Wednesday November 12, 01:40 PM
Kraton Polymers LLC Announces Third Quarter 2008 Results |
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Houston, United States, Wednesday, November 12, 2008 -- (Business Wire India) --
Kraton Polymers LLC (Kraton), a leading global producer of highly
engineered polymers, announces results for the three and nine months
ended September 30, 2008.
Total operating revenues amounted to $382.2 million and $994.4 million
for the three and nine months ended September 30, 2008, respectively. In
the comparable three and nine month periods in 2007, total operating
revenues amounted to $290.2 million and $831.9 million, respectively.
Net income amounted to $34.6 million and $35.4 million for the three and
nine months ended September 30, 2008, respectively, compared to a net
loss of $(0.8) million and $(7.7) million for the three and nine months
ended September 30, 2007, respectively.
Last Twelve Months (LTM) Bank EBITDA, a measurement used to determine
compliance with our debt covenants, totaled $146.0 million for the LTM
ended September 30, 2008. Kraton was in compliance with its debt
covenants at September 30, 2008. A reconciliation of net income (loss)
to LTM Bank EBITDA is attached.
Through the third quarter and into October 2008, Kraton was on
allocation from its suppliers of butadiene, and as a result, was unable
to produce all products necessary to meet customer demand, and in turn,
had to allocate certain available product supplies to customers. As a
result, sales volume in the third quarter of 2008 was 6% less than in
the third quarter of 2007 and on a year-to-date basis was 5% less than
in the first nine months of 2007. In addition, feedstock and energy
costs continued to increase in the third quarter of 2008, and into the
fourth quarter, largely due to supply and demand fundamentals.
“We set out in 2008 to restore Kraton to
profitability. While we are generally pleased with our progress through
three quarters, especially considering the unprecedented cost increases
we absorbed from feedstock and energy inputs, we still have sustainable
improvements to make to fulfill our objectives,”
said Kevin M. Fogarty, Kraton's President and Chief Executive Officer. “Our
third quarter results do reflect both improved global pricing and the
full impact of targeted cost reduction programs that we have
implemented. More recently, the decline in global crude oil prices, and
the resulting impact on feedstock and energy costs, as well as improved
availability of butadiene in particular, should help alleviate the
margin pressure we have been managing all year.”
Recent Developments
Gulf Coast butadiene supply has improved significantly as producers
have returned to normal operations, while several large butadiene
consumers have remained idled from hurricane damage. We believe these
butadiene consumers will likely return to normal operation during the
fourth quarter. Additionally, the global financial market crisis has
coincided with a rapid decline in crude oil prices during October. For
example, in November the price of butadiene in North America declined
20% after 12 consecutive months of price increases. As a result, we
are currently able to acquire all the butadiene we need, and have
therefore discontinued our allocation of selected
Styrene-butadiene-styrene block copolymers. We cannot predict the
extent, duration or ultimate market effect of these changes in energy
and raw material costs, availability, or individual supply/demand
constraints.
Announced latest innovation product, MD6705, which allows fabricators
to make bicomponent elastic nonwovens on commercial production
equipment resulting in excellent elastic recovery at lower cost.
On October 15, 2008, entered into a $320.0 million notional amount
interest rate swap agreement.
Launched a global initiative aimed at further reducing Kraton’s
annual fixed cost spend by at least $10 million beginning in 2009.
Though not final in scope, the initiative is expected to include
purchasing savings, staffing reductions, and curtailing other
expenditures. The initiative also includes a full review of planned
capital expenditures in 2009, with the expectation that any
growth-oriented discretionary spending would be postponed.
“Our operating philosophy at Kraton at its
core is reality-based. Therefore, given the uncertainty that has emerged
regarding global economic growth, we are developing a series of global
actions to achieve cost and productivity improvement, as well as
liquidity conservation, that will prepare Kraton to compete in a down
economy if necessary,” added Fogarty. “In
doing so, we expect to continue to manage Kraton effectively, in
providing our customers with industry-leading innovation and superior
service, and position our industry-leading company to emerge from any
such downturn more competitive than ever.”
Kraton has scheduled a conference call for Wednesday, November 12, 2008
to discuss these earnings. The call will begin at 4:00 p.m. Central
time, 5:00 p.m. Eastern time. To listen to the conference call and view
the slide presentation, which will be broadcast live over the Internet,
go to Kraton’s website at www.kraton.com,
click on Investor Relations, and then go to Presentations and select “Third
Quarter 2008 Earnings Presentation Webcast.”
