PITTSBURGH, Aug. 25, 2020 /PRNewswire/ -- Koppers
Holdings Inc. (NYSE: KOP), an integrated global provider of treated
wood products, wood treatment chemicals and carbon compounds, today
reported its regularly scheduled monthly business update and will
conduct a conference call and related webcast at 11:00 a.m. Eastern Time. This is part of an
ongoing series to share recent developments and highlight strategic
initiatives to the investment community. The company plans to
issue its next monthly business update on September 22, 2020, and will conduct a conference
call with the investment community on that day, which will be
broadcast live on www.koppers.com, with a replay to be made
available.
As previously announced, Koppers is in the process of
consolidating its treating footprint by ceasing production
activities at its facility located in Denver, Colorado. The company expects to
discontinue production activities at the Denver facility by August 31, 2020 as it begins transitioning the
Denver production volumes to its
facility in North Little Rock, Arkansas. The anticipated
future investments of approximately $23
million over two years will serve to modernize equipment and
processes that are near end-of-life, while adding treating capacity
that will position its Railroad Products and Services business for
future growth. The investments will be funded primarily
through proceeds from the sale of the Denver facility and further supported by tax
and economic incentives from the State of
Arkansas.
July Sales by Business Segment
For July 2020, consolidated sales
were $147.4 million compared to
$151.3 million in the prior year
period, representing a decrease of $3.9
million, or 2.6 percent. The decrease was driven by
lower sales from Carbon Materials and Chemicals (CMC) and Railroad
and Utility Products and Services (RUPS), partially offset by
higher sales from Performance Chemicals (PC). Sales for the
month declined from prior year mostly due to a lower year-over-year
contribution from the CMC business as sales shifted from July to
August due to an outage at its facility in the U.S. and lower
overall demand due to the pandemic. Also, the RUPS segment
reported slightly lower year-over-year sales primarily driven by
weaker demand from the commercial crosstie market. By
contrast, the PC business continued to see strong demand for
residential wood treatment preservatives as well as industrial wood
treating activities primarily in the
United States, while international markets delivered a
record sales month.
- Sales for RUPS of $66.8 million
decreased by $1.9 million, or 2.8
percent, compared to sales of $68.7
million in the prior year month. Crosstie volumes were
modestly lower than prior year, primarily due to lower activity in
the commercial market; however, this was partially offset by
year-over-year improvements in the Australian business, as well as
increased activities in its maintenance-of-way businesses.
- Sales for PC of $50.9 million
increased by $7.5 million, or 17.3
percent, compared to sales of $43.4
million in the prior year month. The sales increase was
driven by strong demand for residential decking as a result of
increased focus on home repair and remodel projects during the
pandemic, primarily in the United
States with sales outside of North
America reaching a record high in July due to pent up demand
brought on by several months of restricted activity due to the
pandemic.
- Sales for CMC of $29.7 million
decreased by $9.5 million, or 24.2
percent, compared to sales of $39.2
million in the prior year month. The year-over-year decrease
was associated with sales shifting from July to August as a result
of the outage at its facility in Stickney, Illinois, as well as lower end
market demand globally. Beginning in 2020, Koppers (Jiangsu) Carbon Chemical Company Limited
(KJCC) results are classified as discontinued operations for the
current year, as well as the comparable period in 2019 due to its
pending divestiture.
President and CEO Leroy Ball
said, "I'm pleased with the start of our third quarter showing
sales similar to 2019. Residential lumber sales continue to
outstrip demand for treated lumber and treating chemicals as we
continue to do all we can to catch up. We currently have
several plans in progress to address the chemical shortage in the
short and long-term, and expect that PC customers will begin seeing
some relief before the end of the third quarter."
Mr. Ball continued, "While both RUPS and CMC finished July
behind 2019 sales, all but the North America CMC sales were within
expectations. The Stickney
outage resulted in CMC sales being lower than expected, but most
should be recaptured in August as sales orders got pushed
out. Overall, July held together well in what continues to be
a very challenging operating environment."
2020 Outlook
Although the worldwide effects of the COVID-19 pandemic are
ongoing, based on current market and customer indications, Koppers
continues to expect 2020 sales to be approximately $1.6 billion. By comparison, sales in 2019
(excluding KJCC) were $1.65
billion. Accordingly, Koppers expects adjusted EBITDA
will be approximately $190 million to
$200 million for 2020, compared with
adjusted EBITDA of $201 million in
the prior year.
The effective tax rate for adjusted net income in 2020 is
projected to be approximately 25 percent, compared to the tax rate
in 2019, excluding special tax items, of 26 percent and adjusted
EPS is forecasted to be in the range of $3.10 to $3.40,
compared with adjusted EPS of $3.18
in the prior year.
Mr. Ball commented, "The diversification of our end markets and
our classification as an essential business serving other critical
industries continues to put us in position to have one of our
better years despite the global pandemic that has disrupted many
other business models. The durability and resilience our
business has displayed thus far, as we have dealt with this current
crisis, only reaffirms the strategy that we deployed five years ago
to focus on becoming the global leader in wood preservation
technologies."
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 restructuring, impairment,
non-cash LIFO charges, acquisition-related costs, and non-cash
mark-to-market commodity hedging that are difficult to predict in
advance in order to include in a GAAP estimate and may be
significant.
Capital expenditures for July 2020
were $4.7 million, compared with
$3.1 million in July 2019. For
the year-to-date period ended July 31,
2020, capital expenditures were $31.2
million compared with $21.7
million for the prior year period. Koppers continues
to anticipate investments of $50
million to $60 million in
capital expenditures in 2020, which are primarily related to
improving the safety and reliability of its existing
infrastructure.
