<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended September 30, 1997
[_]Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition Period From to Commission file number 1-12716
KOPPERS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-1588399
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
436 SEVENTH AVENUE
PITTSBURGH, PENNSYLVANIA 15219
(412) 227-2001
(Address of principal executive offices)
(Registrant's telephone number, including area code)
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 periods that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Voting and Non-Voting Common Stock, par value $.01 per share, outstanding at
October 24, 1997 amounted to 6,287,407 and 2,277,380 shares, respectively.
<PAGE>
PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KOPPERS INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands except per share figures)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- ------------------
1997 1996 1997 1996
--------- --------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales............................ $ 160,721 $ 159,922 $452,260 $443,510
Operating expenses:
Cost of sales...................... 133,293 133,070 380,825 374,491
Depreciation and amortization...... 6,001 5,708 17,908 16,298
Selling, general and
administrative.................... 6,909 7,917 21,559 21,379
Restructuring charges.............. -- 10,071 -- 10,071
--------- --------- -------- --------
Total operating expenses......... 146,203 156,766 420,292 422,239
--------- --------- -------- --------
Operating profit..................... 14,518 3,156 31,968 21,271
Equity in earnings of affiliates... 1,346 2,016 4,696 6,427
Other income (expense)............. -- 823 (1,414) (10,123)
--------- --------- -------- --------
Income before interest expense and
provision for income taxes.......... 15,864 5,995 35,250 17,575
Interest expense..................... 4,054 4,104 12,387 12,462
--------- --------- -------- --------
Income before income tax provision
(benefit)........................... 11,810 1,891 22,863 5,113
Income tax provision (benefit)....... (612) (653) 704 (414)
--------- --------- -------- --------
Net income........................... $ 12,422 $ 2,544 $ 22,159 $ 5,527
========= ========= ======== ========
Earnings per share of common stock... $ 1.34 $ 0.27 $ 2.40 $ 0.57
========= ========= ======== ========
</TABLE>
See accompanying notes.
2
<PAGE>
KOPPERS INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996*
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash.............................................. $ 491 $ 1,526
Accounts receivable less allowance for doubtful
accounts
of $148 in 1997 and $359 in 1996................. 75,471 72,229
Inventories:
Raw materials................................... 32,510 33,635
Work in process................................. 2,673 3,168
Finished goods.................................. 42,036 44,090
LIFO reserve.................................... (10,111) (7,971)
--------- ---------
Total inventories............................. 67,108 72,922
Other............................................. 12,833 13,589
--------- ---------
Total current assets............................ 155,903 160,266
Investments......................................... 49,624 55,373
Fixed assets........................................ 308,174 296,688
Less: accumulated depreciation.................... (139,767) (123,468)
--------- ---------
Net fixed assets................................ 168,407 173,220
Other assets........................................ 21,989 22,321
--------- ---------
Total assets.................................... $ 395,923 $ 411,180
========= =========
</TABLE>
- --------
*Summarized from audited fiscal year 1996 balance sheet.
See accompanying notes.
3
<PAGE>
KOPPERS INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands except shares figures)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996*
------------- ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $ 35,809 $ 37,255
Accrued liabilities............................... 31,507 38,174
Current portion of term loans..................... 8,242 7,149
-------- --------
Total current liabilities....................... 75,558 82,578
Long-term debt:
Revolving credit.................................. 26,000 43,000
Term loans........................................ 45,530 49,735
Senior Notes...................................... 110,000 110,000
-------- --------
Total long-term debt............................ 181,530 202,735
Other long-term reserves............................ 47,355 47,804
-------- --------
Total liabilities............................... 304,443 333,117
Common stock subject to redemption.................. 22,940 23,957
Voting common stock, $.01 par value: 10,000,000
shares authorized,
6,707,952 shares issued in 1997 and 1996........... 67 67
Non-voting common stock, $.01 par value: 10,000,000
shares authorized, 3,628,200 shares issued and
outstanding in 1997 and 1996....................... 36 36
Capital in excess of par value...................... 11,675 11,675
Retained earnings................................... 66,230 45,813
Cumulative translation adjustment................... (3,589) 2,181
Treasury stock, at cost, 1,548,335 shares in 1997
and 1,531,511 shares in 1996....................... (5,879) (5,666)
-------- --------
Total liabilities and stockholders' equity...... $395,923 $411,180
======== ========
</TABLE>
- --------
*Summarized from audited fiscal year 1996 balance sheet.
See accompanying notes.
4
<PAGE>
KOPPERS INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1997 1996
--------- ---------
(Unaudited)
<S> <C> <C>
Cash provided by operating activities..................... $ 35,563 $ 31,688
Cash used in investing activities:
Acquisitions and related capital expenditures........... -- (39,331)
Capital expenditures.................................... (12,999) (16,134)
Other................................................... 623 312
--------- ---------
Net cash used in investing activities................. (12,376) (55,153)
Cash provided by (used in) financing activities:
Borrowings from revolving credit........................ 101,500 124,750
Repayments of revolving credit.......................... (118,500) (109,250)
Repayment of long-term debt............................. (3,111) (12,030)
Proceeds from long-term debt............................ -- 35,950
Payment of deferred financing costs..................... (486) (1,081)
Purchases of voting common stock........................ (1,381) (1,811)
Purchase of non-voting common stock..................... -- (12,250)
Dividends on common stock............................... (2,244) (2,336)
--------- ---------
Net cash provided by (used in) financing activities... (24,222) 21,942
--------- ---------
Net increase (decrease) in cash........................... (1,035) (1,523)
Cash at beginning of period............................... 1,526 1,618
--------- ---------
Cash at end of period..................................... $ 491 $ 95
========= =========
</TABLE>
See accompanying notes.
5
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) The Management's Discussion and Analysis of Financial Condition and
Results of Operations which follows these notes contains additional
information on the results of operations and the financial position of the
Company. Those comments should be read in conjunction with these notes. The
Company's annual report on Form 10-K for the fiscal year ended December 31,
1996 includes additional information about the Company, its operations, and
its financial position, and should be read in conjunction with this quarterly
report on Form 10-Q.
