QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Common Stock, par value $0.01 per share, outstanding at ~~October~~July 31, ~~2022~~2023 amounted to ~~20,898,005~~20,872,244 shares.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) ~~INCOME~~

The accompanying notes are an integral part of these condensed consolidated financial statements.

The financial information included herein should be read in conjunction with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Investments and other assets – Represents the broker-quoted cash surrender value on universal life insurance policies. This asset is classified as Level 2 in the valuation hierarchy and is measured from values received from financial institutions.

Debt – The fair value of our ~~long-term debt~~Term Loan B (as defined in Note 12 – "Debt") is estimated based on the market prices for the same or similar issuances or on the current rates offered to us for debt of the same remaining maturities (Level 2). The fair value of our Credit Facility (as defined in Note 12 – "Debt") approximates carrying value due to the variable rate nature of this instrument. As of December 31, 2022, the fair value of our fixed-rate long-term debt was estimated based on the market prices for the same or similar issuances or on the current rates offered to us for debt of the same remaining maturities (Level 2).

See Note 15 – “Derivative Financial Instruments”, for the fair value of our derivative financial instruments.

4. Comprehensive Income (Loss) ~~Income~~ and Equity

~~Total~~The following table presents total comprehensive ~~(loss)~~ income ~~for the three and nine months ended September 30, 2022 and 2021 is summarized in the table below:~~(loss):

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

(Dollars in millions)

Net income

$
19.0

$
10.0

$
49.4

$
62.7

Changes in other comprehensive (loss) income:

Currency translation adjustment

(20.1
)

(11.1
)

(40.7
)

(14.5
)
Unrealized (loss) on cash flow hedges,
  net of tax benefit of $4.9, $6.1, $21.1 and $1.2

(8.7
)

(16.6
)

(37.4
)

(3.3
)
Unrecognized pension net loss, net of tax
  expense of $0.1, $0.1, $0.2 and $0.3

0.3

0.3

1.0

0.8

Total comprehensive (loss) income

(9.5
)

(17.4
)

(27.7
)

45.7

Comprehensive loss attributable to
  noncontrolling interests

(0.4
)

(0.2
)

(0.6
)

(0.2
)
Comprehensive (loss) income attributable to Koppers

$
(9.1
)

$
(17.2
)

$
(27.1
)

$
45.9


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023		2022
(Dollars in millions)
Net income	$	24.4		$	11.6		$	50.6	$	30.4
Changes in other comprehensive income (loss):
Currency translation adjustment		(2.2	)		(26.5	)		0.5		(20.7	)
Unrealized gain (loss) on cash flow hedges, net of tax (expense) benefit of $1.5, $12.6, $(0.4) and $15.0		(3.8	)		(24.4	)		0.9		(28.7	)
Unrecognized pension net loss, net of tax expense of $0.0, $0.0, $0.1 and $0.1		0.3			0.5			0.6		0.6
Comprehensive income (loss)		18.7			(38.8	)		52.6		(18.4	)
Comprehensive income (loss) attributable to noncontrolling interests		(0.3	)		(0.2	)		0.4		(0.3	)
Comprehensive income (loss) attributable to Koppers	$	19.0		$	(38.6	)	$	52.2	$	(18.1	)

Amounts reclassified from accumulated other comprehensive loss to net income consist of amounts shown for changes in or amortization of unrecognized pension net loss. This component of accumulated other comprehensive loss is included in the computation of net periodic pension cost as disclosed in Note 1311 – “Pensions and Post-Retirement Benefit Plans.” Other amounts reclassified from accumulated other comprehensive ~~loss~~income (loss) related to derivative financial instruments, net of tax, were $~~5.8~~0.6 million ~~and $27.0~~ ~~million for the three and nine months ended September 30, 2022,~~ and $11.1 million during the three months ended June 30, 2023 and 2022, respectively, and $~~31.0~~2.3 million ~~for the~~and $21.2 ~~three and nine~~million during the six months ended ~~September~~June 30, ~~2021,~~2023 and 2022, respectively. ~~The amounts in the preceding sentence are net of tax.~~

The following tables present the ~~change~~changes in ~~equity for the three months ended September 30, 2022 and 2021, respectively:~~equity:


(Dollars in millions)	Common Stock		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Noncontrolling Interests			Total Equity			Common Stock		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Noncontrolling Interests			Total Equity
Balance at June 30, 2022	$	0.2	$	257.0	$	329.3		$	(88.7	)	$	(122.5	)	$	3.9		$	379.2
Net income		0.0		0.0		19.1			0.0			0.0			(0.1	)		19.0
Dividends		0.0		0.0		(1.0	)		0.0			0.0			0.0			(1.0	)
Balance at March 31, 2023																				$	0.2	$	269.2	$	384.2		$	(89.6	)	$	(133.4	)	$	4.3		$	434.9
Net income (loss)																					0.0		0.0		24.5			0.0			0.0			(0.1	)		24.4
Dividends ($0.06 per share)																					0.0		0.0		(1.4	)		0.0			0.0			0.0			(1.4	)
Issuance of common stock		0.0		0.3		0.0			0.0			0.0			0.0			0.3			0.0		0.6		0.0			0.0			0.0			0.0			0.6
Repurchases of common stock																					0.0		0.0		0.0			0.0			(0.1	)		0.0			(0.1	)
Employee stock plans		0.0		3.2		0.0			0.0			0.0			0.0			3.2			0.0		3.9		0.0			0.0			0.0			0.0			3.9
Other comprehensive (loss) income
Currency translation adjustment		0.0		0.0		0.0			(19.6	)		0.0			(0.3	)		(19.9	)		0.0		0.0		0.0			(2.0	)		0.0			(0.2	)		(2.2	)
Unrealized loss on cash flow hedges		0.0		0.0		0.0			(8.7	)		0.0			0.0			(8.7	)		0.0		0.0		0.0			(3.8	)		0.0			0.0			(3.8	)
Unrecognized pension net loss		0.0		0.0		0.0			0.3			0.0			0.0			0.3			0.0		0.0		0.0			0.3			0.0			0.0			0.3
Balance at September 30, 2022	$	0.2	$	260.5	$	347.4		$	(116.7	)	$	(122.5	)	$	3.5		$	372.4
Balance at June 30, 2023																				$	0.2	$	273.7	$	407.3		$	(95.1	)	$	(133.5	)	$	4.0		$	456.6


(Dollars in millions)	Common Stock		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Noncontrolling Interests			Total Equity
Balance at March 31, 2022	$	0.2	$	253.4	$	318.7		$	(38.3	)	$	(115.1	)	$	4.1		$	423.0
Net income		0.0		0.0		11.6			0.0			0.0			0.0			11.6
Dividends ($0.05 per share)		0.0		0.0		(1.0	)		0.0			0.0			0.0			(1.0	)
Issuance of common stock		0.0		0.3		0.0			0.0			0.0			0.0			0.3
Repurchases of common stock		0.0		0.0		0.0			0.0			(7.4	)		0.0			(7.4	)
Employee stock plans		0.0		3.3		0.0			0.0			0.0			0.0			3.3
Other comprehensive (loss) income
Currency translation adjustment		0.0		0.0		0.0			(26.5	)		0.0			(0.2	)		(26.7	)
Unrealized loss on cash flow hedges		0.0		0.0		0.0			(24.4	)		0.0			0.0			(24.4	)
Unrecognized pension net loss		0.0		0.0		0.0			0.5			0.0			0.0			0.5
Balance at June 30, 2022	$	0.2	$	257.0	$	329.3		$	(88.7	)	$	(122.5	)	$	3.9		$	379.2


(Dollars in millions)	Common Stock		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Noncontrolling Interests			Total Equity			Common Stock		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Noncontrolling Interests			Total Equity
Balance at June 30, 2021	$	0.2	$	242.7	$	268.8		$	(5.5	)	$	(94.4	)	$	4.3		$	416.1
Net income (loss)		0.0		0.0		10.2			0.0			0.0			(0.2	)		10.0
Balance at December 31, 2022																				$	0.2	$	263.9	$	360.2		$	(97.3	)	$	(127.6	)	$	3.6		$	403.0
Net income																					0.0		0.0		50.0			0.0			0.0			0.6			50.6
Dividends ($0.12 per share)																					0.0		0.0		(2.9	)		0.0			0.0			0.0			(2.9	)
Issuance of common stock		0.0		0.3		0.0			0.0			0.0			0.0			0.3			0.0		1.9		0.0			0.0			0.0			0.0			1.9
Repurchases of common stock		0.0		0.0		0.0			0.0			(1.4	)		0.0			(1.4	)		0.0		0.0		0.0			0.0			(5.9	)		0.0			(5.9	)
Employee stock plans		0.0		3.3		0.0			0.0			0.0			0.0			3.3			0.0		7.9		0.0			0.0			0.0			0.0			7.9
Other comprehensive (loss) income
Currency translation adjustment		0.0		0.0		(0.3	)		(11.1	)		0.0			0.0			(11.4	)		0.0		0.0		0.0			0.7			0.0			(0.2	)		0.5
Unrealized loss on cash flow hedges		0.0		0.0		0.0			(16.6	)		0.0			0.0			(16.6	)
Unrealized gain on cash flow hedges																					0.0		0.0		0.0			0.9			0.0			0.0			0.9
Unrecognized pension net loss		0.0		0.0		0.0			0.3			0.0			0.0			0.3			0.0		0.0		0.0			0.6			0.0			0.0			0.6
Balance at September 30, 2021	$	0.2	$	246.2	$	278.8		$	(33.0	)	$	(95.8	)	$	4.1		$	400.5
Balance at June 30, 2023																				$	0.2	$	273.7	$	407.3		$	(95.1	)	$	(133.5	)	$	4.0		$	456.6

~~The following tables present the change in equity for the nine months ended September 30, 2022 and 2021, respectively:~~

(Dollars in millions)

Common
Stock

Additional
  Paid-In Capital

Retained Earnings

Accumulated Other Comprehensive Loss

Treasury
Stock

Noncontrolling
Interests

Total
Equity

Balance at December 31,
  2021

$
0.2

$
249.5

$
300.9

$
(40.0
)

$
(104.0
)

$
4.2

$
410.8

Net income

0.0

0.0

49.6

0.0

0.0

(0.2
)

49.4

Dividends

0.0

0.0

(3.2
)

0.0

0.0

0.0

(3.2
)
Issuance of common stock

0.0

0.9

0.0

0.0

0.0

0.0

0.9

Repurchases of common
  stock

0.0

0.0

0.0

0.0

(18.5
)

0.0

(18.5
)
Employee stock plans

0.0

10.1

0.0

0.0

0.0

0.0

10.1

Other comprehensive
  (loss) income

    Currency translation
      adjustment

0.0

0.0

0.0

(40.2
)

0.0

(0.6
)

(40.8
)
    Unrealized loss on
      cash flow hedges

0.0

0.0

0.0

(37.4
)

0.0

0.0

(37.4
)
    Unrecognized pension
      net loss

0.0

0.0

0.0

1.0

0.0

0.0

1.0

Balance at September 30, 2022

$
0.2

$
260.5

$
347.4

$
(116.7
)

$
(122.5
)

$
3.5

$
372.4


(Dollars in millions)	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss			Treasury Stock			Noncontrolling Interests			Total Equity			Common Stock		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Noncontrolling Interests			Total Equity
Balance at December 31, 2020	$	0.2	$	234.1	$	215.8	$	(15.9	)	$	(92.5	)	$	4.3		$	346.0
Balance at December 31, 2021																			$	0.2	$	249.5	$	300.9		$	(40.0	)	$	(104.0	)	$	4.2		$	410.8
Net income (loss)		0.0		0.0		63.0		0.0			0.0			(0.3	)		62.7			0.0		0.0		30.5			0.0			0.0			(0.1	)		30.4
Dividends ($0.10 per share)																				0.0		0.0		(2.1	)		0.0			0.0			0.0			(2.1	)
Issuance of common stock		0.0		2.2		0.0		0.0			0.0			0.0			2.2			0.0		0.7		0.0			0.0			0.0			0.0			0.7
Repurchases of common stock		0.0		0.0		0.0		0.0			(3.3	)		0.0			(3.3	)		0.0		0.0		0.0			0.0			(18.5	)		0.0			(18.5	)
Employee stock plans		0.0		9.9		0.0		0.0			0.0			0.0			9.9			0.0		6.8		0.0			0.0			0.0			0.0			6.8
Other comprehensive (loss) income
Currency translation adjustment		0.0		0.0		0.0		(10.2	)		0.0			0.1			(10.1	)		0.0		0.0		0.0			(20.7	)		0.0			(0.2	)		(20.9	)
Cumulative translation adjustment loss on sale of subsidiary		0.0		0.0		0.0		(4.4	)		0.0			0.0			(4.4	)
Unrealized loss on cash flow hedges		0.0		0.0		0.0		(3.3	)		0.0			0.0			(3.3	)		0.0		0.0		0.0			(28.7	)		0.0			0.0			(28.7	)
Unrecognized pension net loss		0.0		0.0		0.0		0.8			0.0			0.0			0.8			0.0		0.0		0.0			0.6			0.0			0.0			0.6
Balance at September 30, 2021	$	0.2	$	246.2	$	278.8	$	(33.0	)	$	(95.8	)	$	4.1		$	400.5
Balance at June 30, 2022																			$	0.2	$	257.0	$	329.3		$	(88.7	)	$	(122.5	)	$	3.9		$	379.2

On ~~November 3, 2022~~August 2, 2023, we declared a quarterly dividend of $~~0.05~~0.06 per common share, payable on ~~December 12, 2022~~September 11, 2023 to shareholders of record as of ~~November~~August 25, ~~2022~~2023.

7.5. Earnings per Common Share

The computation of basic earnings per common share for the periods presented is based upon the weighted average number of common shares outstanding during the periods. The computation of diluted earnings per common share includes the effect of non-vested nonqualified stock options and restricted stock units assuming such options and stock units were outstanding common shares at the beginning of the period. The effect of antidilutive securities is excluded from the computation of diluted loss per common share, if any.

