HOUSTON, April 26, 2017
/PRNewswire/ -- Kraton Corporation (NYSE: KRA), a leading
global producer of styrenic block copolymers, specialty polymers
and high-value performance products derived from pine wood pulping
co-products, announces financial results for the quarter ended
March 31, 2017.
2017 FIRST QUARTER SUMMARY
- Chemical segment sales volumes increased 15% and Polymer
segment sales volumes increased 2%, compared to the first quarter
2016
- Polymer segment raw material costs increased significantly in
the first quarter 2017
-
- As anticipated, Polymer segment margins were adversely impacted
in the quarter, reflecting the timing lag in realization of
announced price increases and, to a lesser extent, continued
competitive market conditions for SIS product grades
- Chemical segment margins for the first quarter 2017 reflect
ongoing market pressures related to hydrocarbon-based C5
alternatives and competitive conditions for TOFA and TOR
products
-
- Outlook for TOFA market conditions has improved
- Successful issuance of $400
million of 7.0% Senior Notes due 2025
-
- Proceeds applied as prepayment of existing Term Loan Facility,
eliminated all scheduled payments prior to final maturity under
Term Loan Facility
|
Three Months Ended
March 31,
|
|
2017
|
|
2016
|
|
(In thousands,
except per share amounts)
|
Revenue
|
$
|
458,125
|
|
|
$
|
419,923
|
|
Polymer segment
operating income
|
$
|
41,628
|
|
|
$
|
13,946
|
|
Chemical segment
operating income (loss)
|
$
|
17,695
|
|
|
$
|
(10,720)
|
|
Net income
attributable to Kraton
|
$
|
6,413
|
|
|
$
|
88,087
|
|
Adjusted EBITDA
(non-GAAP)(1)
|
$
|
65,571
|
|
|
$
|
93,101
|
|
Adjusted EBITDA
margin (non-GAAP)(2)
|
14.3
|
%
|
|
22.2
|
%
|
Diluted earnings per
share
|
$
|
0.20
|
|
|
$
|
2.84
|
|
Adjusted diluted
earnings (loss) per share (non-GAAP)(1)
|
$
|
(0.15)
|
|
|
$
|
0.80
|
|
|
|
|
(1)
|
See non-GAAP
reconciliations included in the accompanying financial tables for
the reconciliation of each non-GAAP measure to its most directly
comparable GAAP measure.
|
(2)
|
Defined as Adjusted
EBITDA as a percentage of revenue.
|
"On a consolidated basis, first quarter 2017 Adjusted EBITDA was
$65.6 million. As expected, during
the quarter we saw unprecedented increases in raw material costs
for our Polymer segment and, as a result, our Adjusted EBITDA was
negatively impacted by the lag in realization of price
increases. While we expect the full realization of price
increases implemented to address the increase in raw material costs
to be completed in the second quarter 2017, the raw material cost
trend itself has also reversed as we move into the second quarter
of the year. As we have pointed out previously, we continue to see
competitive conditions for SIS polymer grades in our Performance
Products business," said Kevin M.
Fogarty, Kraton's President and Chief Executive Officer.
"For our Chemical segment, we are encouraged by the 15% increase in
sales volume compared to the first quarter 2016. However,
segment margins continue to be adversely impacted by availability
of low-cost C5 hydrocarbon alternatives, and pricing pressure for
TOFA and TOR products in general. Regarding TOFA markets
specifically, we implemented a global price increase of
$120 per metric ton effective
March 15th, reflecting an
improving demand outlook for TOFA and, to a lesser extent, cost
increases for CTO raw materials," Fogarty added.
"Strategically, we continue to make progress on our cost
reduction and transaction synergy value realization initiatives. In
the first quarter we delivered an incremental $13 million on top of the cumulative $68 million realized through year-end 2016. We
expect that for the balance of 2017 we will deliver an additional
$27 million in cost reductions
towards our 2018 target of $135
million. In addition, during the first quarter we took steps
to further refine our capital structure. In early January we
repriced our Term Loan Facility, reducing the interest cost for
amounts outstanding under the facility by 100 basis points, and in
late March, we issued $400 million of
7.0% Senior Notes, using the proceeds to reduce borrowings under
the Term Loan Facility. This issuance resulted in a more
appropriate balance between secured and unsecured components of our
outstanding debt, and effectively eliminated all scheduled
amortization payments under the Term Loan Facility, enhancing
financial flexibility," said Fogarty.
