Koppers Reports Third Quarter 2023 Results; Reaffirms 2023 Outlook
- Record sales of $550.4 million in the third quarter, a 2.7% increase compared to the prior year quarter
- Diluted EPS of $1.22, up from $0.91 in the prior year quarter
- Adjusted EPS of $1.32, compared to $1.19 in the prior year quarter
- Record sales and profitability in the Railroad and Utility Products and Services (RUPS) segment
- Record sales and profitability in the Performance Chemicals (PC) segment
- Decline in sales and profitability in the Carbon Materials and Chemicals (CMC) segment
- 2023 sales expected to be approximately $2.1 billion
- Adjusted EBITDA for 2023 anticipated to be in the range of $253 million to $257 million
- Sales and profitability decline in the Carbon Materials and Chemicals (CMC) segment
Third Quarter Record Sales of
Third Quarter Diluted EPS of
Third Quarter Adjusted EPS of
Adjusted net income attributable to Koppers and adjusted earnings per share (EPS) were
Consolidated sales of
The Railroad and Utility Products and Services (RUPS) business delivered record third-quarter sales and record quarterly profitability as a result of pricing increases along with higher volumes for crossties and crosstie recovery, partially offset by increased raw material and operating costs. Notably, the favorable segment performance was driven by third-quarter records in sales, operating profit and adjusted EBITDA from the domestic utility pole business.
The Performance Chemicals (PC) segment generated record third-quarter sales and record quarterly profitability as renegotiated customer contracts allowed for price increases to address higher raw material and other operating costs experienced in the prior year, as well as volume increases on a net basis globally.
The Carbon Materials and Chemicals (CMC) segment sales and profitability declined from the prior year, primarily due to lower prices and volumes related to weaker market demand for carbon pitch and phthalic anhydride, partly offset by reduced raw material costs and operating expenses.
President and CEO Leroy Ball said, "I am happy to report that our third-quarter financial results demonstrate continued solid progress toward our short- and long-term strategic goals. Profitability was strong overall, driven by record quarterly adjusted EBITDA in our PC and RUPS businesses, while our CMC business held its own in a tougher market environment. PC benefited from strong volumes in residential and industrial wood preservatives and higher average pricing to recoup inflationary cost increases from the past two years. High demand for utility poles due to increased infrastructure spending, plus higher average pricing for treated wood products to recover cost inflation, boosted RUPS quarterly results.
"I'm especially pleased in the pull-through of earnings to cash for the quarter, resulting in cash generated from operations of
Third Quarter Financial Performance
- RUPS reported record third-quarter sales of
$234.0 million $26.3 million $207.7 million $0.4 million $26.7 million $20.3 million the United States . In addition, increased volumes for crossties and higher activity in the crosstie recovery business contributed to the sales growth. The increases were partly offset by lower activity in the other maintenance-of-way businesses and decreased volumes in utility poles inAustralia . Adjusted EBITDA, a quarterly record, was$25.1 million $15.5 million - PC delivered record third-quarter sales of
$179.4 million $26.3 million $153.1 million $0.3 million $26.6 million $15.7 million Americas for copper-based preservatives. Volumes increased by 7.1 percent globally, reflecting a 10.2 percent increase in theAmericas , partly offset by volume decreases inAustralasia . Adjusted EBITDA, a quarterly record, was$35.2 million $16.7 million Americas . The price increases more than offset higher raw material costs and increased selling, general and administrative expenses. - Sales for CMC of
$137.0 million $38.3 million $175.3 million $1.5 million $39.8 million $24.3 million $25.9 million $10.4 million $36.6 million North America , and$2.3 million - Capital expenditures for the nine months ended September 30, 2023, were
$91.3 million $80.0 million $88.3 million $75.1 million
2023 Outlook
Koppers remains committed to expanding and optimizing its business and making continued progress on the company's strategic pillars toward its long-term financial goals. After considering global economic conditions, as well as the ongoing uncertainty associated with geopolitical and supply chain challenges, Koppers continues to expect 2023 sales of approximately
The effective tax rate for adjusted net income attributable to Koppers in 2023 is projected to be approximately 28 percent, which is slightly below the adjusted tax rate in 2022. Accordingly, 2023 adjusted EPS is forecasted to be in the range of
Koppers anticipates capital expenditures of approximately
Commenting on the forecast, Mr. Ball said, "As we prepare to close out 2023, we remain confident in finishing the year with adjusted EBITDA and adjusted EPS in the range of our recently increased guidance. For the fourth quarter, we anticipate normal seasonality in demand in most markets, except perhaps CMC, where markets remain in short-term turmoil. I believe we will finish the year with some of our best annual results and in the strongest financial condition since 2017. Looking ahead, we expect to bring our larger capital projects fully online in order to deliver
Koppers does not provide reconciliations of guidance for adjusted EBITDA and adjusted EPS to comparable GAAP measures, in reliance on the unreasonable efforts exception. Koppers is unable, without unreasonable efforts, to forecast certain items required to develop meaningful comparable GAAP financial measures. These items include, 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.