You may also listen to the analyst conference call by telephone by
contacting the conference call operator 5-10 minutes prior to the
scheduled start time and asking for the “Kraton
Conference Call – Passcode: Earnings Call.”
US/Canada Dial-In #: (888) 577-8992 or International Dial-In #:
(312) 470-7060. For those unable to listen to the live call, a replay
will be available 24 hours a day beginning at approximately 6:00 p.m.
Central time November 12th through 11:59 p.m.
Central time on November 26th. To hear a
telephonic replay of the call, dial (888) 277-9385 or (402) 998-0509 for
international callers. To hear a replay of the call over the Internet,
please access Kraton’s website at www.kraton.com.
About Kraton
Kraton is a leading global producer of engineered polymers and, we
believe, the world’s largest producer of
styrenic block copolymers (SBCs), a family of products whose chemistry
was pioneered by us over forty years ago. SBCs are highly-engineered
thermoplastic elastomers, which enhance the performance of numerous
products by delivering a variety of attributes, including greater
flexibility, resilience, strength, durability, and processability.
Kraton polymers are used in a wide range of applications including
adhesives, coatings, consumer and personal care products, sealants,
lubricants, medical, packaging, automotive, paving, roofing, and
footwear products. Kraton has the leading position in nearly all of its
core markets and is the only producer of SBCs with global manufacturing
capability. Its production facilities are located in the United States,
Germany, France, The Netherlands, Brazil, and Japan.
Kraton, the Kraton logo and design, and “Giving
Innovators their Edge” tagline are trademarks
of Kraton Polymers LLC.
Forward-Looking Statements
This press release includes “forward-looking
statements” as that term is defined in
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. All statements other than statements of
historical fact are statements that could be deemed forward-looking
statements and are often characterized by the use of words such as “believes,”
“expects,”
“estimates,”
“projects,”
“may,”
“will,”
“intends,”
“plans” or “anticipates,”
or by discussions of strategy, plans or intentions. In this press
release, forward-looking information relates to covenant compliance,
pricing trends, cost savings, production rates and other similar
matters. All forward-looking statements in this press release are made
based on management’s current expectations
and estimates, which involve risks, uncertainties and other factors that
could cause results to differ materially from those expressed in
forward-looking statements. Such risks include, but are not limited to,
competitive pressures in the specialty chemical industry, changes in
prices or availability of raw materials used in our business, changes in
levels of consumer spending or preferences, overall economic conditions,
the level of our indebtedness and exposure to interest rate and currency
fluctuations, governmental regulations and trade restrictions, acts of
war or terrorism in the United States or worldwide, political or
financial instability in countries where our goods are manufactured and
sold, and other risks and uncertainties described in this report and the
Kraton’s other reports and documents. Readers
are cautioned not to place undue reliance on forward-looking statements.
We assume no obligation to update such information.
