Koppers, a distributor of treated wood and chemicals, will pay $1.3 million to the Securities and Exchange Commission (SEC) to settle allegations it failed to disclose material information about its debt in fiscal year 2019, according to an order  filed Tuesday.

The company issued a press release at the end of 2018 stating it would reduce its debt by $80 million in 2019. Koppers announced at year’s end 2019 that it had achieved that goal and had knocked $81.6 million off its debt, according to the order.

However, the company hadn’t actually reduced that debt because by the end of 2019 it still owed $72 million to vendors, according to the SEC. Koppers delayed paying the vendors to make it appear it had reduced its debt, the SEC alleged.

“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,” the order stated. “Koppers delayed these vendor payments en masse.”

The company would not have reached its reported 2019 year-end debt reduction goal if it hadn’t delayed those payments, per the SEC. The company’s debt reduction was “only temporary,” the SEC alleged.

Koppers recognized that “the company’s high debt and leverage were concerning to investors,” and it tracked the debt on a daily basis, according to the order.

Despite this, Koppers made materially misleading statements to the SEC and the public throughout fiscal year 2019 about the progress it was supposedly making on its debt reduction goal, the SEC said.

Koppers should have, but didn’t disclose, it had significant bills yet to pay to vendors and that if it paid them, its debt would not be reduced, the SEC said.

Koppers’ high debt was largely the result of it acquiring a chemical company in 2014, a utility pole company in 2018, and a railroad tie company in 2018 as it ended its long history of repurposing steel and shifted to distributing wood products and chemicals, the SEC said.

Koppers violated the Securities Act by not disclosing to the public its actual debt at the end of FY2019 and by not telling the SEC and public it was in debt again by significant amounts at the beginning of the following quarter, after it had paid the vendors, the SEC said. It also violated the Exchange Act, the agency alleged.

Koppers promptly hired an outside consultant to help the company identify and adopt measures to strengthen policies and procedures related to accounts payable and disclosures that fall outside of non-generally accepted accounting principles (GAAP), the SEC noted. The company agreed to the settlement without admitting or denying any wrongdoing. 

In accepting Koppers offer to settle for $1.3 million, the SEC took into consideration its remedial measures and cooperation.

A spokesman for Koppers said the company was glad the case was resolved.

Editor’s note: This story was updated Nov. 14 to reflect communication with Koppers.