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 theSecurities and Exchange Commission , or in Koppers communications and discussions with investors and analysts in the normal course of business through meetings, phone calls and conference calls, regarding future dividends, expectations with respect to sales, earnings, cash flows, operating efficiencies, restructurings, product introduction or expansion, the benefits of acquisitions and divestitures, or other matters as well as financings and debt reduction, are subject to known and unknown risks, uncertainties and contingencies. Many of these risks, uncertainties and contingencies are beyond our control, and may cause actual results, performance or achievements to differ materially from anticipated results, performance or achievements. Factors that might affect such forward-looking statements, include, among other things, the impact of changes in commodity prices, such as oil and copper, on product margins; general economic and business conditions; existing and future adverse effects as a result of the coronavirus (COVID-19) pandemic; disruption in theU.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 theSecurities 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 endedDecember 31, 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 capabilities inNorth America ,South America ,Australasia andEurope . We operate three principal businesses: RUPS, PC and CMC. Through our RUPS business, we believe that we are the largest supplier of wood crossties to the Class I railroads inNorth America . Our other treated wood products include utility poles for the electric, telephone, and broadband utility industries inthe United States andAustralia and construction pilings in theU.S. We also provide rail joint bar products as well as various services to the railroad industry inNorth 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, carbon black, high-strength concrete, plasticizers and specialty chemicals, respectively. 22 --------------------------------------------------------------------------------
Non-GAAP Financial Measures
We utilize certain financial measures that are not in accordance withU.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 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 basis 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 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 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 and currently by the Russian invasion ofUkraine ; (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 onNovember 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.
Effects of COVID-19 on our operations
Our operating results may fluctuate due to a variety of factors that are outside of our control, including from the effects of the current pandemic. The COVID-19 outbreak began to have a global effect in the first quarter of 2020 and continues to have a significant impact on global markets driven by supply chain and production disruptions, workforce restrictions, trends in spending patterns and other factors. During the COVID-19 pandemic, substantially all of our global businesses have continued to operate without significant disruption. Inthe United States , Koppers was designated as an essential business, as determined by theCybersecurity and Infrastructure Security Agency (CISA) within theDepartment of Homeland Security . As a result, we have been able to meet the demands of our customers in the various markets we serve by continuing to operate to help our customers transport critical goods, provide power and connectivity to homes and businesses, and keep our infrastructure running reliably. Our condensed consolidated financial statements and discussion and analysis of financial condition and results of operations reflect estimates and assumptions made by us as ofMarch 31, 2022 , including those related to COVID-19. Events and changes in circumstances arising afterMarch 31, 2022 , including those resulting from the impacts of COVID-19, will be reflected in our estimates for future periods. 23 --------------------------------------------------------------------------------
Railroad and Utility Products and Services
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 theRailway 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. Crosstie prices increased significantly as a result of limited supply and railroad customers are deferring their purchases. Given continuing economic uncertainties, including those related to COVID-19, the RTA is forecasting a slight increase in 2022 of 1.9 percent, or 18.7 million crossties, primarily from the commercial market while Class I volumes are expected to remain at relatively similar demand levels. In 2023, the outlook continues to be modest with a projected increase of 2.0 percent, or 19.0 million crossties, primarily from the Class I railroads. According to theAssociation of American Railroads ("AAR"), rail traffic for the first three months of 2022 was mixed compared with the prior year period. For the first quarter of 2022, totalU.S. carload traffic increased 2.6 percent from the prior year, while intermodal units declined by 6.9 percent. The combinedU.S. traffic for carloads and intermodal units was lower than the prior year by 2.7 percent. In March, the trends were conflicting as carloads for certain categories such as chemicals, crushed stone and sand, food products, lumber, and motor vehicles were higher than prior months; however, carloads for grain, petroleum products, and paper products were down. With respect to our utility products business, the installed base for wood distribution poles in theU.S. is approximately 150 million and nearly half of this total are 40 years old. Industry demand has historically been in the range of two million to three million poles annually. On an overall basis, we believe that the rate at which utilities purchase utility poles will grow as they continue replacement programs within their service territories. As a whole, the key factors that drive growth in the utility pole market include growing global energy consumption as well as expansion of the global telecommunication industry. Generally, utilities need to maintain their infrastructure to avoid interruptions in service due to