The following table sets forth the computation of basic and diluted earnings per common share:

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

(Dollars in millions, except share amounts, in thousands)

Net income attributable to Koppers

$
19.1

$
10.2

$
49.6

$
63.0

Less: Gain (loss) on sale of discontinued operations,
net of tax of $0.0

0.0

(0.5
)

(0.5
)

0.1

Income from continuing operations attributable to Koppers

$
19.1

$
10.7

$
50.1

$
62.9

Weighted average common shares outstanding:

Basic

20,897

21,322

21,024

21,253

Effect of dilutive securities

188

625

321

696

Diluted

21,085

21,947

21,345

21,949

Earnings per common share – continuing operations:

Basic earnings per common share

$
0.91

$
0.50

$
2.38

$
2.96

Diluted earnings per common share

0.91

0.49

2.35

2.87

Other data:

Antidilutive securities excluded from computation of
diluted earnings per common share

1,088

563

1,075

437


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
(Dollars in millions, except share amounts, in thousands)
Net income attributable to Koppers	$	24.5	$	11.7	$	50.0	$	30.5
Less: Loss on sale of discontinued operations		0.0		0.0		0.0		(0.5	)
Income from continuing operations attributable to Koppers	$	24.5	$	11.7	$	50.0	$	31.0
Weighted average common shares outstanding:
Basic		20,843		21,026		20,842		21,088
Effect of dilutive securities		508		213		524		384
Diluted		21,351		21,239		21,366		21,472
Earnings per common share – continuing operations:
Basic earnings per common share	$	1.17	$	0.56	$	2.40	$	1.47
Diluted earnings per common share		1.15		0.55		2.34		1.44
Other data:
Antidilutive securities excluded from computation of diluted earnings per common share		494		1,077		619		1,058

8.6. Stock-based Compensation

We have outstanding stock-based compensation awards that were granted under the amended and restated 2005 Long-Term Incentive Plan (the “2005 LTIP”), the 2018 Long-Term Incentive Plan (the “2018 LTIP”) and the 2020 Long-Term Incentive Plan, as amended (the “2020 LTIP”)~~. The 2005 LTIP,~~ (collectively, the ~~2018 LTIP and the 2020 LTIP are collectively referred to as the~~ “LTIP”). The LTIP provides for the grant to eligible persons of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance awards, dividend equivalents and other stock-based awards, which are collectively referred to as the “awards.”

Restricted Stock Units and Performance Stock Units

Under the LTIP, the board of directors grants restricted stock units and performance stock units to certain employee participants (collectively, the “stock units”). Compensation expense for non-vested stock units is recorded over the vesting period based on the fair value at the date of grant. The fair value of restricted stock units is the market price of the underlying common stock on the date of ~~grant and the~~grant. The fair value of performance stock units is determined using the market price of the underlying common stock on the date of grant for units with a performance condition and a Monte Carlo valuation ~~model.~~ model for units with a market condition.

For grants to most employees prior to 2023, the restricted stock units vest in fourequal annual installments. Starting in 2023, most grants of restricted stock units vest in three years. Restricted stock units that have one-year vesting periods are also issued under the LTIP to members of the board of directors in connection with annual director compensation and, from time to time, are issued to employees ~~in connection with employee compensation~~ with vesting periods of typically two years or less.

Performance stock units have vesting based upon either a performance condition or a market condition. ~~These performance~~Performance stock units granted with a performance condition have ~~multi-year performance objectives and~~ a cumulative three-year ~~period for vesting (if~~performance objective based on adjusted EBITDA (see Note 7 – “Segment Information"). For performance stock units granted with a market condition, which applies to all performance stock unit grants made prior to 2023, the applicable ~~performance objectives are achieved). The applicable performance~~ objective is based on our total shareholder return relative to the Standard & Poor’s SmallCap 600 Materials ~~Index.~~Index and has multi-year performance objectives.

Both types of performance stock units have a three-year period for vesting. The number of performance stock units granted represents the target award and participants have the ability to earn between zero and 200 percent of the target award based upon actual performance. If minimum performance criteria are not achieved, no performance stock units will vest. We have the discretion to settle the award in cash rather than shares, although we currently expect that all awards will be settled by the issuance of shares.

We calculated the fair value of the performance stock unit awards with a market condition on the date of grant using the assumptions listed below:


	January 2022 Grant			January 2021 Grant			March 2020 Grant			January 2023 Grant			January 2022 Grant			January 2021 Grant
Grant date price per share of performance award	$	32.19		$	29.84		$	19.63		$	29.01		$	32.19		$	29.84
Expected dividend yield per share		0.00	%		0.00	%		0.00	%
Expected volatility		66.90	%		68.70	%		45.60	%		66.30	%		66.90	%		68.70	%
Risk-free interest rate		1.10	%		0.16	%		0.72	%		4.11	%		1.10	%		0.16	%
Look-back period in years		3.00			3.00			2.83			3.00			3.00			3.00
Grant date fair value per share	$	45.19		$	41.50		$	11.56		$	39.51		$	45.19		$	41.50

Dividends declared, if any, on our common stock during the period prior to vesting of the stock units are credited at equivalent value as additional stock units and become payable as additional common shares upon vesting. In the event of termination of employment, other than retirement, death or disability, any non-vested stock units are forfeited, including additional stock units credited from dividends. In the event of termination of employment due to retirement, death or disability, pro-rata vesting of the stock units over the service period will result. There are special vesting provisions for the stock units related to a change in control.

The following table shows a summary of the performance stock units as of ~~September~~June 30, ~~2022:~~2023:


Performance Period	Minimum Shares		Target Shares		Maximum Shares		Minimum Shares		Target Shares		Maximum Shares
2020 – 2022		0		74,259		148,563
Market Condition Units
2021 – 2023		40,751		137,936		235,138		66,968		115,036		163,104
2022 – 2024		0		149,892		299,784		17,788		117,937		218,086
2023 – 2025								0		78,411		156,822
Performance Condition Units
2023 – 2025								0		188,238		376,476

The following table shows a summary of the status and activity of non-vested stock ~~units for the nine months ended September 30, 2022:~~units:


	Restricted Stock Units			Performance Stock Units			Total Stock Units			Weighted Average Grant Date Fair Value per Unit		Restricted Stock Units			Performance Stock Units			Total Stock Units			Weighted Average Grant Date Fair Value per Unit
Non-vested at December 31, 2021		505,905			474,166			980,071		$	30.79
Non-vested at December 31, 2022													524,612			237,032			761,644		$	32.40
Granted		247,760			151,236			398,996		$	35.92		232,494			267,073			499,567		$	30.75
Performance share adjustment		0			2,491			2,491		$	14.20
Credited from dividends													3,469			1,594			5,063		$	26.89
Vested		(193,462	)		(256,956	)		(450,418	)	$	34.47		(216,257	)		0			(216,257	)	$	26.30
Forfeited		(25,344	)		(8,848	)		(34,192	)	$	28.19		(13,609	)		(6,077	)		(19,686	)	$	32.50
Non-vested at September 30, 2022		534,859			362,089			896,948		$	31.28
Non-vested at June 30, 2023													530,709			499,622			1,030,331		$	32.85

Stock Options

Stock options to executive officers vest and become exercisable in four equal annual installments. The stock options have a term of ten years. In the event of termination of employment, other than retirement, death or disability, any non-vested options are forfeited. In the event of termination of employment due to retirement, death or disability, pro-rata vesting of the options over the service period will result. There are special vesting provisions for the stock options related to a change in control.

Compensation expense for non-vested stock options is recorded over the vesting period based on the fair value at the date of grant. No stock options have been issued in 2023. We calculated the fair value of stock options on the date of grant using the Black-Scholes-Merton model and the assumptions listed below:

January 2022 Grant

January 2021 Grant

March 2020 Grant

March 2019 Grant

Grant date price per share of stock
option award

$
32.19

$
29.84

$
19.63

$
26.63

Expected dividend yield per share

0.00
%

0.00
%

0.00
%

0.00
%
Expected life in years

6.76

6.64

6.40

6.14

Expected volatility

54.50
%

54.80
%

42.85
%

39.44
%
Risk-free interest rate

1.52
%

0.59
%

0.87
%

2.53
%
Grant date fair value per share of option
awards

$
17.58

$
15.79

$
8.42

$
11.29


	January 2022 Grant			January 2021 Grant			March 2020 Grant
Grant date price per share of stock option award	$	32.19		$	29.84		$	19.63
Expected dividend yield per share		0.00	%		0.00	%		0.00	%
Expected life in years		6.76			6.64			6.40
Expected volatility		54.50	%		54.80	%		42.85	%
Risk-free interest rate		1.52	%		0.59	%		0.87	%
Grant date fair value per share of option awards	$	17.58		$	15.79		$	8.42

Prior to February 2022, we had not declared a dividend since 2014. The dividend yield is based on the Company’s current and prospective dividend rate which calculates a continuous dividend yield based upon the market price of the underlying common stock. The expected life in years is based on historical exercise data of options previously granted by us. Expected volatility is based on the historical volatility of our common stock and the ~~historical volatility of certain other similar public companies. The~~ risk-free interest rate is based on U.S. Treasury bill rates for the expected life of the option.

The following table shows a summary of the status and activity of stock ~~options for the nine months ended September 30, 2022:~~options:

Options

Weighted Average
Exercise Price
per Option

Weighted Average
Remaining
Contractual Term
(in years)

Aggregate Intrinsic
Value (in millions)

Outstanding at December 31, 2021

1,054,166

$
26.89

Granted

98,108

$
32.19

Expired

(30,138
)

$
38.21

Outstanding at September 30, 2022

1,122,136

$
27.05

4.87

$
1.3

Exercisable at September 30, 2022

843,475

$
26.99

3.77

$
1.2


	Options			Weighted Average Exercise Price per Option		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in millions)
Outstanding at December 31, 2022		1,122,136		$	27.05
Exercised		(63,974	)	$	18.76
Expired		(50,031	)	$	42.16
Outstanding at June 30, 2023		1,008,131		$	26.83		4.55	$	9.0
Exercisable at June 30, 2023		846,655		$	26.56		3.94	$	8.1

Stock Compensation Expense

~~Total~~The following table presents total stock-based compensation expense recognized under our LTIP and employee stock purchase ~~plan for the three and nine months ended September 30, 2022 and 2021 is as follows:~~plan:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
(Dollars in millions)
Stock-based compensation expense recognized:
Selling, general and administrative expenses	$	3.2	$	3.2	$	10.0	$	9.8	$	3.8	$	3.2	$	7.8	$	6.7
Less related income tax benefit		1.2		0.8		3.6		2.6		1.1		1.1		2.2		2.3
Decrease in net income attributable to Koppers	$	2.0	$	2.4	$	6.4	$	7.2	$	2.7	$	2.1	$	5.6	$	4.4
Intrinsic value of exercised stock options	$	0.0	$	0.0	$	0.0	$	2.2	$	0.2	$	0.0	$	0.9	$	0.0
Cash received from the exercise of stock options	$	0.0	$	0.0	$	0.0	$	2.3	$	0.3	$	0.0	$	1.2	$	0.0

As of ~~September~~June 30, ~~2022,~~2023, total future compensation expense related to non-vested stock-based compensation arrangements is expected to total $~~21.6~~25.4 million and the weighted-average period over which this expense is expected to be recognized is approximately 2725 months.

9.7. Segment Information

We have three reportable segments: ~~RUPS,~~Railroad and Utility Products and Services ("RUPS"), Performance Chemicals (“PC”) and ~~CMC.~~Carbon Materials and Chemicals ("CMC"). Our reportable segments contain multiple aggregated business units since management believes the long-term financial performance of these business units is affected by similar economic conditions. The reportable segments are each managed separately because they manufacture and distribute distinct products with different production processes.

Our RUPS segment sells treated and untreated wood products, manufactured products and services primarily to the railroad and public utility markets. Railroad products and services include procuring and treating items such as crossties, switch ties and various types of lumber used for railroad bridges and crossings and the manufacture of rail joint bars. Utility products include transmission and distribution poles and pilings. The segment also operates a railroad services business that conducts engineering, design, repair and inspection services for railroad bridges, a business related to the recovery of used crossties and utility poles and a business related to the inspection of utility poles.

Our PC segment develops, manufactures, and markets wood preservation chemicals and wood treatment technologies and services a diverse range of end-markets including infrastructure, residential and commercial construction, and agriculture.

Our CMC segment is primarily a manufacturer of creosote, carbon pitch, naphthalene, phthalic anhydride and carbon black feedstock. Creosote is used in the treatment of wood and carbon black feedstock is used in the production of carbon black. Carbon pitch is a critical raw material used in the production of aluminum and for the production of steel in electric arc furnaces. Naphthalene is used for the production of phthalic anhydride and as a surfactant in the production of concrete. Phthalic anhydride is used in the production of plasticizers, polyester resins and alkyd paints.

Our primary measure of segment profitability is adjusted earnings before interest, income taxes, depreciation, amortization and certain non-cash and/or non-recurring items that do not contribute directly to management’s evaluation of our operating results (as defined by us, “adjusted EBITDA"). These items include impairment, restructuring and plant closure costs, mark-to-market commodity hedging, gain or loss on sale of assets and LIFO inventory effects. This presentation is consistent with how our chief operating decision maker evaluates the results of operations and makes strategic decisions about the business. 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.~~payout, as well as one of the measures used to determine performance and related payouts for certain performance share units granted to management. For these reasons, we believe that adjusted EBITDA represents the most relevant measure of segment profit and loss.

~~Consolidated adjusted~~Adjusted EBITDA is reconciled to net income on a consolidated basis, the most directly comparable financial measure determined and reported in accordance with U.S. GAAP. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. Intersegment transactions are eliminated in consolidation.

Contract Balances

The timing of revenue recognition results in both billed accounts receivable and unbilled receivables, both classified as accounts receivable, net of allowance within the condensed consolidated balance sheet. Contract assets of $~~8.4~~6.8 million and $~~7.9~~8.3 million are recorded within accounts receivable, net of allowance within the condensed consolidated balance sheet as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

The following table sets forth certain sales and operating data, net of all intersegment transactions, for our ~~segments for~~segments:


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
(Dollars in millions)
Revenues from external customers:
Railroad and Utility Products and Services	$	234.4		$	204.2		$	447.5		$	387.6
Performance Chemicals		180.9			149.6			327.8			286.0
Carbon Materials and Chemicals		161.9			148.7			315.3			288.2
Total	$	577.2		$	502.5		$	1,090.6		$	961.8
Intersegment revenues:
Performance Chemicals	$	7.2		$	5.9		$	12.8		$	9.9
Carbon Materials and Chemicals		23.2			18.9			42.2			37.5
Total	$	30.4		$	24.8		$	55.0		$	47.4
Depreciation and amortization expense:
Railroad and Utility Products and Services	$	5.8		$	5.5		$	11.7		$	10.9
Performance Chemicals		3.5			3.8			7.0			7.7
Carbon Materials and Chemicals		5.1			4.1			9.7			9.0
Total	$	14.4		$	13.4		$	28.4		$	27.6
Adjusted EBITDA:
Railroad and Utility Products and Services	$	22.3		$	13.2		$	38.1		$	24.8
Performance Chemicals		32.3			20.4			58.6			41.2
Carbon Materials and Chemicals		15.7			21.0			35.1			41.2
Items excluded from the determination of segment profit:
Impairment, restructuring and plant closure (costs) benefits		0.0			0.2			(0.1	)		0.0
Gain on sale of assets		0.0			0.0			1.8			2.5
LIFO expense(1)		(0.2	)		(5.1	)		(0.4	)		(6.8	)
Mark-to-market commodity hedging losses		(1.1	)		(6.8	)		0.0			(7.1	)
Interest expense		(20.3	)		(11.1	)		(34.3	)		(20.8	)
Depreciation and amortization		(14.4	)		(13.4	)		(28.4	)		(27.6	)
Income tax provision		(9.9	)		(6.8	)		(19.8	)		(16.5	)
Discontinued operations		0.0			0.0			0.0			(0.5	)
Net income	$	24.4		$	11.6		$	50.6		$	30.4