(2) The results for the interim periods are not necessarily indicative of
the results to be expected for the full fiscal year.
(3) In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included.
(4) On October 15, 1997 Cornerstone-Spectrum, Inc., ("Cornerstone") sold
2,117,952 shares of voting common stock and 1,815,000 shares of non-voting
common stock in the Registrant for $52.5 million. The shares were sold through
a group of management investors of the Company (the "Management Investors")
and KAP Investments, Inc. ("KAP"), a wholly-owned subsidiary of Koppers
Australia Pty. Limited ("Koppers Australia"), to the Registrant, Saratoga
Partners III, L.P., a private investment fund ("Saratoga"), and Saratoga
Koppers Funding, Inc. ("Saratoga Koppers"). The purchase of shares was an
exercise of a right of first refusal granted to existing shareholders in the
Company's stockholders' agreement which was part of the formation of the
Company in 1988 (the "Stockholders' Agreement"). As a result of the sale of
shares by Cornerstone, and in accordance with the terms of the Stockholders'
Agreement, the Cornerstone director, Brian C. Beazer, tendered his resignation
from the Board of Directors of the Company. The Management Investors and
Koppers Australia intend to use the shares to repay certain loans obtained to
finance the transaction. See Item 5 for additional information regarding
"Change of Control".
(5) On October 8, 1997 the Company announced that it had entered into a
definitive agreement with the Broken Hill Proprietary Company Limited located
in Melbourne, Australia ("Broken Hill") to acquire its 50% interest in Koppers
Australia, which will result in Koppers Australia being a wholly-owned
subsidiary of the Company. The purchase, with an estimated purchase price of
$65 million, is expected to be completed in the fourth quarter of 1997.
(6) The Company has issued a cash tender offer and consent solicitation
relating to all of the Company's $110 million 8 1/2% Senior Notes due 2004
(the "Notes"). The tender offer is part of the Company's overall plan of
recapitalization (the "Recapitalization"). At the expiration of the tender
offer the remaining steps of the Recapitalization will be completed,
including: (i) the acquisition by the Company of the 50% of Koppers Australia
not owned by it; (ii) the repayment in full of the Company's existing bank
credit facilities; and (iii) the redemption by the Company of a portion of the
shares of common stock held by certain existing investors, including a portion
of such shares held by the Management Investors. Financing for the
Recapitalization will be provided by a new senior credit facility and by a
contemporaneous offering of senior subordinated notes of the Company pursuant
to Rule 144A.
(7) The Company has a 50% investment in Koppers Australia and accounts for
this investment using the equity method. This investment is considered to be a
significant subsidiary as defined by applicable SEC regulations. The following
summarizes the income statement of this currently unconsolidated company:
6
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- ------------------
1997 1996 1997 1996
--------- --------- -------- ---------
(In thousands) (In thousands)
<S> <C> <C> <C> <C>
Operating revenues....................... $ 31,867 $ 37,462 $ 95,322 $ 100,755
Costs and expenses:
Cost of sales............................ 24,351 31,506 73,810 78,155
General and administrative............... 2,968 2,946 8,746 8,439
--------- --------- -------- ---------
Total costs and expenses............... 27,319 34,452 82,556 86,594
Interest expense......................... 143 299 430 717
Equity income............................ 1,732 2,066 2,505 2,102
Income taxes............................. 1,901 895 4,479 5,024
Other.................................... 280 -- 978 --
Minority interest........................ 339 153 1,070 841
--------- --------- -------- ---------
Net income............................. $ 3,617 $ 3,729 $ 8,314 $ 9,681
========= ========= ======== =========
Company's share of net income.......... $ 702 $ 1,511 $ 2,469 $ 3,938
========= ========= ======== =========
</TABLE>
Environmental Indemnity and Guarantee
(8) The facilities of the Company are subject to a number of federal, state
and local laws and regulations governing, among other things, the treatment,
storage and disposal of wastes, the discharge of effluent into waterways, the
emission of substances into the air and various health and safety matters.
These laws and regulations are subject to frequent amendment. The Company
expects to incur substantial costs for ongoing compliance with such laws and
regulations. In addition, it is possible that the Company may face third-party
claims for cleanup or for injuries resulting from contamination. Under the
terms of the asset purchase agreement between Koppers Industries, Inc. and
Koppers Company, Inc. at the formation of the Company in 1988 (the "Asset
Purchase Agreement") Beazer East, Inc. ("Beazer East") assumed the liability
for and indemnified the Company against cleanup liabilities for past
contamination occurring prior to the purchase date at properties acquired from
Beazer East, as well as third-party claims arising from such past
contamination (the "Indemnity"). Beazer Limited unconditionally guaranteed
Beazer East's performance of the Indemnity pursuant to a guarantee (the
"Guarantee"). However, if such indemnification was not available for any
reason, including the inability of Beazer East and/or Beazer Limited to make
such indemnification payments, the Company may not have sufficient resources
to meet such liabilities.
Beazer East has adhered to the terms of the Indemnity agreement and is
actively fulfilling its obligations to conduct investigative and remedial
programs at the properties which the Company acquired from Beazer East in
accordance with the requirements of regulatory authorities. The Indemnity is
not applicable to sites acquired since the formation of the Company, for which
separate indemnifications have been negotiated where appropriate. At the
properties which the Company acquired subsequent to the acquisition of the
Beazer East properties, all remedial actions are being performed in accordance
with applicable regulations and all indemnification obligations are being
honored.
The Company believes that for the last three years amounts paid by Beazer
East under the Indemnity have averaged approximately $13 million per year. The
requirement to pay such costs without reimbursement would have a material
adverse effect on the business, financial condition and results of operations
of the Company.
7
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Unaudited)
Furthermore, if the Company were required to record a contingent liability in
respect of matters covered by the Indemnity on its balance sheet the result
could be that the Company would have significant negative net worth.
In addition, Beazer East is presently defending certain toxic tort actions
arising from the pre-Closing operation of assets which the Company acquired
from Beazer East. These tort actions were not assumed by the Company under the
Asset Purchase Agreement and, in any event, are within the scope of the
Indemnity.