Status of Synergies, Operational Improvement, and Cost
Reduction Initiatives
We previously announced synergies and operational improvement
initiatives associated with our January 6,
2016 acquisition of Arizona Chemical (the "Arizona Chemical
Acquisition") and a cost reduction initiative targeted at lowering
costs in our Polymer segment. Following is a summary of the status
of these initiatives:
|
Cumulative
through
|
|
March 31,
2017
|
|
December 31,
2016
|
|
(In
thousands)
|
General and
administrative synergies
|
$
|
20,863
|
|
|
$
|
17,663
|
|
Operational
improvements
|
27,007
|
|
|
19,223
|
|
Cost
reduction
|
33,522
|
|
|
31,338
|
|
|
$
|
81,392
|
|
|
$
|
68,224
|
|
Three Months
Ended March 31, 2017 compared to Three Months Ended March 31,
2016
|
|
|
Polymer
Segment
|
|
|
|
Three Months Ended
March 31,
|
|
2017
|
|
2016
|
Revenue
|
(In
thousands)
|
CariflexTM
|
$
|
38,048
|
|
|
$
|
38,023
|
|
Specialty
Polymers
|
90,920
|
|
|
85,029
|
|
Performance
Products
|
141,718
|
|
|
119,919
|
|
Other
|
262
|
|
|
72
|
|
|
$
|
270,948
|
|
|
$
|
243,043
|
|
|
|
|
|
Operating
income
|
$
|
41,628
|
|
|
$
|
13,946
|
|
Adjusted EBITDA
(non-GAAP) (1)
|
$
|
32,055
|
|
|
$
|
52,244
|
|
|
|
|
|
|
(1)
|
See Non-GAAP
reconciliations included in the accompanying financial tables for
the reconciliation of each non-GAAP measure to its most directly
comparable GAAP measure.
|
Revenue for the Polymer segment was $270.9 million for the three months ended
March 31, 2017 compared to
$243.0 million for the three months
ended March 31, 2016. The increase in
revenue was driven by a $22.7 million
higher average selling price primarily resulting from higher raw
material costs and a $7.6 million
increase in sales volumes, partially offset by a $2.4 million negative effect from changes in
currency exchange rates. Sales volumes were 76.6 kilotons for the
three months ended March 31, 2017, an
increase of 1.5 kilotons or 2.1%.
With respect to revenue for the Polymer segment product
groups:
- Cariflex revenue was $38.0
million for the three months ended March 31, 2017 and was unchanged compared to the
three months ended March 31,
2016.
- Specialty Polymers revenue was $90.9 million for the three months ended
March 31, 2017 compared to
$85.0 million for the three months
ended March 31, 2016. The revenue
increase reflects the 8.1% increase in sales volumes.
- Performance Products revenue was $141.7 million for the three months ended
March 31, 2017 compared to
$119.9 million for the three months
ended March 31, 2016. The
$21.8 million increase was primarily
driven by higher average selling prices resulting from higher raw
material costs.
For the three months ended March 31,
2017, the Polymer segment operating income was $41.6 million compared to $13.9 million for the three months ended
March 31, 2016.
For the three months ended March 31,
2017, the Polymer segment generated $32.1 million of Adjusted EBITDA (non-GAAP)
compared to $52.2 million for the
three months ended March 31, 2016, a
decrease of $20.2 million or 38.6%.
The decline in Adjusted EBITDA was primarily due to lower margins
indicative of the increase in raw material prices which were only
partially offset by increases in selling prices in the first
quarter and the continued pressure on SIS margins overall. The
quarter-over-quarter comparison was also negatively impacted by the
first quarter 2016 raw material market conditions which led to
margin expansion in the prior year. See a reconciliation of GAAP
operating income to non-GAAP Adjusted EBITDA below.