extreme weather events that are occurring more frequently. At the same time, the need for digital connectivity remains strong given that portions of the population are continuing to work remotely. As long as there are not any extended supply chain disruptions, we anticipate that 2022 demand for pole replacements will be relatively stable to slightly higher, as the overall industry is trending toward expanded and upgraded transmission networks. In addition, there is a developing trend in the industry for utilities to maintain some additional inventory to prepare for potential damaging storms. With respect to raw materials, we expect the cost of poles to be affected as lumber for other uses continue to be in high demand and, consequently, lead to increased costs for pole material. Also, transportation costs, which include fuel costs, are expected to experience some upward pressure and affect the price of pole material delivered to the pole peelers from the forest. As a result of these inflationary factors, we are implementing price increases to pass on higher costs to end customers. Longer term, we are evaluating opportunities to potentially expand our market presence inthe United States as well as certain overseas markets. We believe there remains an overall need for sustained investment in infrastructure and capacity expansion and with our vertical integration capabilities in wood treatment and strong customer relationships, we will ultimately benefit from increased demand. As part of optimizing our business, we continue to evaluate a number of opportunities to improve efficiencies in our operational processes, people and facilities. With our 14 North American RUPS treating facilities operating at less than full utilization, our goal is to either capture more volume through the existing facilities or consolidate our operating footprint. InJanuary 2022 , we began curtailing operations at ourSweetwater, Tennessee plant. We sold the plant inMarch 2022 and recorded a gain of$2.5 million on the sale. During 2021, we exited theTexas Electric Cooperatives' Jasper, Texas facility and relocated the production of utility products to ourSomerville, Texas plant. Separately, in the third quarter of 2020, we permanently closed ourDenver, Colorado wood treatment facility. Concurrent with the decision to close theDenver facility, we announced our plan to modernize and upgrade parts of our treating network, specifically at our facility inNorth Little Rock, Arkansas , which would be primarily funded through proceeds from the sale of non-core assets, including theDenver facility. InOctober 2021 , we sold our closedDenver, Colorado crosstie treating facility and recorded a gain on sale of$23.4 million . In addition, as part of the sales agreement, we may receive additional contingent post-closing payments secured by a guaranty from the buyer after applicable redevelopment milestones are reached. At this time, we are unable to estimate how much, if any, of these additional funds will ultimately be paid to us. 24 --------------------------------------------------------------------------------
Performance Chemicals
As most of the products sold by PC are copper-based products, changes in the price and availability of copper can have a significant impact on product pricing and margins. We attempt to moderate the variability in copper pricing over time by entering into hedging transactions for the majority of our copper needs, which primarily range from six months up to 36 months. These hedges typically match expected customer purchases and from time to time, we enter into forward transactions based upon long-term forecasted needs of copper. Copper prices began to reach peak levels in mid-2021 boosted by pent-up demand as home repair and remodeling growth accelerated when pandemic lockdowns were eased, and the market faced tight supplies. In 2022, thus far copper prices have remained high but projections for future copper prices are mixed and are contingent on supply and demand dynamics as well as the impact of higher interest rates on economic growth. Product demand for our PC business has historically been closely associated with consumer spending on home repair and remodeling projects inNorth America , and therefore, trends in existing home sales serve as a leading indicator. In recent months, the market for existing homes seems to be slowing. According to the National Association of Realtors® ("NAR"), total existing-home sales decreased in March by 2.7 percent compared with February and 4.5 percent compared with the prior year, marking two consecutive months of declines. The housing market is expected to be impacted by rising interest rates and inflation, which in turn, are having unfavorable effects on purchasing power. According to the Leading Indicator of Remodeling Activity ("LIRA") reported by theJoint Center for Housing Studies of Harvard University , home renovation and repair expenditures increased by 11.5 percent year-over-year in the first quarter of 2022. The LIRA projects that expenditures for improvements and repairs to the owner-occupied housing stock are expected to grow throughout 2022 and into early next year. The year-over-year increases in residential renovation and maintenance spending are estimated to reach 19.7 percent in the third quarter of 2022 before decreasing to 15.1 percent in the first quarter of 2023. While annual improvement and repair spending is projected to reach$450 billion by the first quarter of 2023, headwinds such as the rising costs of project financing, construction materials, and labor, as well as growing concerns about a broader economic slowdown or recession may further slow remodeling growth. The Conference Board Consumer Confidence Index® was 107.2 in March, increasing slightly from 105.7 in February. While economic growth continued late into the first quarter of 2022, consumers are indicating a weakened outlook and purchasing intentions for big-ticket items such as automobiles are softening somewhat over the past few months as expectations for interest rates have risen.
Although the market data and projections for home improvements are continually changing, we anticipate ongoing demand for residential treated wood and residential renovation markets is remaining favorable.
