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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ 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”,~~filer,” “accelerated ~~filer” and~~filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~

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 31, ~~2017~~2022 amounted to ~~20,745,461~~20,898,005 shares.

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

The financial information included herein should be read in conjunction with ~~the Company’s~~our audited consolidated financial statements and related notes included in ~~its~~our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021.

5. Fair Value Measurements

Carrying amounts and the related estimated fair values of ~~the Company’s~~our financial instruments as of September 30, ~~2017~~2022 and December 31, ~~2016~~2021 are as follows:

September 30, 2017

December 31, 2016

Fair Value

Carrying
Value

Fair Value

Carrying
Value

(Dollars in millions)

Financial assets:

Cash and cash equivalents, including restricted cash

$
50.2

$
50.2

$
20.8

$
20.8

Investments and other assets^(a)

1.1

1.1

1.1

1.1

Financial liabilities:

Long-term debt (including current portion)

$
730.8

$
700.8

$
669.6

$
662.4

~~(a)~~

~~Excludes equity method investments.~~


	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

~~Cash and cash equivalents~~ ~~– The carrying value approximates fair value because of the short maturity of those instruments.~~

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 ~~the Company’s~~our long-term debt is estimated based on the market prices for the same or similar ~~issues~~issuances or on the current rates offered to ~~the Company~~us for debt of the same remaining maturities (Level 2). The fair value of ~~the Company’s revolving credit facility~~our Credit Facility approximates carrying value due to the variable rate nature of this instrument.

6. Comprehensive (Loss) Income and Equity ~~(Deficit)~~

Total comprehensive (loss) income for the three and nine months ended September 30, ~~2017~~2022 and ~~2016~~2021 is summarized in the table below:

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(Dollars in millions)

Net income

$
19.9

$
11.9

$
44.3

$
21.4

Other comprehensive income:

Change in currency translation adjustment

6.3

0.7

17.2

4.1

Unrealized gains on cash flow hedges, net
   of tax expense of $1.1, $1.0, $1.4 and $3.4

4.1

1.7

5.0

5.5

Unrecognized pension net loss (gain), net of tax
   (benefit) expense of $(3.9), $0.1, $(4.3) and $(0.3)

6.5

(0.2
)

7.2

0.4

Total comprehensive income

36.8

14.1

73.7

31.4

Less: Comprehensive income (loss) attributable to
   noncontrolling interests

0.2

(0.2
)

0.6

(1.7
)
Comprehensive income attributable to Koppers

$
36.6

$
14.3

$
73.1

$
33.1


	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

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 ~~income~~loss is included in the computation of net periodic pension cost as disclosed in Note 13 – ~~Pensions~~“Pensions and ~~Postretirement~~Post-Retirement Benefit Plans.” Other amounts reclassified from accumulated other comprehensive loss ~~include income~~ related to derivative financial instruments ~~net~~ of ~~tax, of $2.3~~$5.8 million and ~~$4.9~~$27.0 million for the three and nine months ended September 30, ~~2017, respectively,~~2022, and ~~losses of $1.6~~$11.1 million and ~~$4.8~~$31.0 million for thethree and nine months ended September 30, ~~2016,~~2021, respectively. The amounts in the preceding sentence are net of tax.

The following tables present the change in equity ~~(deficit)~~for the three 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 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	)
Issuance of common stock		0.0		0.3		0.0			0.0			0.0			0.0			0.3
Employee stock plans		0.0		3.2		0.0			0.0			0.0			0.0			3.2
Other comprehensive (loss) income
Currency translation adjustment		0.0		0.0		0.0			(19.6	)		0.0			(0.3	)		(19.9	)
Unrealized loss on cash flow hedges		0.0		0.0		0.0			(8.7	)		0.0			0.0			(8.7	)
Unrecognized pension net loss		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


(Dollars in millions)	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
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			(1.4	)		0.0			(1.4	)
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		(0.3	)		(11.1	)		0.0			0.0			(11.4	)
Unrealized loss on cash flow hedges		0.0		0.0		0.0			(16.6	)		0.0			0.0			(16.6	)
Unrecognized pension net loss		0.0		0.0		0.0			0.3			0.0			0.0			0.3
Balance at September 30, 2021	$	0.2	$	246.2	$	278.8		$	(33.0	)	$	(95.8	)	$	4.1		$	400.5

The following tables present the change in equity for the nine months ended September 30, ~~2017~~2022 and ~~2016,~~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
Balance at December 31, 2020	$	0.2	$	234.1	$	215.8	$	(15.9	)	$	(92.5	)	$	4.3		$	346.0
Net income (loss)		0.0		0.0		63.0		0.0			0.0			(0.3	)		62.7
Issuance of common stock		0.0		2.2		0.0		0.0			0.0			0.0			2.2
Repurchases of common stock		0.0		0.0		0.0		0.0			(3.3	)		0.0			(3.3	)
Employee stock plans		0.0		9.9		0.0		0.0			0.0			0.0			9.9
Other comprehensive (loss) income
Currency translation adjustment		0.0		0.0		0.0		(10.2	)		0.0			0.1			(10.1	)
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	)
Unrecognized pension net loss		0.0		0.0		0.0		0.8			0.0			0.0			0.8
Balance at September 30, 2021	$	0.2	$	246.2	$	278.8	$	(33.0	)	$	(95.8	)	$	4.1		$	400.5

On November 3, 2022, we declared a quarterly dividend of $0.05 per common share, payable on December 12, 2022 to shareholders of record as of November 25, 2022.

(Dollars in millions)

Total Koppers
Shareholders’
Equity

Noncontrolling
Interests

Total Equity

Balance at December 31, 2016

$
30.4

$
4.2

$
34.6

Net income

43.9

0.4

44.3

Issuance of common stock

1.9

0.0

1.9

Employee stock plans

8.0

0.0

8.0

Other comprehensive income

29.2

0.2

29.4

Repurchases of common stock

(5.1
)

0.0

(5.1
)
Balance at September 30, 2017

$
108.3

$
4.8

$
113.1

(Dollars in millions)

Total Koppers
Shareholders’
Equity (Deficit)

Noncontrolling
Interests

Total Equity (Deficit)

Balance at December 31, 2015

$
(18.5
)

$
6.1

$
(12.4
)
Net income (loss)

22.9

(1.5
)

21.4

Employee stock plans

6.0

0.0

6.0

Other comprehensive income (loss)

10.2

(0.2
)

10.0

Repurchases of common stock

(0.3
)

0.0

(0.3
)
Balance at September 30, 2016

$
20.3

$
4.4

$
24.7

7. 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

~~The~~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, 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.~~“awards.”

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 fair value of performance stock units is determined using a Monte Carlo valuation model. For grants to most employees, ~~in 2015 and thereafter,~~ the restricted stock units vest in four equal annual installments. 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 typically.~~less.

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 and performance stock units with a performance condition is the market price of the underlying common stock on the date of grant.

Performance stock units granted prior to 2016 have vesting based upon a performance condition. These performance stock units generally have three-year performance objectives and all performance stock units have a three-year period for vesting (if the applicable performance objective is achieved). For awards granted prior to 2016, the applicable performance objective is based upon a multi-year cumulative value creation calculation that considers the Company’s financial performance commencing on the first day of each grant year. The number of performance stock units granted represents the target award and participants have the ability to earn between zero and 200 percent (depending on the grant date) of the target award based upon actual performance. If minimum performance criteria are not achieved, no performance stock units will vest. Performance stock units granted in 2014 did not meet the value creation threshold and were forfeited in February 2017.

~~Performance stock units granted in 2016 and 2017~~ have vesting based upon a market condition. These performance stock units have ~~a three-year~~multi-year performance ~~objective~~objectives and a three-year period for vesting (if the applicable performance ~~objective is~~objectives are achieved). The applicable performance objective is based on ~~the Company’s~~our total shareholder return relative to the Standard & ~~Poors~~Poor’s SmallCap 600 Materials Index. 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. ~~The Company has~~We have the discretion to settle the award in cash rather than shares, although ~~the Company~~we currently ~~expects~~expect that all awards will be settled by the issuance of shares.

~~Compensation expense for non-vested performance stock units with a market condition is recorded over the vesting period based on the fair value at the date of grant. The Company~~We calculated the fair value of the performance stock unit awards on the date of grant using the ~~Monte Carlo valuation model and the~~ assumptions listed below:

Dividends declared, if any, on ~~the Company’s~~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 30, ~~2017:~~2022:

Performance Period

Minimum
Shares

Target
Shares

Maximum
Shares

2015 – 2017

0

203,953

407,906

2016 – 2018

0

260,588

521,176

2017 – 2019

0

117,010

234,020


Performance Period	Minimum Shares		Target Shares		Maximum Shares
2020 – 2022		0		74,259		148,563
2021 – 2023		40,751		137,936		235,138
2022 – 2024		0		149,892		299,784

The following table shows a summary of the status and activity of non-vested stock units for the nine months ended September 30, ~~2017:~~2022:

	Restricted Stock Units			Performance Stock Units			Total Stock Units			Weighted Average Grant Date Fair Value per Unit
Non-vested at December 31, 2016		279,807			554,388			834,195		$	23.09
												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
Granted		83,879			117,010			200,889		$	55.20		247,760			151,236			398,996		$	35.92
Performance share adjustment													0			2,491			2,491		$	14.20
Vested		(127,443	)		0			(127,443	)	$	24.90		(193,462	)		(256,956	)		(450,418	)	$	34.47
Forfeited		(138	)		(89,847	)		(89,985	)	$	37.80		(25,344	)		(8,848	)		(34,192	)	$	28.19
Non-vested at September 30, 2017		236,105			581,551			817,656		$	29.08
Non-vested at September 30, 2022													534,859			362,089			896,948		$	31.28

Stock Options

~~Prior to 2015, stock~~Stock options to ~~most~~ executive officers vest and become exercisable ~~upon the completion of a three-year service period commencing on the grant date. For grants~~ in ~~2015 and thereafter, the stock options vest in~~ four equal annual installments. The stock options have a term of ten ~~years.~~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. ~~The Company~~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

March 2017 Grant

March 2016 Grant

March 2015 Grant

Grant date price per share of stock option award

$
44.10

$
18.11

$
17.57

Expected dividend yield per share

0.00
%

0.00
%

3.40
%
Expected life in years

5.77

5.96

5.75

Expected volatility

39.70
%

40.86
%

42.27
%
Risk-free interest rate

2.13
%

1.45
%

1.73
%
Grant date fair value per share of option award

$
17.90

$
7.41

$
5.20

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 ~~Company suspended its dividend in February 2015 and does not expect to declare any dividends for the foreseeable future. The~~ expected life in years is based on historical exercise data of options previously granted by ~~the Company.~~us. Expected volatility is based on the

historical volatility of ~~the Company’s~~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, ~~2017:~~2022:

Options

Weighted Average
Exercise Price
per Option

Weighted Average
Remaining
Contractual Term
(in years)

Aggregate Intrinsic
Value (in millions)

Outstanding at December 31, 2016

935,454

$
26.10

Granted

97,403

$
44.10

Exercised

(69,365
)

$
27.52

Outstanding at September 30, 2017

963,492

$
27.81

6.33

$
17.7

Exercisable at September 30, 2017

551,717

$
30.62

4.88

$
8.6


	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

Stock Compensation Expense

Total stock-based compensation expense recognized under our LTIP and employee stock purchase plan for the three and nine months ended September 30, ~~2017~~2022 and ~~2016~~2021 is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016		2022		2021		2022		2021
(Dollars in millions)
Stock-based compensation expense recognized:
Selling, general and administrative expenses	$	2.7	$	2.3	$	7.8	$	5.7	$	3.2	$	3.2	$	10.0	$	9.8
Less related income tax benefit		0.6		1.0		1.7		2.3		1.2		0.8		3.6		2.6
	$	2.1	$	1.3	$	6.1	$	3.4
Decrease in net income attributable to Koppers									$	2.0	$	2.4	$	6.4	$	7.2
Intrinsic value of exercised stock options									$	0.0	$	0.0	$	0.0	$	2.2
Cash received from the exercise of stock options									$	0.0	$	0.0	$	0.0	$	2.3

As of September 30, ~~2017,~~2022, total future ~~gross~~ compensation expense related to non-vested stock-based compensation arrangements ~~which are~~is expected to ~~vest, totaled $17.8~~total $21.6 million and the weighted-average period over which this ~~cost~~expense is expected to be recognized is approximately ~~26 months.~~27 months.

9. Segment Information

~~The Company has~~ We have three reportable segments: ~~Railroad and Utility Products and Services,~~RUPS, Performance Chemicals (“PC”) and ~~Carbon Materials and Chemicals. The Company’s~~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.

~~The Company’s Railroad and Utility Products and Services~~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. Utility products include~~bridges, a business related to the ~~treating~~recovery of ~~transmission~~used crossties and ~~distribution poles and pilings.~~a business related to the inspection of utility poles.

~~The Company’s Performance Chemicals~~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.

~~The Company’s Carbon Materials and Chemicals~~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.

~~The Company~~

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 ~~performance~~the results of operations and ~~determines resource allocations based on a number of factors,~~makes strategic decisions about the business. In addition, adjusted EBITDA is the primary measure ~~being operating~~used to determine the level of achievement of management’s short-term incentive goals and related payout. For these reasons, we believe that adjusted EBITDA represents the most relevant measure of segment profit ~~or loss from operations. Operating profit does not include equity~~and loss.

Consolidated adjusted EBITDA is reconciled to net income, the most directly comparable financial measure determined and reported in ~~earnings of affiliates, other income, interest expense, income taxes or operating costs of Koppers Holdings Inc.~~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 million and $7.9 million are recorded within accounts receivable, net of allowance within the condensed consolidated balance sheet as of September 30, 2022 and December 31, 2021, respectively.

