SEC Charges Koppers Holdings Inc. for Materially Misleading Statements Regarding Non-Gaap Financial Measures.
Nov. 1, 2022
File No. 3-21223
November 1, 2022 - The Securities and Exchange Commission ("Commission" or "SEC") today announced settled charges against Koppers Holdings Inc. ("Koppers") for failing to disclose material information about two non-GAAP financial measures the company highlighted regarding its debt reduction efforts. Specifically, the Commission's Order finds that Koppers failed to disclose that it achieved its debt reduction targets by withholding substantial past-due vendor payments in its 2019 fiscal year.
The Order finds that throughout its fiscal year 2019, Koppers emphasized the importance of debt reduction and used two non-GAAP financial measures - net debt and net leverage ratio - to measure its progress. For 2019, Koppers announced in press releases that it intended to reduce its net debt by at least $80 million and its net leverage ratio to approximately 4 times trailing twelve month adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization). Notwithstanding missing its earnings guidance for the year, Koppers announced that it had met its debt reduction goals. However, Koppers did not disclose that to achieve these targets, the company delayed making material amounts of overdue payments to its vendors. At fiscal year-end 2019, Koppers withheld approximately $72 million in past due vendor payments, which corresponded to over 85% of its reported $81.6 million net debt reduction. Koppers then paid those past due invoices the week after the end of the reporting period through a drawdown of its revolving line of credit, thereby reversing most of its reported 2019 net debt reduction. Koppers' net debt reduction therefore was only temporary and reversed soon after the close of each reporting period of 2019. Without these actions, Koppers would not have achieved the 2019 year-end debt reduction goal it had highlighted to investors.
The SEC's order finds that Koppers violated the antifraud provision of the federal securities laws of Section 17(a)(3) of the Securities Act, and the reporting provisions of Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-11 thereunder, and Rule 100(b) of Regulation G of the Exchange Act. Without admitting or denying the SEC's findings, Koppers consented to a cease-and-desist order and a civil penalty of $1.3 million.
The investigation was conducted by Sean Whittington and Eugene Bull, assisted by David Estabrook, and supervised by Carolyn Welshhans and Laura Josephs.