# Dear Fellow Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/basic-materials-specialty-chemicals/NYSE_KOP_2017/NYSE_KOP_2017.mmd` · pages 2-8_

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Dear Fellow Shareholders:

From my perspective, 2017 represents the best year in Koppers history as we touched the $200 million mark in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the first time, reached another all-time best in adjusted earnings per share (EPS) of \(3.68, increased our share price for the year by 26 percent and ended the year above \)50 per share for the first time ever, improved our balance sheet by considerably reducing our net leverage ratio, and most importantly, continued to improve the safety of our operating locations around the world. Our 1,800 global employees absolutely deserve the credit for that success for they are the ones that have sacrificed and carried out the difficult work in the trenches that made it happen.

## Putting Our People First

At Koppers, it starts and ends with our people. Our company is enjoying the greatest success that we have ever had, and I am certain that it is directly tied to the strong engagement of our employees. Of course, we redefined our strategy, restructured our operations, changed our business profile,

## Investing In Our
People-Based Culture

Our company is enjoying the greatest success that we have ever had, and I am certain that it is directly tied to the strong engagement of our employees.

and had a few market forces move in our direction over time. However, apart from favorable market conditions, every other aspect required the ideas, effort, sweat, commitment, and teamwork of our global workforce. Since stepping into the CEO role in 2015, my personal conviction has been that if we put the safety, health and well-being of our people first, success will follow. Seeing all that we have accomplished together, my belief has never been stronger – Koppers is living proof.

## Reinforcing Zero Harm

As you would expect with a people-based culture, safety remains our top priority. It is the everyday responsibility of each executive leader, plant manager, and employee. Zero Harm is an overarching value that determines how we think, act, and make decisions throughout our company. This people-driven culture that generated such impressive results can only arise when each employee feels that he or she is truly a valued member of the team. As such, we are investing resources wherever necessary to build on the momentum.

If we put the safety, health and well-being of our people first, success will follow. Koppers is living proof.

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Our emphasis on safety continues to be embraced by our employees across the globe.
After visiting 19 different Koppers locations throughout the year, I can say with confidence that our emphasis on safety continues to be embraced by our employees across the globe. During the
past year, all of our operating locations completed the first three modules of safety leadership training designed to incorporate Zero Harm values in all that we do. In addition, we significantly advanced the development of our Life Saving Rules, which will go into effect in 2019. Those rules will provide our people who are performing the most inherently dangerous work even more peace of mind that their safety always comes first.

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In 2017, 13 of our 31 operating facilities worked accident-free, and the number of our full-year OSHA recordable incidents was slightly below our 2016 results. Additionally, conditions that precede potentially life-altering injuries at our facilities decreased significantly year-over-year. This is a positive sign that our efforts to prioritize training and education around identifying and mitigating the most potentially dangerous exposures are showing results.

We are practicing empathetic leadership and demonstrating real concern for our people's health and welfare. I am inspired by what is being done to make our company a better, stronger, safer place to work. Certainly, we still have a lot to do to get to zero, but I'm pleased with our progress so far, and I believe that we are on the right path to a stronger future.

## Unwavering in Our Strategic Focus

Led by our global network of talented people, we took several important next steps in executing our strategy to maintain and grow our leadership position in wood treatment technologies. The hard work and steady diligence of our Koppers team over this past year resulted in the following key accomplishments:

• In early 2017, we successfully executed on our bond refinancing, lowered our overall cost of borrowing and extended our long-term debt payment date to 2025 with the new notes offering, compared with 2019 previously. Also, we entered into a new 5-year credit agreement with our lending group providing for a $400 million revolving credit facility, maturing in February 2022. Because of these financing transactions, we have greater flexibility to invest in our business.

• As part of the strategy to streamline and stabilize our Carbon Materials and Chemicals business (CMC), we entered into long-term coal tar supply agreements with certain key suppliers in early 2017 to satisfy a significant portion of our raw material needs in a cost-efficient manner.

• We further improved our position in China by collecting the full value of the outstanding $9.5 million loan from our Chinese former joint venture partner, while also enjoying one of our most profitable years ever in that region due to our reduced footprint and focus on our lone remaining joint venture serving the revitalized needle coke market.

In 2017, we took several important next steps in executing our strategy to maintain and grow our leadership position in wood treatment technologies.

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The foundation of our overall business remains healthy and poised for future success.

• In our Railroad and Utility Products and Services business (RUPS), we extended or amended supply contracts with a number of Class I railroad customers and increased our long-term market share with several of those customers.