The Company recently evaluated the environmental liabilities related to the
manufacturing sites acquired by the Company at its formation in 1988. The
evaluation was based on a report prepared by an independent consultant, which
utilized site-specific public information to the extent available, as
supplemented by (among other things) its technical knowledge and expertise,
published resources regarding costing of remediation techniques and specified
technical cost and regulatory assumptions. The evaluation and report estimated
that approximately $111.1 million would be expended at these sites for
environmental remediation during the period of 1998 to 2042. The Company
estimates that approximately $92.9 million of this amount is covered under the
Indemnity, that the Company is responsible for $135,000, and that identified
third parties are responsible for the remaining $18.1 million. There can be no
assurance, however, that the actual liabilities associated with the
investigation, cleanup and closure of these sites will not exceed this
estimate. The factors that could positively or negatively affect the estimate
include: new information about the contamination at these sites that is
contrary to previous assumptions, new interpretations of existing
environmental laws, new environmental laws, enforcement policies of regulatory
authorities, and technological advancements in environmental remediation
practices. Further, in the event that Beazer East and Beazer Limited do not
fulfill their commitments under the Indemnity and the Guarantee, respectively,
the Company may be required to pay costs that would have a material adverse
effect on the business, financial condition, cash flow, and results of
operations of the Company.
Other Environmental Matters
The Jefferson County Department of Health ("Jefferson County") issued a
notice of violation in March 1996 in connection with various alleged
violations of Jefferson County's air pollution control regulations for
emissions from coke oven batteries at the Company's Woodward, Alabama coke
facility (the "Woodward Facility") during the period May 26, 1992 through
March 1, 1996. On February 14, 1997 the United States Environmental Protection
Agency ("EPA") issued a notice of violation covering the same issues that were
raised in the Jefferson County notice of violation. Thereafter, the Company
discovered that certain benzene abatement equipment at the Woodward Facility
had not been operational for several months. Following a preliminary
investigation, the Company also discovered that certain environmental reports
and records contained incomplete and inaccurate information and that certain
environmental reports and certifications were not filed when required. The
Company has notified Jefferson County, the State of Alabama and the EPA of the
environmental irregularities, and the environmental reporting status of the
Woodward Facility has been brought up to date by the Company. Counsel and
independent investigators have been retained to conduct a complete and
thorough investigation. While the benzene abatement equipment has been
returned to service, the Company could be subject to significant liability in
connection with these matters, including fines and civil and criminal
penalties and the risk of third party lawsuits. The Company and Jefferson
County have negotiated a settlement agreement, pursuant to which the Company
might be required to install monitoring and control equipment and institute
operational changes. In addition, the Company has permanently shut down
batteries 4A, 4B and 5 at the Woodward Facility. The settlement agreement
includes both the original Jefferson County notice of violation and the self-
reported benzene abatement violations. The settlement agreement, in addition
to the changes listed
8
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Unaudited)
above, also requires the Company to pay a civil penalty in the amount of
$450,000 to Jefferson County, which sum has been paid. There can be no
assurance that the settlement with Jefferson County will deter the EPA from
pursuing its notice of violation and that the EPA will not seek additional
actions or penalties that could have a material adverse effect on the
business, financial condition and results of operations of the Company.
During the investigation of the Woodward Facility described above, it was
also discovered that certain environmental records and reports relating to
discharges of treated process water and treated storm water contained
incomplete and inaccurate information. Corrected reports have been submitted
to the State of Alabama and the EPA. While no notice of violation has been
issued in connection with this matter, it is believed likely that a notice of
violation will be issued and substantial penalties may be sought by the State
of Alabama or the EPA.
The Pennsylvania Department of Environmental Protection ("PADEP") previously
issued a notice of violation alleging that the boilers at the Monessen
Facility are emitting greater quantities of nitrogen oxides than allowed under
a plan approved by PADEP. The Company also received a notice of violation in
connection with a failure to conduct timely emission monitoring testing on the
boilers at the Monessen Facility. The Company has installed additional
equipment and modified existing equipment to improve the quality of boiler
emissions. Resolution of these matters could have a negative effect on the
business, financial condition, cash flow and results of operations of the
Company. The Company has submitted an amended plan approval application to
PADEP that provides for limitations on the operation of the two boilers at the
Monessen Facility. PADEP is currently reviewing this application. As a result
of the failure to meet the original nitrogen oxide emission limitations, it is
expected that PADEP will propose a civil penalty in an amount of approximately
$100,000.
On June 12, 1996 PADEP issued a notice of violation in connection with an
alleged noncompliance with the terms of a consent agreement between the
Company and PADEP regarding liability for environmental conditions existing at
the time the Company purchased the Monessen Facility ("Consent Agreement").
The notice of violation alleged that the Company had not implemented the
corrective actions required under the Consent Agreement in a timely fashion.
PADEP has calculated that a stipulated penalty of $261,000 may be requested
under the Consent Agreement for the alleged untimely actions. The Company has
completed the implementation of the corrective actions at issue and is in the
process of conducting settlement negotiations with PADEP to agree upon the
amount of the stipulated penalty to be assessed in connection with this
matter.
In June 1997, during a routine environmental compliance audit of the
Logansport, Louisiana wood treating plant, it was discovered that certain
records and reports relating to discharges of treated process water contained
incomplete and inaccurate information. Corrected reports have been submitted
to the local municipality, the State of Louisiana and the EPA. While no notice
of violation has been issued in connection with this matter, it is believed
that it is likely a notice of violation will be issued and civil penalties
will be sought by the local municipality, the State of Louisiana and the EPA.
In September 1996, the Company was served with a notice of violation from
the Illinois Environmental Protection Agency ("IEPA") relating to 16 releases
of hazardous materials which occurred at or from its facility located in
Stickney, Illinois between January 24, 1990 and May 3, 1996. The Company has
entered into negotiations with the IEPA to investigate four of the releases
which had the potential to cause groundwater contamination. Although the
Company believes that all such releases were remediated when they occurred,
there can be no assurances that the IEPA will not require additional action in
connection with this matter.