Investor Conference Call and Webcast
Koppers management will conduct a conference call this morning, beginning at 11:00 a.m. Eastern Time to discuss the company's results for the quarter. Presentation materials will be available at least 15 minutes before the call on www.koppers.com in the Investor Relations section of the company's website.
Interested parties may access the live audio broadcast toll free by dialing 833-366-1128 in
An audio replay will be available approximately two hours after the completion of the call at 877-344-7529 for
About Koppers
Koppers, with corporate headquarters in
For more information, visit: www.koppers.com. Inquiries from the media should be directed to Ms. Jessica Franklin Black at BlackJF@koppers.com or 412-227-2025. Inquiries from the investment community should be directed to Ms. Quynh McGuire at McGuireQT@koppers.com or 412-227-2049.
Non-GAAP Financial Measures
This press release contains certain non-GAAP financial measures. Koppers believes that adjusted EBITDA, adjusted net income attributable to Koppers and adjusted earnings per share provide information useful to investors in understanding the underlying operational performance of the company, its business and performance trends, and facilitate comparisons between periods and with other corporations in similar industries. The exclusion of certain items permits evaluation and a comparison of results for ongoing business operations, and it is on this basis that Koppers management internally assesses the company's performance. In addition, the Board of Directors and executive management team use adjusted EBITDA as a performance measure under the company's annual incentive plans and for certain performance share units granted to management.
Although Koppers believes that these non-GAAP financial measures enhance investors' understanding of its business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP basis financial measures and should be read in conjunction with the relevant GAAP financial measure. Other companies in a similar industry may define or calculate these measures differently than the company, limiting their usefulness as comparative measures. Because of these limitations, these non-GAAP financial measures should not be considered in isolation or as substitutes for performance measures calculated in accordance with GAAP.
See the attached tables for the following reconciliations of non-GAAP financial measures included in this press release: Unaudited Reconciliation of Net Income to Adjusted EBITDA and Unaudited Reconciliations of Net Income Attributable to Koppers and Adjusted Net Income Attributable to Koppers and Diluted Earnings Per Share and Adjusted Earnings Per Share.
Safe Harbor Statement
Certain statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and may include, but are not limited to, statements about sales levels, acquisitions, restructuring, declines in the value of Koppers assets and the effect of any resulting impairment charges, profitability and anticipated expenses and cash outflows. All forward-looking statements involve risks and uncertainties.