(1)

The LIFO expense adjustment removes the ~~periods indicated:~~

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

(Dollars in millions)

Revenues from external customers:

Railroad and Utility Products and Services

$
207.7

$
186.9

$
595.3

$
574.3

Performance Chemicals

153.1

115.2

439.1

384.4

Carbon Materials and Chemicals

175.3

122.7

463.5

314.6

Total

$
536.1

$
424.8

$
1,497.9

$
1,273.3

Intersegment revenues:

Performance Chemicals

$
6.8

$
3.9

$
16.7

$
11.2

Carbon Materials and Chemicals

19.9

18.9

57.4

55.2

Total

$
26.7

$
22.8

$
74.1

$
66.4

Depreciation and amortization expense:

Railroad and Utility Products and Services

$
5.6

$
5.3

$
16.5

$
16.9

Performance Chemicals

3.8

4.1

11.5

13.6

Carbon Materials and Chemicals

7.5

4.0

16.5

12.9

Total

$
16.9

$
13.4

$
44.5

$
43.4

Adjusted EBITDA:

Railroad and Utility Products and Services

$
15.5

$
10.7

$
40.3

$
39.1

Performance Chemicals

16.7

20.2

57.9

82.5

Carbon Materials and Chemicals

36.6

22.5

77.8

51.5

Items excluded from the determination of segment
profit:

Impairment, restructuring and plant closure
(costs) benefits

(0.3
)

0.7

(0.2
)

(4.3
)
Gain on sale of assets

0.0

0.0

2.5

7.8

LIFO expense

(6.1
)

(10.6
)

(12.9
)

(15.8
)
Mark-to-market commodity hedging losses

(1.9
)

(4.4
)

(9.0
)

(2.8
)
Corporate unallocated

0.0

0.5

0.0

1.6

Interest expense

(11.4
)

(10.2
)

(32.3
)

(30.5
)
Depreciation and amortization

(16.9
)

(14.1
)

(44.5
)

(44.1
)
Income tax provision

(13.2
)

(4.8
)

(29.7
)

(22.4
)
Discontinued operations

0.0

(0.5
)

(0.5
)

0.1

Net income

$
19.0

$
10.0

$
49.4

$
62.7

entire impact of LIFO and effectively reflects the results as if we were on a FIFO inventory basis.

The following table sets forth revenues for significant product lines, net of all intersegment transactions, for our ~~segments for the periods indicated:~~segments:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
(Dollars in millions)
Railroad and Utility Products and Services:
Railroad treated products	$	120.6	$	107.1	$	348.2	$	327.6	$	138.5	$	122.3	$	266.0	$	227.6
Utility poles		63.0		59.6		178.7		186.2		71.2		59.5		134.5		115.7
Railroad infrastructure services		10.9		8.8		29.9		25.3		8.6		9.7		18.1		19.0
Rail joints		7.8		5.7		21.6		17.9		6.9		7.0		13.2		13.8
Other products		5.4		5.7		16.9		17.3		9.2		5.7		15.7		11.5
Total		207.7		186.9		595.3		574.3		234.4		204.2		447.5		387.6
Performance Chemicals:
Wood preservative products		148.3		110.1		419.2		366.4		166.6		141.7		303.6		270.8
Other products		4.8		5.1		19.9		18.0		14.3		7.9		24.2		15.2
Total		153.1		115.2		439.1		384.4		180.9		149.6		327.8		286.0
Carbon Materials and Chemicals:
Pitch and related products		109.6		70.4		270.0		177.7		104.0		82.5		204.7		160.3
Phthalic anhydride and other chemicals		31.6		19.7		85.0		52.2		21.7		28.2		40.7		53.5
Creosote and distillates		17.2		19.0		56.9		48.6
Carbon black feedstock and distillates										20.8		20.7		38.5		39.7
Naphthalene		9.1		6.2		26.1		15.5		6.7		8.4		15.3		16.9
Other products		7.8		7.4		25.5		20.6		8.7		8.9		16.1		17.8
Total		175.3		122.7		463.5		314.6		161.9		148.7		315.3		288.2
Total	$	536.1	$	424.8	$	1,497.9	$	1,273.3	$	577.2	$	502.5	$	1,090.6	$	961.8

The following table sets forth assets and goodwill allocated to each of our ~~segments as of the dates indicated:~~segments:


	September 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
(Dollars in millions)
Segment assets:
Railroad and Utility Products and Services	$	620.9	$	594.1	$	719.7	$	660.8
Performance Chemicals		516.3		586.9		532.5		516.9
Carbon Materials and Chemicals		487.6		447.1		533.4		500.5
All other		27.9		33.8		30.1		33.2
Total	$	1,652.7	$	1,661.9	$	1,815.7	$	1,711.4
Goodwill:
Railroad and Utility Products and Services	$	120.4	$	120.9	$	120.5	$	120.6
Performance Chemicals		171.6		175.1		173.3		173.4
Total	$	292.0	$	296.0	$	293.8	$	294.0

~~The interest expense deduction limitation is limited to~~ ~~30.0~~ percent of adjusted taxable income as defined under the tax regulations. Starting January 1, 2022, the calculation of adjusted taxable income excludes an addback for depreciation and amortization whereas previous years’ determination of adjusted taxable income included an addback for depreciation and amortization. This change in the determination of adjusted taxable income has decreased the amount of interest expense we can deduct and has had a significant unfavorable impact on our estimated annual effective income tax rate for the current year.

Income taxes as a percentage of pretax income were ~~41.0~~28.9 and 28.1 percent for the three and six months ended ~~September~~June 30, ~~2022. This is~~2023, and 37.0 and 34.8 percent for the three and six months ended June 30, 2022, respectively. The effective income tax rates for the periods mentioned were slightly higher than ~~the~~their respective estimated annual effective income tax ~~rate of~~ ~~36.1~~ ~~percent~~rates due to ~~additional tax expense recognized~~various discrete items, which were not material in the ~~current quarter as a result of increasing the estimated annual effective income tax rate utilized in the previous quarter.~~

~~Income taxes as a percentage of pretax income were~~ ~~37.3~~ ~~percent for the nine months ended September 30, 2022. This was higher than the estimated annual effective income tax rate of~~ ~~36.1~~ ~~percent due to forecasted pre-tax losses of certain foreign subsidiaries that are not expected to generate a future benefit.~~aggregate or individually.

During the year, management regularly updates estimates of pre-tax income and income tax expense based on changes in pre-tax income projections by taxable jurisdiction, repatriation of foreign earnings, unrecognized tax benefits and other tax matters. To the extent that actual results vary from these estimates, the actual annual effective income tax rate at the end of the year could be materially different from the estimated annual effective income tax rate ~~as of September~~for the six months ended June 30, ~~2022.~~2023.

We file income tax returns in the U.S. federal jurisdiction, individual U.S. state jurisdictions and non-U.S. jurisdictions. With few exceptions, we are no longer subject to U.S. federal, U.S. state, or non-U.S. income tax examinations by tax authorities for years prior to ~~2016.~~2017.

Unrecognized tax benefits totaled $~~1.4~~1.5 million and $~~1.5~~1.4 million as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022, respectively. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate, was approximately $~~1.4~~1.5 million and $~~1.5~~1.4 million as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021.~~ 2022, respectively.

We recognize interest expense and any related penalties from unrecognized tax benefits in income tax expense. ~~As of September~~For the six months ended June 30, ~~2022~~2023 we recognized $0.1 million in interest and penalties. For the year ended December 31, ~~2021,~~2022, we ~~had accrued approximately~~recognized income of $~~0.4~~0.1 million ~~for~~in interest and penalties.

We do not anticipate material changes to the amount of unrecognized tax benefits within the next twelve months.

~~11. Inventories~~13

~~Net inventories as of September 30, 2022 and December 31, 2021 are summarized in the~~9. Inventories, net

The following table ~~below:~~presents net inventories:

September 30,
2022

December 31,
2021

(Dollars in millions)

Raw materials

$
264.1

$
266.8

Work in process

11.5

12.6

Finished goods

120.9

112.1

$
396.5

$
391.5

Less revaluation to LIFO

90.5

77.7

Net

$
306.0

$
313.8


	June 30, 2023		December 31, 2022
(Dollars in millions)
Raw materials	$	341.4	$	318.5
Work in process		10.1		10.2
Finished goods		125.5		130.4
	$	477.0	$	459.1
Less revaluation to LIFO		103.9		103.4
Net	$	373.1	$	355.7

~~12.~~10. Property, Plant and Equipment

~~Property,~~The following table presents property, plant and ~~equipment as of September 30, 2022 and December 31, 2021 are summarized in the table below:~~equipment:


	September 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
(Dollars in millions)
Land	$	13.7	$	15.2	$	18.2	$	15.0
Buildings		73.1		75.8		80.0		80.3
Machinery and equipment		888.9		836.8		954.5		924.1
	$	975.7	$	927.8	$	1,052.7	$	1,019.4
Less accumulated depreciation		448.5		438.7		457.8		462.1
Net	$	527.2	$	489.1	$	594.9	$	557.3

~~13.~~11. Pensions and Post-Retirement Benefit Plans

We maintain a number of defined benefit and defined contribution plans to provide retirement benefits for employees in the United States, as well as employees outside the United States. These plans are maintained and contributions are made in accordance with the Employee Retirement Income Security Act of 1974 (“ERISA”), or local ~~statutory~~ law, or as ~~determined by the board of directors.~~applicable. The defined benefit pension plans generally provide benefits based upon years of service and compensation. Pension plans are funded except for three domestic non-qualified defined benefit pension plans for certain key executives.

In the United States, all qualified and two of the non-qualified defined benefit pension plans for salaried and hourly employees have been ~~frozen and are~~ closed to new ~~participants.~~participants and have been frozen. Accordingly, these pension plans no longer accrue additional years of service or recognize future increases in compensation for benefit purposes.

~~With respect to~~In connection with our defined benefit pension plan in the United Kingdom, in 2021, we entered into a buy-in bulk annuity insurance policy in exchange for a premium payment of $67.8 million, which is subject to adjustment as a result of subsequent data cleansing activities. Under the terms of this buy-in insurance policy, the insurer is liable to pay the benefits of ~~our defined benefit pension~~the plan, ~~in the United Kingdom,~~ but the plan still retains full legal responsibility to pay the benefits to ~~the~~ members ~~of the plan~~ using the insurance payments. The buy-in policy will be treated as a plan asset going forward until such time as the buy-in policy is converted to a buy-out policy, which is when individual insurance policies will be assigned to each member of the plan and the plan will no longer have legal responsibility to pay the benefits to the members. The data cleansing effort ~~is expected to be~~was substantially completed in ~~mid-2023 at which time~~late 2022 and by late 2023, the pension obligation ~~will~~is expected to be irrevocably settled. Upon that event, we will recognize a pre-tax pension settlement loss of approximately $2220 million.

The defined contribution plans generally provide retirement assets to employee participants based upon employer and employee contributions to the participant’s individual investment account. We also provide retiree medical insurance coverage to certain U.S. employees and a life insurance benefit to most U.S. employees. For salaried employees, the retiree medical and retiree life insurance plans have been closed to new participants.

The following table provides the components of net periodic benefit cost for the pension ~~plans for the three and nine months ended September 30, 2022 and 2021:~~plans:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021			2023			2022			2023			2022
(Dollars in millions)
Service cost	$	0.3		$	0.4		$	0.9		$	1.1		$	0.4		$	0.3		$	0.8		$	0.6
Interest cost		1.4			1.1			4.3			3.8			2.0			1.5			4.1			2.9
Expected return on plan assets		(1.9	)		(1.8	)		(5.8	)		(5.5	)		(1.8	)		(1.9	)		(3.5	)		(3.9	)
Amortization of net loss		0.4			0.4			1.3			1.1			0.6			0.4			1.1			0.9
Net periodic benefit cost	$	0.2		$	0.1		$	0.7		$	0.5		$	1.2		$	0.3		$	2.5		$	0.5
Defined contribution plan expense	$	2.2		$	1.9		$	7.0		$	6.5		$	2.4		$	2.3		$	4.9		$	4.8

1~~4. Debt~~

12. Debt

~~Debt as of September 30, 2022 and December 31, 2021 was as follows:~~The following table summarizes debt:


	Weighted Average Interest Rate			Maturity	September 30, 2022		December 31, 2021		Weighted Average Interest Rate			Maturity	June 30, 2023		December 31, 2022
(Dollars in millions)
Term Loan		2.38	%	─	$	0.0	$	2.0
Revolving Credit Facility		2.38	%	─		0.0		287.1
Revolving Credit Facility		5.16	%	2027		326.8		0.0
Credit Facility										7.36	%	2027	$	528.4	$	325.3
Term Loan B										8.56	%	2030		387.3		0.0
Senior Notes due 2025		6.00	%	2025		500.0		500.0	-			-		0.0		500.0
Debt						826.8		789.1					$	915.7	$	825.3
Less short-term debt and current maturities of long-term debt						0.0		2.0						4.0		0.0
Less unamortized debt issuance costs						8.1		5.6						9.5		7.6
Long-term debt					$	818.7	$	781.5					$	902.2	$	817.7

~~Revolving~~ Credit Facility

~~In June 2022, we entered into~~We have an $800.0 million revolving credit agreement (the “Credit Facility”) with a consortium of ~~banks which replaced our previous $600.0~~ ~~million senior secured revolving credit facility and $100.0~~ ~~million senior secured term loan facility (the latter having been fully repaid as of March 31, 2022).~~banks. The Credit Facility also provides for a $50.0 million swingline facility and provides for the ability to incur one or more uncommitted incremental revolving or term loan facilities in an aggregate amount of at least $730.0 million, subject to applicable financial covenants. ~~The maturity date of the Credit Facility is in~~ ~~June 2027~~ ~~subject to a springing maturity in the event the 2025 Notes (as defined below) are not repurchased, redeemed or refinanced prior to November 15, 2024.~~ The interest rate on the Credit Facility is variable and may be based on the Secured Overnight Financing Rate (“SOFR”), which is the applicable benchmark for current borrowings, or an alternative benchmark depending on the borrowing type.

Borrowings under the Credit Facility are secured by a first priority lien on substantially all of the assets (excluding real property and other customary assets) of Koppers Inc., Koppers Holdings Inc. and their material domestic subsidiaries. The Credit Facility contains certain covenants that limit Koppers Inc. and its restricted subsidiaries, including, without limitation, limitations on additional indebtedness, liens, dividends, investments, acquisitions, subsidiary and certain other distributions, asset sales, transactions with affiliates and modifications to material documents, including organizational documents. In addition, such covenants give rise to events of default upon the failure by Koppers Inc. and its restricted subsidiaries to meet certain financial ratios.

As of ~~September~~June 30, ~~2022,~~2023, we had approximately $~~400~~301 million of unused revolving credit availability after restrictions from certain letter of credit commitments and other covenants. As of ~~September~~June 30, ~~2022,~~2023, $7.8 million of commitments were utilized by outstanding ~~undrawn~~ letters of credit.