9
<PAGE>
KOPPERS INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Unaudited)
In addition to the environmental issues discussed above, the Company has
received or expects to receive notices of violations and requests for
information at its Monessen, Pennsylvania coke facility, the Stickney,
Illinois and Follansbee, West Virginia tar distillation and chemicals
facilities, and the Gainesville, Florida wood treating facility that relate to
matters which the Company does not believe will have a material impact on the
business, financial condition, cash flow and results of operations of the
Company.
Other Matters
As a result of an internal investigation, the Company discovered in March
1997 that certain reports relating to the moisture of coke contained
incomplete and inaccurate information. Because of these discrepancies, certain
customers who purchased the coke were overbilled. Upon discovery of the
overbilling, refunds were made available to all the affected customers.
For a fee, the Company treats waste water produced by Beazer East during
Beazer East's remediation of certain of the Company's facilities. Beazer East
performs these remediation activities pursuant to the Indemnity. During the
summer of 1997, Beazer East challenged the amounts of the charges for waste
water treatment services at the Company's Florence, South Carolina wood
treating facility and Follansbee, West Virginia tar distillation and chemicals
facility. Beazer East alleged they had been overcharged by approximately $2.2
million at Florence and by approximately $3.1 million at Follansbee. The
Company has contested these allegations and believes that if an overcharge
occurred, the amount of the overcharge is less than Beazer East has alleged.
The Woodward Facility faces significant challenges among which are the
advanced ages of the coke oven batteries, ongoing environmental compliance and
significant capital expenditure requirements, all of which have combined to
reduce productive capacity and increase per unit costs. The Company is
currently conducting a detailed review of its business options at the Woodward
Facility which may result in consideration of either a sale of the facility or
a discontinuance of operations. The Company is attempting to complete this
analysis in 1997. If the Company should choose to close the Woodward Facility,
this could result in a charge to earnings in the fourth quarter of
approximately $32 million, $9 million of which would be comprised of cash
charges primarily for dismantling and severance costs.
Sales at the Woodward Facility for the nine months ended September 30, 1997
and 1996 amounted to $40.7 and $51.7 million, respectively, while gross profit
for the nine months ended September 30, 1997 and 1996 amounted to ($5.1)
million and $1.9 million, respectively.
The Feather River, California Railroad & Utility Products facility ("Feather
River") includes both a wood treating facility (utility poles) and a dormant
wood-fired cogeneration facility. Feather River has found it difficult to
compete in the California utility pole market due to its limited treatment
capabilities, a shrinking product demand and high raw materials cost. The
Company has recently been notified that a targeted customer for Feather River
will not take product in 1998, which will impact the forward-looking
profitability of this facility. The Company is currently conducting an
analysis to determine the feasibility of continuing to operate this facility;
this analysis is expected to be completed by the end of 1997. The current
carrying value of assets at the treating facility is approximately $4.3
million.
The Feather River cogeneration facility has been dormant for 3 years while
the Company explored potential opportunities for developing a treated wood
burning and disposal facility. The Company has thus far been unable to locate
a customer for this process, and expects to make a decision regarding the
future of the facility by the end of 1997. In the event that a decision is
made to close the cogeneration facility, this could result in a charge to
earnings in the fourth quarter of approximately $1.9 million, which includes a
$1.6 million early contract termination fee with the local utility.
10
<PAGE>
KOPPERS INDUSTRIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth certain sales and operating data, net of all
inter-segment transactions, for the Company's businesses for the periods
indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- -------------------
1997 1996 1997 1996
--------- --------- -------- --------
<S> <C> <C> <C> <C>
NET SALES (Dollars in
thousands):
Carbon Materials & Chemicals.. $ 62,711 $ 68,030 $185,766 $178,609
Railroad & Utility Products... 72,665 64,080 193,807 184,290
Coke Products................. 25,345 27,812 72,687 80,611
--------- --------- -------- --------
Total....................... $ 160,721 $ 159,922 $452,260 $443,510
SEGMENT SALES AS PERCENTAGE OF
TOTAL:
Carbon Materials & Chemical... 39.0% 42.5% 41.0% 40.3%
Railroad & Utility Products... 45.2% 40.1% 42.9% 41.5%
Coke Products................. 15.8% 17.4% 16.1% 18.2%
--------- --------- -------- --------
Total....................... 100.0% 100.0% 100.0% 100.0%
GROSS MARGIN BY SEGMENT (AFTER
DEPRECIATION):
Carbon Materials & Chemicals.. 21.0% 17.7% 18.1% 16.2%
Railroad & Utility Products... 11.8% 10.8% 11.7% 10.9%
Coke Products................. (0.6%) 8.5% (2.6%) 5.3%
--------- --------- -------- --------
Total....................... 13.3% 13.2% 11.8% 11.9%
OPERATING MARGIN BY SEGMENT:
Carbon Materials & Chemicals.. 17.9% 3.9% 14.8% 8.6%
Railroad & Utility Products... 9.4% 5.6% 8.9% 6.9%
Coke Products................. (3.2%) 3.2% (5.3%) 2.2%
Corporate Unallocated
Overhead..................... (1.7%) (2.5%) (2.0%) (1.9%)
--------- --------- -------- --------
Total....................... 9.0% 2.0% 7.1% 4.8%
</TABLE>
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
1997 AND 1996.
Net Sales. Net sales for the three months ended September 30, 1997 were 0.5%
higher than the same period in 1996. Net sales for Carbon Materials &
Chemicals decreased by 7.8% due to the elimination of light oil sales in 1997
from the Clairton tar distillation facility acquired in 1996. The effect of
the elimination of light oil sales was offset to some extent by an increase in
volumes and pricing for phthalic anhydride ("PAA"). Net sales for Railroad &
Utility Products increased by 13.4% compared to the prior year quarter due to
a 7.7% increase in sales volumes for railroad crossties. Net sales for Coke
Products decreased by 8.9% due to lower sales at the Woodward Facility as a
result of unfavorable market conditions and capacity rationalization in 1997.
