Koppers Holdings(KOP) - 2025 Q3 - Quarterly Report

Financial Performance - Total net sales for the three months ended September 30, 2025, were $485.3 million, a decrease of $69.0 million or 12.4% compared to $554.3 million in the same period of 2024[111] - Total net sales for the nine months ended September 30, 2025, were $1,446.6 million, a decrease of $168.5 million or 10.4% compared to the prior year[121] - Adjusted EBITDA for the three months ended September 30, 2025, was $70.9 million, down $6.5 million or 8.4% from $77.4 million in the prior year[117] - Adjusted EBITDA margin for Railroad and Utility Products and Services increased to 12.5%, up 2.5% from the prior year[117] - CMC adjusted EBITDA increased due to $26.2 million of lower raw material and operating expenses, partly offset by lower sales prices[131] Segment Performance - The Railroad and Utility Products and Services segment reported net sales of $232.7 million, down $15.4 million or 6.2% from $248.1 million in 2024, primarily due to lower volumes in the Class I crosstie business[111] - Performance Chemicals segment net sales decreased by $32.4 million or 18.3%, from $176.7 million in 2024 to $144.3 million in 2025[111] - Carbon Materials and Chemicals segment saw a decline in net sales of $21.2 million or 16.4%, from $129.5 million in 2024 to $108.3 million in 2025[111] - PC net sales decreased by 19% in volume, primarily due to a shift in United States market share and a slight decrease in remaining customer volumes[112] - CMC net sales decreased by $50.3 million due to the cessation of phthalic anhydride production and lower prices for carbon pitch, which were down approximately 6% globally[123] Market Trends and Projections - The Railway Tie Association estimates total crosstie purchases in 2025 to be approximately 19.9 million ties, down from 21.3 million in 2024, with a decrease expected from the commercial market[110] - Market demand for utility poles is projected to grow due to aging infrastructure and the expansion of renewable energy, with a focus on increasing market share in the western and midwestern U.S. and Canada[110] - The Leading Indicator of Remodeling Activity (LIRA) projects a year-over-year spending growth of 2.4% in early 2026 for homeowner renovation and maintenance expenditures, easing to 1.9% in Q3 2026[110] Operational Strategies and Challenges - The company is implementing transformation initiatives aimed at creating a higher margin profile and improving free cash flow over the next three years[105] - The company anticipates ongoing uncertainty related to geopolitical and supply chain challenges, impacting its operational strategies and cost management[105] Financial Management - Selling, general and administrative expenses decreased by $6.4 million compared to the prior year, mainly due to lower compensation-related costs[115] - Interest expense decreased by $3.5 million compared to the prior year due to lower interest rates and lower borrowings[117] - The company reported a net cash provided by operating activities of $77.4 million for the nine months ended September 30, 2025, compared to $44.7 million in the prior year[134] - As of September 30, 2025, the company's liquidity from its Credit Facility and cash on hand was approximately $379 million[137] - The company anticipates capital expenditures in 2025 to total approximately $52 to $55 million, funded by cash from operations[138] Compliance and Risk Management - The total net leverage ratio as of September 30, 2025, was 3.3, which is below the maximum allowed ratio of 4.75[143] - The cash interest coverage ratio as of September 30, 2025, was 4.2, exceeding the minimum requirement of 2.0[143] - Koppers Holdings Inc. can make dividend payments up to $50 million per fiscal year, with unused amounts carried over[140] - The company is currently in compliance with all covenants governing the Credit Facility[141] - The company manages working capital to enhance flexibility for debt repayment[139] - The company expects liquidity to remain adequate to meet cash requirements for at least the next twelve months[138] - There have been no material changes to critical accounting policies since the last annual report[145] - There are no material changes to market risk disclosures from the previous annual report[147]