Chemical Segment
The following results of operations for the Chemical segment
have been included in our consolidated results since
January 6, 2016.
|
Three Months
Ended
March 31, 2017
|
|
For the period
January 6, 2016
through March 31,
2016
|
Revenue
|
(In
thousands)
|
Adhesives
|
$
|
64,372
|
|
|
$
|
62,943
|
|
Roads and
Construction
|
10,766
|
|
|
10,670
|
|
Tires
|
11,719
|
|
|
8,981
|
|
Performance
Chemicals
|
100,320
|
|
|
94,286
|
|
|
$
|
187,177
|
|
|
$
|
176,880
|
|
|
|
|
|
Operating income
(loss)
|
$
|
17,695
|
|
|
$
|
(10,720)
|
|
Adjusted EBITDA
(non-GAAP) (1)
|
$
|
33,516
|
|
|
$
|
40,857
|
|
|
|
|
|
|
(1)
|
See Non-GAAP
reconciliations included in the accompanying financial tables for
the reconciliation of each non-GAAP measure to its most directly
comparable GAAP measure.
|
Revenue for the Chemical segment was $187.2 million for the three months ended
March 31, 2017 compared to
$176.9 million for the three months
ended March 31, 2016. The increase in
revenue was driven by a $33.7 million
increase in sales volumes, partially offset by lower average
selling prices aggregating $19.9
million and a $3.5 million
negative effect from changes in currency exchange rates. Sales
volumes were 109.1 kilotons for the three months ended March 31, 2017, an increase of 14.2 kilotons or
15.0%.
With respect to revenue for the Chemical segment product
groups:
- Adhesives revenue was $64.4
million for the three months ended March 31, 2017 compared to $62.9 million for the three months ended
March 31, 2016. A 14.3% increase in
sales volumes was largely offset by lower average selling
prices.
- Roads and Construction revenue was $10.8 million for the three months ended
March 31, 2017 compared to
$10.7 million for the three months
ended March 31, 2016. A 10.8%
increase in sales volumes was offset by lower average selling
prices.
- Tires revenue was $11.7
million for the three months ended March 31, 2017 compared to $9.0 million for the three months ended
March 31, 2016. A 24.6% increase in
sales volumes was largely offset by lower average selling
prices.
- Performance Chemicals (formerly Chemical Intermediates)
revenue was $100.3 million for the
three months ended March 31, 2017
compared to $94.3 million for the
three months ended March 31, 2016. A
15.2% increase in sales volumes was partially offset by lower
average selling prices.
For the three months ended March 31,
2017, the Chemical segment operating income was $17.7 million compared to an operating loss of
$10.7 million for the three months
ended March 31, 2016.
For the three months ended March 31,
2017, the Chemical segment generated $33.5 million of Adjusted EBITDA (non-GAAP)
compared to $40.9 million for the
three months ended March 31, 2016.
The decline in Adjusted EBITDA was primarily due to lower margins
indicative of the continued impact of low-cost C5 hydrocarbon
alternatives and pricing pressure for TOFA and TOR products, which
more than offset the 15.0% increase in sales volumes. See a
reconciliation of GAAP operating income (loss) to non-GAAP Adjusted
EBITDA below.
CASH FLOW AND CAPITAL STRUCTURE
During the three months ended March 31,
2017 (excluding borrowings under the Kraton Formosa Polymers
Corporation (KFPC) Loan Agreement) we increased Kraton Corporation
indebtedness by $7.8 million, while
decreasing cash on hand (excluding KFPC cash) by approximately
$21.5 million.
Summary of principal amounts for indebtedness and a
reconciliation of Kraton debt to Kraton net debt and consolidated
net debt (non-GAAP):
|
As of March 31,
2017
|
|
As of December 31,
2016
|
|
(In
thousands)
|
Term Loan
|
$
|
886,000
|
|
|
$
|
1,278,000
|
|
10.5% Senior
Notes
|
440,000
|
|
|
440,000
|
|
7.0% Senior
Notes
|
400,000
|
|
|
—
|
|
ABL
|
—
|
|
|
—
|
|
Capital
lease
|
2,805
|
|
|
3,042
|
|
Kraton
debt
|
1,728,805
|
|
|
1,721,042
|
|
Kraton
cash
|
86,134
|
|
|
107,599
|
|
Kraton net
debt
|
1,642,671
|
|
|
1,613,443
|
|
|
|
|
|
KFPC(1)
loan
|
136,001
|
|
|
115,854
|
|
KFPC(1)
cash
|
17,932
|
|
|
14,150
|
|
KFPC(1)
net debt
|
118,069
|
|
|
101,704
|
|
|
|
|
|
Consolidated net
debt
|
$
|
1,760,740
|
|
|
$
|
1,715,147
|
|
|
|
|
|
|
(1)
|
This amount includes
all of the indebtedness of our Kraton Formosa Polymers Corporation
(KFPC) joint venture, located in Mailiao, Taiwan, which we own a
50% stake in and consolidate within our financial
statements.