Gross Profit After Depreciation. As a percent of net sales, gross profit
after depreciation increased to 13.3% in the third quarter of 1997 from 13.2%
for the same period last year. Gross margins increased to 21.0% from 17.7% for
Carbon Materials & Chemicals, as a 12.9% reduction in volumes for carbon pitch
was offset by increases in volumes and pricing for PAA of 37.3% and 8.0%,
respectively. Gross margin increased to 11.8% from 10.8% for Railroad &
Utility Products due in part to increases in volumes and prices for railroad
crossties as compared to the prior year. Gross margin for Coke Products
decreased to (0.6%) from 8.5% in the prior year
11
<PAGE>
KOPPERS INDUSTRIES, INC.
quarter partly as the result of lower production and higher unit costs at the
Woodward Facility as the result of capacity rationalization. Additionally,
pricing for coke decreased 1.9% as compared to the prior year.
Depreciation and Amortization. The increase in depreciation and amortization
for 1997 as compared to the prior year was due to the Company's ongoing
capital expenditures program.
Selling, General and Administrative Expense. Selling, general and
administrative expense for the three months ended September 30, 1997 decreased
to 4.3% of net sales from 5.0% of net sales in the same period last year
primarily as a result of lower legal and consulting expenses in 1997.
Equity in Earnings of Affiliates. Equity earnings for the third quarter of
1997 were $0.7 million lower than the prior year period primarily as a result
of lower earnings from Koppers Australia due to higher maintenance and repair
expenses coupled with a stronger U.S. currency rate in 1997.
Other Expense. Other income for the third quarter of 1996 consisted of a
$0.8 million reversal of a reserve for a legal judgment. See Note 11 of the
Notes to Consolidated Financial Statements in the Company's 1996 Form 10-K
Income Taxes. The Company's effective income tax rate for the three months
ended September 30, 1997 increased to (5.2%) as compared to (34.5%) in the
prior year period due to $10.1 million of restructuring charges in 1996
coupled with projected tax credits for the Monessen Facility.
Net Income. Net income for the three months ended September 30, 1997
compared to the same period last year increased by $9.9 million primarily as
the result of restructuring charges in the same period in 1996.
COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1997 AND 1996.
Net Sales. Net sales for the nine months ended September 30, 1997 were 2.0%
higher than the same period in 1996. Net sales for Carbon Materials &
Chemicals increased by 4.0% due primarily to sales from the Clairton facility
acquired in April, 1996 coupled with increases in volumes and prices for PAA
of 17.6% and 6.9%%, respectively. The increase in net sales of 5.2% for
Railroad & Utility Products was due to higher revenues for railroad crossties,
which more than offset a 2.9% reduction in sales volumes for utility poles.
Net sales for Coke Products decreased by 9.8% due to lower production and
shipments primarily as the result of capacity rationalization at the Woodward
Facility.
Gross Profit After Depreciation. As a percent of net sales, gross profit
after depreciation decreased to 11.8% for the nine months ended September 30,
1997 from 11.9% for the same period last year. Gross margin for Carbon
Materials & Chemicals increased to 18.1% from 16.2% in the prior year
primarily as the result of increases in volumes and pricing of PAA in 1997 as
noted above. Gross margin for Railroad & Utility Products increased to 11.7%
from 10.9% in the prior year primarily as the result of higher volumes and
prices for railroad crossties. Gross margin for Coke Products decreased to
(2.6%) from 5.3% due to higher unit costs incurred as the result of reduced
production at the Woodward Facility, coupled with costs associated with
quality problems resulting in returned material and credits issued to
customers.
Depreciation and Amortization. The increase in depreciation and amortization
for the nine months ended September 30, 1997 as compared to the prior year was
due primarily to the acquisition of the Clairton, Pennsylvania tar
distillation facility in April 1996 and the Company's ongoing capital
expenditures program.
12
<PAGE>
KOPPERS INDUSTRIES, INC.
Selling, General and Administrative Expense. Selling, general and
administrative expense for the nine months ended September 30, 1997 amounted
to 4.8% of net sales, which was consistent with the prior year period, as
lower expenses for legal and consulting services were offset by increases in
employee benefits in 1997.
Equity in Earnings of Affiliates. Equity earnings for the nine months ended
September 30, 1997 were $1.7 million lower than the prior year period
primarily as a result of lower earnings from Koppers Australia as the result
of higher maintenance and repair expenses coupled with stronger U. S. currency
rates in 1997.
Other Expense. Other expense for the nine months ended September 30, 1997
consisted of the write-off of deferred expenses related to an Initial Public
Offering ("IPO") which was withdrawn in the second quarter. Other expense for
the prior year period consisted of a litigation charge related to products
sold prior to the formation of the Company. See Note 11 on page 55 of the
Notes to Consolidated Financial Statements in the Company's 1996 Form 10-K.
Income Taxes. The Company's effective income tax rate for the nine months
ended September 30, 1997 was 3.1% as compared to (8.1%) in the prior year
period due to $20.2 million of restructuring and legal expenses in 1996
coupled with projected tax credits for the Monessen Facility.
Net Income. Net income for the nine months ended September 30, 1997 as
compared to the prior year increased by $16.6 million due primarily to
litigation and restructuring charges in 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997 the Company had cash and cash equivalents of $0.5
million and $65.5 million of availability under the revolving credit facility
for working capital purposes, subject to limitations imposed by existing debt
covenants and the indenture related to the Company's Notes. As of September
30, 1997, $8.5 million of commitments were utilized by outstanding standby
letters of credit and there were $26.0 million in outstanding borrowings for
working capital purposes.
Cash provided by operating activities totaled $35.6 million for the nine
months ended September 30, 1997 compared to $31.7 million for the same period
last year, as higher earnings and lower working capital requirements
(excluding legal settlement reserves) were offset to some extent by cash
expenses in 1997 related to 1996 restructuring reserves.
Capital expenditures were $13.0 million for the nine months ended September
30, 1997 versus $16.1 million (excluding acquisitions) for the same period
last year, with the decrease in 1997 due primarily to significant capital
improvements at the Stickney PAA plant and the Monessen Facility in 1996. In
April 1996 the Company purchased the coal chemical business of Aristech
Chemical Corporation located in Clairton, Pennsylvania for approximately $40
million cash and the assumption of certain liabilities. See Note 3 on page 45
of the Notes to Consolidated Financial Statements in the Company's 1996 Form
10-K.