Term Loan B

On April 10, 2023, we entered into Amendment No. 1 to the Credit Facility ("Amendment No. 1") which added a new class of senior secured term loans under the Credit Facility in an aggregate principal amount of $400.0 million (the "Term Loan B"), among other modifications. The Term Loan B was issued at 97 percent of face value, resulting in $388.0 million of net proceeds, before debt financing costs. The interest rate on the Term Loan B is variable and is based on, at our option, adjusted Term SOFR Rate or adjusted Daily Simple SOFR, in each case plus 4.00 percent with a floor of 0.50 percent. The principal balance of the Term Loan B will be repayable in quarterly installments of $1.0 million each quarter beginning with the third quarter of 2023, with the balance due at maturity on April 10, 2030.

During the six months ended June 30, 2023, we entered into interest rate swap agreements with an aggregate notional value of $150.0 million related to the Term Loan B. The interest rate swaps effectively convert the variable rate to a weighted average fixed rate of 7.45 percent for that portion of the loan. All swap agreements expire in April 2027.

Senior Notes due 2025

Koppers Inc.’s $500 million Senior Notes due 2025 (the “2025 Notes”) ~~are~~were unsecured senior obligations of Koppers Inc.~~, are unsecured~~ and ~~are~~were guaranteed by Koppers Holdings Inc. and certain of Koppers Inc.’s domestic subsidiaries.

~~The 2025 Notes pay interest semi-annually in arrears~~On April 11, 2023, we used the proceeds from the Term Loan B, cash on ~~February 15~~hand and ~~August 15 and will mature on~~ ~~February 15, 2025~~ ~~unless earlier redeemed or repurchased.~~ ~~We are entitled~~available borrowing capacity under our existing Credit Facility to redeem all ~~or a portion~~of the outstanding 2025 Notes at face value and to pay any fees and expenses incurred in connection with the issuance of the Term Loan B and the redemption of the 2025 ~~Senior Notes at~~Notes.

Subsequent Events

During the third quarter of 2023, we entered into an additional interest rate swap with an aggregate notional value of $100.0 million related to the Term Loan B. As of July 31, 2023, the interest rate swaps collectively convert the variable rate to a ~~redemption price~~weighted average fixed rate of ~~101.5~~7.73 percent for the notional value of ~~principal value as of February 15, 2022 until~~ $250.0 million. All swap agreements expire in April ~~15, 2023 when the 2025 Notes are redeemable at principal value.~~2027

The indenture governing the 2025 Senior Notes includes customary covenants that restrict, among other things, the ability of Koppers Inc. and its restricted subsidiaries to incur additional debt, pay dividends or make certain other restricted payments, incur liens, merge or sell all or substantially all of the assets of Koppers Inc. or its subsidiaries or enter into various transactions with affiliates..

15.13. Asset Retirement Obligations

We recognize asset retirement obligations for the removal and disposal of residues; dismantling of certain tanks required by governmental authorities; cleaning and dismantling costs for owned railcars; cleaning costs for leased ~~rail-cars~~railcars and barges; and site demolition, when required by governmental authorities or by contract. The following table reflects changes in the carrying values of asset retirement obligations:


	September 30, 2022			December 31, 2021			June 30, 2023			December 31, 2022
(Dollars in millions)
Asset retirement obligation at beginning of year	$	13.2		$	19.8
Balance at beginning of year							$	15.5		$	13.2
Accretion expense		0.8			1.0			0.5			1.1
Revision in estimated cash flows		3.3			(0.3	)		(0.5	)		2.2
Cash expenditures		(0.6	)		(7.3	)		(0.2	)		(1.0	)
Currency translation		(0.2	)		0.0
Balance at end of period	$	16.5		$	13.2
Balance at end of year							$	15.3		$	15.5

~~16.~~14. Leases

We recognize lease obligations and associated right-of-use assets for existing non-cancelable leases. We have non-cancelable operating leases primarily associated with railcars, office and manufacturing facilities, storage tanks, ships, production equipment and vehicles. Many of our leases include both lease (e.g., fixed rent) and non-lease components (e.g., maintenance and services). For certain asset classes such as railcars, storage tanks and ships, we have separated the lease and non-lease components based on the estimated stand-alone price for each component. For the remaining asset classes, we have elected to account for these components as a single lease component. In addition, we exclude leases expiring within twelve months from balance sheet recognition.

Many of our leases include one or more options to renew. We evaluate renewal options at the lease commencement date and regularly thereafter to determine if we are reasonably certain to exercise the option, in which case we include the renewal period in our lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on information available to determine the present value of the lease payments.

Lease expense for operating leases is recognized on a straight-line basis over the lease term. Variable lease expense is recognized in the period in which the obligation for those payments is incurred. ~~Operating~~

The following table presents operating and variable lease ~~costs were $~~costs:~~7.1~~


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
(Dollars in millions)
Operating lease costs	$	7.1	$	7.2	$	13.8	$	14.7
Variable lease costs		1.2		0.6		2.1		1.4

~~million and $~~

~~21.8~~16

~~million during the three and nine months ended September 30, 2022, respectively, and $7.5~~ ~~million and $22.8~~ ~~million during the three and nine months ended September 30, 2021, respectively. Variable lease costs were $0.9~~ ~~million and $2.2~~ ~~million during the three and nine months ended September 30, 2022, respectively, and $0.8~~ ~~million and $2.7~~ ~~million during the three and nine months ended September 30, 2021, respectively.~~

The following table presents information about the amount and timing of cash flows arising from our operating leases as of ~~September~~June 30, ~~2022:~~2023:


(Dollars in millions)
2022	$	7.0
2023		23.7		$	14.0
2024		19.9			24.2
2025		16.2			18.6
2026		11.9			13.5
2027					10.9
Thereafter		29.5			20.1
Total lease payments	$	108.2		$	101.3
Less: Interest		(22.6	)		(17.1	)
Present value of lease liabilities	$	85.6		$	84.2

Supplemental condensed consolidated balance sheet information related to leases is as follows:


	September 30,			December 31,			June 30,			December 31,
	2022			2021			2023			2022
(Dollars in millions)
Operating leases:
Operating lease right-of-use assets	$	84.6		$	91.2		$	84.1		$	86.3
Current operating lease liabilities	$	19.4		$	21.3		$	21.7		$	20.5
Operating lease liabilities		66.2			70.3			62.5			66.3
Total operating lease liabilities	$	85.6		$	91.6		$	84.2		$	86.8
Weighted average remaining lease term, in years		5.7			5.8			5.2			5.6
Weighted average discount rate		7.3	%		7.4	%		6.7	%		7.2	%

~~17.~~15. Derivative Financial Instruments

We utilize derivative instruments to manage exposures to risks that have been identified, measured and are capable of being mitigated. The primary risks that we manage by using derivative instruments are commodity price risk associated with copper, ~~and~~ foreign currency exchange risk associated with a number of currencies, principally the U.S. dollar ~~the Euro~~ and ~~British pounds.~~ Australian dollar, and interest rate risk associated with variable rate borrowings.

Swap contracts on copper are used to manage the price risk associated with forecasted purchases of materials used in our manufacturing processes. Generally, we will not hedge cash flow exposures for durations longer than 36 months and we have hedged certain volumes of copper through the end of ~~2023.~~ 2024.

We enter into foreign currency forward contracts to manage foreign currency risk associated with our receivable and payable balances in addition to foreign-denominated sales. We also enter into interest rate swaps to effectively convert portions of our variable interest debt into fixed rate debt. Our objective in using interest rate swaps is to add stability to interest expense and to manage our exposure to interest rate movements. Generally, we enter into master netting arrangements with the counterparties and offset net derivative positions with the same counterparties. Currently, our agreements do not require cash collateral.

The Company recognizes all derivative instruments as either assets or liabilities at fair value on the balance sheet. The derivative instruments are classified as current or noncurrent based upon the expected timing of cash flows and are subject to offset under our master netting arrangements. A derivative instrument's fair value is determined using significant other observable inputs, a Level 2 fair value measurement. We designate certain of our commodity swaps as cash flow hedges of forecasted purchases of commodities. We also designate our interest rate swaps as cash flow hedges on interest payments.

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive ~~(loss)~~ income and is reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative instruments representing hedge ineffectiveness are recognized in current earnings.

For those commodity swaps where hedge accounting is not elected, the fair value of the commodity swap is recognized as an asset or liability on the condensed consolidated balance sheet and the related gain or loss on the derivative is reported in current earnings. These amounts are classified in cost of sales in the condensed consolidated statement of operations.

~~As of September 30, 2022 and December 31, 2021, we had outstanding copper swap contracts of the following amounts:~~

Units Outstanding (in Pounds)

Net Fair Value - Asset (in Dollars)

September 30,
2022

December 31,
2021

September 30,
2022

December 31,
2021

(Amounts in millions)

Cash flow hedges

12.1

29.0

$
4.4

$
53.8

Contracts where hedge accounting was not
elected

7.6

6.1

(2.0
)

7.1

Total

19.7

35.1

$
2.4

$
60.9

~~As of September 30, 2022 and December 31, 2021, the fair value of the outstanding copper swap contracts is recorded in the balance sheet as follows:~~

September 30,
2022

December 31,
2021

(Dollars in millions)

Derivative contracts

$
3.4

$
60.9

Accrued liabilities

(0.4
)

0.0

Other long-term liabilities

(0.6
)

0.0

Net asset on balance sheet

$
2.4

$
60.9

Accumulated other comprehensive gain, net of tax

$
3.7

$
40.6

~~We estimate that $3.9~~ ~~million of unrealized gains, net of tax, related to commodity price hedging will be reclassified from other comprehensive (loss) income into earnings over the next~~ ~~twelve months~~.

See Note 6 – “Comprehensive (Loss) Income and Equity”, for amounts recorded in other comprehensive loss and for amounts reclassified from accumulated other comprehensive loss into net income for the periods specified below.

~~For the three and nine months ended September 30, 2022 and 2021, the unrealized (loss) gain from contracts where hedge accounting was not elected is as follows:~~

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

(Dollars in millions)

(Loss) from contracts where hedge accounting was
not elected

(1.9
)

(4.4
)

(9.0
)

(2.7
)

The fair value associated with forward contracts related to foreign currency that are not designated as hedges are immediately charged to earnings. These amounts are classified in cost of sales in the condensed consolidated statement of operations and comprehensive income (loss).

See Note 4 – “Comprehensive Income (Loss) and Equity”, for amounts recorded in other comprehensive income (loss) and for amounts reclassified from accumulated other comprehensive income (loss) into net income.

As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, we had outstanding copper swap contracts of the ~~fair value of outstanding foreign currency forward~~following amounts:


	Units Outstanding (in Pounds)				Net Fair Value - Asset (Liability)
	June 30, 2023		December 31, 2022		June 30, 2023			December 31, 2022
(Amounts in millions)
Cash flow hedges		28.7		21.3	$	(0.3	)	$	2.5
Contracts where hedge accounting was not elected		8.0		6.0		0.6			0.6
Total		36.7		27.3	$	0.3		$	3.1

The unrealized loss from contracts where hedge accounting was not elected is ~~recorded in the balance sheet~~ as follows:

September 30,
2022

December 31,
2021

(Dollars in millions)

Derivative contracts

$
0.0

$
0.1

Accrued liabilities

(0.8
)

(0.4
)
Net liability on balance sheet

$
(0.8
)

$
(0.3
)


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023		2022
(Dollars in millions)
Loss from contracts where hedge accounting was not elected	$	(1.1	)	$	(6.8	)	$	0.0	$	(7.1	)

~~As of September 30, 2022 and December 31, 2021, the~~The net currency units outstanding for ~~these~~ contracts were:


	September 30, 2022		June 30, 2023		December 31, ~~2021~~2022
(In millions)
Australian Dollars		AUD 3.0		AUD 3.0
United States Dollars		USD ~~11.7~~12.1		USD ~~21.4~~9.3

See Note 12 – "Debt" for discussion of the interest rate swap agreements, which effectively convert the variable rate to a fixed rate for portions of the Term Loan B. The interest rate swaps have been designated as cash flow hedges and involve the receipt of variable amounts from a counterparty in exchange for us making fixed rate payments over the life of the agreements without exchange of the underlying notional amount.

The fair value of the outstanding derivative contracts recorded in the balance sheet are as follows:


	June 30, 2023
	Copper Swap Contracts			Foreign Currency Forward Contracts			Interest Rate Swap Contracts		Total
(Dollars in millions)
Derivative contracts	$	0.9		$	0.0		$	2.8	$	3.7
Other assets		0.3			0.0			1.2		1.5
Accrued liabilities		(0.5	)		(0.2	)		0.0		(0.7	)
Other long-term liabilities		(0.4	)		0.0			0.0		(0.4	)
Net asset (liability) on balance sheet	$	0.3		$	(0.2	)	$	4.0	$	4.1
Accumulated other comprehensive (loss) gain, net of tax	$	(0.2	)	$	0.0		$	3.0	$	2.8


	December 31, 2022
	Copper Swap Contracts			Foreign Currency Forward Contracts			Interest Rate Swap Contracts		Total
(Dollars in millions)
Derivative contracts	$	2.9		$	0.1		$	0.0	$	3.0
Other assets		0.5			0.0			0.0		0.5
Accrued liabilities		(0.3	)		(0.1	)		0.0		(0.4	)
Net asset on balance sheet	$	3.1		$	0.0		$	0.0	$	3.1
Accumulated other comprehensive gain, net of tax	$	1.8		$	0.0		$	0.0	$	1.8

We estimate that unrealized gains, net of tax, for commodity price hedging and interest rate swaps of $2.1 million will be reclassified from other comprehensive income into earnings over the next twelve months.

~~18.~~16. Commitments and Contingent Liabilities

We are involved in litigation and various proceedings relating to environmental laws and regulations, product liability and other matters. Certain of these matters are discussed below. The ultimate resolution of these contingencies is subject to significant uncertainty and should we fail to prevail in any of these legal matters or should several of these legal matters be resolved against us in the same reporting period, these legal matters could, individually or in the aggregate, be material to the condensed consolidated financial statements.

Legal Proceedings

Coal Tar Pitch Cases. Koppers Inc. is one of several defendants in lawsuits filed in two states in which the plaintiffs claim they suffered a variety of illnesses (including cancer) as a result of exposure to coal tar pitch sold by the defendants. There were 5351 plaintiffs in 2827 cases pending as of ~~September~~June 30, ~~2022, compared to~~ 59 ~~plaintiffs in~~ 31 ~~cases pending as of~~2023 and December 31, ~~2021.~~2022. As of ~~September~~June 30, ~~2022,~~2023, there were 2726 cases pending in the Court of Common Pleas of Allegheny County, Pennsylvania, and one case pending in the Circuit Court of Knox County, Tennessee.