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

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

(Dollars in millions)

Revenues from external customers:

Railroad and Utility Products and Services

$
131.7

$
145.7

$
403.1

$
461.5

Performance Chemicals

109.7

107.6

318.2

304.0

Carbon Materials and Chemicals

143.4

117.8

388.1

337.5

Total

$
384.8

$
371.1

$
1,109.4

$
1,103.0

Intersegment revenues:

Performance Chemicals

$
1.8

$
2.3

$
5.0

$
6.2

Carbon Materials and Chemicals

22.1

26.2

60.0

68.1

Total

$
23.9

$
28.5

$
65.0

$
74.3

Depreciation and amortization expense:

Railroad and Utility Products and Services

$
2.9

$
2.9

$
8.8

$
9.1

Performance Chemicals

4.4

4.7

13.3

14.3

Carbon Materials and Chemicals

4.8

6.2

12.9

18.6

Total

$
12.1

$
13.8

$
35.0

$
42.0

Operating profit (loss):

Railroad and Utility Products and Services

$
9.3

$
14.9

$
29.3

$
46.9

Performance Chemicals

18.4

17.6

56.6

52.6

Carbon Materials and Chemicals

16.2

(3.9
)

24.4

(29.8
)
Corporate^(a)

(9.2
)

(0.9
)

(10.4
)

(2.2
)
Total

$
34.7

$
27.7

$
99.9

$
67.5

~~(a)~~

Operating loss for Corporate includes primarily general and administrative costs for Koppers Holdings Inc., the parent company of Koppers Inc., and a loss on pension settlement of $8.8 million for the three and nine months ended September 30, 2017.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
(Dollars in millions)
Railroad and Utility Products and Services:
Railroad treated products	$	120.6	$	107.1	$	348.2	$	327.6
Utility poles		63.0		59.6		178.7		186.2
Railroad infrastructure services		10.9		8.8		29.9		25.3
Rail joints		7.8		5.7		21.6		17.9
Other products		5.4		5.7		16.9		17.3
Total		207.7		186.9		595.3		574.3
Performance Chemicals:
Wood preservative products		148.3		110.1		419.2		366.4
Other products		4.8		5.1		19.9		18.0
Total		153.1		115.2		439.1		384.4
Carbon Materials and Chemicals:
Pitch and related products		109.6		70.4		270.0		177.7
Phthalic anhydride and other chemicals		31.6		19.7		85.0		52.2
Creosote and distillates		17.2		19.0		56.9		48.6
Naphthalene		9.1		6.2		26.1		15.5
Other products		7.8		7.4		25.5		20.6
Total		175.3		122.7		463.5		314.6
Total	$	536.1	$	424.8	$	1,497.9	$	1,273.3

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


	September 30, 2022		December 31, 2021
(Dollars in millions)
Segment assets:
Railroad and Utility Products and Services	$	620.9	$	594.1
Performance Chemicals		516.3		586.9
Carbon Materials and Chemicals		487.6		447.1
All other		27.9		33.8
Total	$	1,652.7	$	1,661.9
Goodwill:
Railroad and Utility Products and Services	$	120.4	$	120.9
Performance Chemicals		171.6		175.1
Total	$	292.0	$	296.0

The income tax provision for interim periods is comprised of an estimated annual effective income tax rate applied to current year ordinary income and tax associated with discrete items. These discrete items generally relate to excess stock compensation deductions, changes in tax laws, adjustments to ~~uncertain~~unrecognized tax ~~positions~~benefits and changes of estimated tax liability to the actual liability determined upon filing income tax returns. To determine the annual effective tax rate, management is required to make estimates of annual pretax income in each domestic and foreign jurisdiction in which ~~the Company conducts~~we conduct business. Entities that have historical pre-tax losses and current year estimated pre-tax losses that are not projected to generate a future benefit are excluded from the estimated annual effective income tax rate.

The estimated annual effective income tax rate, excluding discrete items, ~~discussed above,~~ was ~~21.7~~36.1 percent and ~~29.1~~26.8 percent for the nine months ended September 30, ~~2017~~2022 and ~~2016,~~2021, respectively. The estimated annual effective income tax rate differs from the U.S. federal statutory tax rate due to:

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 ~~19.4~~41.0 percent for the three months ended September 30, ~~2017.~~2022. This is ~~lower~~higher than the estimated annual effective income tax rate ~~primarily~~of 36.1 percent due to additional tax expense recognized in the current quarter as a ~~reduction in~~result of increasing the estimated annual effective income tax rate ~~when compared to the two previous quarters. As a result, tax expense for the two previous quarters was favorably adjusted~~utilized in the ~~three months ended September 30, 2017. Discrete items included in income taxes for the three months ended September 30, 2017 were not material.~~previous quarter.

Income taxes as a percentage of pretax income were ~~25.9~~37.3 percent for the ~~three~~nine months ended September 30, ~~2016.~~2022. This ~~is lower~~was higher than the estimated annual effective income tax rate ~~primarily~~of 36.1 percent due to a reduction in the estimated annual effective income tax rate when compared to the two previous quarters. As a result, tax expense for the two previous quarters was favorably adjusted in the three months ended September 30, 2016. This is offset by continuing and cumulativeforecasted pre-tax losses of certain foreign subsidiaries that are not expected to generate a future benefit. These losses are excluded from the determination of the annual effective income tax rate as discussed above. Discrete items included in income taxes for the three months ended September 30, 2016 were not material.

Income taxes as a percentage of pretax income were 21.4 percent for the nine months ended September 30, 2017. This is lower than the estimated annual effective tax rate due to discrete items. Discrete items included in income taxes for the nine months ended September 30, 2017 were a net benefit of $0.2 million. This discrete benefit primarily relates to excess tax benefits for stock-based compensation of $0.9 million, a benefit of $0.5 million for the reversal of uncertain tax positions due to statute expirations partially offset by additional accruals of $0.8 million for uncertain tax positions and $0.4 million for adjustments to deferred tax assets.

Income taxes as a percentage of pretax income were 33.4 percent for the nine months ended September 30, 2016. This is higher than the estimated annual effective tax rate due to continuing and cumulative losses of certain foreign subsidiaries that are not expected to generate a future benefit. These losses are excluded from the determination of the annual effective income tax rate as discussed above. Discrete items included in income taxes for the nine months ended September 30, 2016 were a net benefit of $0.3 million. This discrete benefit primarily relates to a benefit of $0.7 million for the reversal of uncertain tax positions due to statute expirations and additional accruals of $0.6 million for uncertain tax positions.

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, ~~uncertain~~unrecognized tax ~~positions~~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 ~~the end of the third quarter.~~September 30, 2022.

~~The Company and its subsidiaries~~We file income tax returns in the U.S. federal jurisdiction, individual U.S. state jurisdictions and non-U.S. jurisdictions. With few exceptions, ~~the Company is~~we are no longer subject to U.S. federal, U.S. state, ~~and local,~~ or non-U.S. income tax examinations by tax authorities for years prior to ~~2014.~~2016.

Unrecognized tax benefits totaled ~~$6.9~~$1.4 million and ~~$9.7~~$1.5 million as of September 30, ~~2017~~2022 and December 31, ~~2016, respectively. As of September 30, 2017 and December 31, 2016, the~~2021. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate, was approximately ~~$2.9~~$1.4 million and ~~$5.7~~$1.5 million ~~respectively. The Company recognizes~~as of September 30, 2022 and December 31, 2021. We recognize interest expense and any related penalties from ~~uncertain~~unrecognized tax ~~positions~~benefits in income tax expense. As of September 30, ~~2017~~2022 and December 31, ~~2016, the Company~~2021, we had accrued approximately ~~$3.3 million and $4.2~~$0.4 million for interest and ~~penalties, respectively.~~penalties.

~~Unrecognized tax benefits decreased in the nine months ended September 30, 2017 principally due to the settlement related to a transfer pricing matter. The Company does~~We do not anticipate ~~significant increases or decreases~~material changes to the amount of unrecognized tax benefits within the next twelve months.

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

~~In January 2017,~~ Koppers Inc. ~~completed a private placement offering of $500.0~~’s $500 million ~~6.00 percent~~ Senior Notes due 2025 (the “2025 Notes”). are senior obligations of Koppers Inc. ~~used the proceeds from the offering of the 2025 Notes to repay its outstanding term loan and to fund a tender offer to repurchase its senior notes due 2019.~~

~~The 2025 Notes are our senior obligations,~~, are unsecured and are guaranteed by Koppers Holdings Inc. and certain of Koppers Inc.’s domestic subsidiaries. The 2025 Notes pay interest semi-annually in arrears on February 15 and August 15 ~~beginning on August 15, 2017~~ and will mature on February 15, 2025 unless earlier redeemed or repurchased. ~~On or after February 15, 2020, the Company is~~ We are entitled to redeem all or a portion of the 2025 Senior Notes at a redemption price of ~~104.5~~101.5 percent of principal value ~~declining to a redemption price~~as of ~~101.5 percent on or after~~ February 15, 2022 until April 15, 2023 when the ~~redemption price is equivalent to the~~2025 Notes are redeemable at principal ~~value on February 15, 2023.~~value.

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.

In February 2017, the Company entered into a new $400.0 million senior secured revolving credit facility (“the Revolving Credit Facility”). The maturity date is February 2022 and the interest rate is variable and is based on LIBOR.

Borrowings under the Revolving Credit Facility are secured by a first priority lien on substantially all of the assets of Koppers Inc., Koppers Holdings and their material domestic subsidiaries. The Revolving Credit Facility contains certain covenants for Koppers Inc. and its restricted subsidiaries that limit capital expenditures, additional indebtedness, liens, dividends, investments or acquisitions. 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 30, 2017, the Company had $180.1 million of unused revolving credit availability for working capital purposes after restrictions from certain letter of credit commitments and other covenants. As of September 30, 2017, $45.1 million of commitments were utilized by outstanding letters of credit.

In February 2017, all of the outstanding Koppers Inc. senior notes due 2019 were repurchased at a premium to carrying value and accordingly, the Company realized a loss on extinguishment of debt totaling $10.0 million consisting of $7.3 million for bond premium and bond tender expenses and $2.7 million for the write-off of unamortized debt issuance costs.

Also in February 2017, Koppers Inc. repaid its term loan in full and entered into the Revolving Credit Facility. Accordingly, the Company realized a loss of $3.3 million for the write-off of unamortized debt issuance costs.

The Company’s 75-percent owned subsidiary, Koppers (Jiangsu) Carbon Chemical Company Limited (“KJCC”) entered into two committed loan facility agreements for a combined commitment of RMB 265 million or approximately $44 million. The third-party bank provided facility has a commitment amount of RMB 198.8 million and the other committed facility of RMB 66.2 million is provided by the 25-percent non-controlling shareholder in KJCC. Borrowings under the third-party bank facility are secured by a letter of credit issued by a bank under the Revolving Credit Facility. KJCC will repay the construction loan portion of the third-party commitment in six installments every six months starting in June 2018 with a final repayment on December 21, 2020, the maturity date of the loans.

~~The Company utilizes~~We utilize derivative instruments to manage exposures to risks that have been identified, ~~and~~ measured and are capable of being ~~controlled.~~mitigated. The primary risks ~~managed by the company~~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 ~~Canadian dollar, the New Zealand dollar, the~~ Euro and British pounds. Swap contracts on copper are used to manage the price risk associated with forecasted purchases of materials used in ~~the Company’s~~our manufacturing processes. Generally, ~~the Company~~we will not hedge cash flow exposures for durations longer than 36 months and ~~the Company has~~we have hedged certain volumes of copper through ~~December 2019. The Company enters~~the end of 2023. We enter into foreign currency forward contracts to manage foreign currency risk associated with ~~the Company’s~~our receivable and payable balances ~~and foreign currency denominated~~in addition to foreign-denominated sales. Generally, ~~the Company enters~~we enter into master netting arrangements with the counterparties and ~~offsets~~offset net derivative positions with the same counterparties. Currently, ~~the Company’s~~our agreements do not require cash collateral.

~~ASC Topic 815-10, “Derivatives and Hedging,” requires companies to recognize~~The Company recognizes all derivative instruments as either assets or liabilities at fair value inon the balance sheet. ~~Derivative instruments’~~A derivative instrument's fair value is determined using significant other observable inputs, ora Level 2 ~~in the~~ fair value ~~hierarchy. In accordance with ASC Topic 815-10, the Company designates~~measurement. We designate certain of ~~its~~our commodity swaps as cash flow hedges of forecasted purchases of ~~commodities and certain of its foreign currency swaps as cash flow hedges of forecasted sales.~~commodities. 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 ~~either~~ hedge ineffectiveness ~~or hedge components excluded from the assessment of effectiveness~~ are recognized in current earnings. ~~The amount of hedge ineffectiveness charged to profit and loss is reported in the table below.~~

For those commodity ~~and foreign currency~~ swaps ~~which are~~where hedge accounting is not ~~designated as cash flow hedges,~~elected, the fair value of the commodity swap is recognized as an asset or liability inon the 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, ~~2017~~2022 and December 31, ~~2016,~~2021, the fair value of the outstanding copper swap contracts is recorded in the balance sheet as follows:

~~Based upon contracts outstanding at September 30, 2017, in the next twelve months the Company estimates~~We estimate that ~~$6.8~~$3.9 million of unrealized gains, net of tax, related to commodity price hedging will be reclassified from other comprehensive (loss) income into ~~earnings.~~earnings over the next twelve months.

