Koppers Holdings Inc.

11/07/2025 | Press release | Distributed by Public on 11/07/2025 11:37

Quarterly Report for Quarter Ending September 30, 2025 (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, or in Koppers communications and discussions with investors and analysts in the normal course of business through meetings, phone calls and conference calls, 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 international markets, including governmental changes, tariffs, restrictions on trade and restrictions on the ability to transfer capital across countries; 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, 2024.
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 and inspection services to the utility markets. We also operate a business related to the recovery of used crossties, serving the same customer base as our North American railroad business. We sold our railroad bridge services business during the third quarter of 2025. See Note 2 - Acquisitions and Restructuring.
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. Our CMC segment ceased production of phthalic anhydride in the second quarter of 2025. See Note 2 - Acquisitions and Restructuring.
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.
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, mark-to-market commodity hedging, acquisition-related charges, amortization of cloud-based software implementation costs 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. An adjusted EBITDA reconciliation is presented in the Segment Resultssection 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
After considering the current intensely competitive environment, global economic conditions, as well as ongoing uncertainty associated with geopolitical and supply chain challenges, we anticipate taking measures to streamline our organization to support an increasingly cost-conscious customer base. These actions, some of which are one-time savings and some of which are expected to be permanent savings, are intended to ensure that we continue our growth in profitability and support a higher margin profile by leveraging a smaller global team highly focused on serving customer preferences. Through the planning phase that has occurred throughout 2025, we believe we have identified actionable transformation initiatives to position Koppers for future success, creating a roadmap to reshape our company into a higher earning, higher margin, higher free cash flow and higher return on capital business over the next three years. These initiatives impact all facets of the organization and are focused on growing the more profitable businesses while continuing to selectively scale back our lower margin, capital intensive business. We believe this will grow earnings per share, lower our maintenance and capital requirements and consistently generate higher margins.
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.
Trade Tariff Uncertainties
Our 2025 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 this 10-Q as well as in our Form 10-K for the year ended December 31, 2024.
Significant areas of focus include:
•For our RUPS segment, our focus is to (i) recoup cost increases, including the value of our creosote preservative in the market, (ii) maximize opportunities for increased volumes, including expanding our customer base into the Texas, western and midwestern utility pole markets and (iii) lower operating and selling, general and administrative expenses.
•For our PC segment, our focus is to (i) acquire new customers in our residential preservatives markets to offset certain customer market share losses, (ii) expand market share in our industrial preservatives markets and (iii) improve our cost structure.
•For our CMC segment, our focus is to (i) execute on domestic plant restructuring projects, (ii) optimize and develop markets for enhanced carbon products and (iii) implement global tar and pitch strategies.
Significant market indicators for our businesses include:
•The Railway Tie Association's estimate of total crosstie purchases in 2025 is approximately 19.9 million ties, with approximately 13.4 million for Class I railroads. This is lower than the 2024 crosstie purchases of approximately 21.3 million crossties with the decrease expected to be from the commercial market. 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. Key drivers include aging pole infrastructure, the expansion of renewable energy, vehicle electrification, grid-hardening measures and extreme weather protection as well as some growth driven by productivity gains from artificial intelligence (AI) which will increase electricity demand. We continue to focus on expanding our presence in the western and midwestern United States and Canada along with improving our efficiency and capturing new customers to increase our market share.
•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 projects that year-over-year spending for annual homeowner renovation and maintenance expenditures is expected to grow by 2.4 percent in early 2026 before easing to 1.9 percent in the third quarter of 2026. While the LIRA projects a slight increase in the fourth quarter of 2025, our PC business expects lower volumes as a result of customer market share shifts with the remaining customer volumes expected to be slightly down.
•For the external markets served by our CMC business, we have experienced a slowdown in manufacturing overall as well as in the steel, aluminum and carbon black industries. 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 are also investing 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, as well as 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 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, 2025 and 2024
Consolidated Results
Three Months Ended September 30,
2025 2024 Change % Change
(Dollars in millions)
Net sales:
Railroad and Utility Products and Services $ 232.7 $ 248.1 $ (15.4) (6.2) %
Performance Chemicals 144.3 176.7 (32.4) (18.3) %
Carbon Materials and Chemicals 108.3 129.5 (21.2) (16.4) %
Total $ 485.3 $ 554.3 $ (69.0) (12.4) %
RUPS net sales decreased due to $15.8 million of lower volumes in our Class I crosstie business and lower activity in our maintenance-of-way businesses, including the sale of our railroad bridge services business during the third quarter of 2025. These decreases were partly offset by higher volumes in our commercial crosstie business, a 6.5 percent volume increase in our domestic utility pole business and $1.9 million of price increases, primarily in crossties.
The decrease in PC net saleswas the result of a 19 percent volume decrease primarily driven by a shift in United States market share, as well as a slight decrease in remaining customer volumes.
CMC net sales decreased mainly due to volume decreases of phthalic anhydride of $19.6 million as we ceased production of the product in the second quarter of 2025, lower volumes and lower prices for carbon black feedstock and lower sales prices for carbon pitch where prices were down approximately three 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 pitch and creosote.