Additionally, Koppers plans to reduce debt by approximately
$120 million in 2020, which includes
and will be contingent on the successful closing of its KJCC
divestiture.
Investor Conference Call and Webcast
Koppers management will conduct a conference call this morning,
beginning at 11:00 a.m. Eastern Time
to discuss its business update for July 2020. 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 by
dialing 1-833-366-1128 in the United
States and Canada, or
1-412-902-6774 for international, Conference ID number 10147448.
Participants are requested to access the call at least five minutes
before the scheduled start time to complete a brief
registration.
The conference call will be broadcast live online at:
https://services.choruscall.com/links/koppers200825.html.
(Due to the length of this URL, it may be necessary to copy and
paste this hyperlink into your internet browser's URL address
field.)
An audio replay will be available approximately two hours after
the completion of the call at 1-877-344-7529 for U.S. toll free,
855-669-9658 for Canada toll free,
or 1-412-317-0088 for international, Conference ID number 10147448.
The recording will be available for replay through November 25, 2020.
About Koppers
Koppers, with corporate headquarters in Pittsburgh, Pennsylvania, is an integrated
global provider of treated wood products, wood treatment 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. Including our joint ventures, we serve our
customers through a comprehensive global manufacturing and
distribution network, with facilities located in North America, South
America, Australasia, China
and Europe. The stock of Koppers Holdings Inc. is publicly
traded on the New York Stock Exchange under the symbol
"KOP."
For more information, visit us on the Web:
www.koppers.com. Questions concerning investor relations
should be directed to Michael Zugay
at 412-227-2231 or Quynh McGuire at
412-227-2049.
Non-GAAP Financial Measures
This press release contains certain non-GAAP financial
measures. Koppers believes that adjusted EBITDA, adjusted
EBITDA margin, adjusted net income, adjusted earnings per share,
net debt and net leverage ratio 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.
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 EBITDA and Adjusted
EBITDA; Unaudited Reconciliation of Net Income Attributable to
Koppers and Adjusted Net Income; Unaudited Reconciliation of
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 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; the length and
extent of economic contraction as a result of the coronavirus
(COVID-19) pandemic; disruption in the U.S. and global financial
markets; potential difficulties in protecting our intellectual
property; 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; potential
impairment of our goodwill and/or long-lived assets; demand for
Koppers goods and services; competitive conditions; interest rate
and foreign currency rate fluctuations; availability and costs of
key raw materials; unfavorable resolution of claims against us, as
well as those discussed more fully elsewhere in this release and in
documents filed with the Securities and Exchange Commission by
Koppers, particularly our latest annual report on Form 10-K and any
subsequent filings by Koppers with the Securities and Exchange
Commission. Any forward-looking statements in this release
speak only as of the date of this release, and we undertake no
obligation to update any forward-looking statement to reflect
events or circumstances after that date or to reflect the
occurrence of unanticipated events.
UNAUDITED
RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED
EBITDA
|
(In
millions)
|
|
|
|
Year
Ended
|
|
|
December 31,
2019
|
Net income
|
|
$
|
67.4
|
Interest
expense
|
|
|
61.9
|
Depreciation and
amortization
|
|
|
51.4
|
Depreciation in
impairment and restructuring charges
|
|
|
3.2
|
Income
taxes
|
|
|
0.0
|
Loss from discontinued
operations
|
|
|
(3.7)
|
EBITDA
|
|
|
180.2
|
Unusual items
impacting net income
|
|
|
|
Impairment,
restructuring and plant closure costs
|
|
|
20.4
|
Non-cash LIFO
expense
|
|
|
4.4
|
Mark-to-market
commodity hedging
|
|
|
(3.9)
|
Total
adjustments
|
|
|
20.9
|
Adjusted
EBITDA
|
|
$
|
201.1
|
UNAUDITED
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO KOPPERS AND ADJUSTED
NET INCOME
|
(In
millions)
|
|
|
|
Year
Ended
|
|
|
December 31,
2019
|
Net income
attributable to Koppers
|
|
$
|
66.6
|
Unusual items
impacting net income
|
|
|
|
Impairment,
restructuring and plant closure costs
|
|
|
25.3
|
Non-cash LIFO
expense
|
|
|
4.5
|
Mark-to-market
commodity hedging
|
|
|
(4.0)
|
Total
adjustments
|
|
|
25.8
|
Adjustments to income
tax and noncontrolling interests
|
|
|
|
Income tax on
adjustments to pre-tax income
|
|
|
(22.7)
|
Noncontrolling
interests
|
|
|
0.8
|
Effect on adjusted net
income
|
|
|
3.9
|
Adjusted net income
including discontinued operations
|
|
|
70.5
|
Income from
discontinued operations
|
|
|
(3.7)
|
Adjusted net income
attributable to Koppers
|
|
$
|
66.8
|
UNAUDITED
RECONCILIATION OF DILUTED EARNINGS PER SHARE AND
|
ADJUSTED EARNINGS
PER SHARE
|
(In millions
except share amounts)
|
|
|
|
Year
Ended
|
|
|
December 31,
2019
|
Net income
attributable to Koppers
|
|
$
|
66.6
|
Adjusted net income
attributable to Koppers
|
|
$
|
66.8
|
Denominator for
diluted earnings per share (in thousands)
|
|
|
21,068
|
Earnings per
share:
|
|
|
|
Diluted earnings per
share
|
|
$
|
3.16
|
Adjusted earnings per
share
|
|
$
|
3.18
|
For Information:
|
|
Michael J. Zugay,
Chief Financial Officer
|
|
|
412 227
2231
|
|
|
ZugayMJ@koppers.com
|
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SOURCE Koppers