Carbon Materials and Chemicals
The primary products produced by CMC are creosote, which is a registered pesticide inthe United States and used primarily in the pressure treatment of railroad crossties, and carbon pitch, which is sold primarily to the aluminum industry for the production of carbon anodes used in the smelting of aluminum. We have realigned capacity in our CMC plants inNorth America andEurope over the past several years to levels required to meet creosote demand inNorth America for the treatment of railroad crossties. The CMC business currently supplies our North American RUPS business with its creosote requirements. The availability of coal tar, the primary raw material for our CMC business, is linked to levels of metallurgical coke production. As the global steel industry, excludingAsia , has reduced the production of steel using metallurgical coke, the volumes of coal tar have been reduced. 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 Russian invasion ofUkraine inMarch 2022 . Our European CMC business typically receives approximately 20 percent of its annual coal tar requirements fromRussia andUkraine . We have ceased purchasing coal tar from Russian suppliers and we are currently unable to purchase coal tar from Ukrainian suppliers due to the conflict. Currently, the financial impact of volume reductions in our coal tar supply have been offset by higher prices in our end markets for that region and are not expected to materially impact operating results. For the external markets served by our CMC business, we anticipate some slowdown in manufacturing. According toIHS Markit Automotive Group (IHS), the global auto production forecast was updated in March to reflect the impact ofRussia's invasion ofUkraine and in April, the forecast was further downgraded. This was due to some additional challenges that have arisen, including a sluggish recovery in semiconductor supplies, the impact of further COVID lockdowns inChina , and the longer-term influence of high raw material prices that will put added pressure on new vehicle affordability. Currently, the forecast reflects noteworthy reductions for several markets, with the most significant reductions focused onEurope andChina . 25
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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
Consolidated Results
Net sales for the three months ended
Three Months Ended March 31, 2022 2021 Net Change (Dollars in millions) Railroad and Utility Products and Services$ 183.4 $ 191.9 -4 % Performance Chemicals 136.4 123.6 10 % Carbon Materials and Chemicals 139.5 92.0 52 %$ 459.3 $ 407.5 13 % RUPS net sales decreased by$8.5 million , or four percent, compared to the prior year period. The sales decrease was largely related to volume decreases in our utility pole business as a result of transitioning production from theTexas Electric Cooperatives' Jasper, Texas plant to ourSomerville, Texas plant along with volume decreases of untreated crossties for certain Class I customers and volume decreases in the commercial crosstie market. These decreases were offset, in part, by pricing increases in various markets within the segment and volume increases in our maintenance-of-way businesses. Foreign currency changes compared to the prior year period had an unfavorable impact on sales in the current year period of$0.6 million , mainly from our Australian utility pole business. PC net sales increased by$12.8 million , or ten percent, compared to the prior year period. The sales increase was primarily due to global price increases in the current year period for our copper-based preservatives and higher demand for preservatives in some of our international markets. The increases were offset, in part, by volume decreases for preservatives inCanada as high lumber prices, excess treated inventory from prior year and a return to normal consumer spending habits have tempered customer demand compared to extremely high levels of pandemic-fueled demand in the first half of 2021. Foreign currency changes compared to the prior year period had a de minimis impact on sales in the current year period. CMC net sales increased by$47.5 million , or 52 percent, compared to the prior year period due mainly to higher sales prices and volumes for carbon pitch, phthalic anhydride and carbon black feedstock along with higher sales prices for naphthalene in the current year period. Foreign currency changes compared to the prior year period from our international markets had an unfavorable impact on sales in the current year period of$5.3 million . Cost of sales as a percentage of net sales was 81 percent for the quarter endedMarch 31, 2022 compared to 78 percent in the prior year quarter. Gross margin was unfavorably impacted in the current year period primarily by an increase in raw material costs, fuel costs and shipping costs along with a decrease in absorption due to lower utilization at some of our plants in the current year period as sales volumes and throughput at RUPS has declined compared to the prior year period. Depreciation and amortization charges for the quarter endedMarch 31, 2022 were$1.9 million lower when compared to the prior year period mainly due to an increase in an asset retirement obligation in our European CMC operations in the first quarter of 2021. Gain on sale of assets for the quarter endedMarch 31, 2022 was$2.5 million and was related to the sale of our utility pole treating facility inSweetwater, Tennessee while the gain on sale of assets for the quarter endedMarch 31, 2021 was$7.5 million and 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 quarter endedMarch 31, 2022 were$1.2 million lower when compared to the prior year period. The prior year period included accelerated depreciation, demolition and other plant closure period costs related to the closure of ourDenver, Colorado facility. 26 -------------------------------------------------------------------------------- Selling, general and administrative expenses for the quarter endedMarch 31, 2022 were$4.6 million higher when compared to the prior year period due mainly to an increase of$1.6 million for consulting and professional services,$1.4 million for employee benefit related expenses and$1.0 million for travel and entertainment expenses.