Cost of salesas a percentage of net sales was 76 percent, compared to 78 percent in the prior year period as lower operating expenses were partly offset by lower sales volumes. Significant items impacting cost of sales in individual operating segments are discussed as part of "Segment adjusted EBITDA and adjusted EBITDA margin" herein.
Selling, general and administrative expenses were $6.4 million lower when compared to the prior year period due mainly to a decrease in compensation-related costs, in particular lower stock-based long term incentive plan expenses of $2.9 million. See Note 6 - Stock-based Compensation for changes related to our long-term incentive plan.
Impairment and restructuring chargesin the current year period represent consulting services related to our comprehensive assessment of our businesses and costs associated with discontinuing phthalic anhydride production at our facility in Stickney, Illinois. See Note 2 - Acquisitions and Restructuring.
Loss on sale of assetsfor the three months ended September 30, 2024 was related to the liquidation of our former coal tar distillation facility located in China. See Note 2 - Acquisitions and Restructuring.
Interest expensewas $3.5 million lower when compared to the prior year period due to lower interest rates as well as lower borrowings.
Income tax provisionincreased by $1.4 million when compared to the prior year period due primarily to higher income before income taxes. See Note 8 - Income Taxes.
Segment Results
Three Months Ended September 30,
2025 2024 Change % Change
(Dollars in millions)
Adjusted EBITDA:
Railroad and Utility Products and Services $ 29.2 $ 24.7 $ 4.5 18.2 %
Performance Chemicals 26.1 40.0 (13.9) (34.8) %
Carbon Materials and Chemicals 15.6 12.7 2.9 22.8 %
Total $ 70.9 $ 77.4 $ (6.5) (8.4) %
Adjusted EBITDA margin as a percentage of GAAP sales:
Railroad and Utility Products and Services 12.5 % 10.0 % 2.5 % 25.0 %
Performance Chemicals 18.1 % 22.6 % (4.5) % (19.9) %
Carbon Materials and Chemicals 14.4 % 9.8 % 4.6 % 46.9 %
RUPS adjusted EBITDAincreased due to $7.7 million of lower selling, general and administrative and operating expenses in addition to net sales price increases, partly offset by lower sales volumes.
PC adjusted EBITDA decreased due primarily to lower sales volumes and higher raw material and operating costs of $7.3 million, partly offset by lower logistics costs and selling, general and administrative expenses of $1.6 million and higher royalty income.
CMC adjusted EBITDAincreased due to operating cost savings from discontinuing phthalic anhydride production and lower raw material costs of $2.9 million, partly offset by lower sales prices.
Results of Operations - Comparison of Nine Months Ended September 30, 2025 and 2024
Consolidated Results
Nine Months Ended September 30,
2025 2024 Change % Change
(Dollars in millions)
Net sales:
Railroad and Utility Products and Services $ 718.1 $ 727.1 $ (9.0) (1.2) %
Performance Chemicals 416.0 503.7 (87.7) (17.4) %
Carbon Materials and Chemicals 312.5 384.3 (71.8) (18.7) %
Total $ 1,446.6 $ 1,615.1 $ (168.5) (10.4) %
RUPS net salesdecreased due to $22.7 million of lower volumes in our Class I crosstie business and lower activity in our maintenance-of-way businesses. These decreases were largely offset by higher volumes in our commercial crosstie business, increased volumes in our domestic utility pole business and $6.9 million of price increases across multiple markets, particularly for crossties. Foreign currency changes compared to the prior year period had an unfavorable impact on sales in the current year period of $2.1 million, mainly from our Australian utility pole business.
PC net sales decreased due primarily to a 17 percent volume decrease driven by a shift in United States market share and a slight decrease in remaining customer volumes as well as sales to Brown Wood which were included in external sales during the first quarter of 2024. Foreign currency changes compared to the prior year period from our international markets had an unfavorable impact on sales in the current year period of $2.0 million.
CMC net salesdecreased mainly due to lower phthalic anhydride volumes of $50.3 million as we ceased production of the product in the second quarter of 2025, lower volumes and prices for carbon black feedstock and lower sales prices for carbon pitch, which were down approximately six 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 pitch, creosote and refined tar.
Cost of salesas a percentage of net sales was 77 percent, compared to 79 percent in the prior year period as lower operating expenses and freight costs were partly offset by lower sales volumes. Significant items impacting cost of sales in individual operating segments are discussed as part of "Segment adjusted EBITDA and adjusted EBITDA margin" herein.
Depreciation and amortization expenses were $1.4 million higher when compared to the prior year period primarily as a result of our acquisition of Brown Wood.
Selling, general and administrative expenses were $17.2 million lower when compared to the prior year period due mainly to a decrease in compensation-related costs and other administrative expenses, in particular lower stock-based long term incentive plan expenses of $5.4 million. See Note 6 - Stock-based Compensation for changes related to our long-term incentive plan.
Impairment and restructuring chargesin the current year period represent costs associated with discontinuing phthalic anhydride production at our facility in Stickney, Illinois, consulting services related to our comprehensive assessment of our businesses and our workforce reduction program across selected U.S. locations to streamline operations and reduce costs. See Note 2 - Acquisitions and Restructuring.
