PITTSBURGH, April 10, 2018 /PRNewswire/ -- Koppers Holdings
Inc. (NYSE: KOP), an integrated global provider of treated wood
products, wood treatment chemicals and carbon compounds, today
reported that Koppers Inc., a wholly-owned subsidiary of Koppers
Holdings, signed an agreement to acquire, and expects to fully
close at the end of business today, the acquisition of the
Industrial division of Cox Industries, Inc. (Cox Industrial) for
approximately $200 million in cash.
Cox Industrial manufactures and distributes power
distribution and transmission poles, pilings and related products
to investor-owned utilities, electric cooperatives, municipalities
and other entities. The transaction creates a leading utility
pole and wood treatment producer and advances Koppers strategy of
being a vertically integrated, high-value global supplier of
wood-based technologies to infrastructure markets.
Commenting on the transaction, President and CEO Leroy Ball said, "We are thrilled to return to
the U.S. utility pole market with a significantly larger presence
than when we exited the business in January 2015. While we
were working hard during the past several years to restructure our
operations and reduce our balance sheet leverage, Cox Industrial
grew to become the largest supplier of utility poles in the eastern
U.S. The opportunity to re-enter this market with the scale
to better compete, along with gaining a growth-focused management
team, was attractive and compelling. In addition to numerous
synergies being explored, we plan to focus on continuing to grow
the business organically as well as through strategic partnerships
and select acquisitions."
CEO and President of Cox Industries, Inc., R. Michael Johnson, said, "We know Koppers well,
having enjoyed a strong relationship with the management team over
the years, and we share a commitment to providing innovative
products and strong customer service to our served markets.
We believe that our complementary customer-centric mindset,
expanded product portfolio, and enhanced innovation and geographic
reach should benefit our collective stakeholders."
Cox Industrial is one of a few industry players that competes on
a national level due to its capacity, scale and breadth of
treatment options, and proven track record of storm response.
Cox Industrial facilities are strategically located near
railroads and ports to facilitate shipments throughout the
U.S. The operations include eight manufacturing locations,
three dedicated peeling facilities, and 19 reload yards which
support its market leadership position and opportunities for
further growth in key expansion markets. On a combined basis,
Koppers and Cox Industrial will result in a powerful platform with
national scale and local expertise.
Terms of Transaction
Under the terms of the transaction, Koppers is acquiring Cox
Industrial for approximately $200
million in cash. Cox Industrial will be renamed as the
Utility and Industrial Products unit of Koppers.
The agreement to acquire Cox Industrial has been structured as
an acquisition of stock with a mutual 338(h)(10) election,
resulting in approximately $24
million of net present value tax benefits to Koppers.
Additionally, Koppers expects that the combined company will
achieve total synergies of at least $5
million on an annualized basis from overhead cost savings as
well as incremental sales opportunities for the company's
Performance Chemicals, and Carbon Materials and Chemicals
businesses through vertically integrated supply
relationships. Koppers expects the acquisition to be
accretive to earnings per share in 2018.
Koppers is financing the acquisition through existing bank debt,
and expects to enter into a new secured term loan facility, added
to the company's existing $600
million revolving credit facility, immediately after the
closing of the transaction. The new secured term loan
facility will include a secured term loan of $100 million with a quarterly amortization of
$2.5 million and a five-year
maturity. The initial average borrowing rates under the new
facilities are expected to be approximately five percent.
Transaction Advisors
Wells Fargo Securities, LLC acted as financial advisor
to Koppers in regard to the transaction, and K&L
Gates LLP acted as legal counsel to the company.
Committed financing will be provided by PNC Bank, National
Association.
Updated 2018 Outlook
Including the Utility and Industrial Products unit, Koppers now
expects that 2018 sales will be approximately $1.9 billion, with adjusted earnings before
interest, taxes, depreciation and amortization (EBITDA) estimated
at $240 million. The revised
guidance represents an increase to the prior estimate of
$1.7 billion in sales and
$210 million in adjusted
EBITDA.
On an adjusted basis, the acquisition is expected to contribute
$0.15 to $0.20 in earnings per share (EPS) in 2018 before
achieving an annualized run rate of $0.40 to $0.50 per
share in 2019. The company is in the process of finalizing
the estimated effective tax rate for 2018, and therefore, will
provide the updated consolidated adjusted EPS outlook for 2018 when
first-quarter results are reported on May 3,
2018.
In addition, the company anticipates capital expenditures to be
in the range of $60 million to
$70 million, which is an increase
from the prior estimate of $55
million to $65 million, and
reflects the anticipated additional capital investments related to
the Utility and Industrial Products unit. The pro-forma net
debt to adjusted EBITDA ratio is expected to be below the company's
desired ceiling of 4x, and projected to be at or below 3.5x by
December 31, 2018.