The plaintiffs in all 2827 pending cases seek to recover compensatory damages. Plaintiffs in 24 of those cases also seek to recover punitive damages. The plaintiffs in the 2726 cases filed in Pennsylvania seek unspecified damages in excess of the court’s minimum jurisdictional limit. The plaintiff in the Tennessee state court case seeks damages of $15.0 million. The other defendants in these lawsuits vary from case to case and include companies such as Beazer East, Inc. (“Beazer East”), Honeywell International Inc., Graftech International Holdings, ~~Dow Chemical Company,~~ UCAR Carbon Company, Inc., and SGL Carbon Corporation. Discovery is proceeding in these cases. No trial dates have been set in any of these cases.

We have not provided a reserve for the coal tar pitch lawsuits because, at this time, we cannot reasonably determine the probability of a loss, and the amount of loss, if any, cannot be reasonably estimated. The timing of resolution of these cases cannot be reasonably determined. Although Koppers Inc. is vigorously defending these cases, an unfavorable resolution of these matters may have a material adverse effect on our business, financial condition, cash flows and results of operations.

Environmental and Other Litigation Matters

We are subject to federal, state, local and foreign laws and regulations and potential liabilities relating to the protection of the environment and human health and safety including, among other things, the cleanup of contaminated sites, the treatment, storage and disposal of wastes, the discharge of effluent into waterways, the emission of substances into the air and various health and safety matters. We expect to incur substantial costs for ongoing compliance with such laws and regulations. We may also face governmental or third-party claims, or otherwise incur costs, relating to cleanup of, or for injuries resulting from, contamination at sites associated with past and present operations. We accrue for environmental liabilities when a determination can be made that a liability is probable and reasonably estimable.

Environmental and Other Liabilities Retained or Assumed by Others. We have agreements with former owners of certain of our operating locations under which the former owners retained, assumed and/or agreed to indemnify us against certain environmental and other liabilities. The most significant of these agreements was entered into at Koppers Inc.’s formation on December 29, 1988 (the “Acquisition”). Under the related asset purchase agreement between Koppers Inc. and Beazer East, subject to certain limitations, Beazer East retained the responsibility for and agreed to indemnify Koppers Inc. against certain liabilities, damages, losses and costs, including, with certain limited exceptions, liabilities under and costs to comply with environmental laws to the extent attributable to acts or omissions occurring prior to the Acquisition and liabilities related to products sold by Beazer East prior to the Acquisition (the “Indemnity”). Beazer Limited, the parent company of Beazer East, unconditionally guaranteed Beazer East’s performance of the Indemnity pursuant to a ~~guarantee (the “Guarantee”).~~guarantee.

The Indemnity provides different mechanisms, subject to certain limitations, by which Beazer East is obligated to indemnify Koppers Inc. with regard to certain environmental, product and other liabilities and imposes certain conditions on Koppers Inc. before receiving such indemnification, including, in some cases, certain limitations regarding the time period as to which claims for indemnification can be brought. In July 2004, Koppers Inc. and Beazer East agreed to amend the environmental indemnification provisions of the December 29, 1988 asset purchase agreement to extend the indemnification period for pre-closing environmental liabilities, subject to the following paragraph, and agreed to share toxic tort litigation defense arising from any sites acquired from Beazer East.

Qualified expenditures under the Indemnity are not subject to a monetary limit. Qualified expenditures under the Indemnity include (i) environmental cleanup liabilities required by third parties, such as investigation, remediation and closure costs, relating to pre-December 29, 1988 (“Pre-Closing”) acts or omissions of Beazer East or its predecessors; (ii) environmental claims by third parties for personal injuries, property damages and natural resources damages relating to Pre-Closing acts or omissions of Beazer East or its predecessors; (iii) punitive damages for the acts or omissions of Beazer East and its predecessors without regard to the date of the alleged conduct and (iv) product liability claims for products sold by Beazer East or its predecessors without regard to the date of the alleged conduct. The indemnification period ended July 14, 2019 (the “Claim Deadline”) and Beazer East may now tender certain third-party claims described in sections (i) and (ii) above to Koppers Inc. However, to the extent the third-party claims described in sections (i) and (ii) above were tendered to Beazer East by the Claim Deadline, Beazer East will continue to be required to pay the costs arising from such claims under the Indemnity. Furthermore, the Claim Deadline did not change the provisions of the Indemnity with respect to indemnification for non-environmental claims, such as product liability claims, which claims may continue to be tendered by Koppers Inc. to Beazer East.

The Indemnity provides for the resolution of issues between Koppers Inc. and Beazer East by an arbitrator on an expedited basis upon the request of either party. The arbitrator could be asked, among other things, to make a determination regarding the allocation of environmental responsibilities between Koppers Inc. and Beazer East. Arbitration decisions under the Indemnity are final and binding on the parties.

Contamination has been identified at most manufacturing and other sites of our subsidiaries. One site currently owned and operated by Koppers Inc. in the United States is listed on the National Priorities List promulgated under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (“CERCLA”). Currently, at the properties acquired from Beazer East (which includes the National Priorities List site and all but one of the sites permitted under the Resource Conservation and Recovery Act (“RCRA”)), a significant portion of all investigative, cleanup and closure activities are being conducted and paid for by Beazer East pursuant to the terms of the Indemnity. In addition, other of Koppers Inc.’s sites are or have been operated under RCRA and various other environmental permits, and remedial and closure activities are being conducted at some of these sites.

To date, the parties that retained, assumed and/or agreed to indemnify us against the liabilities referred to above, including Beazer East, have performed their obligations in all material respects. We believe that, for the last three years ended December 31, 2021, amounts paid by Beazer East as a result of its environmental remediation obligations under the Indemnity have averaged, in total, approximately $~~6.4~~ ~~million per year.~~ Periodically, issues have arisen between Koppers Inc. and Beazer East and/or other indemnitors that have been resolved without arbitration. Koppers Inc. and Beazer East engage in discussions from time to time that involve, among other things, the allocation of environmental costs related to certain operating and closed facilities.

If for any reason (including disputed coverage or financial incapability) one or more of such parties fail to perform their obligations and we are held liable for or otherwise required to pay all or part of such liabilities without reimbursement, the imposition of such liabilities on us could have a material adverse effect on our business, financial condition, cash flows and results of operations. Furthermore, we could be required to record a contingent liability on our balance sheet with respect to such matters, which could result in a negative impact to our business, financial condition, cash flows and results of operations.

Domestic Environmental Matters. Koppers Inc. has been named as one of the potentially responsible parties (“PRPs”) at the Portland Harbor CERCLA site located on the Willamette River in Oregon. Koppers Inc. operated a coal tar pitch terminal near the site. Koppers Inc. has responded to an EPA information request and has executed a PRP agreement which outlines a private process to develop an allocation of past and future costs among more than 80 parties to the site. Koppers Inc. believes it is a de minimis contributor at the site.

The EPA issued its Record of Decision (“ROD”) in January 2017 for the Portland Harbor CERCLA site. The selected remedy includes a combination of sediment removal, capping, enhanced and monitored natural recovery and riverbank improvements. The ROD does not determine who is responsible for remediation costs. At that time, the net present value and undiscounted costs of the selected remedy as estimated in the ROD were approximately $1.1 billion and $1.7 billion, respectively. These costs ~~may~~are likely to increase given recent submissions to EPA regarding remedy design and because the remedy will not be implemented for several years. Responsibility for implementing and funding that work ~~will~~is yet to be ~~decided in~~determined. The funding of that work amongst the PRPs is the subject of a separate private allocation process which is ongoing.

Additionally, Koppers Inc. is involved in two separate matters involving natural resource damages at the Portland Harbor site. One matter involves claims by the trustees to recover damages based upon an assessment of damages to natural resources caused by the releases of hazardous substances to the Willamette River. The assessment serves as the foundation to estimate liabilities for settlements of natural resource damages claims or litigation to recover from those who do not settle with the trustee groups. Koppers Inc. has been engaged in a process to resolve its natural resource damage liabilities for the assessment area. A second matter involves a lawsuit filed in January 2017 by the Yakama Nation in Oregon federal court. Yakama Nation seeks recovery for response costs and the costs of assessing injury to natural resources in waterways beyond the current assessment area. Following the most recent court rulings, the Yakama Nation case has been stayed pending completion of the private allocation process for the Portland Harbor CERCLA site.

In September 2009, Koppers Inc. received a general notice letter stating that it may be a PRP at the Newark Bay CERCLA site. In January 2010, Koppers Inc. submitted a response to the general notice letter asserting that Koppers Inc. is a de minimis party at this site.

We have accrued the estimated costs of participating in the PRP group at the Portland Harbor and Newark Bay CERCLA sites and estimated de minimis contributor settlement amounts at the sites totaling $~~3.3~~4.0 million as of ~~September~~June 30, ~~2022.~~2023. The actual cost could be materially higher as there has not been a determination of how those costs will be allocated among the PRPs at the sites. Accordingly, an unfavorable resolution of these matters may have a material adverse effect on our business, financial condition, cash flows and results of operations.

There are two plant sites related to the Performance Chemicals business and one plant site related to the Utility and Industrial Products business in the United States where we have recorded environmental remediation liabilities for soil and groundwater contamination which occurred prior to our acquisition of the businesses. As of ~~September~~June 30, ~~2022,~~2023, our estimated environmental remediation liability for these acquired sites totals $3.9 million.

Foreign Environmental Matters. There is one plant site related to the Performance Chemicals business located in Australia where we have recorded an environmental remediation liability for soil and groundwater contamination which occurred prior to the acquisition of the business. As of ~~September~~June 30, ~~2022,~~2023, our estimated environmental remediation liability for the acquired site totals $1.2 million.

Environmental Reserves Rollforward. The following table reflects changes in the accrual for environmental remediation. ~~A total~~As of $~~2.4~~ ~~million and $2.8~~ ~~million are classified as current liabilities as of September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022, $2.5 million is classified as current liabilities.


	Period ended						Period ended
	September 30, 2022			December 31, 2021			June 30, 2023			December 31, 2022
(Dollars in millions)
Balance at beginning of year	$	10.7		$	11.0
Balance at beginning of period							$	10.9		$	10.7
Expense		0.4			0.3			0.1			1.6
Reversal of reserves		0.0			(0.1	)
Cash expenditures		(0.7	)		(0.4	)		(0.2	)		(1.1	)
Currency translation		(0.3	)		(0.1	)		(0.1	)		(0.3	)
Balance at end of period	$	10.1		$	10.7		$	10.7		$	10.9

~~19. Subsequent Events~~

~~In October 2022, we acquired substantially all of the assets of Gross & Janes Co. for approximately $~~15 ~~million. Gross & Janes, headquartered in Kirkwood, Missouri, is the largest independent supplier of untreated railroad crossties in North America, with operations in Missouri, Arkansas and Texas.~~

2221

ITEM 2. 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 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 “believe,” “anticipate,” “expect,” “estimate,” “may,” “will,” “should,” “continue,” “plans,” “potential,” “intends,” “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, product introduction or expansion, 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, the impact of changes in commodity prices, such as oil and copper, on product margins; general economic and business conditions; inflation; 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 limits 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, such as coal tar, and unfavorable resolution of claims 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 update any forward-looking statement to reflect events or circumstances after that date or to reflect the occurrence of unanticipated events.

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, ~~2021.~~2022.

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 wood crossties to the Class I railroads in North America. Our other treated wood products include utility poles for the electric, telephone, and broadband utility industries in the United States and Australia and construction pilings in the U.S. We also provide rail joint bar products as well as various services to the railroad industry in North America.

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, naphthalene and phthalic anhydride, which are intermediate materials necessary in the pressure treatment of wood, and the production of aluminum, steel, carbon black, high-strength concrete, plasticizers and specialty chemicals, respectively.

2322

Non-GAAP Financial Measures

We utilize certain financial measures that are not in accordance with U.S. generally accepted accounting principles (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. In addition, our board of directors and executive management team use adjusted EBITDA as a performance measure under the company’s annual incentive ~~plans.~~plans for certain performance share units granted to management.

Although we believe that these non-GAAP financial measures enhance investors’ understanding of our business and performance, these non-GAAP financial measures 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 these measures differently than we do, 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.

Adjusted EBITDA is a non-GAAP financial measure defined as net income from continuing operations before interest, 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 certain expenses associated with impairment, restructuring and plant closure costs, significant gains and losses on asset disposals or business combinations, LIFO and mark-to-market commodity hedging and other unusual items. We adjust for LIFO to reflect operating results on a FIFO basis. Adjusted EBITDA is the primary measure of profitability we use to evaluate our businesses. Refer to Note 97 – “Segment Information” for reconciliations from adjusted EBITDA to net income on a consolidated basis.

Outlook

Trend Overview

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; (ii) raw material pricing and availability, in particular the cost and availability of hardwood lumber for railroad crossties and 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 and currently by the Russian invasion of Ukraine;~~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, phthalic anhydride, and naphthalene; (iv) competitive conditions in global carbon pitch markets; and (v) changes in foreign exchange rates.

The Infrastructure Investment and Jobs Act, which was signed into law on November 15, 2021, will usher in more than a trillion dollars in new spending across eight years to improve the nation's roads, bridges, rail, internet, water systems and more. As a global leader in water- and oil-borne preservatives serving many end markets with our wood-treatment technologies, we believe we are well-positioned to benefit from the new legislation. Our products are used in multiple infrastructure applications, including utility poles, railroad ties, highway and construction concrete, steel, aluminum, and wood for construction projects.

Railroad and Utility Products and Services

Historically, North American demand for crossties had been in the range of 2218 million to 2522 million crossties annually. ~~However, the crosstie replacement market has been significantly lower in recent years.~~ According to the Railway Tie Association (“RTA”), ~~the estimated~~ total crosstie installations in ~~2021~~2022 were down 1.9 percent from the prior year, to approximately ~~18.3~~18.4 million, of which ~~14.2~~14.8 million were for Class I railroads. ~~Throughout~~In the ~~pandemic, some sawmills were operating at 50 percent or less~~aggregate, spending by railroads is projected to be somewhat higher in 2023 in nominal terms; however, it will be marginally lower in real terms due to higher input costs for labor, crossties and other materials. In terms of ~~their production capacity. Sawmills provide raw materials to several industries beyond~~ the ~~wood~~supply of crossties, the demand for pallet lumber has eased, which has improved crosstie ~~market~~availability, and ~~as demand and pricing for construction lumber increased significantly throughout 2021 and continuing into 2022, overall crosstie production output thus far~~the price has ~~been lower than forecasted, but is beginning to show improvement. Crosstie prices increased significantly as~~moderated on slowing consumer spending. As a result of ~~limited supply~~the weakening demand for board roads and ~~railroad customers are deferring~~mats, availability for crosstie production by sawmills is improving which is encouraging for the railroads as their ~~purchases. Given continuing economic uncertainties such as a tight labor market,~~inventory-to-sales ratio has been depressed for many months, mainly because of low crosstie inventories. Nevertheless, the RTA demand forecast predicts slightly lower crosstie demand of 1.3 percent in 2023, or total industry demand of 18.2 million crossties. For 2024, the economy is ~~forecasting a slight decrease in 2022 of 0.8 percent, or 18.6 million crossties, primarily from lower Class I volumes while the commercial market~~estimated to grow and crosstie demand is expected to ~~have slightly higher demand levels. In 2023, the outlook reflects a modest overall~~recover, with an increase of ~~1.1~~2.4 percent, or ~~18.8~~total industry demand of 18.6 million ~~crossties, with increases from Class I as well as commercial railroads.~~crossties.