• In our Performance Chemicals business (PC), we completed various capacity expansion projects at our facilities in Hubbell, Michigan; Rock Hill, South Carolina; and Millington, Tennessee; to support increased production of our flagship product, MicroPro \( ^{®} \) , a micronized copper wood preservative technology developed by our PC business. During 2017, MicroPro \( ^{®} \)  celebrated ten years of commercial production. Since its introduction in 2007, more than 20 billion board feet have been treated with the micronized copper preservative. PC holds the number one spot in market share globally for wood treating chemicals and MicroPro \( ^{®} \)  is a key contributor to our company's success.

• From a financial perspective, we delivered record adjusted EBITDA of \(200.4 million and record adjusted EPS of \)3.68, as well as increased sales by 4 percent. For the third straight year, we generated more than $100 million of operating cash flow, which helped our efforts to continue improving our balance sheet, as evidenced by our net leverage ratio of 3.1 at year-end 2017, compared with a ratio of 3.7 at prior year-end.

• Our stock price appreciated by 26 percent over the course of 2017, beating both the Russell 2000 and S&P SmallCap 600 Materials benchmark indices.

## Strengthening Our Business

Due to the significant progress in reducing our balance sheet leverage the past three years, Koppers is now well-positioned to expand our presence as the global leader in wood treatment technologies. In 2017, we delivered strong operating performance on a consolidated basis and the foundation of our overall business remains healthy and poised for future success.

Although our RUPS business struggled throughout 2017 as it dealt with reduced demand in the rail industry and a soft commercial pricing environment, our PC and CMC businesses had banner years. Strong fundamentals in the U.S. repair and remodeling markets driven by a continued strengthening in existing home sales supported higher sales volumes for copper-based wood preservatives and additives in our PC business. Our CMC segment had a tremendous bounce back year that saw both a sales increase and adjusted EBITDA margins that approached levels not seen in close to a decade. While certain market tailwinds contributed to the incredible turnaround, we would not have come close to posting the remarkable results in CMC in 2017 without the ingenuity and determination of our people that continued to carry out the massive restructuring efforts of that business segment. Throughout 2018, we should finally be winding down our consolidation efforts that began several years ago when we made the tough decisions to shutter or sell unused capacity. Needless to say, I couldn't be more pleased with our results to date.

The past few years have been a whirlwind of activity culminating in many remarkable accomplishments thanks to our innovative and talented employees, but we are far from done.

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## Maximizing Our Opportunities

While remaining disciplined in our approach, we are beginning to turn our focus to the various prospects of growing our wood treatment-based businesses. In early 2018, we increased the capacity of our revolving credit facility from \(400 million to \)600 million, which will provide us with additional financial flexibility. We continue to assess ways to grow organically as well as through selective acquisitions that would present another new and exciting chapter for our company. The past few years have been a whirlwind of activity culminating in many remarkable accomplishments thanks to our innovative and talented employees, but we are far from done. Looking ahead, we are confident that we still have a long runway in front of us and we can continue to outperform. It is what drives our people every day.

I would also like to thank our Board of Directors for their ongoing commitment and dedication to excellence. Their collective wisdom and experience have continued to provide our management team with invaluable guidance. In 2017, the Koppers Board received the well-deserved honor of Public Company Board of the Year by the National Association of Corporate Directors, Three Rivers Chapter, which serves the areas of Buffalo, New York; Cincinnati and Cleveland, Ohio; and Pittsburgh, Pennsylvania. Recognition was given to the Board for their support and insight in

In 2017, the Koppers Board received the well-deserved honor of Public Company Board of the Year by the National Association of Corporate Directors, Three Rivers Chapter.

## Koppers Board of Directors

Front: Sharon Feng, Leroy M. Ball, David M. Hillenbrand (Chairman), Cynthia A. Baldwin

Back: T. Michael Young, Louis L. Testoni, Stephen R. Tritch, Albert J. Neupaver helping our company successfully transition from a commodity chemical company to a market-leading, global wood-based solutions provider demonstrating sustainably improving financial and safety performance. My team and I are fortunate to have such an esteemed group of individuals available to us for counsel and support.

In closing, I want to reiterate that the key to our progress has been – and will continue to be – our people. After all, it's the people who define our company's culture and ultimately determine our success. We are committed to continue investing in them and their many great ideas. I am incredibly proud to be working at Koppers with such a resilient group of employees. With their help, we will do everything possible to remain steadfast in our mission to create safe and environmentally responsible solutions that solve our customers' most important challenges and result in superior performance for shareholders. Thank you for your ongoing support.

Sincerely,

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Leroy M. Ball

President and Chief Executive Officer

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