|
OUTLOOK
We continue to estimate that our 2017 Adjusted EBITDA will be
approximately $350 million and we
expect to reduce net indebtedness by $100-$150 million in 2017.
We currently estimate that our results in the second quarter
2017 will reflect a positive spread between FIFO and ECRC of
approximately $10 million.
We have not reconciled Adjusted EBITDA guidance to net income
(loss) because we do not provide guidance for net income (loss) or
for items that we do not consider indicative of our on-going
performance, including, but not limited to, transaction and
acquisition costs and costs associated with dispositions, business
exits, and production downtime, as certain of these items are out
of our control and/or cannot be reasonably predicted. We have not
reconciled net debt guidance to debt due to high variability and
difficulty in making accurate forecasts and projections that are
impacted by future decisions and actions. The actual amount of such
reconciling items will have a significant impact if they were
included in our Adjusted EBITDA and net debt. Accordingly, a
reconciliation of the non-GAAP financial measure guidance to the
corresponding U.S. GAAP measures is not available without
unreasonable effort.
USE OF NON-GAAP FINANCIAL MEASURES
This press release includes the use of both GAAP and non-GAAP
financial measures. The non-GAAP financial measures are EBITDA,
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Diluted Earnings
per Share, and Net Debt. Tables included in this earnings release
reconcile each of these non-GAAP financial measures with the most
directly comparable U.S. GAAP financial measure. For additional
information on the impact of the spread between the FIFO basis of
accounting and estimated current replacement cost ("ECRC"), see
Management's Discussion and Analysis of Financial Condition and
Results of Operations in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2016.
We consider these non-GAAP financial measures to be important
supplemental measures of our performance and believe they are
frequently used by investors, securities analysts and other
interested parties in the evaluation of our performance including
period-to-period comparisons and/or that of other companies in our
industry. Further, management uses these measures to evaluate
operating performance, and our incentive compensation plan bases
incentive compensation payments on our Adjusted EBITDA performance
and attainment of net debt, along with other factors. These
non-GAAP financial measures have limitations as analytical tools
and in some cases can vary substantially from other measures of our
performance. You should not consider them in isolation, or as a
substitute for analysis of our results under U.S. GAAP in
the United States.
EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin: For
our consolidated results, EBITDA represents net income (loss)
before interest, taxes, depreciation and amortization. For each
reporting segment, EBITDA represents operating income before
depreciation and amortization, disposition and exit of business
activities and earnings of unconsolidated joint ventures. Among
other limitations EBITDA does not: reflect the significant interest
expense on our debt or reflect the significant depreciation and
amortization expense associated with our long-lived assets; and
EBITDA included herein should not be used for purposes of assessing
compliance or non-compliance with financial covenants under our
debt agreements. The calculation of EBITDA in our debt agreements
includes adjustments, such as extraordinary, non-recurring or
one-time charges, proforma cost savings, certain non-cash items,
turnaround costs, and other items included in the definition of
EBITDA in the debt agreements. Other companies in our industry may
calculate EBITDA differently than we do, limiting its usefulness as
a comparative measure. As an analytical tool, Adjusted EBITDA is
subject to all the limitations applicable to EBITDA. We prepare
Adjusted EBITDA by eliminating from EBITDA the impact of a number
of items we do not consider indicative of our on-going performance,
including the spread between FIFO and ECRC, but you should be aware
that in the future we may incur expenses similar to the adjustments
in this presentation. Our presentation of Adjusted EBITDA should
not be construed as an inference that our future results will be
unaffected by unusual or non-recurring items. In addition, due to
volatility in raw material prices, Adjusted EBITDA may, and often
does, vary substantially from EBITDA and other performance
measures, including net income calculated in accordance with U.S.