Loss on sale of assetsfor the nine months ended September 30, 2024 was related to the liquidation of our former coal tar distillation facility located in China. See Note 2 - Acquisitions and Restructuring.
Other income increased in the current year period primarily as a result of increased royalty income in our PC business and lower pension costs.
Interest expense was $7.3 million lower when compared to the prior year period due to lower interest rates.
Loss on pension settlementin the current 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 expensedecreased by $9.0 million when compared to the prior year period due primarily to lower income before income taxes. See Note 8 - Income Taxes.
Segment Results
Nine Months Ended September 30,
2025 2024 Change % Change
(Dollars in millions)
Adjusted EBITDA:
Railroad and Utility Products and Services $ 86.3 $ 64.8 $ 21.5 33.2%
Performance Chemicals 74.9 114.1 (39.2) (34.4)%
Carbon Materials and Chemicals 42.3 27.5 14.8 53.8%
Total $ 203.5 $ 206.4 $ (2.9) (1.4)%
Adjusted EBITDA margin as a percentage of GAAP sales:
Railroad and Utility Products and Services 12.0% 8.9% 3.1% 34.8%
Performance Chemicals 18.0% 22.7% (4.7)% (20.7)%
Carbon Materials and Chemicals 13.5% 7.2% 6.3% 87.5%
RUPS adjusted EBITDAincreased due to $15.7 million of lower selling, general and administrative, operating and raw material expenses in addition to net sales price increases.
PC adjusted EBITDA decreased due primarily to lower sales volumes and higher raw material costs of $23.0 million, partly offset by lower logistics expenses, particularly in North America, and selling, general and administrative expenses of $7.1 million and higher royalty income. Higher raw material costs were unfavorably impacted by scrap copper costs, net of the benefit realized from our copper-hedging program.
CMC adjusted EBITDAincreased due to $26.2 million of lower raw material, selling, general and administrative and operating expenses, particularly in North America, including the operating cost savings from discontinuing phthalic anhydride production and improved plant performance as a result of an outage in North America in the prior year period, along with a favorable sales mix, partly offset by lower sales prices.
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,
2025 2024 2025 2024
(Dollars in millions)
Net income $ 23.8 $ 19.0 $ 26.3 $ 58.8
Interest expense 16.7 20.2 50.6 57.9
Depreciation and amortization 17.6 17.9 53.6 52.2
Income tax provision 12.0 10.6 16.2 25.2
Sub-total 70.1 67.7 146.7 194.1
Adjustments to arrive at adjusted EBITDA:
LIFO (benefit) expense(1)
(4.8) (1.2) (7.3) 2.9
Impairment, restructuring and plant closure costs(2)
10.2 0.4 47.8 0.4
(Gain) loss on sale of assets (0.1) 9.7 (0.4) 9.7
Mark-to-market commodity hedging gains (4.9) 0.0 (14.7) (3.0)
Acquisition inventory step-up amortization 0.0 0.8 0.0 2.3
Amortization of cloud-based software implementation costs 0.3 0.0 1.1 0.0
Pension settlement and expense 0.1 0.0 30.3 0.0
Total adjustments 0.8 9.7 56.8 12.3
Adjusted EBITDA $ 70.9 $ 77.4 $ 203.5 $ 206.4
(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.
(2)See Note 2 - Acquisitions and Restructuring.
Cash Flow
Net cash provided by operating activitiesfor the nine months ended September 30, 2025 was $77.4 million compared to $44.7 million in the prior year. For both periods, the primary source of cash was net income, excluding non-cash items, principally depreciation and in 2025, the pension settlement loss. Working capital usage was lower in the current year primarily as a result of the timing of receipts and payments, partly offset by pension funding of approximately $14 million in connection with the settlement.
Net cash used in investing activitiesfor the nine months ended September 30, 2025 was $38.5 million compared to $154.4 million in the prior year. The decrease was due to cash paid for the Brown Wood acquisition in the prior year as well as lower capital expenditures in the current year due to the completion of certain growth projects, such as the yield enhancement project at our CMC facility in Nyborg, Denmark which was completed in the first quarter of 2024.
Net cash used in financing activities for the nine months ended September 30, 2025 was $47.3 million compared to net cash provided by financing activities of $88.4 million in the prior year. The primary uses of financing cash flows for the nine months ended September 30, 2025 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. In the prior year, the primary source of financing cash flows was net borrowings of $138.9 million due primarily to borrowings to fund the Brown Wood acquisition. The primary uses of financing cash flows in the prior year were repurchases of common stock, including payments related to taxes withheld under stock-based compensation plans and dividends.
Liquidity and Capital Resources
As of September 30, 2025, liquidity from our Credit Facility and cash on hand was approximately $379 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 and share repurchases. We may also use cash to pursue other potential strategic acquisitions. Capital expenditures in 2025, excluding acquisitions, if any, are expected to total approximately $52 to $55 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, 2025 and December 31, 2024, approximately 85 percent of accounts payable was current and 15 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 as of September 30, 2025 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 September 30, 2025 was 4.2.
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, 2024.
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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