According to the Association of American Railroads (“AAR”), ~~rail traffic for the first nine months of 2022 was unfavorable~~ compared ~~with the prior year period. Compared~~ to the prior year, ~~total~~ U.S. carload traffic ~~increased 0.1 percent, while intermodal units declined by 5.1 percent~~ for the year-to-date period through ~~September~~June 30, ~~2022. The~~2023 was up 0.6 percent and intermodal units were down 10.3 percent. For 2023 to-date, total combined U.S. traffic ~~for carloads and~~decreased 5.3 percent compared to last year. The recent rail traffic patterns demonstrate the contrasts in the broader economy. Rail intermodal units was lower than the prior year by 2.7 percent. The data reflects that consumers are continuing to shift toward services and away from goods, as well as certain underlying factors that have helped to magnify this trend for railroads. These consist of retailers holding substantial inventories of unsoldis largely consumer goods, and ~~significantly lower internet buying from its pandemic peak, which negatively impacts replacement demand~~recent spending on goods has cooled considerably. On the other hand, rail carloads of industrial products are performing much better, reflecting relative strength in automotive, mineral extraction, and ~~rail volumes for packaged goods.~~other sectors.

With respect to our utility products business, the installed base for wood distribution poles in the ~~U.S.~~United States is approximately 150 million and nearly half ~~of this total~~ are 40 years old. Industry demand has historically been in the range of approximately two ~~million~~ to ~~three~~four million poles annually. On an overall basis, we believe that the rate at which utilities purchase utility poles will grow as they continue replacement programs within their service territories. As a whole, the key factors that drive growth in the utility pole market include ~~growing~~higher global energy consumption, ~~as well as~~ expansion of the electric vehicle charging network, and investments in the global ~~telecommunication~~telecommunications industry. ~~Generally,~~Now more than ever, utilities need to maintain and strengthen their infrastructure, referred to as hardening the electrical grid, to avoid interruptions in service ~~due to extreme weather events that are occurring more frequently along with aging electrical grid systems across the U.S. At the same time, the need for digital connectivity remains strong given that~~as portions of the population ~~are continuing to~~ work remotely. As long as there are not any extended supply chain disruptions, we anticipate that ~~2022~~2023 demand for pole replacements will be ~~relatively stable to slightly~~ higher, as the overall industry is trending toward expanded and upgraded transmission networks. In addition, the higher incidence of extreme climate conditions along with a growing frequency of natural disasters including floods, hurricanes, storms, wildfires and tornadoes have affected the industry. As a result,we believe there is a developing trend in the industry for utilities to maintain some additional inventory to prepare for ~~potential~~potentially damaging ~~climate events.~~storms that occur throughout the year.

With respect to raw materials, ~~wood supply remains~~we expect the availability of poles to be affected as lumber demand continues to be relatively ~~stable, however we are experiencing pricing pressures based on higher freight~~strong and, consequently, results in increased costs for pole material. Also, transportation ~~costs. This negatively affects~~costs, which include fuel costs, could experience some upward pressure and may affect the price of pole material delivered to ~~our~~the pole ~~peeling locations~~peelers from the forest. ~~As a result of these inflationary factors, we~~At the same time, utilities are ~~implementing more real-time price increases~~working through various supply constraints by adjusting their ordering patterns and moving away from single-source supply, which may represent additional growth opportunities to ~~pass on higher costs to end customers.~~gain market share.

Longer term, we are evaluating opportunities to potentially expand our market presence in the United States as well as certain overseas markets. We believe there remains an overall need for sustained investment in infrastructure and capacity expansion and with our vertical integration capabilities in wood treatment and strong customer relationships, we will ultimately benefit from increased demand.

For the overall segment, we believe a positive development involves the Infrastructure Investment and Jobs Act, which was signed into law on November 15, 2021, and will usher in more than a trillion dollars in new spending across eight years to improve the nation's roads, bridges, rail, Internet, water systems and more. As a global leader in water- and oil-borne preservatives serving many end markets with our wood-treatment technologies, we believe we are well-positioned to benefit from the new legislation. Our products are used in multiple infrastructure applications, including utility poles, railroad ties and wood for construction projects.

As part of optimizing our business, we continue to evaluate a number of opportunities to improve efficiencies in our operational processes, people and facilities. With our 14 North American RUPS treating facilities operating at less than full utilization, our goal is to either capture more volume through the existing facilities or consolidate our operating footprint. ~~In January 2022, we began curtailing operations at~~Actions taken in the past include the purchase of a 105-acre property in Leesville, Louisiana, to host a facility providing additional peeling and drying capacity for utility poles, the sale of our Sweetwater, Tennessee ~~plant. We sold the~~ plant, ~~in March 2022 and recorded a gain of $2.5 million on the sale. During 2021, we exited~~exiting the Texas Electric Cooperatives’ Jasper, Texas facility and ~~relocated~~relocating the production of utility products to our existing Somerville, Texas ~~plant. Separately, in~~plant and the ~~third quarter~~permanent closure of ~~2020, we permanently closed~~ our Denver, Colorado wood treatment facility. Concurrent with the decision to close the Denver facility, we announced our plan to modernize and upgrade parts of our treating network, specifically at our facility in North Little Rock, Arkansas, which ~~would be primarily~~has been partly funded through proceeds from the sale of non-core assets, including the Denver facility. ~~In October 2021, we sold our closed Denver, Colorado crosstie treating facility and recorded a gain on sale of $23.4 million.~~

Performance Chemicals

As most of the products sold by PC are copper-based products, changes in the price and availability of copper can have a significant impact on product pricing and margins. We attempt to moderate the variability in copper pricing over time by entering into hedging transactions for the majority of our copper needs, which primarily range from six months up to 36 months. These hedges typically match expected customer purchases and from time to time, we enter into forward transactions based upon long-term forecasted needs of copper.

Product demand for our PC business has historically been closely associated with consumer spending on home repair and remodeling projects in North America, and therefore, trends in existing home sales serve as a leading indicator. ~~In 2022, the market for existing homes seems to be slowing.~~ According to the National Association of Realtors® (“NAR”), total existing-home sales ~~decreased~~ in ~~September by 1.5~~June declined 3.3 percent ~~compared with August~~from May and 23.8 percent compared with the prior year, marking eight consecutive months of declines. Three out of the four major U.S. regions experienced month-over-month sales contractions, while the Western region held steady. Onon a year-over-year basis, sales ~~dropped~~were lower by 18.9 percent. While existing-home sales declined, pending home sales in ~~all regions. In addition,~~June registered a modest increase of 0.3 percent from the prior month. Home prices have held firm in most parts of the country as housing inventory remains low, and the limited supply is leading to multiple-offer situations, with one-third of homes being sold above the list price in June. The NAR projects that the market ~~is expected to be impacted by rising interest~~can easily absorb a doubling of housing inventory and if mortgage rates and ~~inflation, which~~inventory move favorably, pent-up demand could be realized in ~~turn, continue to have unfavorable effects on purchasing power.~~the near term.

According to the Leading Indicator of Remodeling Activity (“LIRA”) reported by the Joint Center for Housing Studies of Harvard University, ~~home renovation~~after more than a decade of continuous growth, annual expenditures for improvements and ~~repair expenditures increased by 17.8 percent year-over-year in~~repairs to owner-occupied homes are expected to decline at an accelerating rate through the ~~third quarter~~first half of ~~2022.~~2024. The LIRA projects that year-over-year ~~gains in remodeling expenditures to owner-occupied homes~~spending on homeowner improvements and maintenance will ~~decelerate from 16.1~~decline by 2.7 percent ~~in 2022 to 6.5 percent by~~through the ~~third~~first quarter of ~~2023. Housing~~2024 and by 5.9 percent through mid-2024. Home remodeling ~~markets are slowing~~activity continues to face strong headwinds from ~~the~~ high ~~growth~~interest rates, ~~that were driven by the pandemic-induced demand~~softening house price appreciation, and sluggish home sales. Annual spending ~~for~~on home improvements and repairs is expected to decrease from $486 billion through the second quarter of this year to $457 billion over the coming twelve months. Reductions in household moves will likely result in a decline in the remodeling and repair activity; however, the magnitude of the impact may be offset if homeowners with ultra-low mortgage rates continue to ~~face challenges from declining home sales, rising interest rates,~~“upgrade-in-place” and the increasing costs of contractor labor and building materials. By contrast, the Center’s Remodeling Futures Program steering committee, comprised of executives from leading corporations involved in the housing sector, anticipates that energy-efficiency retrofits incentivized by the Inflation Reduction Act of 2022, as well as disaster repairs and mitigationrenovate their current homes. In addition, since pressure-treated lumber prices are approximately 50-60 percent lower year-over-year at big-box retailers, outdoor residential projects ~~following Hurricane Ian~~ are ~~expected to further support expansion of the home remodeling market to nearly $450 billion in 2023.~~significantly more affordable than this time a year ago.

The Conference Board Consumer Confidence Index® ~~was 102.5~~increased in ~~October, down from 107.8~~June to 110.1 and again in ~~September. The Index decreased in October after back-to-back monthly~~July to 117.0, which is the second straight month of gains ~~in August~~ and ~~September. Notably, concerns about inflation—which had been receding~~reflects the highest confidence level since ~~July—picked up again, with both gas and food prices serving~~July 2021. Despite rising interest rates, consumers are more upbeat, likely reflecting softening inflation as ~~main drivers. According~~well as a favorable outlook on a labor market that continues to ~~the Conference Board, the decline in confidence suggests that economic growth may be slowing~~outperform expectations. As a result, consumer expectations for the ~~remainder of 2022~~next six months improved materially, indicating greater confidence about future business conditions and ~~recession risks appear to be rising.~~job availability.

Carbon Materials and Chemicals

The primary products produced by CMC are creosote, which is a registered pesticide in the United States and used primarily in the pressure treatment of railroad crossties, and carbon pitch, which is sold primarily to the aluminum industry for the production of carbon anodes used in the smelting of aluminum. We have realigned capacity in our CMC plants in North America and Europe over the past several years to levels required to meet creosote demand in North America for the treatment of railroad crossties. The CMC business currently supplies our North American RUPS business with its creosote requirements.

The availability of coal tar, the primary raw material for our CMC business, is linked to levels of metallurgical coke production. AsCurrently, we are seeing weakening end market demand, which is allowing more availability of coal tar in the near term. However, as the global steel industry, excluding Asia, has reduced the production of steel using metallurgical coke, the volumes of coal tar have been reduced. ~~Coal~~We are actively working to mitigate the impacts of 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 remains constrained globally due to reductions in blast furnace steel capacity in addition to near term supply restrictions resulting from the Russian invasion of Ukraine in March 2022. Our European CMC business historically received approximately 20 percent of its annual coal tar requirements from Russia and ~~Ukraine. We have ceased purchasing coal tar from Russian suppliers~~cost with customer demand and we are currently unable to purchase normal volumes of coal tar from Ukrainian suppliers due to the conflict. Currently, the financial impact of volume reductions in our coal tar supply have been offset by higher prices in our end markets for that region and are not expected to negatively impact operating results during 2022.pricing.

For the external markets served by our CMC business, we anticipate ~~some~~a slowdown in ~~manufacturing. According to~~the near-term in manufacturing overall as well as in the steel, aluminum and carbon black industries. The June 2023 S&P Global Mobility (formerly IHS Markit Automotive ~~Group (IHS),~~Group) forecast sees global light-vehicle sales increasing by 5.6 percent from the prior year and reaching 83.6 million units globally in 2023, recovering from sales declines in 2021 and 2022 that were driven by production constraints rather than by a lack of consumer demand or willingness to buy. As for global ~~auto industry continues~~light-vehicle production, the output is forecast to ~~be influenced by near-term challenges of navigating ongoing~~reach 85.6 million units in 2023 as supply chain ~~pressures coupled with economic headwinds. While semiconductor availability has improved, it~~issues are approaching a more normalized situation. However, the near-term outlook remains ~~a key factor~~unclear as the new vehicle sales environment will be defined in the ~~ability to accelerate~~second half of the year by auto consumers pressured by potential vehicle affordability issues (rising interest rates, credit tightening, high vehicle prices) and production growth. Therefore, IHS has adjusted its forecast for macro deterioration and in the longer term, vehicle pricing will be a key consideration and a potential headwind to demand. The IHS forecast update, provided in September 2022, reflects near-to-intermediate term downward revisions, particularly focused on Europe and North America.advances that could build back inventory more quickly than anticipated.

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.

2625

Results of Operations – Comparison of Three Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022

Consolidated Results

Net sales ~~for the three months ended September 30, 2022 and 2021~~ are summarized by segment in the following table:


	Three Months Ended June 30,
	2023		2022		Change		% Change
(Dollars in millions)
Railroad and Utility Products and Services	$	234.4	$	204.2	$	30.2		15	%
Performance Chemicals		180.9		149.6		31.3		21	%
Carbon Materials and Chemicals		161.9		148.7		13.2		9	%
	$	577.2	$	502.5	$	74.7		15	%

Three Months Ended September 30,

2022

2021

Net Change

(Dollars in millions)

Railroad and Utility Products and Services

$
207.7

$
186.9

11
%
Performance Chemicals

153.1

115.2

33
%
Carbon Materials and Chemicals

175.3

122.7

43
%

$
536.1

$
424.8

26
%

RUPS net sales increased ~~by $20.8~~largely due to a net $20.3 million ~~or 11 percent, compared to the prior year period. The sales increase was largely related to~~of pricing increases across multiple markets, particularly for crossties and domestic utility poles. Volume increases for crossties and utility poles ~~and activity increases in our railroad bridge services business. These increases were offset, in part, by volume decreases in our utility pole business mostly due~~also contributed to ~~capacity and transportation issues driven by~~ the ~~current labor shortage.~~increase. Foreign currency changes compared to the prior year period had an unfavorable impact on sales in the current year period of $0.8 million, mainly from our Australian utility pole business.

PC net sales increased ~~by $37.9~~as a result of global price increases of $21.0 million, or 3314 percent ~~compared to~~in the ~~prior year period. The sales increase was primarily due to a 31% volume increase~~current period, particularly in the Americas ~~and global price increases in the current year period~~ for our copper-based ~~preservatives. In the prior year period, volumes in~~preservatives, along with volume increases of eight percent globally driven by the Americas ~~decreased as high lumber prices~~ and ~~a temporary change in consumer spending habits tempered customer demand for treated lumber products. The increases were~~ offset ~~in part,~~ by ~~volume decreases for wood treatment preservatives within our European markets.~~Europe and Australasia. Foreign currency changes compared to the prior year period had an unfavorable impact on sales in the current year period of ~~$3.3~~$2.3 million.