KRAT-F
KRATON POLYMERS LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands)
Three Months Ended September 30, 2008 and 2007
September 30,
2008
September 30,
2007
Operating Revenues
Sales
$
363,275
$
284,498
Other
18,892
5,652
Total operating revenues
382,167
290,150
Costs of goods sold
287,719
243,699
Gross profit
94,448
46,451
Operating Expenses
Research and development
5,808
5,452
Selling, general, and administrative
28,214
15,594
Depreciation and amortization of identifiable intangibles
13,118
12,539
Total operating expenses
47,140
33,585
Equity in earnings of unconsolidated joint venture
(94
)
(189
)
Interest expense, net
7,875
12,375
Income before income taxes
39,527
680
Income tax provision
(4,910
)
(1,434
)
Net income (loss)
$
34,617
$
(754
)
KRATON POLYMERS LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands)
Nine Months Ended September 30, 2008 and 2007
September 30,
2008
September 30,
2007
Operating Revenues
Sales
$
947,925
$
812,326
Other
46,472
19,546
Total operating revenues
994,397
831,872
Costs of goods sold
788,618
701,660
Gross profit
205,779
130,212
Operating Expenses
Research and development
21,129
18,504
Selling, general, and administrative
73,578
49,208
Depreciation and amortization of identifiable intangibles
40,880
36,417
Total operating expenses
135,587
104,129
Equity in earnings of unconsolidated joint venture
(314
)
(514
)
Interest expense, net
27,678
32,507
Income before income taxes
42,828
(5,910
)
Income tax provision
(7,405
)
(1,822
)
Net income (loss)
$
35,423
$
(7,732
)
KRATON POLYMERS LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
September 30,
2008
December 31,
2007
ASSETS
Current assets
Cash and cash equivalents
$
84,239
$
48,277
Receivables, net of allowances of $1,737 and $1,542
183,922
140,321
Inventories of products, net
285,974
256,323
Inventories of materials and supplies, net
11,888
12,170
Other current assets
10,251
12,404
Total current assets
576,274
469,495
Property, plant and equipment, less accumulated depreciation of
$176,578 and $157,643
379,393
402,270
Identifiable intangible assets, less accumulated amortization of
$34,428 and $29,205
71,133
76,356
Investment in unconsolidated joint venture
10,896
10,326
Deferred financing costs
8,675
10,323
Other long-term assets
17,803
16,124
Total assets
$
1,064,174
$
984,894
LIABILITIES AND MEMBER’S EQUITY
Current liabilities
Current portion of long-term debt
$
3,445
$
3,445
Accounts payable-trade
107,665
102,952
Other payables and accruals
58,740
55,816
Due to related party
21,046
24,505
Deferred income taxes
9,015
9,827
Insurance note payable
—
494
Total current liabilities
199,911
197,039
Long-term debt, net of current portion
572,462
535,020
Deferred income taxes
38,696
39,443
Long-term liabilities
25,996
30,682
Total liabilities
837,065
802,184
Commitments and contingencies
Member’s equity
Common equity
189,350
143,149
Accumulated other comprehensive income
37,759
39,561
Total member’s equity
227,109
182,710
Total liabilities and member’s equity
$
1,064,174
$
984,894
KRATON POLYMERS LLC
LTM Bank EBITDA
(In thousands)
3 MosEnded09/30/08
12 MosEnded09/30/08
3 MosEnded06/30/08
12 MosEnded06/30/08
Net income (loss)
$
34,617
$
(588
)
$
10,216
$
(35,959
)
Income tax provision (benefit)
4,910
11,721
2,649
8,245
Interest expense, net
7,875
38,631
9,418
43,131
Depreciation and amortization
13,118
56,380
13,110
55,801
EBITDA (1)
$
60,520
106,144
$
35,393
71,218
LTM Bank EBITDA addbacks (2)
Sponsor fees and expenses
2,001
2,000
Plant turnaround costs
3,536
4,321
Permitted acquisition costs
3,000
2,548
Severance related restructuring charges
3,220
3,320
Specific cost savings expenses
6,483
10,000
Schedule 1.1 cost
3,000
3,000
Equity Investment (3)
9,588
9,588
Other non-cash items increasing Net Income (loss)
9,065
9,783
LTM Bank EBITDA (4)
$
146,037
$
115,778
(1)
The EBITDA measure is used by management to evaluate operating
performance. Management believes that EBITDA is useful to investors
because it is frequently used by securities analysts, institutional
investors and other interested parties in the evaluation of
companies in our industry. EBITDA is not a recognized term under
GAAP and does not purport to be an alternative to net income (loss)
as an indicator of operating performance or to cash flows from
operating activities as a measure of liquidity. Because all
companies do not use identical calculations, this presentation of
EBITDA may not be comparable to other similarly titled measures of
other companies. Additionally, EBITDA is not intended to be a
measure of free cash flow for management's discretionary use, as it
does not consider certain cash requirements such as interest
payments, tax payments and debt service requirements.
(2)
These adjustments are made pursuant to the Credit and Guaranty
Agreement, amended as of May 12, 2006.
(3)
On January 14, 2008, we received an equity investment of $10.0
million of which $9.6 million was included in LTM Bank EBITDA as
provided under the terms of the senior credit facility.
(4)
LTM Bank EBITDA is defined in the senior credit facility and is used
to determine compliance with certain covenants included in the
senior credit facility.
CONTACT:
Kraton Polymers LLC
Analyst: Stephen E. Tremblay, 281-504-4760
or
Media: Richard A. Ott, 281-504-4720
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