As of September 30, 2017, the Company has $12.1 million of U.S. dollar-denominated forward contracts related to foreign currency, which are designated as cash flow hedges. The fair value of these forward contracts, which expire in the next twelve months, is $1.1 million which has been credited to other comprehensive income for the three and nine months ended September 30, 2017. The fair value associated with forward contracts related to foreign currency that are not designated as hedges ~~and the fair value changes associated with these contracts~~ are immediately charged to earnings. These amounts are classified in cost of sales in the ~~Condensed Consolidated Statement~~condensed consolidated statement of ~~Operations~~operations and ~~Comprehensive Income.~~ comprehensive (loss) income.

19. Subsequent Events

Period ended

September 30,
2017

December 31,
2016

(Dollars in millions)

Balance at beginning of year

$
12.9

$
19.8

Expense

2.5

1.5

Reversal of reserves

(0.3
)

(1.0
)
Cash expenditures

(1.7
)

(6.3
)
Disposal

0.0

(0.3
)
Currency translation

0.4

(0.8
)
Balance at end of period

$
13.8

$
12.9

~~19. Subsidiary Guarantor Information for Koppers Inc. Senior Notes~~

On January 25, 2017, Koppers Inc. issued $500.0 million principal value of Senior Notes due 2025 (the “2025 Notes”). Koppers Holdings and each of Koppers Inc.’s 100 percent-owned material domestic subsidiaries other than Koppers Assurance, Inc. fully and unconditionally guarantee the payment of principal and interest on the 2025 Notes. The domestic guarantor subsidiaries include Koppers World-Wide Ventures Corporation, Koppers Delaware, Inc., Koppers Concrete Products, Inc., Concrete Partners, Inc., Koppers Performance Chemicals Inc., Koppers Railroad Structures Inc., Koppers NZ, LLC, Koppers-Nevada Limited Liability Company, Wood Protection LP, Wood Protection Management LLC, Koppers Asia LLC and Koppers Ventures Inc. Non-guarantor subsidiaries are owned directly or indirectly by Koppers Inc. or are owned directly or indirectly by Koppers World-Wide Ventures Corporation.

~~The guarantee of a guarantor subsidiary will be automatically and unconditionally released and discharged in the event of:~~

~~any sale of the capital stock or~~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 ~~guarantor subsidiary;~~largest independent supplier of untreated railroad crossties in North America, with operations in Missouri, Arkansas and Texas.

~~the designation of the guarantor subsidiary as an unrestricted subsidiary in accordance with the indenture governing the 2025 Notes; and~~

~~the legal defeasance, covenant defeasance or satisfaction and discharge of the indenture governing the 2025 Notes.~~

~~Shelf Registration~~

Under a registration statement on Form S-3, Koppers Holdings may sell a combination of securities, including common stock, debt securities, preferred stock, depository shares, warrants, purchase contracts and units, from time to time in one or more offerings. In addition, Koppers Inc. may sell debt securities from time to time under the registration statement. Debt securities may be fully and unconditionally guaranteed, on a joint and several basis, by Koppers Holdings, Koppers Inc. and/or each of Koppers Inc.’s 100 percent-owned material domestic subsidiaries other than Koppers Assurance, Inc. The domestic guarantor subsidiaries are the same as those which guarantee the 2025 Notes. Non-guarantor subsidiaries are owned directly or indirectly by Koppers Inc. or are owned directly or indirectly by Koppers World-Wide Ventures Corporation. The guarantor subsidiaries that issue guarantees, if any, will be determined when a debt offering actually occurs under the registration statement and accordingly, the condensed consolidating financial information for subsidiary guarantors will be revised to identify the subsidiaries that actually provided guarantees. These guarantees will be governed pursuant to a supplement indenture which the trustee and the issuing company would enter into concurrent with the debt offering.22

~~Reliance of Koppers Holdings on Earnings of Koppers Inc. and its Subsidiaries~~

potential default has occurred or is continuing under the credit agreement, and (3) we are in pro forma compliance with our fixed charge coverage ratio covenant after giving effect to such dividend. The indenture governing the 2025 Notes restricts Koppers Inc.’s ability to finance our payment of dividends if (1) a default has occurred or would result from such financing, (2) Koppers Inc., or a restricted subsidiary of Koppers Inc. which is not a guarantor under the applicable indenture, is not able to incur additional indebtedness (as defined in the applicable indenture), and (3) the sum of all restricted payments (as defined in the applicable indenture) have exceeded the permitted amount (which we refer to as the “basket”) at such point in time.

The Koppers Inc. Revolving Credit Facility provides for a revolving credit facility of up to $400.0 million at variable rates. Borrowings under the Revolving Credit Facility are secured by a first priority lien on substantially all of the assets of Koppers Inc. and its material domestic subsidiaries. The Revolving Credit Facility contains certain covenants for Koppers Inc. and its restricted subsidiaries that limit capital expenditures, additional indebtedness, liens, dividends and investments or acquisitions. 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 30, 2017, Koppers Inc.’s assets exceeded its liabilities by $109.3 million. The amount of restricted net assets unavailable for distribution to Koppers Holdings Inc. by Koppers Inc. totals $45 million as of September 30, 2017. Cash dividends paid to Koppers Holdings Inc. by its subsidiaries totaled $3.7 million and $1.1 million for the nine months ended September 30, 2017 and 2016, respectively.

~~Condensed Consolidating Statement of Operations~~

~~For the Three Months Ended September 30, 2017~~

Parent

Koppers Inc.

Domestic
Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated

(Dollars in millions)

Net sales

$
0.0

$
151.1

$
92.0

$
162.9

$
(21.2
)

$
384.8

Cost of sales including depreciation
and amortization

0.0

136.3

64.6

128.2

(21.2
)

307.9

Loss on pension settlement

0.0

8.8

0.0

0.0

0.0

8.8

Selling, general and administrative

0.5

12.3

10.2

10.4

0.0

33.4

Operating profit (loss)

(0.5
)

(6.3
)

17.2

24.3

0.0

34.7

Other income

0.0

0.2

0.6

0.1

(0.3
)

0.6

Equity income (loss) of subsidiaries

19.9

29.4

17.0

0.1

(66.4
)

0.0

Interest expense

(0.1
)

9.8

0.1

1.1

(0.4
)

10.5

Income taxes

(0.3
)

(6.4
)

6.5

5.0

0.0

4.8

Income from continuing operations

19.8

19.9

28.2

18.4

(66.3
)

20.0

Discontinued operations

0.0

0.0

0.0

(0.1
)

0.0

(0.1
)
Noncontrolling interests

0.0

0.0

0.0

0.1

0.0

0.1

Net income attributable to Koppers

$
19.8

$
19.9

$
28.2

$
18.2

$
(66.3
)

$
19.8

Comprehensive income
attributable to Koppers

$
36.6

$
36.8

$
38.7

$
24.4

$
(99.9
)

$
36.6

~~Condensed Consolidating Statement of Operations~~

~~For the Three Months Ended September 30, 2016~~

Parent

Koppers Inc.

Domestic
Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated

(Dollars in millions)

Net sales

$
0.0

$
165.7

$
104.7

$
128.9

$
(28.2
)

$
371.1

Cost of sales including depreciation
and amortization

0.0

164.0

73.5

103.6

(28.2
)

312.9

Gain on sale of business

0.0

—

0.0

(2.1
)

—

(2.1
)
Selling, general and administrative

0.5

10.6

13.7

7.8

0.0

32.6

Operating profit (loss)

(0.5
)

(8.9
)

17.5

19.6

0.0

27.7

Other income

0.0

0.1

0.8

(0.3
)

(0.4
)

0.2

Equity income of subsidiaries

12.6

33.7

15.2

0.0

(61.5
)

0.0

Interest expense

0.0

11.0

0.0

1.1

(0.4
)

11.7

Income taxes

0.0

1.9

0.0

2.3

0.0

4.2

Income from continuing operations

12.1

12.0

33.5

15.9

(61.5
)

12.0

Discontinued operations

0.0

0.0

0.0

(0.1
)

0.0

(0.1
)
Noncontrolling interests

0.0

0.0

0.0

(0.2
)

0.0

(0.2
)
Net income attributable to Koppers

$
12.1

$
12.0

$
33.5

$
16.0

$
(61.5
)

$
12.1

Comprehensive income
attributable to Koppers

$
14.3

$
14.9

$
35.4

$
15.6

$
(65.9
)

$
14.3

~~Condensed Consolidating Statement of Operations~~

~~For the Nine Months Ended September 30, 2017~~

Parent

Koppers Inc.

Domestic
Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated

(Dollars in millions)

Net sales

$
0.0

$
455.2

$
267.4

$
451.1

$
(64.3
)

$
1,109.4

Cost of sales including depreciation
and amortization

0.0

426.3

183.7

357.0

(62.6
)

904.4

Loss on pension settlement

0.0

8.8

0.0

0.0

0.0

8.8

Selling, general and administrative

1.5

34.5

30.5

29.8

0.0

96.3

Operating profit (loss)

(1.5
)

(14.4
)

53.2

64.3

(1.7
)

99.9

Other income

0.0

0.4

1.8

1.9

(0.8
)

3.3

Equity income (loss) of subsidiaries

44.8

81.2

47.3

0.0

(173.3
)

0.0

Interest expense

(0.1
)

29.5

0.1

3.2

(0.8
)

31.9

Loss on extinguishment of debt

0.0

13.3

0.0

0.0

0.0

13.3

Income taxes

(0.5
)

(20.4
)

20.2

13.1

0.0

12.4

Income from continuing operations

43.9

44.8

82.0

49.9

(175.0
)

45.6

Discontinued operations

0.0

0.0

0.0

(1.3
)

0.0

(1.3
)
Noncontrolling interests

0.0

0.0

0.0

0.4

0.0

0.4

Net income attributable to Koppers

$
43.9

$
44.8

$
82.0

$
48.2

$
(175.0
)

$
43.9

Comprehensive income
attributable to Koppers

$
73.1

$
74.2

$
104.5

$
66.4

$
(245.1
)

$
73.1

~~Condensed Consolidating Statement of Operations~~

~~For the Nine Months Ended September 30, 2016~~

Parent

Koppers Inc.

Domestic
Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated

(Dollars in millions)

Net sales

$
0.0

$
515.2

$
272.0

$
391.6

$
(75.8
)

$
1,103.0

Cost of sales including depreciation
and amortization

0.0

499.8

195.4

326.4

(77.1
)

944.5

Gain on sale of business

0.0

0.0

0.0

(2.1
)

0.0

(2.1
)
Selling, general and administrative

1.3

31.5

27.9

32.4

0.0

93.1

Operating profit (loss)

(1.3
)

(16.1
)

48.7

34.9

1.3

67.5

Other income

0.0

0.2

3.5

(0.2
)

(1.3
)

2.2

Equity income of subsidiaries

24.2

77.2

23.3

0.0

(124.7
)

0.0

Interest expense

0.0

36.1

0.0

3.5

(1.3
)

38.3

Income taxes

0.0

1.3

0.4

8.8

0.0

10.5

Income from continuing operations

22.9

23.9

75.1

22.4

(123.4
)

20.9

Discontinued operations

0.0

0.0

0.0

0.5

0.0

0.5

Noncontrolling interests

0.0

0.0

0.0

(1.5
)

0.0

(1.5
)
Net income attributable to Koppers

$
22.9

$
23.9

$
75.1

$
24.4

$
(123.4
)

$
22.9

Comprehensive income
attributable to Koppers

$
33.1

$
34.4

$
84.7

$
27.8

$
(146.9
)

$
33.1

~~Condensed Consolidating Balance Sheet~~

~~September 30, 2017~~

Parent

Koppers Inc.

Domestic
Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated

(Dollars in millions)

ASSETS

Cash and cash equivalents

$
0.0

$
0.0

$
0.0

$
50.2

$
0.0

$
50.2

Receivables, net

0.0

56.1

34.3

93.8

0.0

184.2

Affiliated receivables

0.0

16.4

0.0

9.7

(26.1
)

0.0

Inventories, net

0.0

79.5

41.7

107.9

(2.5
)

226.6

Other current assets

0.0

7.3

22.5

23.0

0.2

53.0

         Total current assets

0.0

159.3

98.5

284.6

(28.4
)

514.0

Equity investments

108.3

801.1

254.4

0.0

(1,163.8
)

0.0

Property, plant and equipment, net

0.0

145.1

46.7

120.5

0.0

312.3

Goodwill

0.0

0.8

153.1

34.7

0.0

188.6

Intangible assets, net

0.0

7.7

104.4

21.4

0.0

133.5

Deferred tax assets

0.0

25.3

(11.3
)

6.0

0.0

20.0

Affiliated loan receivables

0.0

34.9

224.3

21.4

(280.6
)

0.0

Other assets

0.0

3.5

0.7

8.3

0.0

12.5

         Total assets

$
108.3

$
1,177.7

$
870.8

$
496.9

$
(1,472.8
)

$
1,180.9

LIABILITIES AND EQUITY

Accounts payable

0.1

51.9

36.6

44.6

0.0

133.2

Affiliated payables

0.0

8.1

4.0

14.7

(26.8
)

0.0

Accrued liabilities

0.0

47.2

13.0

48.0

0.0

108.2

Current maturities of long-term debt

0.0

0.1

0.0

12.7

0.0

12.8

         Total current liabilities

0.1

107.3

53.6

120.0

(26.8
)

254.2

Long-term debt

0.0

662.6

0.0

25.4

0.0

688.0

Affiliated debt

0.0

233.7

19.3

27.6

(280.6
)

0.0

Other long-term liabilities

0.0

64.8

13.9

46.9

0.0

125.6

         Total liabilities

0.1

1,068.4

86.8

219.9

(307.4
)

1,067.8

Koppers shareholders’ equity

108.2

109.3

784.0

272.2

(1,165.4
)

108.3

Noncontrolling interests

0.0

0.0

0.0

4.8

0.0

4.8

         Total liabilities and equity

$
108.3

$
1,177.7

$
870.8

$
496.9

$
(1,472.8
)

$
1,180.9

~~Condensed Consolidating Balance Sheet~~

~~December 31, 2016~~

Parent

Koppers Inc.