CMC net sales increased ~~by $52.6~~mainly due to $7.2 million ~~or 43 percent, compared to the prior year period due mainly to~~of higher sales prices, primarily for carbon pitch ~~phthalic anhydride, carbon black feedstock and naphthalene~~ driven by strong ~~demand for our products~~end markets and ~~a higher~~constrained raw material ~~price environment,~~supply, along with volume increases of refined tar in North America. These increases were partly offset by price decreases for certain other products and volume decreases of ~~$8.1 million.~~phthalic anhydride in North America. 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 ~~$12.9~~$1.3 million.

Cost of sales as a percentage of net sales was 8281 percent for the ~~quarters~~quarter ended ~~September~~June 30, ~~2022 and 2021~~2023, compared to 83 percent in the prior year period as global price increases ~~across our businesses~~ have ~~offset an increase in~~outpaced increased raw material and operating costs ~~fuel costs, shipping costs~~on a consolidated basis and ~~other~~across most of our businesses. Significant items impacting cost of sales in individual operating ~~expenses~~segments are discussed as ~~a result~~part of ~~rising inflation in the current year period.~~"Segment adjusted EBITDA and adjusted EBITDA margin" herein.

~~Depreciation~~Selling, general and ~~amortization charges~~administrative expenses for the quarter ended ~~September~~June 30, ~~2022~~2023 were ~~$3.5~~$3.1 million higher when compared to the prior year period due mainly to an increase in ~~depreciation associated~~compensation related costs along with an ~~asset retirement obligation within our European CMC business.~~

~~Selling, general~~increase in travel, entertainment and ~~administrative expenses~~ ~~for the quarter ended September 30, 2022~~advertising. These increases were ~~$1.1 million lower when compared to the prior year period due mainly to~~partly offset by a ~~decrease~~reduction in ~~self-insured workers compensation and medical liabilities, as well as consulting and other~~ professional services ~~in the current year period.~~and insurance costs.

Interest expense for the quarter ended ~~September~~June 30, ~~2022~~2023 was ~~$1.2~~$9.2 million higher when compared to the prior year period due to higher interest ~~rates.~~rates and a $1.6 million increase in write-off of debt issuance costs related to the repayment of the 2025 Notes as described in Note 12 – "Debt."

Income tax expense for the quarter ended ~~September~~June 30, ~~2022~~2023 increased due to higher ~~pre-tax earnings and~~income from continuing operations before income taxes when compared to the prior year period. This increase was partially offset by a ~~higher~~lower estimated annual effective income tax rate ~~of 36.1 percent~~ when compared to the prior year ~~period~~period. The higher effective tax rate ~~of 26.8 percent. This increase~~ in the prior year period was driven by higher estimated ~~annual effective income tax rate is attributable to the geographical mix of earnings as well as an increase in the~~non-deductible expenses, notably interest expense, ~~deduction limitation due to a tax law change that went into effect January 1, 2022.~~as discussed in Note 8 – "Income Taxes."

Segment ~~Results.~~Results

Segment adjusted EBITDA and adjusted EBITDA margin ~~for the three months ended September 30, 2022 and 2021~~ is summarized in the following table:


	Three Months Ended September 30,									Three Months Ended June 30,
(Dollars in millions)	2022			2021			% Change			2023			2022			Change			% Change
Adjusted EBITDA:
Railroad and Utility Products and Services	$	15.5		$	10.7			45	%	$	22.3		$	13.2		$	9.1			69	%
Performance Chemicals		16.7			20.2			-17	%		32.3			20.4			11.9			58	%
Carbon Materials and Chemicals		36.6			22.5			63	%		15.7			21.0			(5.3	)		-25	%
Corporate unallocated		0.0			0.5			-100	%
Total Adjusted EBITDA	$	68.8		$	53.9			28	%	$	70.3		$	54.6		$	15.7			29	%
Adjusted EBITDA margin as a percentage of GAAP sales:
Railroad and Utility Products and Services		7.5	%		5.7	%		30	%		9.5	%		6.5	%		3.0	%		46	%
Performance Chemicals		10.9	%		17.5	%		-38	%		17.9	%		13.6	%		4.3	%		32	%
Carbon Materials and Chemicals		20.9	%		18.3	%		14	%		9.7	%		14.1	%		-4.4	%		-31	%
Total Adjusted EBITDA margin		12.8	%		12.7	%		1	%

RUPS adjusted EBITDA increased ~~by $4.8 million compared~~due primarily to ~~the prior year period. Adjusted EBITDA as a percentage of~~ net sales ~~increased to 7.5 percent from 5.7 percent in the prior year period and was favorably impacted by improvements in our utility pole and maintenance of way businesses primarily as a result of~~ price increases and ~~favorable absorption,~~$6.5 million from improved plant utilization, partly offset by higher raw material and operating costs ~~as a result~~ of ~~rising inflation~~$23.2 million in our crosstie, utility pole and maintenance of way businesses in the current year period.

PC adjusted EBITDA increased as renegotiated customer contracts allowed us to increase prices to recapture prior year raw material and other operating cost increases, along with a global volume increase for wood treatment preservatives. These price increases more than offset $12.5 million of raw material cost increases from the prior year period.

CMC adjusted EBITDA decreased due to an increase of $17.2 million in raw material costs, particularly in Europe and North America, partly offset by ~~$3.5 million~~higher pricing and higher volumes, which also improved plant utilization in North America compared to the prior year period. ~~Adjusted EBITDA~~

Results of Operations – Comparison of Six Months Ended June 30, 2023 and 2022

Consolidated Results

Net sales are summarized by segment in the following table:


	Six Months Ended June 30,
	2023		2022		Change		% Change
(Dollars in millions)
Railroad and Utility Products and Services	$	447.5	$	387.6	$	59.9		15	%
Performance Chemicals		327.8		286.0		41.8		15	%
Carbon Materials and Chemicals		315.3		288.2		27.1		9	%
	$	1,090.6	$	961.8	$	128.8		13	%

RUPS net sales increased largely due to a net $44.0 million of pricing increases across multiple markets, particularly for crossties and domestic utility poles. Volume increases for crossties and higher activity in our crosstie recovery business also contributed to the increase. Foreign currency changes compared to the prior year period had an unfavorable impact on sales in the current year period of $1.5 million, mainly from our Australian utility pole business.

PC net sales increased as a result of global price increases of $46.0 million, or 16 percent in the current year period, particularly in the Americas for our copper-based preservatives, along with $16.2 million of volume increases in the Americas. These increases were offset, in part, by $15.8 million of volume decreases for wood treatment preservatives across most international markets, primarily Europe and Australasia. Foreign currency changes compared to the prior year period had an unfavorable impact on sales in the current year period of $4.7 million.

CMC net sales increased due mainly to $50.9 million of higher sales prices, primarily for carbon pitch driven by strong end markets and constrained raw material supply, partly offset by volume decreases of phthalic anhydride and carbon pitch. 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 $5.6 million.

Cost of sales as a percentage of net sales ~~decreased~~was 80 percent for the six months ended June 30, 2023, compared to ~~10.9 percent from 17.5~~82 percent in the prior year ~~period. Higher overall~~period as global price increases have outpaced increased raw material and operating costs ~~which~~on a consolidated basis and across most of our businesses. Significant items impacting cost of sales in individual operating segments are discussed as part of "Segment adjusted EBITDA and adjusted EBITDA margin" herein.

Gain on sale of assets for the six months ended June 30, 2023 was related to a sale of assets of our former coal tar distillation facility located in China while the gain on sale of assets in the prior year was related to the sale of our utility pole treating facility in Sweetwater, Tennessee.

Selling, general and administrative expenses for the six months ended June 30, 2023 were ~~exacerbated~~$5.6 million higher when compared to the prior year period due mainly to an increase in compensation related costs along with an increase in travel, entertainment and advertising. These increases were partly offset by ~~working through~~a reduction in professional services and insurance costs.

Interest expense for the six months ended June 30, 2023 was $13.4 million higher when compared to the prior year period due to higher interest rates and a $1.6 million increase in write-off of debt issuance costs related to the repayment of the 2025 Notes as described in Note 12 – "Debt."

Income tax expense for the six months ended June 30, 2023 increased due to higher income from continuing operations before income taxes when compared to the prior year period. This increase was partially offset by a lower estimated annual effective income tax rate when compared to the prior year period. The higher effective tax rate in the prior year period was driven by higher estimated non-deductible expenses, notably interest expense, as discussed in Note 8 – "Income Taxes."

Segment Results

Segment adjusted EBITDA and adjusted EBITDA margin is summarized in the following table:


	Six Months Ended June 30,
(Dollars in millions)	2023			2022			Change			% Change
Adjusted EBITDA:
Railroad and Utility Products and Services	$	38.1		$	24.8		$	13.3			54	%
Performance Chemicals		58.6			41.2			17.4			42	%
Carbon Materials and Chemicals		35.1			41.2			(6.1	)		-15	%
Total Adjusted EBITDA	$	131.8		$	107.2		$	24.6			23	%
Adjusted EBITDA margin as a percentage of GAAP sales:
Railroad and Utility Products and Services		8.5	%		6.4	%		2.1	%		33	%
Performance Chemicals		17.9	%		14.4	%		3.5	%		24	%
Carbon Materials and Chemicals		11.1	%		14.3	%		-3.2	%		-22	%

RUPS adjusted EBITDA increased due primarily to net sales price increases and $10.4 million from improved plant utilization, partly offset by higher raw material and operating costs of $44.4 million in our crosstie, utility pole and maintenance of way businesses in the current year period.

PC adjusted EBITDA increased as renegotiated customer contracts allowed us to increase prices to recapture prior year raw material and other operating cost ~~inventory~~increases, along with a 7.1 percent volume increase in ~~a falling copper~~the Americas for wood treatment preservatives. These price ~~environment,~~increases more than offset ~~higher volumes in~~$25.4 million of raw material and selling, general and administrative cost increases from the ~~Americas and global price increases.~~prior year period.

CMC adjusted EBITDA ~~increased by $14.1 million compared to the prior year period. Adjusted EBITDA as a percentage of net sales increased to 20.9 percent from 18.3 percent in the prior year period~~decreased due to ~~a favorable pricing environment~~an increase of $60.5 million in raw material costs, particularly in North America and Europe, partly offset by ~~an increase~~higher pricing globally and lower operating costs in ~~raw material and other operating costs~~North America compared to the prior year period. Foreign currency changes from our international markets had an unfavorable impact on profitability in the current year period of ~~$3.1~~$0.9 million.

~~Results of Operations – Comparison of Nine Months Ended September 30, 2022 and 2021~~

~~Consolidated Results~~

~~Net sales~~ ~~for the nine months ended September 30, 2022 and 2021 are summarized by segment in the following table:~~

Nine Months Ended September 30,

2022

2021

Net Change

(Dollars in millions)

Railroad and Utility Products and Services

$
595.3

$
574.3

4
%
Performance Chemicals

439.1

384.4

14
%
Carbon Materials and Chemicals

463.5

314.6

47
%

$
1,497.9

$
1,273.3

18
%

~~RUPS net sales~~ increased by $21.0 million or four percent compared to the prior year period. The increase was primarily a result of pricing increases across multiple markets, particularly crossties and utility poles, and activity increases in our railroad bridge services business. These increases were offset by volume decreases in our utility pole business due to transitioning production from the Texas Electric Cooperatives’ Jasper, Texas plant to our Somerville, Texas plant. In addition, a decrease in purchasing activity of untreated crossties by our customers during the first half of the current period was a result of decreased supply due to increased demand for lumber driven by strong construction markets. Foreign currency changes compared to the prior year period had an unfavorable impact on sales in the current year period of $2.2 million, mainly from our Australian utility pole business.

~~PC net sales~~ increased by $54.7 million or 14 percent compared to the prior year period. The sales increase was primarily due to global price increases in the current year period for most preservatives in our portfolio of products and a 9% volume increase in the Americas. In the prior year period, volumes in the Americas decreased as high lumber prices and a temporary change in consumer spending habits tempered customer demand for treated wood products. The increases were offset, in part, by volume decreases for preservatives within our European markets. Foreign currency changes compared to the prior year period had an unfavorable impact on sales in the current year period of $7.0 million.

~~CMC net sales~~ increased by $148.9 million or 47 percent compared to the prior year period due mainly to higher sales prices and volumes for carbon pitch and phthalic anhydride, along with higher sales prices for carbon black feedstock and naphthalene driven by strong demand for our products coupled with limited supply in the current year period. Foreign currency changes from our international markets had an unfavorable impact on sales in the current year period of $28.9 million.

~~Cost of sales~~ as a percentage of net sales was 82 percent for the nine months ended September 30, 2022 compared to 79 percent in the prior year period. Gross margin was unfavorably impacted in the current year period primarily by an increase in raw material costs, fuel costs, shipping costs and other operating expenses across our businesses as a result of inflationary pressures in the current year period that outpaced price increases to our customers especially earlier in the year.

~~Depreciation and amortization charges~~ ~~for the nine months ended September 30, 2022 were consistent with the prior year period.~~

~~Gain on sale of assets~~ for the nine months ended September 30, 2022 was related to the sale of our utility pole treating facility in Sweetwater, Tennessee while the gain on sale of assets for the prior year period was related to the sales of two previously decommissioned plants as described in Note 3 – “Plant Closures and Divestitures”.

~~Impairment and restructuring charges~~ ~~for the nine months ended September 30, 2021 included demolition and other plant closure period costs related to the closure of our Denver, Colorado facility.~~

~~Selling, general and administrative expenses~~ for the nine months ended September 30, 2022 were $5.8 million higher when compared to the prior year period due mainly to an increase of $4.1 million in travel, entertainment and advertising expenses and $1.9 million for consulting and other professional services.

~~Interest expense~~ ~~for the nine months ended September 30, 2022 was $1.8 million higher when compared to the prior year period due to higher interest rates.~~

~~Income tax expense~~ for the nine months ended September 30, 2022 increased due to a higher estimated annual effective income tax rate of 36.1 percent when compared to the prior year period rate of 26.8 percent. This increase in the estimated annual effective income tax rate is attributable to the geographical mix of earnings as well as an increase in the interest expense deduction limitation due to a tax law change that went into effect January 1, 2022.

~~Segment Results.~~

~~Segment adjusted EBITDA and adjusted EBITDA margin~~ ~~for the nine months ended September 30, 2022 and 2021 is summarized in the following table:~~

Nine Months Ended September 30,

(Dollars in millions)

2022

2021

% Change

Adjusted EBITDA:

Railroad and Utility Products and Services

$
40.3

$
39.1

3
%
Performance Chemicals

57.9

82.5

-30
%
Carbon Materials and Chemicals

77.8

51.5

51
%
Corporate unallocated

0.0

1.6

-100
%
Total Adjusted EBITDA

$
176.0

$
174.7

1
%
Adjusted EBITDA margin as a percentage of GAAP sales:

Railroad and Utility Products and Services

6.8
%

6.8
%

-1
%
Performance Chemicals

13.2
%

21.5
%

-39
%
Carbon Materials and Chemicals

16.8
%

16.4
%

3
%
Total Adjusted EBITDA margin

11.7
%

13.7
%

-14
%

~~RUPS adjusted EBITDA~~ ~~increased by $1.2 million compared to the prior year period.~~ Adjusted EBITDA as a percentage of net sales remained at 6.8 percent compared to the prior year period as improvements in our utility pole and maintenance of way businesses, price increases and favorable absorption were substantially offset by higher raw material and operating costs as a result of rising inflation in the current year period.Reconciliation.