Interest expense for the quarter ended
Income tax expense for the quarter endedMarch 31, 2022 was$9.7 million , an increase of$1.2 million when compared to the prior year quarter. The increase in the current year period is due to an increase in the estimated annual effective income tax rate when compared to the prior year period. The increase 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 effectJanuary 1, 2022 . Segment Results.
Segment adjusted EBITDA and adjusted EBITDA margin for the three months ended
Three Months Ended March 31, (Dollars in millions) 2022 2021 % Change Adjusted EBITDA: Railroad and Utility Products and Services $ 11.6 $ 16.4 -29 % Performance Chemicals 20.9 27.8 -25 % Carbon Materials and Chemicals 20.1 10.4 93 % Corporate unallocated 0.0 0.5 -100 % Total Adjusted EBITDA $ 52.6 $ 55.1 -5 % Adjusted EBITDA margin as a percentage of GAAP sales: Railroad and Utility Products and Services 6.3 % 8.5 % -26 % Performance Chemicals 15.3 % 22.5 % -32 % Carbon Materials and Chemicals 14.4 % 11.3 % 27 % Total Adjusted EBITDA margin 11.5 % 13.5 % -15 % RUPS adjusted EBITDA decreased by$4.8 million compared to the prior year period. Adjusted EBITDA as a percentage of net sales decreased to 6.3 percent from 8.5 percent in the prior year period and was unfavorably impacted in our domestic utility pole business by higher raw material, freight and fuel costs, as well as driver shortages and labor inefficiencies driven by the current labor shortage. In addition, unfavorability in our railroad crosstie business was driven by higher raw material costs and lower absorption of fixed costs due to lower tie throughput as a result of decreased purchasing activity of untreated crossties by our Class I customers driven by the impact that higher lumber prices had on the hardwood market. Finally, travel expenses have also increased over the prior year period as we emerge from in-person restrictions related to the pandemic. These unfavorable factors were partially offset by price increases implemented across our businesses. PC adjusted EBITDA decreased by$6.9 million compared to the prior year period. Adjusted EBITDA as a percentage of net sales decreased to 15.3 percent from 22.5 percent in the prior year period. The current year period was unfavorably impacted primarily by an increase in raw material costs, including scrap copper, net of gains realized from our copper-hedging program. This was offset, in part, by global price increases in the current year period for our copper-based preservatives and higher demand for preservatives in some of our other international markets. CMC adjusted EBITDA increased by$9.7 million compared to the prior year period. Adjusted EBITDA as a percentage of net sales increased to 14.4 percent from 11.3 percent in the prior year period. The current year period was favorably impacted by higher sales prices and volumes for carbon pitch, phthalic anhydride and carbon black feedstock along with higher sales prices for naphthalene. These increases were offset, in part, by an increase in raw material costs and selling, general and administrative costs in the current year period. 27 --------------------------------------------------------------------------------
The following table reconciles net income to adjusted EBITDA on a consolidated basis as calculated by us for the periods indicated below:
Three Months Ended March 31, (Dollars in millions) 2022 2021 Net income $ 18.8 $ 25.8 Interest expense 9.8 10.1 Depreciation and amortization 14.2 16.1 Income tax provision 9.7 8.5 Discontinued operations 0.5 0.4 Sub-total 53.0 60.9 Adjustments to arrive at adjusted EBITDA: Impairment, restructuring and plant closure costs(1) 0.1 3.3 (Gain) on sale of assets (2.5 ) (7.5 ) LIFO expense 1.7 1.0 Mark-to-market commodity hedging losses (gains) 0.3 (2.6 ) Total adjustments (0.4 ) (5.8 ) Adjusted EBITDA $ 52.6 $ 55.1
(1) Includes costs associated with restructuring, sales and closures of certain RUPS and CMC facilities as described in Note 3 - "Plant Closures and Divestitures".