GAAP. We define Adjusted EBITDA Margin as Adjusted EBITDA as a
percentage of revenue (for each reporting segment or on a
consolidated basis, if applicable). Because of these and other
limitations, EBITDA and Adjusted EBITDA should not be considered as
a measure of discretionary cash available to us to invest in the
growth of our business.
Adjusted Diluted Earnings Per Share: We prepare Adjusted
Diluted Earnings per Share by eliminating from Diluted Earnings
(loss) per Share the impact of a number of non-recurring items we
do not consider indicative of our on-going performance, including
the spread between FIFO and ECRC.
Net Debt: We define net debt for Kraton as total debt
(excluding debt of KFPC) less cash and cash equivalents. We define
consolidated net debt as Kraton net debt plus debt of KFPC less
KFPC's cash and cash equivalents. Management uses net debt to
determine our outstanding debt obligations that would not readily
be satisfied by its cash and cash equivalents on hand. Management
believes that using net debt is useful to investors in determining
our leverage since we could choose to use cash and cash equivalents
to retire debt. In addition, management believes that presenting
Kraton's net debt excluding KFPC is useful because KFPC has its own
capital structure.
CONFERENCE CALL AND WEBCAST INFORMATION
Kraton has scheduled a conference call on Thursday,
April 27, 2017 at 9:00 a.m. (Eastern
Time) to discuss first quarter 2017 financial results.
Kraton invites you to listen to the conference call, which will be
broadcast live over the internet at www.kraton.com, by
selecting the "Investor Relations" link at the top of the home page
and then selecting "Events" from the Investor Relations menu on the
Investor Relations page.
You may also listen to the conference call by telephone by
contacting the conference call operator 5 to 10 minutes prior to
the scheduled start time and asking for the "Kraton Conference Call
– Passcode: Earnings Call." U.S./Canada dial-in 800-839-6511. International
dial-in #: 210-839-8886.
For those unable to listen to the live call, a replay will be
available beginning at approximately 11:00
a.m. (Eastern Time) on April 27, 2017 through
1:59 a.m. (Eastern Time) on
May 11, 2017. To hear a replay of the call over the Internet,
access Kraton's Website at www.kraton.com by selecting the
"Investor Relations" link at the top of the home page and then
selecting "Events" from the Investor Relations menu on the Investor
Relations page. To hear a telephonic replay of the call, dial
800-839-2290.
ABOUT KRATON CORPORATION
Kraton Corporation (NYSE: KRA) is a leading global producer of
styrenic block copolymers, specialty polymers and high-value
performance products derived from pine wood pulping co-products.
Kraton's polymers are used in a wide range of applications,
including adhesives, coatings, consumer and personal care products,
sealants and lubricants, and medical, packaging, automotive, paving
and roofing applications. As the largest global provider in the
pine chemicals industry, the company's pine-based specialty
products are sold into adhesive, road and construction and tire
markets, and it produces and sells a broad range of performance
chemicals into markets that include fuel additives, oilfield
chemicals, coatings, metalworking fluids and lubricants, inks,
flavors and fragrances and mining. Kraton offers its products to a
diverse customer base in numerous countries worldwide.
Kraton, the Kraton logo and design, and Cariflex are all
trademarks of Kraton Polymers LLC or its affiliates.
FORWARD LOOKING STATEMENTS
Some of the statements and information in this press release
contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. This press
release includes forward-looking statements that reflect our plans,
beliefs, expectations, and current views with respect to, among
other things, future events and financial performance.
Forward-looking statements are often identified by words such as
"outlook," "believes," "target," "estimates," "expects,"
"projects," "may," "intends," "plans", "on track", or
"anticipates," or by discussions of strategy, plans or intentions,
including all matters described on the section titled "Outlook"
including, but not limited to, our outlook for full year 2017
guidance for Adjusted EBITDA, expectations of Kraton net debt at
December 31, 2017 and second quarter
2017 guidance on the positive spread between FIFO and ECRC.