All statements contained herein that are not clearly historical in nature are forward-looking, and words such as "outlook," "guidance," "forecast," "believe," "anticipate," "expect," "estimate," "may," "will," "should," "continue," "plan," "potential," "intend," "likely," or other similar words or phrases are generally intended to identify forward-looking statements. Any forward-looking statement contained herein, in other press releases, written statements or other documents filed with the Securities and Exchange Commission, or in Koppers communications and discussions with investors and analysts in the normal course of business through meetings, phone calls and conference calls, regarding future dividends, expectations with respect to sales, earnings, cash flows, operating efficiencies, restructurings, the benefits of acquisitions, divestitures, joint ventures or other matters as well as financings and debt reduction, are subject to known and unknown risks, uncertainties and contingencies.
Many of these risks, uncertainties and contingencies are beyond our control, and may cause actual results, performance or achievements to differ materially from anticipated results, performance or achievements. Factors that might affect such forward-looking statements include, among other things, the impact of changes in commodity prices, such as oil and copper, on product margins; general economic and business conditions; disruption in the
For Information: | Quynh McGuire, Vice President, Investor Relations | |
412 227 2049 | ||
KOPPERS HOLDINGS INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Dollars in millions, except share and per share amounts) | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Net sales | $ | 550.4 | $ | 536.1 | $ | 1,641.0 | $ | 1,497.9 | ||||||||
Cost of sales | 439.0 | 439.7 | 1,313.0 | 1,229.4 | ||||||||||||
Depreciation and amortization | 14.3 | 16.9 | 42.7 | 44.5 | ||||||||||||
(Gain) on sale of assets | 0.0 | 0.0 | (1.8) | (2.5) | ||||||||||||
Selling, general and administrative expenses | 43.8 | 36.7 | 129.1 | 116.4 | ||||||||||||
Operating profit | 53.3 | 42.8 | 158.0 | 110.1 | ||||||||||||
Other income, net | 0.2 | 0.8 | 0.2 | 1.8 | ||||||||||||
Interest expense | 19.0 | 11.4 | 53.3 | 32.3 | ||||||||||||
Income from continuing operations before income taxes | 34.5 | 32.2 | 104.9 | 79.6 | ||||||||||||
Income tax provision | 8.3 | 13.2 | 28.1 | 29.7 | ||||||||||||
Income from continuing operations | 26.2 | 19.0 | 76.8 | 49.9 | ||||||||||||
Loss on sale of discontinued operations | 0.0 | 0.0 | 0.0 | (0.5) | ||||||||||||
Net income | 26.2 | 19.0 | 76.8 | 49.4 | ||||||||||||
Net income (loss) attributable to noncontrolling interests | (0.1) | (0.1) | 0.5 | (0.2) | ||||||||||||
Net income attributable to Koppers | $ | 26.3 | $ | 19.1 | $ | 76.3 | $ | 49.6 | ||||||||
Earnings (loss) per common share attributable to Koppers common shareholders: | ||||||||||||||||
Basic - | ||||||||||||||||
Continuing operations | $ | 1.27 | $ | 0.91 | $ | 3.66 | $ | 2.38 | ||||||||
Discontinued operations | 0.00 | 0.00 | 0.00 | (0.02) | ||||||||||||
Earnings per basic common share | $ | 1.27 | $ | 0.91 | $ | 3.66 | $ | 2.36 | ||||||||