Cash Flow
Net cash used in operating activities for the three months endedMarch 31, 2022 was$8.0 million compared to net cash used in operating activities of$7.4 million in the prior year period as higher working capital usage of$0.5 million in the current year period was a result of an increase in accounts receivable consistent with our increase in sales and an increase in inventory due to increased levels and raw material costs offset, in part, by a corresponding increase in accounts payable. Operating profit, excluding gain on sale of assets, was consistent with the prior year period. Net cash used in investing activities for the three months endedMarch 31, 2022 was$22.0 million compared to net cash used in investing activities of$19.5 million in the prior year period. Capital expenditures for both periods include increased investment in growth projects, primarily in our crosstie business, such as the expansion of our RUPS facility inNorth Little Rock, Arkansas . In addition, the current year period included$3.8 million of cash provided by the sale of our utility pole treating facility inSweetwater, Tennessee while the prior year period included$4.7 million of cash provided by the sales of two previously decommissioned CMC plants. Net cash provided by financing activities was$33.4 million for the three months endedMarch 31, 2022 andMarch 31, 2021 . The cash provided by financing activities in the three months endedMarch 31, 2022 reflected net borrowings of$45.4 million partially offset by repurchases of common stock and dividends paid of$12.2 million . The cash provided by financing activities in the prior year period primarily reflected net borrowings of debt of$34.1 million .
Liquidity and Capital Resources
The Credit Facility includes a$600.0 million senior secured revolving credit facility and a$100.0 million secured term loan facility as described in Note 14 "Debt." As ofMarch 31, 2022 , the secured term loan has been fully repaid.
Restrictions on Dividends to
Koppers Holdings depends on the dividends from the earnings ofKoppers Inc. and its subsidiaries to generate the funds necessary to meet its financial obligations, including the payment of any declared dividend ofKoppers Holdings . The Credit Facility prohibitsKoppers Inc. from making dividend payments toKoppers Holdings unless (1) such dividend payments are permitted by the indenture governing the "2025 Notes", (2) no event of default or potential default has occurred or is continuing under our Credit Facility, 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 restrictsKoppers 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 ofKoppers Inc. which is not a guarantor under the indenture, is not able to incur additional indebtedness (as defined in the indenture), and (3) the sum of all restricted payments (as defined in the indenture) have exceeded the permitted amount (which we refer to as the "basket") at such point in time. AtMarch 31, 2022 , the basket totaled$281.2 million . Notwithstanding such restrictions, the indenture governing the 2025 Notes permits an additional aggregate amount of$0.30 per share each fiscal quarter to finance dividends on the capital stock ofKoppers Holdings , whether or not there is any basket availability, provided that at the time of such payment, no default in the indenture has occurred or would result from financing the dividends. In addition, certain required coverage ratios in the Credit Facility may restrict the ability ofKoppers Inc. to pay dividends. 28
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Liquidity
The following table summarizes our estimated liquidity as of
Cash and cash equivalents(1)$ 46.9 Amount available under Credit Facility 257.8 Total estimated liquidity$ 304.7
(1) Cash includes approximately
excludes approximately
Our liquidity was
Our need for cash in the next twelve months relates primarily to contractual obligations which include debt service, pension plan funding, purchase commitments and operating leases, as well as working capital, capital maintenance programs, the funding of plant consolidation and rationalizations, dividends and share repurchases. We may also use cash to pursue other potential strategic acquisitions or voluntary pension plan contributions. Capital expenditures in 2022, excluding acquisitions, if any, are expected to total approximately$95 million and are expected to be funded by cash from operations. We anticipate that our liquidity will continue to be adequate to fund our cash requirements for 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 ofMarch 31, 2022 andDecember 31, 2021 , approximately 80 percent and 75 percent of accounts payable was current, approximately 15 percent and 20 percent was 1-30 days past due and approximately five percent was past due greater than 30 days, respectively.
Debt Covenants
The covenants under the Credit Facility may affect availability of the facility
or restrict the ability of
? 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 as of
? The total 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 total secured leverage ratio as of
? The total leverage ratio, calculated as of the end of each fiscal quarter for
the four fiscal quarters then ended, is not permitted to exceed 4.75. The
total leverage ratio as of
We are currently in compliance with all covenants governing the Credit Facility. Our continued ability to meet these financial ratios can be affected by events beyond our control; however, excluding possible acquisitions, we currently expect that our net cash flows from operating activities and funds available from our Credit Facility will be sufficient to provide for our working capital needs and capital spending requirements over the next twelve months.
Legal Matters
The information set forth in Note 18 to the Condensed Consolidated Financial
Statements of
Recently Issued Accounting Guidance
The information set forth in Note 2 to the Condensed Consolidated Financial
Statements of
Critical Accounting Policies
There have been no material changes to our critical accounting policies as
disclosed in our Annual Report on Form 10-K for the year ended
Environmental and Other Matters
The information set forth in Note 18 to the Condensed Consolidated Financial
Statements of
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