Document 6BVyb7dY5NJ6XzDpzD03bbJQ3

32 Financial Review > * i* 'V/ I Common shareholders' equity grew by 11%, to $504.7 million, equivalent to S20.12 per common share, and this increased Koppers total capitalization to 5763.1 million, a rise of 21%. At the close of 1978, total debt was at 32% of total capitalization, well under the Company's self-imposed 35% limit. As Koppers entered 1979, expected levels of cash flow and existing credit lines gave it the financial flexibility to meet all re quirements for planned capital expenditures and working capital increases. Contents of the Financial Review Chief Financial Officer's Letter Management's analysis ol earnings A. William Capone Chief Financial Officer's Letter To Our Shareholders: Koppers operating base and financial struc ture expanded significantly in 1978. Record capital expenditures increased investment in net fixed assets to 5463.5 million, 20% higher than at year-end 1977. A record cash flow of St4i.7 million, up by nearly 24%, provided much of the additional funding needed. New debt arrangements provided further financing to support expanded operations and expected sales increases. Total debt was raised by nearly 46%, to 5243.4 million. 32 Investment Controls A number of factors have enabled Koppers to put the equivalent of virtually all of its in ternally generated cash flow into capital in vestments over the past decade. One such factor has been management's ability to maintain close control of investment in wont ing capital (current assets minus current lia bilities). Working capital increased by nearly 562 million in 1978, solely as the result of Koppers'investment in Cutler-Hammer stock. Trade receivables, in relation to rising saies. were held to a lower level, and manufactur ing inventories were reduced. If each of these working capital items had been main tained at the 1977 levels, which were al ready good, an additional 555 million in working capital would have been required. New Debt Arrangements To finance further expansion of the Com pany's asset base, as well as to support the expected growth of sales, long-term debt (in cluding obligations under capital leases) was raised by 582 million in 1978. Much of the increase was accounted for by the 560million, 8.95%. 20-year promissory note and the 514-million. 8%% industrial development bonds issued in the second quarter. The bal ance came from 520 million borrowed unoer the Company's revolving credit loan at the close of the year. Additional financing flexibility was ar ranged at year-end 1978 with a new bank credit agreemem that provides revolving credit loans for up to 5100 million, replacing the former 550-million line. Interest on bor rowed funds will be at the prime rate until December 28. 1983, when the loans may be converted to term loans payable during the succeeding three years. There will be a commitment fee of W of 1 % per year on the unborrowed amount. Financial Review increased shareholders' equity ... record caoital expenaitures ... quarterly resuits ... financial condition ... debt structure ... common stock information 35 10-Year Financial Highlights 40 Index to Financial Statements 42