Financing activities utilized $24.2 million in cash for the nine months
ended September 30, 1997 compared to providing $21.9 million for the same
period last year. Cash used in 1997 included approximately $20.1 million of
debt repayment; cash supplied by financing activities in 1996 was the result
of the $35.0 million term loan for the Clairton acquisition coupled with a net
increase of $15.5 million in the revolving credit facility, used in part to
provide for a $12.0 million term loan repayment and a $12.3 million purchase
of non-voting common stock of the Company. See Note 5 on page 47 of the Notes
to Consolidated Financial Statements in the Company's 1996 Form 10-K.
13
<PAGE>
KOPPERS INDUSTRIES, INC.
Recent Developments
On October 15, 1997, Cornerstone sold all of its voting and non-voting
common stock in the Registrant, through the Management Investors and KAP, to
the Registrant, Saratoga and Saratoga Koppers for $52.5 million. The purchase
of shares was an exercise of a right of first refusal granted to existing
shareholders in the Company's Stockholders' Agreement. The Management
Investors and Koppers Australia intend to use the shares to repay certain
loans obtained to finance the transaction.
On October 8, 1997 the Company announced that it had entered into a
definitive agreement with Broken Hill to acquire its 50% interest in Koppers
Australia, which will result in Koppers Australia being a wholly-owned
subsidiary of the Company. The purchase, with an estimated purchase price of
$65 million, is expected to be completed in the fourth quarter of 1997.
The Company has issued a cash tender offer and consent solicitation relating
to all of the Company's Notes. The tender offer is part of the Company's
Recapitalization. At the expiration of the tender offer the remaining steps of
the Recapitalization will be completed, including: (i) the acquisition by the
Company of the 50% of Koppers Australia not owned by it; (ii) the repayment in
full of the Company's existing bank credit facilities; and (iii) the
redemption by the Company of a portion of the shares of common stock held by
certain existing investors, including a portion of such shares held by
Management Investors. Financing for the Recapitalization will be provided by a
new senior credit facility and by a contemporaneous offering of senior
subordinated notes of the Company pursuant to Rule 144A.
Environmental Indemnity and Guarantee
The facilities of the Company are subject to a number of federal, state and
local laws and regulations governing, among other things, the treatment,
storage and disposal of wastes, the discharge of effluent into waterways, the
emission of substances into the air and various health and safety matters.
These laws and regulations are subject to frequent amendment. The Company
expects to incur substantial costs for ongoing compliance with such laws and
regulations. In addition, it is possible that the Company may face third-party
claims for cleanup or for injuries resulting from contamination. Under the
terms of the Asset Purchase Agreement, Beazer East assumed the liability for
and indemnified the Company against cleanup liabilities for past contamination
occurring prior to the purchase date at properties acquired from Beazer East,
as well as third-party claims arising from such past contamination. Beazer
Limited unconditionally guaranteed Beazer East's performance of the indemnity
pursuant to the Guarantee. However, if such indemnification was not available
for any reason, including the inability of Beazer East and/or Beazer Limited
to make such indemnification payments, the Company may not have sufficient
resources to meet such liabilities.
Beazer East has adhered to the terms of the Indemnity agreement and is
actively fulfilling its obligations to conduct investigative and remedial
programs at the properties which the Company acquired from Beazer East in
accordance with the requirements of regulatory authorities. The Indemnity is
not applicable to sites acquired since the formation of the Company, for which
separate indemnifications have been negotiated where appropriate. At the
properties which the Company acquired subsequent to the acquisition of the
Beazer East properties, all remedial actions are being performed in accordance
with applicable regulations and all indemnification obligations are being
honored.
The Company has been informed by Beazer East that for the last three years
amounts paid by Beazer East under the Indemnity have averaged approximately
$13 million per year. The requirement to pay such costs without reimbursement
would have a material adverse effect on the business, financial condition and
results of operations of the Company. Furthermore, if the Company were
required to record a contingent liability in respect of matters covered by the
Indemnity on its balance sheet the result could be that the Company would have
significant negative net worth.
14
<PAGE>
KOPPERS INDUSTRIES, INC.
In addition, Beazer East is presently defending certain toxic tort actions
arising from the pre-Closing operation of assets which the Company acquired
from Beazer East. These tort actions were not assumed by the Company under the
Asset Purchase Agreement and, in any event, are within the scope of the
Indemnity.
The Company recently evaluated the environmental liabilities related to the
manufacturing sites acquired by the Company at its formation in 1988. The
evaluation was based on a report prepared by an independent consultant, which
utilized site-specific public information to the extent available, as
supplemented by (among other things) its technical knowledge and expertise,
published resources regarding costing of remediation techniques and specified
technical cost and regulatory assumptions. The evaluation and report estimated
that approximately $111.1 million would be expended at these sites for
environmental remediation during the period of 1998 to 2042. The Company
estimates that approximately $92.9 million of this amount is covered under the
Indemnity, that the Company is responsible for $135,000, and that identified
third parties are responsible for the remaining $18.1 million. There can be no
assurance, however, that the actual liabilities associated with the
investigation, cleanup and closure of these sites will not exceed this
estimate. The factors that could positively or negatively affect the estimate
include: new information about the contamination at these sites that is
contrary to previous assumptions, new interpretations of existing
environmental laws, new environmental laws, enforcement policies of regulatory
authorities, and technological advancements in environmental remediation
practices. Further, in the event that Beazer East and Beazer Limited do not
fulfill their commitments under the Indemnity and the Guarantee, respectively,
the Company may be required to pay costs that would have a material adverse
effect on the business, financial condition, cash flow, and results of
operations of the Company.