All forward-looking statements in this press release are made
based on management's current expectations and estimates, which
involve known and unknown risks, uncertainties, assumptions, and
other important factors that could cause actual results,
performance or our achievements, or industry results to differ
materially from those expressed in forward-looking statements.
These risks and uncertainties are more fully described in our
latest Annual Report on Form 10-K, including but not limited to
"Part I, Item 1A. Risk Factors" and "Part II, Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations" therein, and in our other filings with the Securities
and Exchange Commission, and include, but are not limited to, risks
related to: the integration of Arizona Chemical (now, AZ Chem
Holdings LP); Kraton's ability to repay its indebtedness; Kraton's
reliance on third parties for the provision of significant
operating and other services; conditions in the global economy and
capital markets; fluctuations in raw material costs; limitations in
the availability of raw materials; competition in Kraton's end-use
markets; and other factors of which we are currently unaware or
deem immaterial. There may be other factors of which we are
currently unaware or deem immaterial that may cause our actual
results to differ materially from the forward-looking statements.
In addition, to the extent any inconsistency or conflict exists
between the information included in this report and the information
included in our prior reports and other filings with the SEC, the
information contained in this report updates and supersedes such
information. Readers are cautioned not to place undue reliance on
our forward-looking statements. Forward-looking statements speak
only as of the date they are made, and we assume no obligation to
update such information in light of new information or future
events.
For Further Information:
H. Gene Shiels
Director of Investor Relations
(281) 504-4886
KRATON
CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
|
|
|
|
Three Months Ended
March 31,
|
|
2017
|
|
2016
|
Revenue
|
$
|
458,125
|
|
|
$
|
419,923
|
|
Cost of goods
sold
|
314,759
|
|
|
326,105
|
|
Gross
profit
|
143,366
|
|
|
93,818
|
|
Operating
expenses:
|
|
|
|
Research and
development
|
10,345
|
|
|
10,576
|
|
Selling, general, and
administrative
|
40,555
|
|
|
49,862
|
|
Depreciation and
amortization
|
33,143
|
|
|
30,154
|
|
Operating
income
|
59,323
|
|
|
3,226
|
|
Disposition and exit
of business activities
|
—
|
|
|
45,251
|
|
Loss on
extinguishment of debt
|
(19,738)
|
|
|
(13,423)
|
|
Earnings of
unconsolidated joint venture
|
127
|
|
|
78
|
|
Interest expense,
net
|
(34,305)
|
|
|
(33,838)
|
|
Income before income
taxes
|
5,407
|
|
|
1,294
|
|
Income tax benefit
(expense)
|
(1,218)
|
|
|
86,251
|
|
Consolidated net
income
|
4,189
|
|
|
87,545
|
|
Net loss attributable
to noncontrolling interest
|
2,224
|
|
|
542
|
|
Net income
attributable to Kraton
|
$
|
6,413
|
|
|
$
|
88,087
|
|
Earnings per common
share:
|
|
|
|
Basic
|
$
|
0.21
|
|
|
$
|
2.87
|
|
Diluted
|
$
|
0.20
|
|
|
$
|
2.84
|
|
Weighted average
common shares outstanding:
|
|
|
|
Basic
|
30,430
|
|
|
30,026
|
|
Diluted
|
30,851
|
|
|
30,289
|
|
KRATON
CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
|
|
|
March 31,
2017
|
|
December 31,
2016