Domestic
Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated

(Dollars in millions)

ASSETS

Cash and cash equivalents

$
0.0

$
0.0

$
0.0

$
20.8

$
0.0

$
20.8

Receivables, net

0.0

50.8

25.4

64.4

0.0

140.6

Affiliated receivables

0.7

34.8

32.2

15.4

(83.1
)

0.0

Inventories, net

0.0

106.6

23.9

99.0

(0.8
)

228.7

Other current assets

0.0

5.1

13.4

29.2

0.3

48.0

Total current assets

0.7

197.3

94.9

228.8

(83.6
)

438.1

Equity investments

29.9

697.4

195.4

0.0

(922.7
)

0.0

Property, plant and equipment, net

0.0

126.7

39.6

114.5

0.0

280.8

Goodwill

0.0

0.8

153.1

32.5

0.0

186.4

Intangible assets, net

0.0

7.9

107.1

26.9

0.0

141.9

Deferred tax assets

0.0

29.7

(8.4
)

5.8

0.0

27.1

Affiliated loan receivables

0.0

36.9

205.3

21.9

(264.1
)

0.0

Other assets

0.0

5.5

6.1

1.6

0.0

13.2

Total assets

$
30.6

$
1,102.2

$
793.1

$
432.0

$
(1,270.4
)

$
1,087.5

LIABILITIES AND EQUITY

Accounts payable

$
0.2

$
69.6

$
38.9

$
35.5

$
0.0

$
144.2

Affiliated payables

0.0

46.0

20.7

24.5

(91.2
)

0.0

Accrued liabilities

0.0

49.5

18.9

37.9

0.0

106.3

Current maturities of long-term debt

0.0

30.2

0.0

12.4

0.0

42.6

Total current liabilities

0.2

195.3

78.5

110.3

(91.2
)

293.1

Long-term debt

0.0

592.0

0.0

27.8

0.0

619.8

Affiliated debt

0.0

209.9

23.5

30.7

(264.1
)

0.0

Other long-term liabilities

0.0

75.0

11.6

53.4

0.0

140.0

Total liabilities

0.2

1,072.2

113.6

222.2

(355.3
)

1,052.9

Koppers shareholders’ equity

30.4

30.0

679.5

205.6

(915.1
)

30.4

Noncontrolling interests

0.0

0.0

0.0

4.2

0.0

4.2

Total liabilities and equity

$
30.6

$
1,102.2

$
793.1

$
432.0

$
(1,270.4
)

$
1,087.5

~~Condensed Consolidating Statement of Cash Flows~~

~~For the Nine Months Ended September 30, 2017~~

Parent

Koppers Inc.

Domestic
Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated

(Dollars in millions)

Cash provided by (used in) operating
   activities

$
3.2

$
(15.9
)

$
33.9

$
31.0

$
(3.7
)

$
48.5

Cash provided by (used in) investing
   activities:

Capital expenditures and
   acquisitions

0.0

(32.0
)

(11.3
)

(5.3
)

0.0

(48.6
)
Repayments (loans to) from
   affiliates

0.0

2.0

(19.1
)

0.6

16.5

0.0

Repayment of loan

0.0

0.0

0.0

9.5

0.0

9.5

Net cash provided by
   divestitures and asset sales

0.0

0.0

0.7

0.4

0.0

1.1

Net cash (used in) provided by
   investing activities

0.0

(30.0
)

(29.7
)

5.2

16.5

(38.0
)
Cash provided by (used in) financing
   activities:

Borrowings (repayments) of
   long-term debt

0.0

36.7

0.0

(4.0
)

0.0

32.7

Borrowings (repayments) of
   affiliated debt

0.0

23.9

(4.2
)

(3.2
)

(16.5
)

0.0

Debt issuance costs

0.0

(11.0
)

0.0

0.0

0.0

(11.0
)
Dividends paid

0.0

(3.7
)

(0.0
)

0.0

3.7

0.0

Stock repurchased

(3.2
)

0.0

0.0

0.0

0.0

(3.2
)
Net cash provided by (used in)
   financing activities

(3.2
)

45.9

(4.2
)

(7.2
)

(12.8
)

18.5

Effect of exchange rates on cash

0.0

0.0

0.0

0.4

0.0

0.4

Net increase in cash and cash
   equivalents

0.0

0.0

0.0

29.4

0.0

29.4

Cash and cash equivalents at
   beginning of year

0.0

0.0

0.0

20.8

0.0

20.8

Cash and cash equivalents at end of
   period

$
0.0

$
0.0

$
0.0

$
50.2

$
0.0

$
50.2

~~Condensed Consolidating Statement of Cash Flows~~

~~For the Nine Months Ended September 30, 2016~~

Parent

Koppers Inc.

Domestic
Guarantor
Subsidiaries

Non-Guarantor
Subsidiaries

Consolidating
Adjustments

Consolidated

(Dollars in millions)

Cash provided by (used in) operating
   activities

$
(0.2
)

$
10.8

$
76.1

$
15.7

$
(19.9
)

$
82.5

Cash provided by (used in) investing
   activities:

Capital expenditures and
   acquisitions

0.0

(20.0
)

(3.2
)

(9.0
)

0.0

(32.2
)
Repayments (loans to) from
   affiliates

0.0

(12.2
)

(48.0
)

(1.0
)

61.2

0.0

Net cash proceeds from
   divestitures and asset sales

0.0

0.0

0.7

(5.2
)

0.0

(4.5
)
Net cash (used in) provided by
   investing activities

0.0

(32.2
)

(50.5
)

(15.2
)

61.2

(36.7
)
Cash provided by (used in) financing
   activities:

Repayments of long-term debt

0.0

(42.5
)

0.0

(0.9
)

0.0

(43.4
)
Borrowings (repayments) of
   affiliated debt

0.0

66.0

(7.2
)

2.4

(61.2
)

0.0

Deferred financing cost

0.0

(1.4
)

0.0

0.0

—

(1.4
)
Dividends paid

0.0

(0.8
)

(19.1
)

0.0

19.9

0.0

Stock repurchased

0.2

0.0

0.0

0.0

0.0

0.2

Net cash provided by (used in)
   financing activities

0.2

21.3

(26.3
)

1.5

(41.3
)

(44.6
)
Effect of exchange rates on cash

0.0

0.0

0.0

(5.3
)

0.0

(5.3
)
Net decrease in cash and
   cash equivalents

0.0

(0.1
)

(0.7
)

(3.3
)

0.0

(4.1
)
Cash and cash equivalents at
   beginning of year

0.0

0.1

0.7

21.0

0.0

21.8

Cash and cash equivalents at end of
   period

$
0.0

$
0.0

$
0.0

$
17.7

$
0.0

$
17.7

~~ITEM 2.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

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 ~~with~~ 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, ~~joint ventures~~ or other matters as well as financings and debt reduction, are subject to known and unknown risks, uncertainties and contingencies. Many of these risks, uncertainties and contingencies are beyond our control, and may cause actual results, performance or achievements to differ materially from anticipated results, performance or achievements. Factors that might affect such forward-looking statements, include, among other things, the impact of changes in commodity prices, such as oil and copper, on product margins; general economic and business conditions; 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, ~~2016.~~2021.

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 ~~facilities located~~capabilities in North America, South America, Australasia ~~China~~ and Europe.

We operate three principal businesses: ~~Railroad~~RUPS, PC and ~~Utility Products and Services (“RUPS”), Performance Chemicals (“PC”) and Carbon Materials and Chemicals (“CMC”).~~

CMC. Through our RUPS business, we believe that we are the largest supplier of ~~railroad~~wood crossties to the Class I railroads in North ~~American railroads.~~America. Our other treated wood products include utility poles for the electric, telephone, and ~~telephone~~broadband utility industries in ~~Australia.~~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.~~ 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, ~~the production of~~steel, carbon black, ~~the production of~~ high-strength concrete, ~~and the production of~~ plasticizers and specialty chemicals, ~~respectively.~~respectively.

~~Outlook~~

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.

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. Adjusted EBITDA is the primary measure of profitability we use to evaluate our businesses. Refer to Note 9 – “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 ~~materials~~material pricing and availability, in particular the cost and availability of

hardwood lumber for railroad crossties, softwood lumber for utility poles, scrap copper prices, and the cost and amount of coal tar available in global markets, which is negatively affected by reductions in blast furnace steel ~~production;~~production and currently by the Russian invasion of Ukraine; (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

~~The primary end-market for RUPS is the~~Historically, North American demand for crossties had been in the range of 22 million to 25 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 were approximately 18.3 million, of which 14.2 million were for Class I railroads. Throughout the pandemic, some sawmills were operating at 50 percent or less of their production capacity. Sawmills provide raw materials to several industries beyond the wood crosstie market and as demand and pricing for construction lumber increased significantly throughout 2021 and continuing into 2022, overall crosstie production output thus far has been lower than forecasted, but is beginning to show improvement. Crosstie prices increased significantly as a result of limited supply and railroad ~~industry,~~customers are deferring their purchases. Given continuing economic uncertainties such as a tight labor market, the RTA 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 is expected to have slightly higher demand levels. In 2023, the outlook reflects a modest overall increase of 1.1 percent, or 18.8 million crossties, with increases from Class I as well as commercial railroads.

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 30, 2022. The combined U.S. traffic for carloads and 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 unsold goods and significantly lower internet buying from its pandemic peak, which ~~has an~~negatively impacts replacement demand and rail volumes for packaged goods.

With respect to our utility products business, the installed base for wood distribution poles in the U.S. is approximately 150 million and nearly half of ~~approximately 700 million wood crossties that require periodic replacement. As a result,~~this total are 40 years old. Industry demand has historically been in the range of ~~22-25~~two million ~~wood crossties~~to three million poles annually. We sell treated and untreated wood products, rail joint bars and services primarily to the railroad markets in the United States and Canada, and utility poles to the utility sector in Australia. We also operate a railroad services business that conducts engineering, design, repair and inspection services primarily for railroad bridges in the U.S. and Canada.

The supply of untreated crossties can vary at times based upon weather conditions in addition to other factors. We have a nationwide wood procurement team that maintains close working relationships with a network of sawmills. The first component of our revenue stream for many of our largest customers occurs when we procure the untreated crossties, on behalf of our customers, at a nominal markup. This practice provides the railroad customers withOn an assured level of inventory and minimizes our working capital usage as untreated crossties go through a six- to nine-month air seasoning process before they are ready to be pressure treated. The next phase involves the RUPS segment providing value-added services to customers through treating crossties, switch ties and various types of lumber used for railroad bridges and crossings. The processes include creosote-only treatment and a combined creosote and borate treatment. During any given year, there is a seasonal effect in the winter months on our crosstie business depending on weather conditions for harvesting lumber and installation.

In 2017, the major companies in the rail industry have substantially reduced both operating and capital spending from peak spending levels, which has had a negative short-term impact on sales of various products and services that we provide to that industry. Current year revenues and profitability have reflected a decline year-over-year due to the effects of lower demand caused by continued reductions in capital budgets for most North American Class I railroads. The lower demand has caused the market to reduce raw material purchase prices primarily in the Eastern U.S. which will further reduce our revenues in the near-term and have some impact on our profitability as well. Furthermore, the lower demand has also resulted in price reductions for the products we supply the commercial railroad business as competition to replace the lower Class I demand for crossties has increased. We currently supply all seven of the North American Class I railroads and have long-standing relationships with these customers. Approximately 70 percent of our North American sales are under long-term contracts andoverall basis, we believe that ~~we are positioned~~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 global energy consumption as well as expansion of the global telecommunication industry. Generally, utilities need to maintain ~~or grow our current market position.~~

~~Overall, the long-term prognosis for the railroad industry and the products and services that we provide~~their infrastructure to ~~it remains favorable. Currently, the railroad industry is managing the cyclical downturn~~avoid interruptions in ~~the oil and gas industry, while looking to replace demand lost~~service due to ~~a long-term reduction in coal production.~~extreme weather events that are occurring more frequently along with aging electrical grid systems across the U.S. At the same time, the ~~railroads~~need for digital connectivity remains strong given that portions of the population are ~~building their revenue base of shipments of non-energy related products. In the near term, railroad customers have scaled back and~~continuing to work remotely. As long as there are ~~focusing on cutting their operating costs and working capital. The Association of American Railroads (“AAR”) reported~~not any extended supply chain disruptions, we anticipate that ~~the total U.S. rail carload traffic~~2022 demand for ~~the nine months ending September 30, 2017 was up 3.8 percent year-over-year and intermodal units were 3.5 percent~~pole replacements will be relatively stable to slightly higher, than prior year period. Together, the total combined U.S. traffic for the year-to-date period through September 30, 2017 increased 3.6 percent compared to last year and is expected to continue posting mid-single digit year-over-year growth. While there has been a decline in coal transportation due to low natural gas prices and environmental concerns regarding the burning of coal, all other major categories of freight have exceeded expectations thus far in 2017. According to the AAR,as the overall levels of railroad investment are forecast to be $22 billion in 2017, a decline from $25 billion in 2016 and $29 billion in 2015. It is expected that the reduction in coal transport will likely persist; however, the spending by the railroad industry is ~~projected~~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, there is a developing trend in the industry for utilities to ~~improve modestly~~maintain some additional inventory to prepare for potential damaging climate events.

With respect to raw materials, wood supply remains relatively stable, however we are experiencing pricing pressures based on higher freight and transportation costs. This negatively affects the price of pole material delivered to our pole peeling locations from the forest. As a result of these inflationary factors, we are implementing more real-time price increases to pass on higher costs to end customers.

