 percent primarily driven by volume increases in PC, domestic utility pole and Class I crossties. The volume-driven increase was offset in part by unfavorable pricing for Class I crossties in our RUPS segment as well as lower prices in our CMC segment when compared to the prior year period.
RUPS net sales decreased due primarily to approximately $27.8 million related to the sale of our railroad services business during the third quarter of 2025 as well as price decreases for crossties. These decreases were partly offset by an 11 percent volume increase in our domestic utility pole business led by expansion in new markets, including our acquisition of a western U.S. pole procurement business, and increased volumes for crossties. Foreign currency changes had a favorable impact on sales in the current year period of $3.4 million compared to the prior year period, mainly from our Australian utility pole business.
PC net sales increased due to an 11 percent volume increase, primarily in the Americas, and higher prices in the Americas and Australasia which more than offset lower prices in Europe. Foreign currency changes from our international markets had a favorable impact on sales in the current year period of $7.8 million compared to the prior year period.
CMC net sales decreased due to lower volumes and lower prices, partly offset by favorable foreign currency changes from our international markets of $13.8 million compared to the prior year period. Phthalic anhydride revenues were $20.5 million lower as we ceased production of the product in the second quarter of 2025 as well as lower volumes for carbon pitch, creosote and refined tar. Most products had lower sales prices, especially carbon pitch where prices were down
approximately two percent globally. The decreases in carbon pitch prices were driven by market dynamics in the current year period, particularly in Australasia. These decreases were partly offset by volume increases for carbon black feedstock and naphthalene. See Note 2 - Restructuring for further discussion.
Cost of sales as a percentage of net sales was 80 percent, compared to 77 percent in the prior year period due primarily to higher raw material costs. Significant items impacting cost of sales in individual operating segments are discussed as part of "Segment Results" herein.
Depreciation and amortization expenses were $1.8 million higher when compared to the prior year period primarily as a result of depreciation on recent capital expenditures as well as higher asset retirement obligations in our European CMC operations.
Selling, general and administrative expenses were $5.4 million higher when compared to the prior year period due mainly to an increase in legal costs, an increase in compensation-related costs and higher technology costs.
Impairment and restructuring charges in the current year period represent costs associated with discontinuing production at our facility in Stickney, Illinois, the decision to idle two plants in our RUPS business and consulting services related to our comprehensive assessment of our businesses. In the prior year period, it also includes our workforce reduction program across select U.S. locations to streamline operations and reduce costs. See Note 2 - Restructuring.
(Gain) on sale of assets in the current year period was primarily related to the liquidation of KCCC. See Note 2 - Restructuring.
Other income, net decreased by $1.3 million compared to the prior year period due primarily to lower royalty income in our PC business as a result of our increased market share in the current year period.
Interest expense was $5.7 million lower when compared to the prior year period due to lower interest rates and lower borrowings.
Loss on pension settlement in the prior year period represents the settlement loss recorded as a result of the termination of our United States qualified pension plan as discussed in Note 10 - Pensions and Post-Retirement Benefit Plans.
Income tax provision (benefit) decreased by $46.1 million when compared to the prior year period due to lower income before income taxes primarily as a result of impairment and restructuring charges. See Note 8 - Income Taxes and Note 2 - Restructuring.
Segment Results
| Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | Change | % Change | ||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||
| Adjusted EBITDA: | |||||||||||||||||||||||
| Railroad and Utility Products and Services | $ | 70.6 | $ | 86.3 | $ | (15.7) | (18.2) | % | |||||||||||||||
| Performance Chemicals | 93.1 | 74.9 | 18.2 | 24.3 | % | ||||||||||||||||||
| Carbon Materials and Chemicals | 14.6 | 42.3 | (27.7) | (65.5) | % | ||||||||||||||||||
| Total | $ | 178.3 | $ | 203.5 | $ | (25.2) | (12.4) | % | |||||||||||||||
| Adjusted EBITDA margin as a percentage of GAAP sales: | |||||||||||||||||||||||
| Railroad and Utility Products and Services | 10.1 | % | 12.0 | % | (1.9) | % | (15.8) | % | |||||||||||||||
| Performance Chemicals | 19.7 | % | 18.0 | % | 1.7 | % | 9.4 | % | |||||||||||||||
| Carbon Materials and Chemicals | 4.8 | % | 13.5 | % | (8.7) | % | (64.4) | % | |||||||||||||||
RUPS adjusted EBITDA decreased due to net sales price decreases largely related to Class I crossties, higher raw material and selling, general and administrative costs and approximately $2.9 million related to the sale of our railroad services business during the third quarter of 2025. These decreases were partly offset by increased sales volume and favorable utilization in our domestic utility pole business, including our acquisition of a western U.S. pole procurement business.
PC adjusted EBITDA increased due primarily to higher sales volumes and lower raw material costs of $3.3 million. Lower raw material costs were favorably impacted by the benefit realized from our copper-hedging program, net of increased scrap copper costs.
CMC adjusted EBITDA decreased due to higher raw material, selling, general and administrative and lower utilization of $26.8 million and lower sales prices. These decreases were partly offset by operating cost savings from discontinuing phthalic anhydride production at our facility in Stickney, Illinois in the second quarter of 2025.
