Document 6RX2RY7dpgYZaX5o9DMb5v3vd

38 Financial Review Liquidity Continues Strong Koppers 1970 operating performance, along with additional financing arrangements com pleted during the year, has maintained the Company in a strong liquidity position. (Liquidity is defined as the ability of a com pany to generate or obtain, at acceptable costs, the funds it needs for the conduct of its operations.) The Company's expenditures of funds during 1978 totaled more than $240 million. Capital investments rose to $144.5 million. Dividends paid to shareowners were increased by nearly 19%, to $28.8 million. The Company invested $62.1 million in the stock of Cutler-Hammer, Inc., and more than $12 million in debt and capital lease obliga tions was retired. A major portion of these cash needs was provided by internally generated funds. Cash flow provided $141.7 million, and $13.8 mil lion resulted from sale of assets no longer needed in Koppers operations. The balance was available through debt arrangements, explained in the following section, which Koppers Total Capitalization December 31, Total Debt 8.95% Note 6% Notes Term Loans Payable to Banks Industrial Development Bonds Revolving Credit Loans Pollution Control Loans 8% Notes 5.8% Notes Obligations Under Capital Leases Debt Due Within One Year Other Total Equity Common Preferred Total Total Capitalization 1978 S Millions % of Total $ 60.0 4 1.0 30.0 25.0 20.0 26.0 8.9 4.6 14.4 7.7 5.8 $243.4 7.9% 5.4 3.9 3.3 2.6 3.4 1.2 .6 1.9 1.0 .7 31.9% $504.7 15.0 $519.7 $763.1 66.1% 2.0 68.1% 100.0% Term Debt Used to Support Growth* (S Millions) S275 250 1977 S Millions % ol Total $44.0 30.0 11.0 -- 26.0 11.1 5.3 16.5 7.7 10.1 $161.7 --% 7.0 4.8 1.7 -- 4.1 1.8 .8 2.6 1.2 1.6 25.6% $454.9 15.0 $469.9 $631.6 72.0% 2.4 74.4% 100.0% 1 produced a net increase of nearly $82 mil lion in the Company's term debt. Although $61.9 million was added to Koppers working capital, the total increase was the result of the redemption of the Com pany's investment in Cutler-Hammer stock, which, at year end. was accounted for as an account receivable on the balance sheet. Proceeds from the sale were received on January 4, 1979. Apart from this increase, additional work ing capital was not required in Koppers op erations in 1978, even though sales rose by $226.2 million, or 16.7%. Trade accounts re ceivable were $33.7 million higher at the close of 1978, much of which was added by operations purchased during the year. In spite of this, trade receivables--measured in "number of day's sales outstanding"-- declined to 46 days, versus 47 at the close of 1977. Close control of inventories during 1978 resulted in a $6-million reduction at year end. Company Debt Raised As shown in the accompanying chart and ta ble. Koppers increased its term debt during 1978 to finance investments, to expand its manufacturing base and to provide working capital in support of growing sales volumes. In addition, commercial paper bearing an 8.2% average annual interest rate was issued at various times during the year to cover peak working capital requirements. The maximum amount outstanding during the year was $29 million. None was out standing at year end. The debt added in 1978 was obtained un der three separate agreements: A 20-year, $60-million, 8.95% promissory note issued on May 15, 1978. $14 million in 8V4% taxable industrial de velopment bonds issued on June i, 1978 for use in the expansion of the Company's Woodward, Alabama coke plant. Additional taxable bonds for $15 million will be issued in March, 1979 and will complete the finan cial package for the Woodward expansion. $20 million drawn down on a new $100million revolving bank credit agreement en tered into on December 28, 1978 that re placed the former $50-million revolving credit loan. The agreement calls for interest at the prime rate on loans until December 28, 1983. Any loans outstanding on that dale may be converted to term loans payable dur ing the succeeding three years. Under the most restrictive conditions con tained in the Company's various debt agree ments, Koppers could incur additional in debtedness of approximately $97 million. Additional information on Company debt ap pears in Note 6 on page 49. 74 75 76 * Does not include obligations under capital leases.