Longer term, we are evaluating opportunities to potentially expand our market presence in ~~2018~~the United States as ~~the economy continues to trend favorably and interest rates remain relatively subdued. From a long-term perspective,~~well as certain overseas markets. We believe there remains aan overall need for sustained investment in infrastructure and capacity ~~expansion. We believe that~~expansion and with our vertical integration capabilities in wood treatment and strong customer relationships, we will ultimately benefit from increased ~~infrastructure~~demand.

As part of optimizing our business, we continue to evaluate a number of opportunities to improve efficiencies in our operational processes, people and ~~capacity expansion when it occurs.~~

~~Performance Chemicals~~

~~The largest geographic market for~~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 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 the Texas Electric Cooperatives’ Jasper, Texas facility and relocated the production of utility products to our Somerville, Texas plant. Separately, in the third quarter 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 ~~chemicals sold by~~network, specifically at our ~~PC business is~~facility in North ~~America,~~Little Rock, Arkansas, which would be primarily 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 ~~the largest application for our products is the residential remodeling market. We also have~~recorded a ~~market presence in Europe, South America, Australia and New Zealand. Product demand for our PC business has historically been influenced by existing home sales, which is a leading indicator~~gain on sale of consumer spending on remodeling projects. The National Association of Realtors estimates that existing home sales will increase two percent in 2017, which we expect will favorably impact repair and remodeling activity. According to the Leading Indicator of Remodeling Activity (“LIRA”), strong gains in home renovation and repair are expected to continue into mid-2018.$23.4 million.

We believe that PC is the largest global manufacturer and supplier of water-based wood preservatives and wood specialty additives to treaters who supply pressure treated wood products to large retailers and independent lumber dealers. These retailers and dealers, in turn, serve the residential, agricultural and industrial pressure-treated wood market. Our primary products are copper-based wood preservatives, including micronized copper azole (“MicroPro®”) and micronized pigments (“MicroShades®”). Applications for these products include decking, fencing, utility poles, construction lumber and other outdoor structures. We continue to invest in research and development activities at various locations around the world, particularly in areas that have high fungal decay and termite activity, in order to assess the performance and efficacy of various wood preservation systems.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 3036 months. These hedges typically match expected customer purchases and ~~receive hedge accounting treatment. From~~from time to time, we enter into forward transactions based upon long-term forecasted needs of copper. ~~These forward positions are typically marked to market~~

Product demand for our PC business has historically been closely associated with consumer spending on ~~a quarterly basis.~~

Inhome repair and remodeling projects in North America, we are vertically integrated due to our manufacturing capabilities for copper compounds for our copper-based wood preservatives. We believe our vertical integration is part of our proprietary processes and ~~reflects an important competitive advantage.~~therefore, trends in existing home sales serve as a leading indicator. In addition, we believe this provides our customers with the security of a continuous supply of wood preservative chemicals. Beginning in mid-2016, we have seen large retailers and lumber dealers opting for a product mix with higher levels of preservative retention driven primarily by changes in treated wood product application standards. This shift towards a higher retention product mix simplifies the treating and stocking processes for the treaters that purchase PC products and their end-customers, as well as provides for higher quality products that will better withstand the effects of insects and fungal decay. Even though it is difficult to predict competitive trends and to quantify the total impact it will have on PC sales, operating profit, and cash flow, we believe the shift to higher retention product mix has continued into 2017 but has moderated as the market completes this transition.

~~Overall,~~2022, the market for existing homes ~~continues~~seems to ~~show mixed signals. The market trends in~~be slowing. According to the ~~repair and remodeling markets and existing home sales remain favorable but have been decelerating slightly. The~~ National Association of ~~Realtors reported that~~Realtors® (“NAR”), total ~~existing home~~existing-home sales ~~increased by 0.7 percent~~decreased in September ~~after three straight monthly~~by 1.5 percent compared with August 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. On ~~an annual~~a year-over-year basis, ~~existing home~~ sales ~~declined for~~dropped in all regions. In addition, the ~~first time in more than a year due to ongoing supply shortages and recent hurricanes. Total~~ housing inventory has been declining and the lack of available housing has resulted in upward pressure on prices. The decrease in closings can also be attributed to hurricane-related damages and existing home sales are likelymarket is expected to be ~~negatively~~ impacted ~~for the remainder of 2017. At the same time, accelerating growth is anticipated for repair~~by rising interest rates and ~~remodel activity according~~inflation, which in turn, continue to have unfavorable effects on purchasing power.

According to the ~~LIRA from~~Leading Indicator of Remodeling Activity (“LIRA”) reported by the Joint Center for Housing Studies of Harvard University, ~~(“Center”).~~home renovation and repair expenditures increased by 17.8 percent year-over-year in the third quarter of 2022. The LIRA projects ~~that spending~~year-over-year gains in remodeling expenditures to owner-occupied homes will ~~increase~~decelerate from ~~6.3~~16.1 percent in ~~the fourth quarter of 2017~~2022 to ~~7.7~~6.5 percent by the third quarter of ~~2018. The Center also reports~~2023. Housing and remodeling markets are slowing from the high growth rates that ~~U.S. consumers~~were driven by the pandemic-induced demand and spending for home improvements will continue to face challenges from declining home sales, rising interest rates, 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 mitigation projects following Hurricane Ian are expected to ~~spend in excess~~further support expansion of ~~$330~~the home remodeling market to nearly $450 billion in ~~home remodeling this year, up from $296 billion in the prior year. Additionally, the Consumer Confidence Index®, as reported by~~ 2023.

The Conference Board ~~improved~~Consumer Confidence Index® was 102.5 in October, down from 107.8 in September. The Index decreased in October after back-to-back monthly gains in August and September. Notably, concerns about inflation—which had been receding since July—picked up again, with both gas and food prices serving as main drivers. According to ~~119.8~~the Conference Board, the decline in ~~September 2017, compared with 113.7 in December 2016, which should continue~~confidence suggests that economic growth may be slowing for the remainder of 2022 and recession risks appear to provide a positive backdrop for housing-related demand. For the time being, it appears that the U.S. Federal Reserve will raise the Federal Funds rate at a slower pace than originally expected, which should also benefit the residential repair and remodeling market, as well as continue to drive general economic growth. In general, our raw material costs have been increasing, primarily due to copper pricing which has been trending higher for 2017. Our strategy is to hedge a majority of our requirements over a two-to-three year time frame in order to lessen the impact that may arise in commodity markets. Therefore, we are only experiencing the impact of higher prices on the unhedged portion of our copper requirements in the current year.be rising.

Carbon Materials and Chemicals

The primary products produced by CMC are creosote, which is a registered pesticide in the ~~U.S.~~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 ~~reduced~~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. WeThe CMC business currently ~~supply~~supplies our North American RUPS business with ~~100 percent of~~ its creosote requirements. As discussed in the RUPS outlook, there is a decrease in 2017 spending for railroad infrastructure. This results in a shift in excess distillate production to the less profitable carbon black feedstock market until demand for creosote returns to historical levels.

While the sale of carbon pitch remains a significant portion of our sales volume, the reduction of aluminum smelting capacity in the United States, Australia and Western Europe has led to sharply lower demand for carbon pitch over the past several years. Accordingly, we have experienced significantly lower sales volumes due to the reduction in aluminum production in parts of the world where the majority of our production facilities are located. In 2017, the aluminum production in the U.S. is expected to be relatively flat due to the reduction of global inventories, modestly improved economic demand, and more rational levels of global aluminum production.

The availability of coal tar, the primary raw material for our CMC business, is linked to levels of metallurgical coke production. As the global steel industry, excluding Asia, has reduced the production of steel using metallurgical coke, the volumes of coal tar have ~~also~~ been reduced. ~~For~~Coal tar raw material supply remains constrained globally due to reductions in blast furnace steel capacity in addition to near term supply restrictions resulting from the ~~past decade, the~~Russian invasion of Ukraine in March 2022. Our European CMC business historically received approximately 20 percent of its annual coal tar ~~distillation industry has operated in an excess capacity mode, which further increased the competition for a limited amount~~requirements from Russia and Ukraine. We have ceased purchasing coal tar from Russian suppliers and we are currently unable to purchase normal volumes of coal tar in North America. Over the past three years we have consolidated our operating footprint and significantly lowered production levels at the same time that we added distribution assets to move finished products from ~~Europe~~Ukrainian suppliers due to the ~~U.S.~~conflict. Currently, the financial impact of volume reductions in ~~an easier fashion. As a result,~~ our ~~raw material needs in North America~~coal tar supply have been significantly less than historically required. In the past twelve months, we entered into several new long-term supply agreements to further lower our overall input costs and redistribute our finished product pricing risk.

In recent quarters, there has been an overall tightened market supply of coal tar and carbon pitch in China and it has put upward pressure on both raw materials and finished product pricing. This is due to an ongoing shutdown of older steel and coking capacity that does not meet environmental and emissions requirements. The pricing for coal tar products in the region has increased significantly and as a result, our recently constructed coal-tar distillation facility serving those markets has a competitive advantage. In Australia, the market has also been favorable since pricing is correlated to the trends seen in China. We anticipate that these conditions are relatively temporary and pricing for coal tar products will likely moderate sometime in 2018, but could remain well above recent years’ averages.

~~CMC Restructuring Initiatives~~

We embarked on a plan to restructure our CMC operating footprint that reduced our global number of coal tar distillation facilities from the eleven that existed as of January 1, 2014 to four in total. The remaining facilities are located in regions where we believe we hold key competitive advantages that allow us to better serve our global customers: Stickney, Illinois; Nyborg, Denmark; Mayfield, Australia; and Jiangsu Province, China.

As a result of the reduction in operating capacity at the seven closed or sold coal tar distillation facilities, we have incurred substantial restructuring and impairment costs over the last four years. As a result of these initiatives, we expect additional restructuring and related charges to earnings of $7 million to $10 million through 2020. The overall expected future cash requirements for the CMC plant closures are estimated to be approximately $30 million through 2020. There may be additional curtailments or closures at our other CMC facilities as part of our efforts to reduce our cost structure and improve capacity utilizationoffset by higher prices in our ~~business.~~end markets for that region and are not expected to negatively impact operating results during 2022.

~~Through these restructuring initiatives, we are significantly transforming~~For the external markets served by our CMC business, ~~model~~we anticipate some slowdown in manufacturing. According to IHS Markit Automotive Group (IHS), the global auto industry continues to be influenced by ~~streamlining~~near-term challenges of navigating ongoing supply chain pressures coupled with economic headwinds. While semiconductor availability has improved, it remains a key factor in the ~~operating footprint~~ability to accelerate production growth. Therefore, IHS has adjusted its forecast for macro deterioration and ~~reducing our primary reliance~~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 exposure to the carbon pitch markets. We believe that the extensive and ongoing efforts to reduce our fixed cost structure will result in a sustainable improvement in earnings in addition to lower volatility in cash flow.North America.

Seasonality and Effects of Weather on Operations

Our quarterly operating results fluctuate due to a variety of factors that are outside of our control, including inclement weather conditions, which in the past have affected operating results. Operations at some of our facilities have at times been reduced during the winter months. Moreover, demand for some of our products declines during periods of inclement weather. As a result of the foregoing, we anticipate that we may experience material fluctuations in quarterly operating results. Historically, our operating results have been significantly lower in the first and fourth calendar quarters as compared to the second and third calendar quarters.

Results of Operations – Comparison of Three Months Ended September 30, ~~2017~~2022 and ~~2016~~2021

Consolidated Results

Net sales for the three months ended September 30, ~~2017~~2022 and ~~2016~~2021 are summarized by segment in the following table:


	Three Months Ended September 30,							Three Months Ended September 30,
	2017		2016		Net Change			2022		2021		Net Change
(Dollars in millions)
Railroad and Utility Products and Services	$	131.7	$	145.7		-10	%	$	207.7	$	186.9		11	%
Performance Chemicals		109.7		107.6		2	%		153.1		115.2		33	%
Carbon Materials and Chemicals		143.4		117.8		22	%		175.3		122.7		43	%
	$	384.8	$	371.1		4	%	$	536.1	$	424.8		26	%

RUPS net sales ~~decreased~~ increased by ~~$14.0~~$20.8 million, or ten percent compared to the prior year period. The sales decrease was primarily due to lower sales volumes of crossties and railroad bridge services, partially offset by higher sales volumes of utility products. Sales of crossties and railroad bridge services declined by $13.7 million and $2.6 million, respectively. The reduction in treated crossties and structure services is attributed to lower spending in the rail industry due to the impact of reduced freight car loadings and rail traffic across both the Class I and commercial markets. In addition, commercial crosstie pricing has been reduced due to an over-supply of crossties in the non-Class I market. Sales of utility products increased by $3.5 million due to increased demand for structural timber in Australia.

~~PC net sales~~ ~~increased by $2.1 million or two~~11 percent, compared to the prior year period. The sales increase was ~~due primarily~~largely related to ~~higher North American sales volumes for some copper-based wood preservatives~~pricing increases across multiple markets, particularly crossties and ~~additives. Higher sales volumes were driven primarily by favorable market trends~~utility poles, and activity increases in ~~the repair and remodeling markets and existing home sales as well as treated wood dealers stocking and selling treated wood with higher preservative retention levels.~~our railroad bridge services business. These ~~gains~~increases were offset, in part, by ~~higher customer development costs, which are reflected as a reduction of net sales.~~

~~CMC net sales~~ ~~increased~~volume decreases in our utility pole business mostly due to capacity and transportation issues driven by ~~$25.6 million or 22 percent~~the current labor shortage. Foreign currency changes compared to the prior year period ~~due mainly to higher~~had an unfavorable impact on sales volumes for carbon black feedstock and phthalic anhydride with higher sales prices for carbon pitch and carbon black feedstock, partially offset by lower carbon pitch and creosote volumes. Our strategy is to sell as much distillate production to the higher value wood preservative market, however there was a reduction in creosote volume driven by lower demand for treated crossties. The excess distillate was sold as carbon black feedstock. Carbon pitch sales prices were higher in all regions. Higher sales prices for carbon pitch and carbon black feedstock in Australasia and Europe were driven primarily by reduced supply in those regions.