Other Environmental Matters
Jefferson County issued a notice of violation in March 1996 in connection
with various alleged violations of Jefferson County's air pollution control
regulations for emissions from coke oven batteries at the Company's Woodward
Facility during the period May 26, 1992 through March 1, 1996. On February 14,
1997 the EPA issued a notice of violation covering the same issues that were
raised in the Jefferson County notice of violation. Thereafter, the Company
discovered that certain benzene abatement equipment at the Woodward Facility
had not been operational for several months. Following a preliminary
investigation, the Company also discovered that certain environmental reports
and records contained incomplete and inaccurate information and that certain
environmental reports and certifications were not filed when required. The
Company has notified Jefferson County, the State of Alabama and the EPA of the
environmental irregularities, and the environmental reporting status of the
Woodward Facility has been brought up to date by the Company. Counsel and
independent investigators have been retained to conduct a complete and
thorough investigation. While the benzene abatement equipment has been
returned to service, the Company could be subject to significant liability in
connection with these matters, including fines and civil and criminal
penalties and the risk of third party lawsuits. The Company and Jefferson
County have negotiated a settlement agreement, pursuant to which the Company
might be required to install monitoring and control equipment and institute
operational changes. In addition, the Company has permanently shut down
batteries 4A, 4B and 5 at the Woodward Facility. The settlement agreement
includes both the original Jefferson County notice of violation and the self-
reported benzene abatement violations. The settlement agreement, in addition
to the changes listed above, also requires the Company to pay a civil penalty
in the amount of $450,000 to Jefferson County, which sum has been paid. There
can be no assurance that the settlement with Jefferson County will deter the
EPA from pursuing its notice of violation and that the EPA will not seek
additional actions or penalties that could have a material adverse effect on
the business, financial condition and results of operations of the Company.
During the investigation of the Woodward Facility described above, it was
also discovered that certain environmental records and reports relating to
discharges of treated process water and treated storm water
15
<PAGE>
KOPPERS INDUSTRIES, INC.
contained incomplete and inaccurate information. Corrected reports have been
submitted to the State of Alabama and the EPA. While no notice of violation
has been issued in connection with this matter, it is believed likely that a
notice of violation will be issued and substantial penalties may be sought by
the State of Alabama or the EPA.
PADEP previously issued a notice of violation alleging that the boilers at
the Monessen Facility are emitting greater quantities of nitrogen oxides than
allowed under a plan approved by PADEP. The Company also received a notice of
violation in connection with a failure to conduct timely emission monitoring
testing on the boilers at the Monessen Facility. The Company has installed
additional equipment and modified existing equipment to improve the quality of
boiler emissions. Resolution of these matters could have a negative effect on
the business, financial condition, cash flows and results of operations of the
Company. The Company has submitted an amended plan approval application to
PADEP that provides for limitations on the operation of the two boilers at the
Monessen Facility. PADEP is currently reviewing this application. As a result
of the failure to meet the original nitrogen oxide emission limitations, it is
expected that PADEP will propose a civil penalty in an amount of approximately
$100,000.
On June 12, 1996 PADEP issued a notice of violation in connection with an
alleged noncompliance with the terms of the Consent Agreement. The notice of
violation alleged that the Company had not implemented the corrective actions
required under the Consent Agreement in a timely fashion. PADEP has calculated
that a stipulated penalty of $261,000 may be requested under the Consent
Agreement for the alleged untimely actions. The Company has completed the
implementation of the corrective actions at issue and is in the process of
conducting settlement negotiations with PADEP to agree upon the amount of the
stipulated penalty to be assessed in connection with this matter.
In June 1997, during a routine environmental compliance audit of the
Logansport, Louisiana wood treating plant, it was discovered that certain
records and reports relating to discharges of treated process water contained
incomplete and inaccurate information. Corrected reports have been submitted
to the local municipality, the State of Louisiana and the EPA. While no notice
of violation has been issued in connection with this matter, it is believed
that it is likely a notice of violation will be issued and civil penalties
will be sought by the local municipality, the State of Louisiana and the EPA.
In September 1996, the Company was served with a notice of violation from
the IEPA relating to 16 releases of hazardous materials which occurred at or
from its facility located in Stickney, Illinois between January 24, 1990 and
May 3, 1996. The Company has entered into negotiations with the IEPA to
investigate four of the releases which had the potential to cause groundwater
contamination. Although the Company believes that all such releases were
remediated when they occurred, there can be no assurances that the IEPA will
not require additional action in connection with this matter.
In addition to the environmental issues discussed above, the Company has
received or expects to receive notices of violations and requests for
information at its Monessen, Pennsylvania coke facility, the Stickney,
Illinois and Follansbee, West Virginia tar distillation and chemicals
facilities, and the Gainesville, Florida wood treating facility that relate to
matters which the Company does not believe will have a material impact on the
business, financial condition, cash flow and results of operations of the
Company.
Other Matters
As a result of an internal investigation, the Company discovered in March
1997 that certain reports relating to the moisture of coke contained
incomplete and inaccurate information. Because of these discrepancies, certain
customers who purchased the coke were overbilled. Upon discovery of the
overbilling, refunds were made available to all the affected customers.
16
<PAGE>
KOPPERS INDUSTRIES, INC.
For a fee, the Company treats waste water produced by Beazer East during
Beazer East's remediation of certain of the Company's facilities. Beazer East
performs these remediation activities pursuant to the Indemnity. During the
summer of 1997, Beazer East challenged the amounts of the charges for waste
water treatment services at the Florence and Follansbee facilities. Beazer
East alleged they had been overcharged by approximately $2.2 million at
Florence and by approximately $3.1 million at Follansbee. The Company has
contested these allegations and believes that if an overcharge occurred, the
amount of the overcharge is less than Beazer East has alleged.
The Woodward Facility faces significant challenges among which are the
advanced ages of the coke oven batteries, ongoing environmental compliance and
significant capital expenditure requirements, all of which have combined to
reduce productive capacity and increase per unit costs. The Company is
currently conducting a detailed review of its business options at the Woodward
Facility which may result in consideration of either a sale of the facility or
a discontinuance of operations. The Company is attempting to complete this
analysis in 1997. If the Company should choose to close the Woodward Facility,
this could result in a charge to earnings in the fourth quarter of
approximately $32 million, $9 million of which would be comprised of cash
charges primarily for dismantling and severance costs.
Sales at the Woodward Facility for the nine months ended September 30, 1997
and 1996 amounted to $40.7 and $51.7 million, respectively, while gross profit
for the nine months ended September 30, 1997 and 1996 amounted to ($5.1)
million and $1.9 million, respectively.