Diluted - | ||||||||||||||||
Continuing operations | $ | 1.22 | $ | 0.91 | $ | 3.54 | $ | 2.35 | ||||||||
Discontinued operations | 0.00 | 0.00 | 0.00 | (0.03) | ||||||||||||
Earnings per diluted common share | $ | 1.22 | $ | 0.91 | $ | 3.54 | $ | 2.32 | ||||||||
Comprehensive income (loss) | $ | 18.1 | $ | (9.5) | $ | 70.7 | $ | (27.7) | ||||||||
Comprehensive income (loss) attributable to noncontrolling interests | 0.0 | (0.4) | 0.4 | (0.6) | ||||||||||||
Comprehensive income (loss) attributable to Koppers | $ | 18.1 | $ | (9.1) | $ | 70.3 | $ | (27.1) | ||||||||
Weighted average shares outstanding (in thousands): | ||||||||||||||||
Basic | 20,828 | 20,897 | 20,838 | 21,024 | ||||||||||||
Diluted | 21,659 | 21,085 | 21,546 | 21,345 | ||||||||||||
KOPPERS HOLDINGS INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET (Dollars in millions, except share and per share amounts) | ||||||||
September 30, | December 31, | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 53.5 | $ | 33.3 | ||||
Accounts receivable, net of allowance of | 241.7 | 215.7 | ||||||
Inventories, net | 369.6 | 355.7 | ||||||
Derivative contracts | 4.7 | 3.1 | ||||||
Other current assets | 30.0 | 29.0 | ||||||
Total current assets | 699.5 | 636.8 | ||||||
Property, plant and equipment, net of accumulated depreciation | 607.8 | 557.3 | ||||||
Operating lease right-of-use assets | 84.3 | 86.3 | ||||||
Goodwill | 292.9 | 294.0 | ||||||
Intangible assets, net | 105.2 | 116.1 | ||||||
Deferred tax assets | 10.7 | 11.7 | ||||||
Other assets | 9.8 | 9.2 | ||||||
Total assets | $ | 1,810.2 | $ | 1,711.4 | ||||
Liabilities | ||||||||
Accounts payable | $ | 205.6 | $ | 207.4 | ||||
Accrued liabilities | 80.9 | 96.1 | ||||||
Current operating lease liabilities | 22.4 | 20.5 | ||||||
Current maturities of long-term debt | 4.0 | 0.0 | ||||||
Total current liabilities | 312.9 | 324.0 | ||||||
Long-term debt | 859.8 | 817.7 | ||||||
Accrued postretirement benefits | 34.9 | 34.7 | ||||||
Deferred tax liabilities | 22.9 | 21.5 | ||||||
Operating lease liabilities | 61.8 | 66.3 | ||||||
Other long-term liabilities | 41.9 | 44.2 | ||||||
Total liabilities | 1,334.2 | 1,308.4 | ||||||
Commitments and contingent liabilities | ||||||||
Equity | ||||||||
Senior Convertible Preferred Stock, | 0.0 | 0.0 | ||||||
Common Stock, | 0.2 | 0.2 | ||||||
Additional paid-in capital | 280.1 | 263.9 | ||||||
Retained earnings | 432.4 | 360.2 | ||||||
Accumulated other comprehensive loss | (103.3) | (97.3) | ||||||
Treasury stock, at cost, 4,066,548 and 3,783,901 shares | (137.4) | (127.6) | ||||||
Total Koppers shareholders' equity | 472.0 | 399.4 | ||||||
Noncontrolling interests | 4.0 | 3.6 | ||||||
Total equity | 476.0 | 403.0 | ||||||
Total liabilities and equity | $ | 1,810.2 | $ | 1,711.4 | ||||
KOPPERS HOLDINGS INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in millions) | ||||||||
Nine Months Ended September 30, | ||||||||
2023 | 2022 | |||||||
Cash provided by (used in) operating activities: | ||||||||
Net income | $ | 76.8 | $ | 49.4 | ||||
Adjustments to reconcile net cash used in operating activities: | ||||||||
Depreciation and amortization | 42.7 | 44.5 | ||||||