Adjusted EBITDA Reconciliation. The following table reconciles net income to adjusted EBITDA on a consolidated basis:
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||
| Net income (loss) | $ | 14.7 | $ | 23.8 | $ | (125.7) | $ | 26.3 | |||||||||||||||
| Depreciation and amortization | 18.1 | 17.6 | 55.4 | 53.6 | |||||||||||||||||||
| Interest expense | 14.9 | 16.7 | 44.9 | 50.6 | |||||||||||||||||||
| Income tax provision (benefit) | 1.8 | 12.0 | (29.9) | 16.2 | |||||||||||||||||||
| Sub-total | 49.5 | 70.1 | (55.3) | 146.7 | |||||||||||||||||||
| Adjustments to arrive at adjusted EBITDA: | |||||||||||||||||||||||
| Acquisition inventory step-up amortization | 0.0 | 0.0 | 0.8 | 0.0 | |||||||||||||||||||
| Amortization of cloud-based software implementation costs | 0.8 | 0.3 | 2.0 | 1.1 | |||||||||||||||||||
| (Gain) on sale of assets | 0.0 | (0.1) | (3.9) | (0.4) | |||||||||||||||||||
|
Impairment, restructuring and plant closure costs(1)
|
9.8 | 10.2 | 233.4 | 47.8 | |||||||||||||||||||
|
LIFO benefit(2)
|
(3.1) | (4.8) | (6.6) | (7.3) | |||||||||||||||||||
| Mark-to-market commodity hedging losses (gains) | 1.0 | (4.9) | 7.9 | (14.7) | |||||||||||||||||||
| Pension settlement and expense | 0.0 | 0.1 | 0.0 | 30.3 | |||||||||||||||||||
| Total adjustments | 8.5 | 0.8 | 233.6 | 56.8 | |||||||||||||||||||
| Adjusted EBITDA | $ | 58.0 | $ | 70.9 | $ | 178.3 | $ | 203.5 | |||||||||||||||
(1)See Note 2 - Restructuring.
(2)The LIFO (benefit) expense adjustment removes the entire impact of LIFO and effectively reflects the results as if we were on a FIFO inventory basis.
Cash Flow
Net cash provided by operating activities for the nine months ended September 30, 2026 was $126.9 million compared to $77.4 million in the prior year. The increase primarily reflected improved working capital performance and approximately $14 million of pension funding in the prior-year period, partially offset by lower underlying earnings. The improvement in working capital reflected the timing of customer receipts and vendor payments as well as lower inventory.
Net cash used in investing activities for the nine months ended September 30, 2026 was $33.0 million compared to $38.5 million in the prior year. The decrease was due in part to cash paid in 2025 for a land transfer associated with our agreement to liquidate KCCC.
Net cash used in financing activities for the nine months ended September 30, 2026 was $88.4 million compared to $47.3 million in the prior year. In the current year, the primary uses of financing cash flows were repurchases of common stock, including payments related to taxes withheld under stock-based compensation plans, net debt repayments of $33.8 million and dividends. In the prior year, the primary uses of financing cash flows were repurchases of common stock, including payments related to taxes withheld under stock-based compensation plans, net debt repayments of $7.8 million, dividends and debt issuance costs.
Liquidity and Capital Resources
As of September 30, 2026, liquidity from our Credit Facility after considering restrictions from debt covenants and cash on hand was approximately $360 million. Our Credit Facility is described in Note 11 - Debt.
Our need for cash in the next twelve months relates primarily to contractual obligations which include debt service, purchase commitments and operating leases, as well as working capital, capital spending, dividends, share repurchases and plant consolidations and closure. We may also use cash to pursue other potential strategic acquisitions. Capital expenditures in 2026, excluding acquisitions, if any, are expected to total approximately $50 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 at least the next twelve months.
We manage our working capital to increase our flexibility to pay down debt. 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 September 30, 2026 and December 31, 2025, approximately 95 percent of accounts payable was current and 5 percent was 1-30 days past due.
Restrictions on Dividends to Koppers Holdings Inc.
Koppers Holdings Inc. 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 Inc. The Credit Facility permits Koppers Inc. to make dividend payments to Koppers Holdings Inc. if certain conditions are met, including, among other permitted dividend payments, the ability to fund the payment of regularly scheduled dividends on Koppers Holdings Inc. common stock and repurchases of Koppers Holdings Inc. common stock, in an aggregate amount per fiscal year not to exceed the greater of $50.0 million, with unused amounts in any fiscal year being carried over to the succeeding fiscal year, and 6.0 percent of market capitalization.
Bank Debt Covenants
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 4.75. The total net leverage ratio under our Credit Facility as of September 30, 2026 was 3.5.
•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 under our Credit Facility as of September 30, 2026 was 4.4.
We are currently in compliance with all covenants governing the Credit Facility. Our continued ability to meet these financial covenants may be affected by events beyond our control.
Legal Matters
The information set forth in Note 12 to the Condensed Consolidated Financial Statements of Koppers Holdings Inc. included in Item 1 of this Part I is incorporated herein by reference.
Recently Issued Accounting Guidance
The information set forth in Note 1 to the Condensed Consolidated Financial Statements of Koppers Holdings Inc. included in Item 1 of this Part I is incorporated herein by reference.
Critical Accounting Policies
There have been no material changes to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.
Environmental and Other Matters
The information set forth in Note 12 to the Condensed Consolidated Financial Statements of Koppers Holdings Inc. included in Item 1 of this Part I is incorporated herein by reference.
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