~~Cost of sales~~ as a percentage of net sales was 76 percent for the quarter ended September 30, 2017 compared to 79 percent in the prior year quarter due mainly to higher gross margins for CMC driven by lower raw material and shipping costs in North America and higher sales prices in Europe and Australasia. In addition, a sales mix shift for PC improved our results as higher gross margins were driven by increased sales volumes and lower costs. This more than offset lower sales volumes and gross margins from RUPS due to reduced sales volumes of crossties and railroad services combined with reduced margins in the commercial crosstie market as a result of inventory over-supply in the non-Class I market.

~~Depreciation and amortization~~ for the quarter ended September 30, 2017 was $1.7 million lower when compared to the prior year period due mainly to a reduction in assets, excluding assets under construction, related to our shutdown of distillation facilities in the United States and United Kingdom.

~~Impairment and restructuring expenses~~ for the quarter ended September 30, 2017 were $2.8 million lower when compared to the prior year period due mainly to a prior year accrual for exited real estate lease obligations, net of estimated sublease revenue, at our closed coal tar distillation facility in Uithoorn, the Netherlands, as well as severance charges related to our closed coal tar distillation CMC facilities in the United Kingdom and impairment charges for the remaining fixed assets at our coal tar distillation facility in Clairton, Pennsylvania. Current year charges consist of restructuring-related storage tank decommissioning costs and accelerated depreciation for the remaining fixed assets at our coal tar distillation facilities in Clairton, Pennsylvania and Follansbee, West Virginia.

~~Loss on pension settlement~~ for the quarter ended September 30, 2017 was $8.8 million higher when compared to the prior year period. On July 31, 2017, the Company completed an irrevocable transaction with an insurance company to annuitize approximately $33 million of retiree pension obligations in its U.S. qualified defined benefit pension plan for a selected group of retirees. The transaction was funded by transferring a similar amount of assets from the pension plan to the insurance company. Subsequent to this transfer, the insurance company has assumed all remaining pension obligations associated with these retirees. This represents approximately 20 percent of the plan’s discounted pension obligation as of that date and the Company recorded a pension settlement loss of $8.8 million in the third quarter of 2017.

~~Selling, general and administrative expenses~~ ~~for the quarter ended September 30, 2017 were $0.8 million higher when compared to the prior year period due mainly to increases in consulting and stock-based compensation expense.~~

~~Other income~~ for the quarter ended September 30, 2017 was $0.4 million higher when compared to the prior year period. In the quarter ended September 30, 2016, we incurred equity method losses of $0.3 million for CMC related to our TKK facility in China. This facility was sold in the first quarter of 2017.

~~Interest expense~~ for the quarter ended September 30, 2017 was $1.2 million lower than the prior year period as a result of reduced average debt levels and reduced interest rates related to our new 2025 Notes and our new Revolving Credit Facility.

~~Income taxes~~ for the quarter ended September 30, 2017 were $4.8 million, an increase of $0.6 million when compared to the prior year period. The increase in tax expense is due to an increase in pre-tax earnings when compared to the prior period offset by a lower effective income tax rate. The effective income tax rates for the quarters ended September 30, 2017 and September 30, 2016 were 19.4 percent and 25.9 percent, respectively. The decrease in the effective income tax rate is primarily due to an increase in foreign pre-tax earnings that are taxed at more favorable rates. Additionally, in the prior period, we incurred losses in certain foreign subsidiaries that did not generate a tax benefit, which increased our effective tax rate for that prior period.

~~Segment Results~~

~~Segment operating profit~~ ~~for the three months ended September 30, 2017 and 2016 is summarized by segment in the following table:~~

Three Months Ended September 30,

2017

2016

% Change

(Dollars in millions)

Operating profit (loss):

Railroad and Utility Products and Services

$
9.3

$
14.9

-38
%
Performance Chemicals

18.4

17.6

5
%
Carbon Materials and Chemicals

16.2

(3.9
)

515
%
Corporate

(9.2
)

(0.9
)

-922
%

$
34.7

$
27.7

25
%
Operating profit (loss) as a percentage of net sales:

Railroad and Utility Products and Services

7.1
%

10.2
%

-3.1
%
Performance Chemicals

16.8
%

16.4
%

0.4
%
Carbon Materials and Chemicals

11.3
%

(3.3
)%

14.6
%

9.0
%

7.5
%

1.5
%

~~RUPS operating profit~~ decreased by $5.6 million or 38 percent compared to the prior year period. Operating profit as a percentage of net sales for RUPS decreased to 7.1 percent from 10.2 percent in the prior year quarter. Operating profit as a percentage of net sales for the three months ended September 30, 2017 was impacted by reduced sales volumes of crossties and railroad services combined with reduced margins in the commercial crosstie market as a result of inventory over-supply in the commercial market. The negative impact from these factors was slightly offset by favorable volumes and sales mix of rail joint products and utility products.

~~PC operating profit~~ increased by $0.8 million or five percent compared to the prior year period. Operating profit as a percentage of net sales for PC increased to 16.8 percent from 16.4 percent in the prior year quarter. Sales volumes have improved due to favorable market trends in the repair and remodeling markets and existing home sales. The increase was driven primarily by changes in treated wood product application standards in 2016 resulting in treated wood dealers stocking and selling more high retention ground contact treated wood, which has moderated in 2017 as dealer inventory has sufficiently been substantially restocked with higher retention treated wood. Although we hedge the majority of our copper purchases, higher copper prices partially offset our increases in sales and operating profit margin for the three months ended September 30, 2017.

~~CMC operating profit~~ increased by $20.1 million or 515 percent compared to the prior year period. Operating profit as a percentage of net sales for CMC increased to 11.3 percent from a loss of 3.3 percent in the prior year quarter. Operating profit for the three months ended September 30, 2017 was positively affected by lower raw material and logistics costs in North America and higher sales prices in Australasia and Europe particularly related to carbon pitch. In addition to this, in recent quarters there has been an overall tightened market supply of coal tar and carbon pitch in China. This is due to an ongoing shutdown of steel and coking capacity that does not meet environmental and emissions requirements. The pricing for coal tar products in the region has increased significantly and as a result, our coal-tar distillation facility serving those markets has a competitive advantage. These positive impacts were partially offset by lower sales prices in North America, accelerated depreciation, and unabsorbed fixed costs.

~~Corporate operating loss~~ increased by $8.3 million or 922 percent compared to the prior year period due to the pension settlement loss of $8.8 million recorded in the third quarter of 2017, partially offset by decreased foreign currency losses in the current year ~~period.~~period of $0.8 million, mainly from our Australian utility pole business.

~~Results of Operations – Comparison of Nine Months Ended September 30, 2017 and 2016~~

~~Consolidated Results~~

~~Net sales~~ ~~for the nine months ended September 30, 2017 and 2016 are summarized by segment in the following table:~~

Nine Months Ended September 30,

2017

2016

Net Change

(Dollars in millions)

Railroad and Utility Products and Services

$
403.1

$
461.5

-13
%
Performance Chemicals

318.2

304.0

5
%
Carbon Materials and Chemicals

388.1

337.5

15
%

$
1,109.4

$
1,103.0

1
%

~~RUPS net sales~~ decreased by $58.4 million or 13 percent compared to the prior year period. The sales decrease was primarily due to lower sales volumes of crossties and railroad bridge services, partially offset by an increase in sales volumes of utility products. Sales of crossties and railroad bridge services declined by $48.5 million and $6.6 million, respectively. The reduction in treated crossties and structure services is attributed to lower spending in the rail industry due to the impact of reduced freight car loadings and rail traffic across both the Class I and commercial markets. In addition, commercial crosstie pricing has been reduced due to an over-supply of crossties in the commercial market. Sales of utility products increased by $1.9 million due to increased demand for structural timber in Australia in the current year period.

PC net sales increased by ~~$14.2~~$37.9 million, or 533 percent, compared to the prior year period. The sales increase was primarily due ~~primarily~~ to ~~higher North American sales volumes for some copper-based wood preservatives and additives. Higher sales volumes were driven primarily by favorable market trends~~a 31% volume increase in the ~~repair~~Americas and ~~remodeling markets~~global price increases in the current year period for our copper-based preservatives. In the prior year period, volumes in the Americas decreased as high lumber prices and ~~existing home sales as well as~~a temporary change in consumer spending habits tempered customer demand for treated ~~wood dealers stocking and selling treated wood with higher preservative retention levels. These gains~~lumber products. The increases were offset, in part, by ~~higher customer development costs, which are reflected as a reduction of net sales,~~volume decreases for wood treatment preservatives within our European markets. Foreign currency changes compared to the prior year ~~period.~~period had an unfavorable impact on sales in the current year period of $3.3 million.

CMC net sales increased by ~~$50.6~~$52.6 million, or 1543 percent, compared to the prior year period due mainly to higher sales prices for carbon ~~black feedstock, carbon~~ pitch, ~~and coal tar chemicals with higher sales volumes for~~phthalic anhydride, carbon black feedstock and ~~coal tar chemicals, partially~~naphthalene driven by strong demand for our products and a higher raw material price environment, partly offset by ~~lower carbon pitch and creosote volumes. Our strategy is~~volume decreases of $8.1 million. Foreign currency changes compared to sell as much distillate production to the higher value wood preservative market, however there was a reduction in creosote volume driven by lower demand for treated crossties in the first nine months of 2017. The excess distillate was sold as carbon black feedstock. Sales of coal tar chemicals increased over the prior year period ~~due to increases~~from our international markets had an unfavorable impact on sales in ~~sales volumes and pricing~~the current year period of phthalic anhydride and naphthalene. The increases, in part, were driven by the effect of higher orthoxylene prices, which impact phthalic anhydride market prices. Higher sales prices for carbon pitch and carbon black feedstock in China and Europe were driven primarily by reduced supply in those regions.$12.9 million.

Cost of sales as a percentage of net sales was 7882 percent for the ~~nine months~~quarters ended September 30, ~~2017~~2022 and 2021 as global price increases across our businesses have offset an increase in raw material costs, fuel costs, shipping costs and other operating expenses as a result of rising inflation in the current year period.

Depreciation and amortization charges for the quarter ended September 30, 2022 were $3.5 million higher when compared to ~~80 percent in~~ the prior year period due mainly to ~~higher gross margins for~~an increase in depreciation associated with an asset retirement obligation within our European CMC ~~driven by lower raw material~~business.

Selling, general and shipping costs in North America and higher sales prices in Europe and Australasia. In addition, a sales mix shift for PC improved our results as higher gross margins were driven by increased sales volumes and lower costs. This more than offset lower sales volumes and gross margins from RUPS due to reduced sales volumes of crossties and railroad services combined with reduced margins in the commercial crosstie market as a result of inventory over-supply in the non-Class I market.

~~Depreciation and amortization~~administrative expenses for the ~~nine months~~quarter ended September 30, ~~2017 was $7.0~~2022 were $1.1 million lower when compared to the prior year period due mainly to a ~~reduction~~decrease in ~~assets, excluding assets under construction, related to our shutdown of distillation facilities~~self-insured workers compensation and medical liabilities, as well as consulting and other professional services in the ~~United States~~current year period.

Interest expense for the quarter ended September 30, 2022 was $1.2 million higher when compared to the prior year period due to higher interest rates.

Income tax expense for the quarter ended September 30, 2022 increased due to higher pre-tax earnings and ~~United Kingdom.~~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.

~~Impairment~~

Segment Results.

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


	Three Months Ended September 30,
(Dollars in millions)	2022			2021			% Change
Adjusted EBITDA:
Railroad and Utility Products and Services	$	15.5		$	10.7			45	%
Performance Chemicals		16.7			20.2			-17	%
Carbon Materials and Chemicals		36.6			22.5			63	%
Corporate unallocated		0.0			0.5			-100	%
Total Adjusted EBITDA	$	68.8		$	53.9			28	%
Adjusted EBITDA margin as a percentage of GAAP sales:
Railroad and Utility Products and Services		7.5	%		5.7	%		30	%
Performance Chemicals		10.9	%		17.5	%		-38	%
Carbon Materials and Chemicals		20.9	%		18.3	%		14	%
Total Adjusted EBITDA margin		12.8	%		12.7	%		1	%

RUPS adjusted EBITDA increased by $4.8 million compared 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, partly offset by higher raw material and operating costs as a result of rising inflation in the current year period.

PC adjusted EBITDA decreased by $3.5 million compared to the prior year period. Adjusted EBITDA as a percentage of net sales decreased to 10.9 percent from 17.5 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 higher volumes in the Americas and global price increases.

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 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 $3.1 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, ~~2017~~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 ~~$10.3~~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, ~~lower when~~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 ~~a prior year accrual~~higher sales prices and volumes for ~~exited real estate lease obligations, net of estimated sublease revenue, at~~carbon pitch and phthalic anhydride, along with higher sales prices for carbon black feedstock and naphthalene driven by strong demand for our ~~closed coal tar distillation facility in Uithoorn, the Netherlands, as well as severance charges related to our closed coal tar distillation CMC facilities~~products coupled with limited supply in the ~~United Kingdom and impairment charges for~~current year period. Foreign currency changes from our international markets had an unfavorable impact on sales in the ~~remaining fixed assets at our coal tar distillation facility in Clairton, Pennsylvania. Current~~current year ~~charges consist~~period of restructuring-related storage tank decommissioning costs and accelerated depreciation for the remaining fixed assets at our coal tar distillation facilities in Clairton, Pennsylvania and Follansbee, West Virginia.$28.9 million.