Stock-based compensation | 13.0 | 10.0 | ||||||
Change in derivative contracts | 0.0 | 9.0 | ||||||
Non-cash interest expense | 4.1 | 2.2 | ||||||
(Gain) on sale of assets | (2.0) | (2.6) | ||||||
Insurance proceeds | (0.8) | (0.7) | ||||||
Deferred income taxes | 1.6 | 1.1 | ||||||
Change in other liabilities | 0.6 | 0.4 | ||||||
Other - net | (1.0) | 5.3 | ||||||
Changes in working capital: | ||||||||
Accounts receivable | (27.5) | (59.0) | ||||||
Inventories | (16.8) | (5.8) | ||||||
Accounts payable | 4.3 | 19.5 | ||||||
Accrued liabilities | (10.0) | (7.5) | ||||||
Other working capital | (5.5) | 1.6 | ||||||
Net cash provided by operating activities | 79.5 | 67.4 | ||||||
Cash (used in) provided by investing activities: | ||||||||
Capital expenditures | (91.3) | (80.0) | ||||||
Insurance proceeds received | 0.8 | 0.7 | ||||||
Cash provided by sale of assets | 2.2 | 4.2 | ||||||
Net cash used in investing activities | (88.3) | (75.1) | ||||||
Cash provided by (used in) financing activities: | ||||||||
Net increase in credit facility borrowings | 159.9 | 39.9 | ||||||
Borrowings of long-term debt | 388.0 | 0.0 | ||||||
Repayments of long-term debt | (501.0) | (2.0) | ||||||
Issuances of Common Stock | 3.2 | 0.9 | ||||||
Repurchases of Common Stock | (9.8) | (18.5) | ||||||
Payment of debt issuance costs | (4.9) | (4.8) | ||||||
Dividends paid | (3.8) | (3.2) | ||||||
Net cash provided by financing activities | 31.6 | 12.3 | ||||||
Effect of exchange rate changes on cash | (2.6) | (7.3) | ||||||
Net increase (decrease) in cash and cash equivalents | 20.2 | (2.7) | ||||||
Cash and cash equivalents at beginning of period | 33.3 | 45.5 | ||||||
Cash and cash equivalents at end of period | $ | 53.5 | $ | 42.8 | ||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Right-of-use assets obtained in exchange for new operating lease liabilities | $ | 16.1 | $ | 10.5 | ||||
Accrued capital expenditures | 5.6 | 7.6 | ||||||
UNAUDITED SEGMENT INFORMATION (Dollars in millions) | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Net sales: | ||||||||||||||||
Railroad and Utility Products and Services | $ | 234.0 | $ | 207.7 | $ | 681.5 | $ | 595.3 | ||||||||
Performance Chemicals | 179.4 | 153.1 | 507.2 | 439.1 | ||||||||||||
Carbon Materials and Chemicals | 137.0 | 175.3 | 452.3 | 463.5 | ||||||||||||
Total | $ | 550.4 | $ | 536.1 | $ | 1,641.0 | $ | 1,497.9 | ||||||||
Adjusted EBITDA(1): | ||||||||||||||||
Railroad and Utility Products and Services | $ | 25.1 | $ | 15.5 | $ | 63.2 | $ | 40.3 | ||||||||
Performance Chemicals | 35.2 | 16.7 | 93.8 | 57.9 | ||||||||||||
Carbon Materials and Chemicals | 10.4 | 36.6 | 45.5 | 77.8 | ||||||||||||
Total | $ | 70.7 | $ | 68.8 | $ | 202.5 | $ | 176.0 | ||||||||
Adjusted EBITDA margin(2): | ||||||||||||||||
Railroad and Utility Products and Services | 10.7 | % | 7.5 | % | 9.3 | % | 6.8 | % | ||||||||
Performance Chemicals | 19.6 | % | 10.9 | % | 18.5 | % | 13.2 | % | ||||||||
Carbon Materials and Chemicals | 7.6 | % | 20.9 | % | 10.1 | % | 16.8 | % | ||||||||
(1) | The tables below describe the adjustments to arrive at adjusted EBITDA. |
(2) | Adjusted EBITDA as a percentage of GAAP sales. |