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
104,066
|
|
|
$
|
121,749
|
|
Receivables, net of
allowances of $929 and $814
|
216,330
|
|
|
200,860
|
|
Inventories of
products
|
386,900
|
|
|
327,996
|
|
Inventories of
materials and supplies
|
23,671
|
|
|
22,392
|
|
Prepaid
expenses
|
36,628
|
|
|
35,851
|
|
Other current
assets
|
39,267
|
|
|
37,658
|
|
Total current
assets
|
806,862
|
|
|
746,506
|
|
Property, plant, and
equipment, less accumulated depreciation of $438,005 and
$411,418
|
921,411
|
|
|
906,722
|
|
Goodwill
|
770,525
|
|
|
770,012
|
|
Intangible assets,
less accumulated amortization of $155,595 and $144,946
|
430,329
|
|
|
439,198
|
|
Investment in
unconsolidated joint venture
|
11,003
|
|
|
11,195
|
|
Debt issuance
costs
|
3,218
|
|
|
3,511
|
|
Deferred income
taxes
|
7,113
|
|
|
6,907
|
|
Other long-term
assets
|
24,752
|
|
|
22,594
|
|
Total
assets
|
$
|
2,975,213
|
|
|
$
|
2,906,645
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Current portion of
long-term debt
|
$
|
28,192
|
|
|
$
|
41,825
|
|
Accounts
payable-trade
|
165,792
|
|
|
150,081
|
|
Other payables and
accruals
|
112,122
|
|
|
130,398
|
|
Due to related
party
|
20,895
|
|
|
14,669
|
|
Total current
liabilities
|
327,001
|
|
|
336,973
|
|
Long-term debt, net
of current portion
|
1,753,382
|
|
|
1,697,700
|
|
Deferred income
taxes
|
211,380
|
|
|
211,396
|
|
Other long-term
liabilities
|
171,687
|
|
|
170,339
|
|
Total
liabilities
|
2,463,450
|
|
|
2,416,408
|
|
|
|
|
|
Equity:
|
|
|
|
Kraton stockholders'
equity:
|
|
|
|
Preferred stock,
$0.01 par value; 100,000 shares authorized; none issued
|
—
|
|
|
—
|
|
Common stock, $0.01
par value; 500,000 shares authorized; 31,176 shares issued and
outstanding at March 31, 2017; 30,960 shares issued and outstanding
at December 31, 2016
|
312
|
|
|
310
|
|
Additional paid in
capital
|
364,194
|
|
|
361,682
|
|
Retained
earnings
|
260,852
|
|
|
254,439
|
|
Accumulated other
comprehensive loss
|
(145,593)
|
|
|
(158,530)
|
|
Total Kraton
stockholders' equity
|
479,765
|
|
|
457,901
|
|
Noncontrolling
interest
|
31,998
|
|
|
32,336
|
|
Total
equity
|
511,763
|
|
|
490,237
|
|
Total liabilities and
equity
|
$
|
2,975,213
|
|
|
$
|
2,906,645
|
|
KRATON
CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
|
|
|
|
Three Months Ended
March 31,
|
|
2017
|
|
2016
|
CASH FLOWS FROM
OPERATING ACTIVITIES
|
|
|
|
Consolidated net
income
|
$
|
4,189
|
|
|
$
|
87,545
|
|
Adjustments to
reconcile consolidated net income to net cash provided by (used in)
operating activities:
|
|
|
|
Depreciation and
amortization
|
33,143
|
|
|
30,154
|
|
Amortization of
original issue discount
|
2,093
|
|
|
1,655
|
|
Amortization of debt
issuance costs
|
2,381
|
|
|
1,959
|
|
(Gain) loss on
disposal of property, plant, and equipment
|
(29)
|
|
|
82
|
|
Disposition and exit
of business activities
|
—
|
|
|
(45,251)
|
|
Loss on
extinguishment of debt
|
19,738
|
|
|
13,423
|
|
Earnings from
unconsolidated joint venture, net of dividends received
|
309
|
|
|
369
|
|
Deferred income tax
benefit
|
(1,177)
|
|
|
(2,643)
|
|
Release of valuation
allowance
|
—
|
|
|
(86,631)
|
|
Share-based
compensation
|
2,974
|
|
|
3,083
|
|
Decrease
(increase) in:
|
|
|
|
Accounts
receivable
|
(13,188)
|
|
|
(15,551)
|
|
Inventories of
products, materials, and supplies
|
(56,818)
|
|
|
26,478
|
|
Other
assets