Investor Conference Call and Web Simulcast
Koppers management will conduct a conference call on
Wednesday, April 11, 2018, at
10:15 a.m. to 11:00 a.m. Eastern Time
to discuss the transaction and the company's revised outlook for
2018. Presentation materials will be available at least 15
minutes before the call on www.koppers.com in the Investor
Relations section of the company's website.
Interested parties may access the live audio broadcast by
dialing 877-317-6789 in the United
States/Canada, or
412-317-6789 for international, Conference ID number
10119272. Participants are requested to access the call at
least five minutes before the scheduled start time in order to
complete a brief registration.
In addition, the conference call will be broadcast live online
at: https://services.choruscall.com/links/koppers180411.html.
(Due to the length of this URL, it may be necessary to copy and
paste this hyperlink into your internet browser's URL address
field.)
An audio replay will be available approximately two hours after
the completion of the call at 877-344-7529 for U.S. toll free,
855-669-9658 for Canada toll free,
or 412-317-0088 for international, Conference ID number
10119272. The recording will be available for replay through
May 11, 2018.
About Koppers
Koppers, with corporate headquarters in Pittsburgh, Pennsylvania, is an integrated
global provider of treated wood products, wood treatment 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. Including our joint ventures, we serve our
customers through a comprehensive global manufacturing and
distribution network, with facilities located in North America, South
America, Australasia, China
and Europe. The stock of Koppers Holdings Inc. is publicly
traded on the New York Stock Exchange under the symbol "KOP."
For more information, visit us at www.koppers.com. Questions
concerning investor relations should be directed to Mr.
Michael J. Zugay at 412-227-2231 or
Ms. Quynh McGuire at
412-227-2049.
About Cox Industries
Cox Industries, Inc. is a leading U.S. producer of wood utility
poles and marine construction products serving a wide range of
customers nationwide. Cox operates multiple production
facilities in eight different states. In addition to
supplying much-needed products to support America's infrastructure,
Cox also provides additional services to help customers manage the
end-of-life disposal of poles in an environmentally sensitive
manner.
Non-GAAP Financial Measures
This press release contains certain forecasted non-GAAP
financial measures. Koppers believes that adjusted EBITDA,
adjusted earnings per share, net debt and net leverage ratio
provide information useful to investors in understanding the
underlying operational performance of the company, its business and
performance trends, and facilitates comparisons between periods and
with other corporations in similar industries. The exclusion
of certain items permits evaluation and a comparison of results for
ongoing business operations, and it is on this basis that Koppers
management internally assesses the company's performance. In
addition, the Board of Directors and executive management team use
adjusted EBITDA and adjusted earnings per share as performance
measures under the company's annual incentive plans.
Although Koppers believes that these non-GAAP financial measures
enhance investors' understanding of its 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 measure. Other
companies in a similar industry may define or calculate these
measures differently than the company, 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.
For the company's guidance, adjusted EBITDA and adjusted EPS
excludes restructuring, impairment, non-cash LIFO charges, and
non-cash mark-to-market commodity hedging. The forecasted
amounts for these items cannot be reasonably estimated due to their
nature, but may be significant. For that reason, the company
is unable to provide GAAP earnings estimates at this time.
Safe Harbor Statement
Certain statements in this press release are "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
resulting 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 "outlook," "guidance," "forecast," "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 other press releases, written statements or
other documents filed with the Securities and Exchange Commission,
or in Koppers communications with and discussions with investors
and analysts in the normal course of business through meetings,
phone calls and conference calls, regarding expectations with
respect to sales, earnings, cash flows, operating efficiencies,
restructurings, the benefits of acquisitions, divestitures, joint
ventures or other matters as well as financings and debt reduction,
are subject to known and unknown risks, uncertainties and
contingencies. Many of these risks, uncertainties and
contingencies are beyond our control, and may cause actual results,
performance or achievements to differ materially from anticipated
results, performance or achievements. Factors that might
affect such forward-looking statements, include, among other
things, the impact of changes in commodity prices, such as oil and
copper, on product margins; general economic and business
conditions; 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 limitations 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; unfavorable resolution of claims against us, as
well as those discussed more fully elsewhere in this release and in
documents filed with the Securities and Exchange Commission by
Koppers, particularly our latest annual report on Form 10-K and
quarterly report on Form 10-Q. Any forward-looking statements
in this release speak only as of the date of this release, 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.
For
Information:
|
Michael J. Zugay,
Chief Financial Officer
|
|
412 227
2231
|
|
ZugayMJ@koppers.com
|
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SOURCE Koppers Holdings Inc.