~~PC adjusted EBITDA~~ decreased by $24.6 million compared to the prior year period. Adjusted EBITDA as a percentage of net sales decreased to 13.2 percent from 21.5 percent in the prior year period. Higher overall raw material costs, which were exacerbated by working through higher cost inventory in a falling copper price environment, more than offset global price increases and higher volumes in the Americas.

~~CMC adjusted EBITDA~~ increased by $26.3 million compared to the prior year period. Adjusted EBITDA as a percentage of net sales increased to 16.8 percent from 16.4 percent in the prior year period due to a favorable pricing environment partly offset by an increase in raw material and other operating costs compared to the prior year period. Foreign currency changes from our international markets had an unfavorable impact on profitability in the current year period of $6.5 million. In addition, the prior year period margin was favorably impacted by a $2.9 million insurance recovery.

The following table reconciles net income to adjusted EBITDA on a consolidated ~~basis as calculated by us for the periods indicated below:~~basis:


	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended June 30,					Six Months Ended June 30,
(Dollars in millions)	2022		2021			2022			2021			2023		2022			2023			2022
Net income	$	19.0	$	10.0		$	49.4		$	62.7		$	24.4	$	11.6		$	50.6		$	30.4
Interest expense		11.4		10.2			32.3			30.5			20.3		11.1			34.3			20.8
Depreciation and amortization		16.9		13.4			44.5			43.4			14.4		13.4			28.4			27.6
Depreciation in impairment and restructuring charges		0.0		0.7			0.0			0.7
Income tax provision		13.2		4.8			29.7			22.4			9.9		6.8			19.8			16.5
Discontinued operations		0.0		0.5			0.5			(0.1	)		0.0		0.0			0.0			0.5
Sub-total		60.5		39.6			156.4			159.6			69.0		42.9			133.1			95.8
Adjustments to arrive at adjusted EBITDA:
Impairment, restructuring and plant closure costs (benefits)(1)		0.3		(0.7	)		0.2			4.3			0.0		(0.2	)		0.1			0.0
(Gain) on sale of assets		0.0		0.0			(2.5	)		(7.8	)		0.0		0.0			(1.8	)		(2.5	)
LIFO expense		6.1		10.6			12.9			15.8
LIFO expense(2)													0.2		5.1			0.4			6.8
Mark-to-market commodity hedging losses		1.9		4.4			9.0			2.8			1.1		6.8			0.0			7.1
Total adjustments		8.3		14.3			19.6			15.1			1.3		11.7			(1.3	)		11.4
Adjusted EBITDA	$	68.8	$	53.9		$	176.0		$	174.7		$	70.3	$	54.6		$	131.8		$	107.2

(1)

Includes costs associated with restructuring, sales and closures of certain RUPS and CMC ~~facilities~~facilities.

(2)

The LIFO expense adjustment removes the entire impact of LIFO and effectively reflects the results as ~~described in Note 3 – “Plant Closures and Divestitures”.~~if we were on a FIFO inventory basis.

Cash Flow

Net cash ~~provided by~~used in operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was ~~$67.4~~$2.1 million compared to net cash provided by operating activities of ~~$59.6~~$21.2 million in the prior year. The ~~increase~~decrease is primarily the result of ~~lower~~higher working capital usage of ~~$5.8~~$36.6 million, which more than offset the cash impact of the increase in net income in the current year period. The increase in working capital during the current year period is consistent with higher costs combined with a reduction in accounts payable as a result of the timing of purchases and related vendor payments.

Net cash used in investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was ~~$75.1~~$60.6 million compared to net cash used in investing activities of ~~$78.7~~$51.1 million in the prior year period driven primarily by capital expenditures. Capital expenditures for both periods include increased investment in growth projects, ~~primarily in our crosstie business,~~ such as the expansion of our RUPS facility in North Little Rock, ~~Arkansas.~~Arkansas and a yield enhancement project at our CMC facility in Nyborg, Denmark.

Net cash provided by financing activities ~~was $12.3 million~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was $78.6 million compared to ~~$28.3~~$28.5 million of net cash provided by financing activities in the prior year. ~~The cash~~Cash provided by financing activities in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 reflected net borrowings of ~~$37.9~~$90.1 million partly offset by payments of debt issuance costs, repurchases of common stock and dividends ~~paid and payments of debt issuance costs.~~paid. The cash provided by financing activities in the prior year period primarily reflected net borrowings of debt of ~~$29.5~~$53.0 million partly offset by repurchases of common stock, payments of ~~$3.3 million related to long-term incentive compensation plans.~~debt issuance costs and dividends paid.

Liquidity and Capital Resources

Our Credit Facility is described in Note 1412 – “Debt.”

Restrictions on Dividends to Koppers Holdings

Koppers Holdings 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. The Credit Facility permits Koppers Inc. to make dividend payments to Koppers Holdings if certain conditions are met, including, among other permitted dividend payments, the ability to fund the payment of regularly scheduled dividends on and repurchases of Koppers Holdings common stock, in an aggregate amount per year not to exceed the greater of $50.0 million in any fiscal year, with unused amounts in any fiscal year being carried over to the succeeding fiscal year, and ~~6.0%~~6.0 percent of market capitalization. The indenture governing the 2025 Notes restricts Koppers Inc.’s ability to finance our payment of dividends if a default has occurred or would result from such financing, Koppers Inc. is not able to incur additional indebtedness (as defined in the indenture), or the sum of all restricted payments (as defined in the indenture) have exceeded the permitted amount (which we refer to as the “basket”) at such point in time.

At September 30, 2022, the basket totaled $297.5 million. Notwithstanding such restrictions, the indenture governing the 2025 Notes permits an additional aggregate amount of $0.30 per share each fiscal quarter to finance dividends on the capital stock of Koppers Holdings, whether or not there is any basket availability, provided that at the time of such payment, no default in the indenture has occurred or would result from financing the dividends.

Liquidity

As of ~~September~~June 30, ~~2022,~~2023, the maximum amount available under the Credit Facility considering restrictions from debt covenants was approximately ~~$400~~$301 million. As of December 31, 2022, the maximum amount available under the Credit Facility was approximately $412 million. The maximum amount available under the Credit Facility is increased by the amount of cash held by certain subsidiaries as defined by the Credit Facility. ~~At December 31, 2021, the maximum amount available under the previous credit agreement which contained different covenants was approximately $300 million.~~

Our need for cash in the next twelve months relates primarily to contractual obligations which ~~include acquisitions,~~includes debt service, pension plan funding, purchase commitments and operating leases, as well as working capital, capital maintenance programs, the funding of plant consolidation and rationalizations, dividends and share repurchases. We may also use cash to pursue other potential strategic acquisitions or voluntary pension plan contributions. In addition, we continually monitor debt and capital markets. We may, from time to time, pursue one or more transactions to refinance all or a portion of the 2025 Notes, which may include, among other things, the purchase of 2025 Notes in the open market. We would expect to cancel any 2025 Notes which are purchased. Capital expenditures in ~~2022,~~2023, excluding acquisitions, if any, are expected to total approximately ~~$95~~$110 to $120 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. Debt will fluctuate throughout any operating period based upon the timing of receipts from customers and payments to vendors. As of ~~September~~June 30, ~~2022,~~2023, approximately 8590 percent of accounts payable was current and 1510 percent was 1-30 days past due. As of ~~September 30, 2021,~~December 31, 2022, approximately 7580 percent of accounts payable was current and 20 percent was 1-30 ~~days past due and five percent was greater than 30~~ days past due.

Debt Covenants

The covenants ~~under the Credit Facility, including the following financial covenants, may~~that affect availability of the ~~facility:~~Credit Facility and which may restrict the ability of Koppers Inc. to pay dividends include the following financial ratios:

•

The total net leverage ratio, calculated as of the last day of each fiscal quarter, ~~(commencing with the fiscal quarter ending September 30, 2022),~~ is not permitted to exceed 5.0. The total net leverage ratio as of ~~September~~June 30, ~~2022~~2023 was ~~3.33.~~3.3.

•

The cash interest coverage ratio, calculated as of the last day of each fiscal quarter, ~~(commencing with the fiscal quarter ending September 30, 2022),~~ is not permitted to be less than 2.0. The cash interest coverage ratio as of ~~September~~June 30, ~~2022~~2023 was ~~5.68.~~4.7.

We are currently in compliance with all covenants governing the Credit Facility. Our continued ability to meet these financial covenants can be affected by events beyond our control; however, we currently expect that our net cash flows from operating activities and funds available from our Credit Facility will be sufficient to provide for our ~~working capital~~ needs ~~and capital spending requirements~~ over at least the next twelve months.

Legal Matters

The information set forth in Note 1816 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 2 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, ~~2021.~~2022.

Environmental and Other Matters

The information set forth in Note 1816 to the Condensed Consolidated Financial Statements of Koppers Holdings Inc. included in Item 1 of this Part I is incorporated herein by reference.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~There~~Except for the following update regarding interest rate sensitivity, there are no material changes to the disclosure on this matter made in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

See Note 12 – “Debt” for discussion of the changes in debt and interest rate swap agreements. For variable rate debt, interest rate changes impact earnings and cash flows, assuming other factors are held constant. A one percentage point increase in interest rates would have decreased earnings and cash flows by approximately $7.0 million over a twelve-month period, holding other variables constant inclusive of interest rate swap effects.

ITEM 4. CONTROLS AND PROCEDURES

Our management, with the participation of the Chief Executive Officer and Chief Financial Officer and utilizing the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal Control – Integrated Framework (2013), have evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures were effective as of the end of the period covered by this report. There were no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended ~~September~~June 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information set forth in Note 1816 to the Condensed Consolidated Financial Statements of Koppers Holdings Inc. included in Item 1 of Part I of this report is incorporated herein by reference.

Koppers Holdings Inc. (the “Company”) has been cooperating with an investigation by the staff of the Division of Enforcement (the “Division”) of the U.S. Securities and Exchange Commission (“Commission”) into the Company’s public non-GAAP financial metrics disclosures regarding the Company’s debt reduction target and net leverage ratio for Fiscal Year 2019 and the related management of its accounts payable (the “Inquiry”). The Company and several of its current and former officers and employees received subpoenas for information and testimony (the “Subpoenas”), pursuant to a non-public formal order of investigation for the Inquiry dated February 14, 2021.

On November 1, 2022, the Commission announced that it had agreed to accept Koppers’ Offer of Settlement and, pursuant to that settlement, entered an order making findings, which Koppers neither admits nor denies, that Koppers violated Section 17(a)(3) of the Securities Act of 1933, Section 13(a) of the Securities Exchange Act of 1934 and related rules, and Rule 100(b) of Regulation G when it negligently failed to explain in its non-GAAP disclosures in the Company’s 2019 earnings releases, that it was delaying the payment of its non-critical vendors in order to meet its 2019 net debt reduction and net leverage ratio targets and that its short-term debt would increase in the next period. The Commission’s order acknowledges that the Company cooperated with its staff’s investigation and promptly undertook remedial acts, including strengthening policies and procedures relating to its accounts payables and its non-GAAP disclosures, and requires that the Company cease and desist from future violations and pay a civil monetary penalty of $1.3 million. No current or former officers or employees of the Company were the subject of any enforcement action in connection with this matter.30

~~The Company does not anticipate that the resolution of the SEC’s investigation will have any material impact on its operations or its current or any prior period financial statements.~~

ITEM 1A. RISK FACTORS

There have been no material changes to the Risk Factors previously disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022, except for the addition of the following risk factor.

The failure of financial institutions or transactional counterparties could adversely affect our current and projected business operations and our liquidity, financial condition and results of operations.

33We regularly maintain domestic cash deposits in Federal Deposit Insurance Corporation (“FDIC”) insured banks which exceed the FDIC insurance limits. We also maintain cash deposits in foreign banks where we operate, some of which are not insured or are only partially insured by the FDIC or other similar agencies. The failure of a bank, or events involving limited liquidity, defaults, non-performance or other adverse conditions in the financial or credit markets impacting financial institutions at which we maintain balances, or concerns or rumors about such events, may lead to disruptions in access to our bank deposits or otherwise adversely impact our liquidity and financial condition. There can be no assurance that our deposits in excess of the FDIC or other comparable insurance limits will be backstopped by the U.S. or applicable foreign government, or that any bank or financial institution with which we do business will be able to obtain needed liquidity from other banks, government institutions or by acquisition in the event of a failure or liquidity crisis.

In addition, instability, liquidity constraints or other distress in the financial markets, including the effects of bank failures, defaults, non-performance or other adverse developments that affect financial institutions could impair the ability of one or more of the banks participating in our current or any future credit agreement from honoring their commitments under the credit agreement or situations where the banks serve as a counterparty on our derivative swap agreements. This could have a material adverse effect on our business if we were not able to replace those commitments or locate other sources of liquidity on acceptable terms.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

~~Not applicable.~~During the three months ended June 30, 2023, none of our directors or executive officers adopted or terminated any Rule 10b5-1 trading arrangement or any non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-X).

ITEM 6. EXHIBITS


10.1*	Amendment to the Koppers Holdings Inc. Benefit Restoration Plan, effective as of May 1, 2023
10.2*	Form of Restricted Stock Unit Issuance Agreement Non-Employee Director ~~Deferred Compensation Plan, as amended and restated effective August 3, 2022~~- Time Vesting
31.1*	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

3431

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	KOPPERS HOLDINGS INC. (REGISTRANT)

Date: ~~November 4, 2022~~August 3, 2023	By:	/s/ Jimmi Sue Smith
		Jimmi Sue Smith Chief Financial Officer
		(Principal Financial Officer and Duly Authorized Officer)

3532


Pennsylvania	20-1878963
(State of incorporation)	(IRS Employer Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	KOP	The New York Stock Exchange


	September 30, 2022				December 31, 2021
	Fair Value		Carrying Value		Fair Value		Carrying Value
(Dollars in millions)
Financial assets:
Investments and other assets	$	1.3	$	1.3	$	1.3	$	1.3
Financial liabilities:
Long-term debt (including current portion)	$	789.3	$	826.8	$	804.1	$	789.1


	June 30, 2023				December 31, 2022
	Fair Value		Carrying Value		Fair Value		Carrying Value
(Dollars in millions)
Financial assets:
Investments and other assets	$	1.3	$	1.3	$	1.3	$	1.3
Financial liabilities:
Long-term debt	$	927.4	$	915.7	$	801.1	$	825.3


	Units Outstanding (in Pounds)				Net Fair Value - Asset (in Dollars)
	September 30, 2022		December 31, 2021		September 30, 2022			December 31, 2021
(Amounts in millions)
Cash flow hedges		12.1		29.0	$	4.4		$	53.8
Contracts where hedge accounting was not elected		7.6		6.1		(2.0	)		7.1
Total		19.7		35.1	$	2.4		$	60.9