Feather River includes both a wood treating facility (utility poles) and a
dormant wood-fired cogeneration facility. Feather River has found it difficult
to compete in the California utility pole market due to its limited treatment
capabilities, a shrinking product demand and high raw materials cost. The
Company has recently been notified that a targeted customer for Feather River
will not take product in 1998, which will impact the forward-looking
profitability of this facility. The Company is currently conducting an
analysis to determine the feasibility of continuing to operate this facility;
this analysis is expected to be completed by the end of 1997. The current
carrying value of assets at the treating facility is approximately $4.3
million.
The Feather River cogeneration facility has been dormant for 3 years while
the Company explored potential opportunities for developing a treated wood
burning and disposal facility. The Company has thus far been unable to locate
a customer for this process, and expects to make a decision regarding the
future of the facility by the end of 1997. In the event that a decision is
made to close the cogeneration facility, this could result in a charge to
earnings in the fourth quarter of approximately $1.9 million, which includes a
$1.6 million early contract termination fee with the local utility.
Status of Restructuring Reserves
Restructuring charges for 1996 consisted of $11.1 million and $4.1 million
of cash and non-cash charges, respectively. At September 30, 1997 $6.8 million
of total cash charges had been expended.
Impact of Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, "Earnings Per Share", which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of stock options will be excluded. The impact of
Statement 128 on the calculation of earnings per share for the nine months
ended September 30, 1997 and 1996 is not expected to be material.
17
<PAGE>
KOPPERS INDUSTRIES, INC.
Additionally, the following statements have been issued during 1997 and are
effective for fiscal years beginning after December 15, 1997:
Statement No. 129, "Disclosure of Information about Capital Structure",
requires additional disclosures about an entity's capital structure.
Statement No. 130, "Reporting Comprehensive Income", requires enterprises to
classify items of comprehensive income by their nature in a financial
statement and display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in-capital.
Statement No. 131, "Disclosure about Segments of an Enterprise and Related
Information" changes the way companies report segment information in annual
reports and in interim financial statements.
The Company does not expect the effect of adoption of Statements No. 129,
130 or 131 to be material.
18
<PAGE>
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material changes in the status of legal proceedings as
previously reported.
ITEM 5. OTHER INFORMATION
Change of Control
On October 15, 1997 Cornerstone-Spectrum, Inc. (an affiliate of Beazer East,
Inc. and Hanson PLC) sold all of its shares of voting and non-voting common
stock in the Registrant, through a group of management investors of the
Company (the "Management Investors") and KAP Investments, Inc. (a wholly-owned
subsidiary of Koppers Australia Pty. Limited), to the Registrant, Saratoga
Partners III, L.P., a private investment fund ("Saratoga"), and Saratoga
Koppers Funding, Inc. Upon the completion of a contemplated recapitalization
of the Registrant, Saratoga will be entitled to elect a majority of the Board
of Directors of the Registrant pursuant to the terms of a stockholders'
agreement to be executed among the Registrant, Saratoga and the Management
Investors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)Exhibits:
11 Statement Regarding Computation of Per Share Earnings.
27.1 Financial Data Schedule
(b)Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended September 30, 1997.
19
<PAGE>
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 INDUSTRIES, INC.
(Registrant)
Date October 30, 1997 /s/ Donald E. Davis
--------------------- -------------------------------------
Donald E. Davis,
Chief Financial Officer
(Principal Financial Officer,
Principal Accounting Officer)
20
<PAGE>
EXHIBIT 11
KOPPERS INDUSTRIES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ---------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE:
Voting common stock outstanding.... 5,183,653 5,279,406 5,179,910 5,291,865
Non-Voting common stock
outstanding....................... 3,628,200 3,628,200 3,628,200 3,948,182
Common stock equivalents........... 426,189 459,405 439,197 462,506
---------- ---------- ---------- ----------
Common stock outstanding, including
convertible securities............ 9,238,042 9,367,011 9,247,307 9,702,553
Net income to common stockholders
(000's)......................... $ 12,422 $ 2,544 $ 22,159 $ 5,527
Primary earnings per common share.. $ 1.34 $ 0.27 $ 2.40 $ 0.57
========== ========== ========== ==========
FULLY DILUTED EARNINGS PER SHARE:
Voting common stock outstanding.... 5,183,653 5,279,406 5,179,910 5,291,865
Non-Voting common stock
outstanding....................... 3,628,200 3,628,200 3,628,200 3,948,182
Common stock equivalents........... 426,189 459,405 439,197 462,506
---------- ---------- ---------- ----------
Common stock outstanding, including
convertible securities............ 9,238,042 9,367,011 9,247,307 9,702,553
Net income to common stockholders
(000's)......................... $ 12,422 $ 2,544 $ 22,159 $ 5,527
Fully diluted earnings per common
share............................. $ 1.34 $ 0.27 $ 2.40 $ 0.57
========== ========== ========== ==========
</TABLE>
Common stock equivalents include stock options granted to management. Each
stock option awarded to management gives the holder the right to purchase an
equal amount of common stock at the listed exercise price and becomes
exercisable one year after the date of grant.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JUL-01-1997 JAN-01-1997
<PERIOD-END> SEP-30-1997 SEP-30-1997
<CASH> 0 491
<SECURITIES> 0 0
<RECEIVABLES> 0 75,619
<ALLOWANCES> 0 148
<INVENTORY> 0 67,108
<CURRENT-ASSETS> 0 155,903
<PP&E> 0 308,174
<DEPRECIATION> 0 (139,767)
<TOTAL-ASSETS> 0 395,923
<CURRENT-LIABILITIES> 0 75,558
<BONDS> 0 110,000
0 0
0 0
<COMMON> 0 103
<OTHER-SE> 0 58,836
<TOTAL-LIABILITY-AND-EQUITY> 0 395,923
<SALES> 160,721 452,260
<TOTAL-REVENUES> 160,721 452,260
<CGS> 133,293 380,825
<TOTAL-COSTS> 146,203 420,292
<OTHER-EXPENSES> (1,346) (3,282)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,054 12,387
<INCOME-PRETAX> 11,810 22,863
<INCOME-TAX> (612) 704
<INCOME-CONTINUING> 12,422 22,159
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 12,422 22,159
<EPS-PRIMARY> $1.34 $2.40
<EPS-DILUTED> 0 0
</TABLE>