~~Loss on pension settlement~~Cost of sales as a percentage of net sales was 82 percent for the nine months ended September 30, ~~2017 was $8.8 million higher when~~2022 compared to 79 percent in the prior year period. On July 31, 2017, the Company completed an irrevocable transaction with an insurance company to annuitize approximately $33 million of retiree pension obligations in its U.S. qualified defined benefit pension plan for a

~~selected group of retirees. The transaction~~Gross margin was funded by transferring a similar amount of assets from the pension plan to the insurance company. Subsequent to this transfer, the insurance company has assumed all remaining pension obligations associated with these retirees. This represents approximately 20 percent of the plan’s discounted pension obligation as of that date and the Company recorded a pension settlement loss of $8.8 millionunfavorably impacted in the ~~third quarter~~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 ~~2017.~~inflationary pressures in the current year period that outpaced price increases to our customers especially earlier in the year.

~~Selling, general~~Depreciation and ~~administrative expenses~~amortization charges for the nine months ended September 30, ~~2017~~2022 were ~~$3.2~~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 ~~increases~~an increase of $4.1 million in travel, entertainment and advertising expenses and $1.9 million for consulting and ~~stock-based compensation~~other professional services.

Interest expense ~~offset by decreases in customer development costs.~~

~~Other income~~ for the nine months ended September 30, ~~2017~~2022 was ~~$1.1~~$1.8 million higher when compared to the prior year ~~period. In the nine months ended September 30, 2016, we incurred equity method losses of $1.0 million for CMC related~~period due to ~~our TKK facility in China. This facility was sold in the first quarter of 2017.~~higher interest rates.

~~Interest~~Income tax expensefor the nine months ended September 30, ~~2017 was $6.4 million lower than~~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 ~~result of reduced average debt levels~~tax law change that went into effect January 1, 2022.

Segment Results.

Segment adjusted EBITDA and ~~reduced interest rates related to our new 2025 Notes and our new Revolving Credit Facility.~~

~~Loss on extinguishment of debt~~adjusted EBITDA margin for the nine months ended September 30, ~~2017 was $13.3~~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 ~~higher when~~ compared to the prior year period. InAdjusted 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.

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 ~~all~~ of ~~our senior notes due 2019 were repurchased at~~$6.5 million. In addition, the prior year period margin was favorably impacted by a ~~premium~~$2.9 million insurance recovery.

The following table reconciles net income to ~~carrying value and accordingly, we realized~~adjusted EBITDA on a ~~loss on extinguishment of debt totaling $10.0 million consisting of $7.3 million for bond premium and bond tender expenses and $2.7 million~~consolidated basis as calculated by us for the ~~write-off~~periods indicated below:


	Three Months Ended September 30,					Nine Months Ended September 30,
(Dollars in millions)	2022		2021			2022			2021
Net income	$	19.0	$	10.0		$	49.4		$	62.7
Interest expense		11.4		10.2			32.3			30.5
Depreciation and amortization		16.9		13.4			44.5			43.4
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
Discontinued operations		0.0		0.5			0.5			(0.1	)
Sub-total		60.5		39.6			156.4			159.6
Adjustments to arrive at adjusted EBITDA:
Impairment, restructuring and plant closure costs (benefits)(1)		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
Total adjustments		8.3		14.3			19.6			15.1
Adjusted EBITDA	$	68.8	$	53.9		$	176.0		$	174.7

(1) Includes costs associated with restructuring, sales and closures of ~~unamortized debt issuance costs. In addition, we repaid our term loan~~certain RUPS and CMC facilities as described in ~~full~~Note 3 – “Plant Closures and ~~entered into a new revolving credit facility. Accordingly, we realized a loss of $3.3 million for the write-off of unamortized debt issuance costs.~~Divestitures”.

~~Income taxes~~Cash Flow

Net cash provided by operating activities for the nine months ended September 30, 2017 were $12.4 million, an increase of $1.9 million when compared to the prior period. The increase in tax expense is due to an increase in pre-tax earnings when compared to the prior period offset by a lower effective income tax rate. The effective income tax rates for the nine months ended September 30, 2017 and September 30, 2016 were 21.4 percent and 33.4 percent, respectively. The decrease in the effective income tax rate is primarily due to an increase in foreign pre-tax earnings that are taxed at more favorable rates. Additionally, in the prior period, we incurred losses in certain foreign subsidiaries that did not generate a tax benefit, which increased our effective tax rate for that prior period.

~~Segment Results~~

~~Segment operating profit~~ ~~for the nine months ended September 30, 2017 and 2016 is summarized by segment in the following table:~~

Nine Months Ended September 30,

2017

2016

% Change

(Dollars in millions)

Operating profit (loss):

Railroad and Utility Products and Services

$
29.3

$
46.9

-38
%
Performance Chemicals

56.6

52.6

8
%
Carbon Materials and Chemicals

24.4

(29.8
)

182
%
Corporate

(10.4
)

(2.2
)

-373
%

$
99.9

$
67.5

48
%
Operating profit (loss) as a percentage of net sales:

Railroad and Utility Products and Services

7.3
%

10.2
%

-2.9
%
Performance Chemicals

17.8
%

17.3
%

0.5
%
Carbon Materials and Chemicals

6.3
%

(8.8
)%

15.1
%

9.0
%

6.1
%

2.9
%

~~RUPS operating profit~~ decreased by $17.6 million or 38 percent compared to the prior year period. Operating profit as a percentage of net sales for RUPS decreased to 7.3 percent from 10.2 percent in the prior year period. Operating profit as a percentage of net sales for the nine months ended September 30, 20172022 was impacted by reduced sales volumes of crossties and railroad services combined with reduced margins in the commercial crosstie market as a result of inventory over-supply in the commercial market. The negative impact from these factors was slightly offset by favorable volumes and sales mix of rail joint products and utility products.

~~PC operating profit~~ increased by $4.0 million or eight percent compared to the prior year period. Operating profit as a percentage of net sales for PC increased to 17.8 percent from 17.3 percent in the prior year quarter. Operating profit for the nine months ended September 30, 2017 was positively impacted due primarily to higher North American sales volumes for copper-based wood preservatives. Sales volumes have improved due to favorable market trends in the repair and remodeling markets and existing home sales. Higher sales volumes were also driven primarily by changes in treated

wood product application standards in 2016 resulting in treated wood dealers stocking and selling more high retention ground contact treated wood, which has moderated in 2017 as dealer inventory has been sufficiently restocked with higher retention treated wood. Although we hedge the majority of our copper purchases, higher copper prices partially offset our increases in sales and operating profit margin for the nine months ended September 30, 2017.

~~CMC operating profit~~ increased by $54.2 million or 182 percent compared to the prior year period. Operating profit as a percentage of net sales for CMC increased to 6.3 percent from a loss of 8.8 percent in the prior year period. Operating profit for the nine months ended September 30, 2017 was positively affected by lower raw material and shipping costs in North America and higher sales volumes and prices in Europe and Australasia. In addition to this, in recent quarters there has been an overall tightened market supply of coal tar and carbon pitch in China. This is due to an ongoing shutdown of steel and coking capacity that does not meet environmental and emissions requirements. The pricing for coal tar products in the region has increased significantly and as a result, our coal-tar distillation facility serving those markets has a competitive advantage. These positive impacts were partially offset by lower sales prices in North America, accelerated depreciation, and unabsorbed fixed costs.

~~Corporate operating loss~~ increased by $8.2 million or 373 percent compared to the prior year period due to the pension settlement loss of $8.8 million recorded in the third quarter of 2017, partially offset by decreased foreign currency losses in the current year period.

~~Cash Flow~~

~~Net cash provided by operating activities~~ ~~for the nine months ended September 30, 2017 was $48.5~~$67.4 million compared to net cash provided by operating activities of ~~$82.5~~$59.6 million in the prior ~~year period.~~year. The ~~net decrease~~increase is primarily the result of ~~$34.0 million in cash from operations was due primarily to higher~~lower working capital usage ~~compared to the prior year period principally as a result~~ of an increase in accounts receivable of $19.7 million and a decrease in accounts payable of $15.3 million. In addition, the Company funded a voluntary pension contribution to our largest defined benefit plan of $7.0$5.8 million in the current year ~~period that is reflected as a reduction of other liabilities.~~period.

Net cash used in investing activities ~~amounted to $38.0 million~~ for the nine months ended September 30, ~~2017~~2022 was $75.1 million compared to net cash used in investing activities of ~~$36.7~~$78.7 million in the prior year ~~period. The increase~~period driven primarily by capital expenditures. Capital expenditures for both periods include increased investment in ~~cash used for investing activities~~growth projects, primarily in our crosstie business, such as the expansion of ~~$1.3 million is primarily due to current year capital expenditures to expand production capacity at PC~~our RUPS facility in ~~the United States and continued spending on the new naphthalene unit construction at our CMC plant in Stickney, Illinois offset by our cash proceeds of $9.5 million from the loan repayment by TKK.~~North Little Rock, Arkansas.

Net cash provided by financing activities was ~~$18.5~~$12.3 million for the nine months ended September 30, ~~2017~~2022 compared to ~~$44.6~~$28.3 million of net cash ~~used in~~provided by financing activities in the prior ~~year period.~~year. The cash provided by financing activities in the nine months ended September 30, ~~2017,~~2022 reflected net borrowings of ~~revolving credit of $74.1~~$37.9 million partly offset by ~~net repayments~~repurchases of ~~long-term debt of $41.4 million, payment~~common stock, dividends paid and payments of debt issuance ~~costs~~costs. The cash provided by financing activities in the prior year period primarily reflected net borrowings of ~~$11.0~~debt of $29.5 million ~~from the issuance of new debt and~~partly offset by repurchases of common stock of ~~$5.1 million. The cash used in financing activities in the nine months ended September 30, 2016, reflected net repayments of revolving credit and~~$3.3 million related to long-term ~~debt of $20.0 million and $23.4 million, respectively.~~incentive compensation plans.

Liquidity and Capital Resources

In January 2017, Koppers Inc. completed a private placement offering of $500.0 million 6.00 percent Senior Notes due 2025 (the “2025 Notes”). The 2025 Notes will pay interest semi-annually in arrears on February 15 and August 15 beginning on August 15, 2017 and will mature on February 15, 2025 unless earlier redeemed or repurchased. The 2025 Notes are unsecured and are guaranteed by Koppers Holdings Inc. and certain of Koppers Inc.’s domestic subsidiaries.

Koppers Inc. used the proceeds from the offering of the 2025 Notes to repay its outstanding term loan and to fund a tender offer to repurchase its senior notes due 2019 (the “2019 Notes”). The tender offer for the 2019 Notes was completed in early February 2017. Any 2019 Notes remaining outstanding following the tender offer were called for redemption and Koppers Inc. concurrently satisfied and discharged its remaining obligations under the indenture governing the 2019 Notes.

~~In February 2017, the Company entered into a new $400.0 million senior secured revolving credit facility (the “Revolving Credit Facility”). The maturity date of the Revolving~~Our Credit Facility is ~~February 2022. The interest rate on the Revolving Credit Facility is variable and is based on LIBOR.~~described in Note 14 “Debt.”

Expenses associated with the redemption of the 2019 Notes, the repayment of our term loan and placement of the new Revolving Credit Facility were $13.3 million for the nine months ended September 30, 2017 and are included in “Loss on Extinguishment of Debt” on the Condensed Consolidated Statement of Operations and Comprehensive Income. These costs consist of tender offer premiums, fees and write off of unamortized debt issuance costs.

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 ~~Revolving~~ Credit Facility ~~prohibits~~permits Koppers Inc. ~~from making~~to make dividend payments to Koppers Holdings ~~unless (1) such~~if certain conditions are met, including, among other permitted dividend payments, ~~are permitted by~~ the ~~indenture governing~~ability to fund the payment of regularly scheduled dividends on and repurchases of Koppers ~~Inc.’s 2025 Notes, (2) no event~~Holdings common stock, in an aggregate amount per year not to exceed the greater of ~~default or potential default has occurred or is continuing under our Revolving Credit Facility,~~$50.0 million in any fiscal year, with unused amounts in any fiscal year being carried over to the succeeding fiscal year, and ~~(3) we are in pro forma compliance with our fixed charge coverage ratio covenant after giving effect to such dividend.~~6.0% of market capitalization. The indenture governing the 2025 Notes ~~restrict~~restricts Koppers Inc.’s ability to finance our payment of dividends if ~~(1)~~ a default has occurred or would result from such financing, ~~(2)~~ Koppers Inc.~~, or a restricted subsidiary of Koppers Inc. which is not a guarantor under the applicable indenture,~~ is not able to incur additional indebtedness (as defined in the ~~applicable~~ indenture), ~~and (3)~~or the sum of all restricted payments (as defined in the ~~applicable~~ indenture) have exceeded the permitted amount (which we refer to as the “basket”) at such point in time.

The basket is governed by a formula based on the sum of a beginning amount, plus or minus a percentage of Koppers Inc.’s consolidated net income (as defined in the applicable indenture), plus the net proceeds of Koppers Inc.’s qualified stock issuance or conversions of debt to qualified stock, plus the net proceeds from the sale of or a reduction in an investment (as defined in the applicable indenture) or the value of the assets of an unrestricted subsidiary which is designated a restricted subsidiary. At September 30, ~~2017,~~2022, the basket totaled ~~$157.8~~$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.

In addition, certain required coverage ratios in Koppers Inc.’s Revolving Credit Facility may restrict the ability of Koppers Inc. to pay dividends. Koppers Holdings suspended its dividend in February 2015 and does not expect to declare any dividends for the foreseeable future.