UNAUDITED RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA (Dollars in millions) | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Net income | $ | 26.2 | $ | 19.0 | $ | 76.8 | $ | 49.4 | ||||||||
Interest expense | 19.0 | 11.4 | 53.3 | 32.3 | ||||||||||||
Depreciation and amortization | 14.3 | 16.9 | 42.7 | 44.5 | ||||||||||||
Income tax provision | 8.3 | 13.2 | 28.1 | 29.7 | ||||||||||||
Discontinued operations | 0.0 | 0.0 | 0.0 | 0.5 | ||||||||||||
Sub-total | 67.8 | 60.5 | 200.9 | 156.4 | ||||||||||||
Adjustments to arrive at adjusted EBITDA: | ||||||||||||||||
LIFO expense(1) | 2.8 | 6.1 | 3.3 | 12.9 | ||||||||||||
Impairment, restructuring and plant closure costs | 0.1 | 0.3 | 0.1 | 0.2 | ||||||||||||
(Gain) on sale of assets | 0.0 | 0.0 | (1.8) | (2.5) | ||||||||||||
Mark-to-market commodity hedging losses | 0.0 | 1.9 | 0.0 | 9.0 | ||||||||||||
Total adjustments | 2.9 | 8.3 | 1.6 | 19.6 | ||||||||||||
Adjusted EBITDA | $ | 70.7 | $ | 68.8 | $ | 202.5 | $ | 176.0 | ||||||||
(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. |
UNAUDITED RECONCILIATIONS OF NET INCOME ATTRIBUTABLE TO KOPPERS TO ADJUSTED NET INCOME ATTRIBUTABLE TO KOPPERS AND DILUTED EARNINGS PER SHARE AND ADJUSTED EARNINGS PER SHARE (Dollars in millions, except share and per share amounts) | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Net income attributable to Koppers | $ | 26.3 | $ | 19.1 | $ | 76.3 | $ | 49.6 | ||||||||
Adjustments to arrive at adjusted net income: | ||||||||||||||||
LIFO expense(1) | 2.8 | 6.1 | 3.3 | 12.9 | ||||||||||||
Impairment, restructuring and plant closure costs | 0.1 | 0.3 | 0.1 | 0.2 | ||||||||||||
(Gain) on sale of assets | 0.0 | 0.0 | (1.8) | (2.5) | ||||||||||||
Mark-to-market commodity hedging losses | 0.0 | 1.9 | 0.0 | 9.0 | ||||||||||||
Write-off of debt issuance costs | 0.0 | 0.0 | 2.0 | 0.4 | ||||||||||||
Total adjustments | 2.9 | 8.3 | 3.6 | 20.0 | ||||||||||||
Adjustments to income tax and noncontrolling interests: | ||||||||||||||||
Income tax on adjustments to pre-tax income | (0.6) | (2.2) | (1.2) | (5.4) | ||||||||||||
Deferred tax adjustments | 0.0 | 0.0 | 0.2 | 0.7 | ||||||||||||
Noncontrolling interest | 0.0 | (0.1) | 0.6 | (0.2) | ||||||||||||
Effect on adjusted net income | 2.3 | 6.0 | 3.2 | 15.1 | ||||||||||||
Adjusted net income including discontinued operations | 28.6 | 25.1 | 79.5 | 64.7 | ||||||||||||
Loss on sale of discontinued operations | 0.0 | 0.0 | 0.0 | 0.5 | ||||||||||||
Adjusted net income attributable to Koppers | $ | 28.6 | $ | 25.1 | $ | 79.5 | $ | 65.2 | ||||||||
Diluted weighted average common shares outstanding | 21,659 | 21,085 | 21,546 | 21,345 | ||||||||||||
Earnings per share: | ||||||||||||||||
Diluted earnings per share - continuing operations | $ | 1.22 | $ | 0.91 | $ | 3.54 | $ | 2.35 | ||||||||
Diluted earnings per share - net income | $ | 1.22 | $ | 0.91 | $ | 3.54 | $ | 2.32 | ||||||||
Adjusted earnings per share | $ | 1.32 | $ | 1.19 | $ | 3.69 | $ | 3.06 | ||||||||
(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. |
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SOURCE KOPPERS HOLDINGS INC.
FAQ
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