~~Liquidity~~31

Borrowings under the Revolving Credit Facility are secured by a first priority lien on substantially all of the assets of Koppers Inc., Koppers Holdings and their material domestic subsidiaries. The Revolving Credit Facility contains certain covenants for Koppers Inc. and its restricted subsidiaries that limit capital expenditures, additional indebtedness, liens, dividends and investments or acquisitions. 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.Liquidity

As of September 30, ~~2017, we had $180.1 million of unused revolving credit availability for working capital purposes after~~2022, the maximum amount available under the Credit Facility considering restrictions ~~by various~~from debt covenants ~~and~~was approximately $400 million. The maximum amount available under the Credit Facility is increased by the amount of cash held by certain ~~letter of credit commitments. As of September 30, 2017, $45.1 million of commitments were utilized~~subsidiaries as defined by ~~outstanding letters of credit.~~

~~The following table summarizes our estimated liquidity as of September 30, 2017~~ ~~(dollars in millions)~~:

Cash and cash equivalents⁽¹⁾

$
50.2

Amount available under Revolving Credit Facility

180.1

Total estimated liquidity

$
230.3

~~(1)~~

~~Cash includes approximately $50.1 million held by foreign subsidiaries, which if repatriated to the United States, would not incur a material cash tax cost.~~

~~Our estimated liquidity was $181.5 million at~~the Credit Facility. At December 31, ~~2016.~~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, debt service, pension plan funding, purchase commitments and operating leases, as well as working capital, capital maintenance programs, ~~and~~ the funding of plant consolidation and ~~rationalizations.~~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 ~~2017,~~2022, excluding acquisitions, if any, are expected to total approximately ~~$70 million to $75~~$95 million and are expected to be ~~primarily~~ funded by cash from operations. We anticipate that our liquidity will continue to be adequate to fund our cash requirements for 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 30, 2022, approximately 85 percent of accounts payable was current and 15 percent was 1-30 days past due. As of September 30, 2021, approximately 75 percent of accounts payable was current, 20 percent was 1-30 days past due and five percent was greater than 30 days past due.

Debt Covenants

The covenants ~~that~~under the Credit Facility, including the following financial covenants, may affect availability of the ~~Revolving Credit Facility and which may restrict~~facility:

•

The total net leverage ratio, calculated as of the ~~ability~~last day of ~~Koppers Inc.~~each fiscal quarter (commencing with the fiscal quarter ending September 30, 2022), is not permitted to ~~pay dividends include~~exceed 5.0. The total net leverage ratio as of September 30, 2022 was 3.33.

•

The cash interest coverage ratio, calculated as of the ~~following financial ratios:~~

▪

The fixed charge coverage ratio, calculated as of the end of each fiscal quarter for the four fiscal quarters then ended, is not permitted to be less than 1.10. The fixed charge coverage ratio at September 30, 2017 was 2.16.

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 30, 2022 was 5.68.

▪

~~The secured leverage ratio, calculated as of the end of each fiscal quarter for the four fiscal quarters then ended, is not permitted to exceed 2.75. The leverage ratio at September 30, 2017 was 1.06.~~

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

Legal Matters

The information set forth in Note 18 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 ~~the Company’s~~our critical accounting policies as disclosed in ~~the Company’s~~our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021.

Environmental and Other Matters

The information set forth in Note 18 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 are no material changes to the disclosure on this matter made in ~~the Company’s~~our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021.

ITEM 4. CONTROLS AND PROCEDURES

~~The Company’s~~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 ~~the Company’s~~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 ~~was~~were no ~~change~~changes in ~~the Company’s~~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 30, ~~2017~~2022 that ~~has~~have materially affected, or isare reasonably likely to materially affect, ~~the Company’s~~our internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information set forth in Note 18 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.

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 ~~the Company’s~~our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2021.

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.

ITEM 6. EXHIBITS


12.110.1	~~Computation of ratio of earnings to fixed charges~~Koppers Holdings Inc. Director Deferred Compensation Plan, as amended and restated effective August 3, 2022

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.INS101.SCH	~~XBRL Instance Document~~

101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
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.~~

~~SIGNATURES~~

* Filed herewith.

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 ~~9, 2017~~4, 2022	By:	/s/ M~~ICHAEL~~ ~~J. ZUGAY~~ Jimmi Sue Smith
		~~Michael J. Zugay~~Jimmi Sue Smith Chief Financial Officer
		(Principal Financial ~~Officer,~~ ~~Principal Accounting~~ Officer and Duly Authorized Officer)


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
(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


	September 30, 2017		December 31, 2016		September 30, 2022		December 31, 2021
(Dollars in millions)
Land	$	17.7	$	17.0	$	13.7	$	15.2
Buildings		60.4		58.2		73.1		75.8
Machinery and equipment		745.5		716.0		888.9		836.8
	$	823.6	$	791.2	$	975.7	$	927.8
Less accumulated depreciation		511.3		510.4		448.5		438.7
Net	$	312.3	$	280.8	$	527.2	$	489.1

	Severance and employee benefits			Environmental remediation			Site demolition			Other			Total
(Dollars in millions)
Reserve at December 31, 2015	$	2.0		$	4.3		$	21.9		$	0.0		$	28.2
Accrual		2.4			0.1			5.6			5.6			13.7
Cost charged against assets		0.0			0.0			0.0			(1.9	)		(1.9	)
Reversal of accrued charges		(1.9	)		(0.5	)		(8.7	)		(0.1	)		(11.2	)
Cash paid		(1.0	)		(2.4	)		(8.1	)		(0.2	)		(11.7	)
Currency translation		(0.1	)		0.0			(0.7	)		(0.2	)		(1.0	)
Reserve at December 31, 2016	$	1.4		$	1.5		$	10.0		$	3.2		$	16.1
Accrual		0.9			2.1			0.0			4.9			7.9
Cost charged against assets		0.0			0.0			0.0			(4.5	)		(4.5	)
Reversal of accrued charges		(0.3	)		0.0			(0.4	)		0.0			(0.7	)
Cash paid		(0.1	)		(1.0	)		(1.8	)		(0.4	)		(3.3	)
Currency translation		0.0			0.2			0.1			0.0			0.3
Reserve at September 30, 2017	$	1.9		$	2.8		$	7.9		$	3.2		$	15.8

	September 30, 2017				December 31, 2016
	Fair Value		Carrying Value		Fair Value		Carrying Value
(Dollars in millions)
Financial assets:
Cash and cash equivalents, including restricted cash	$	50.2	$	50.2	$	20.8	$	20.8
Investments and other assets^(a)		1.1		1.1		1.1		1.1
Financial liabilities:
Long-term debt (including current portion)	$	730.8	$	700.8	$	669.6	$	662.4

(Dollars in millions)	Total Koppers Shareholders’ Equity			Noncontrolling Interests		Total Equity
Balance at December 31, 2016	$	30.4		$	4.2	$	34.6
Net income		43.9			0.4		44.3
Issuance of common stock		1.9			0.0		1.9
Employee stock plans		8.0			0.0		8.0
Other comprehensive income		29.2			0.2		29.4
Repurchases of common stock		(5.1	)		0.0		(5.1	)
Balance at September 30, 2017	$	108.3		$	4.8	$	113.1

(Dollars in millions)	Total Koppers Shareholders’ Equity (Deficit)			Noncontrolling Interests			Total Equity (Deficit)
Balance at December 31, 2015	$	(18.5	)	$	6.1		$	(12.4	)
Net income (loss)		22.9			(1.5	)		21.4
Employee stock plans		6.0			0.0			6.0
Other comprehensive income (loss)		10.2			(0.2	)		10.0
Repurchases of common stock		(0.3	)		0.0			(0.3	)
Balance at September 30, 2016	$	20.3		$	4.4		$	24.7


	March 2017 Grant			March 2016 Grant			January 2022 Grant			January 2021 Grant			March 2020 Grant
Grant date price per share of performance award	$	44.10		$	18.11		$	32.19		$	29.84		$	19.63
Expected dividend yield per share		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Expected volatility		43.50	%		40.86	%		66.90	%		68.70	%		45.60	%
Risk-free interest rate		1.54	%		0.96	%		1.10	%		0.16	%		0.72	%
Look-back period in years		2.83			2.84			3.00			3.00			2.83
Grant date fair value per share of performance award	$	64.02		$	23.70
Grant date fair value per share							$	45.19		$	41.50		$	11.56

	March 2017 Grant			March 2016 Grant			March 2015 Grant
Grant date price per share of stock option award	$	44.10		$	18.11		$	17.57
Expected dividend yield per share		0.00	%		0.00	%		3.40	%
Expected life in years		5.77			5.96			5.75
Expected volatility		39.70	%		40.86	%		42.27	%
Risk-free interest rate		2.13	%		1.45	%		1.73	%
Grant date fair value per share of option award	$	17.90		$	7.41		$	5.20


	September 30,
	2022			2021
Federal income tax rate		21.0	%		21.0	%
Foreign earnings taxed at different rates		6.8			3.6
Interest expense deduction limitation		5.9			0.0
Nondeductible expenses		1.6			1.3
State income taxes, net of federal tax benefit		0.6			0.8
Change in tax contingency reserves		0.1			0.1
GILTI inclusion, net of foreign tax credits		0.1			0.0
Estimated annual effective income tax rate		36.1	%		26.8	%

	September 30, 2017			September 30, 2016
Federal income tax rate		35.0	%		35.0	%
State income taxes, net of federal tax benefit		1.1			1.8
Foreign earnings taxed at different rates		(16.8	)		(9.4	)
Change in tax contingency reserves		0.2			0.6
Nondeductible expenses		1.6			1.2
Tax credits		(0.2	)		(0.4	)
Other		0.8			0.3
Estimated annual effective income tax rate		21.7	%		29.1	%


	Weighted Average Interest Rate			Maturity	September 30, 2017		December 31, 2016		Weighted Average Interest Rate			Maturity	September 30, 2022		December 31, 2021
(Dollars in millions)
Term Loan					$	0.0	$	232.5		2.38	%	─	$	0.0	$	2.0
Revolving Credit Facility		3.81	%	2022		174.8		100.1		2.38	%	─		0.0		287.1
Construction and other loans		4.86	%	2020		38.1		40.4
Revolving Credit Facility										5.16	%	2027		326.8		0.0
Senior Notes due 2025		6.00	%	2025		500.0		0.0		6.00	%	2025		500.0		500.0
Senior Notes due 2019						0.0		298.1
Debt					$	712.9	$	671.1						826.8		789.1
Less short-term debt and current maturities of long-term debt						12.8		42.6						0.0		2.0
Less unamortized debt issuance costs						12.1		8.7						8.1		5.6
Long-term debt					$	688.0	$	619.8					$	818.7	$	781.5


(Dollars in millions)
2022	$	7.0
2023		23.7
2024		19.9
2025		16.2
2026		11.9
Thereafter		29.5
Total lease payments	$	108.2
Less: Interest		(22.6	)
Present value of lease liabilities	$	85.6


	September 30,			December 31,
	2022			2021
(Dollars in millions)
Operating leases:
Operating lease right-of-use assets	$	84.6		$	91.2
Current operating lease liabilities	$	19.4		$	21.3
Operating lease liabilities		66.2			70.3
Total operating lease liabilities	$	85.6		$	91.6
Weighted average remaining lease term, in years		5.7			5.8
Weighted average discount rate		7.3	%		7.4	%


	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

	Units Outstanding (in Pounds)		Net Fair Value - Asset
	September 30, 2017	December 31, 2016	September 30, 2017		December 31, 2016
(Amounts in millions)
Cash flow hedges	35.4	42.6	$	17.9	$	10.6
Not designated as hedges	7.4	6.5		3.0		1.0
Total	42.8	49.1	$	20.9	$	11.6


		September 30, ~~2017~~ 2022		~~December 31,~~ ~~2016~~	December 31, 2021
(In millions)
~~British Pounds~~		~~GBP 8.0~~		~~GBP 7.3~~
~~New Zealand Dollars~~		~~NZD 15.5~~		~~NZD 15.5~~
United States Dollars		~~USD 16.8~~	USD 11.7	~~USD 24.7~~
~~Canadian Dollars~~	USD 21.4	~~CAD 0.8~~		~~CAD 0.3~~


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

	Parent			Koppers Inc.			Domestic Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Consolidating Adjustments			Consolidated
(Dollars in millions)
Net sales	$	0.0		$	151.1		$	92.0	$	162.9		$	(21.2	)	$	384.8
Cost of sales including depreciation and amortization		0.0			136.3			64.6		128.2			(21.2	)		307.9
Loss on pension settlement		0.0			8.8			0.0		0.0			0.0			8.8
Selling, general and administrative		0.5			12.3			10.2		10.4			0.0			33.4
Operating profit (loss)		(0.5	)		(6.3	)		17.2		24.3			0.0			34.7
Other income		0.0			0.2			0.6		0.1			(0.3	)		0.6
Equity income (loss) of subsidiaries		19.9			29.4			17.0		0.1			(66.4	)		0.0
Interest expense		(0.1	)		9.8			0.1		1.1			(0.4	)		10.5
Income taxes		(0.3	)		(6.4	)		6.5		5.0			0.0			4.8
Income from continuing operations		19.8			19.9			28.2		18.4			(66.3	)		20.0
Discontinued operations		0.0			0.0			0.0		(0.1	)		0.0			(0.1	)
Noncontrolling interests		0.0			0.0			0.0		0.1			0.0			0.1
Net income attributable to Koppers	$	19.8		$	19.9		$	28.2	$	18.2		$	(66.3	)	$	19.8
Comprehensive income attributable to Koppers	$	36.6		$	36.8		$	38.7	$	24.4		$	(99.9	)	$	36.6

Cash and cash equivalents⁽¹⁾	$	50.2
Amount available under Revolving Credit Facility		180.1
Total estimated liquidity	$	230.3