|
(1,584)
|
|
|
(10,393)
|
|
Increase
(decrease) in:
|
|
|
|
Accounts
payable-trade
|
20,262
|
|
|
(10,272)
|
|
Other payables and
accruals
|
(14,122)
|
|
|
(27,952)
|
|
Other long-term
liabilities
|
(157)
|
|
|
6,176
|
|
Due to related
party
|
5,427
|
|
|
1,154
|
|
Net cash provided by
(used in) operating activities
|
3,441
|
|
|
(26,615)
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES
|
|
|
|
Kraton purchase of
property, plant, and equipment
|
(27,279)
|
|
|
(18,502)
|
|
KFPC purchase of
property, plant, and equipment
|
(5,558)
|
|
|
(8,325)
|
|
Purchase of software
and other intangibles
|
(1,514)
|
|
|
(352)
|
|
Acquisition, net of
cash acquired
|
—
|
|
|
(1,317,252)
|
|
Sale of
assets
|
—
|
|
|
72,000
|
|
Net cash used in
investing activities
|
(34,351)
|
|
|
(1,272,431)
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES
|
|
|
|
Proceeds from
debt
|
415,000
|
|
|
1,782,965
|
|
Repayments of
debt
|
(407,000)
|
|
|
(430,133)
|
|
KFPC proceeds from
debt
|
13,244
|
|
|
12,100
|
|
Capital lease
payments
|
(237)
|
|
|
(35)
|
|
Purchase of treasury
stock
|
(1,511)
|
|
|
(954)
|
|
Proceeds from the
exercise of stock options
|
1,051
|
|
|
169
|
|
Settlement of
interest rate swap
|
—
|
|
|
(5,155)
|
|
Debt issuance
costs
|
(9,318)
|
|
|
(57,116)
|
|
Net cash provided by
financing activities
|
11,229
|
|
|
1,301,841
|
|
Effect of exchange
rate differences on cash
|
1,998
|
|
|
5,534
|
|
Net increase
(decrease) in cash and cash equivalents
|
(17,683)
|
|
|
8,329
|
|
Cash and cash
equivalents, beginning of period
|
121,749
|
|
|
70,049
|
|
Cash and cash
equivalents, end of period
|
$
|
104,066
|
|
|
$
|
78,378
|
|
Supplemental
disclosures:
|
|
|
|
Cash paid during the
period for income taxes, net of refunds received
|
$
|
6,523
|
|
|
$
|
3,792
|
|
Cash paid during the
period for interest, net of capitalized interest
|
$
|
17,741
|
|
|
$
|
19,690
|
|
Capitalized
interest
|
$
|
1,215
|
|
|
$
|
797
|
|
Supplemental non-cash
disclosures:
|
|
|
|
Property, plant, and
equipment accruals
|
$
|
23,796
|
|
|
$
|
15,121
|
|
KRATON
CORPORATION
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO KRATON AND
OPERATING INCOME (LOSS) TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
(In thousands)
|
|
|
|
|
|
Three Months Ended
March 31, 2017
|
|
Three Months Ended
March 31, 2016
|
|
Polymer
|
|
Chemical
|
|
Total
|
|
Polymer
|
|
Chemical
|
|
Total
|
Net income
attributable to Kraton
|
|
|
|
|
$
|
6,413
|
|
|
|
|
|
|
$
|
88,087
|
|
Net loss attributable
to noncontrolling interest
|
|
|
|
|
(2,224)
|
|
|
|
|
|
|
(542)
|
|
Consolidated net
income
|
|
|
|
|
4,189
|
|
|
|
|
|
|
87,545
|
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit)
expense
|
|
|
|
|
1,218
|
|
|
|
|
|
|
(86,251)
|
|
Interest expense,
net
|
|
|
|
|
34,305
|
|
|
|
|
|
|
33,838
|
|
Earnings of
unconsolidated joint venture
|
|
|
|
|
(127)
|
|
|
|
|
|
|
(78)
|
|
Loss on
extinguishment of debt
|
|
|
|
|
19,738
|
|
|
|
|
|
|
13,423
|
|
Disposition and exit
of business activities
|
|
|
|
|
—
|
|
|
|
|
|
|
(45,251)
|
|
Operating income
(loss)
|
$
|
41,628
|
|
|
$
|
17,695
|
|
|
$
|
59,323
|
|
|
$
|
13,946
|
|
|
$
|
(10,720)
|
|
|
$
|
3,226
|
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
16,324
|
|
|
16,819
|
|
|
33,143
|
|
|
14,592
|
|
|
15,562
|
|
|
30,154
|
|
Disposition and exit
of business activities
|
—
|
|
|
—
|
|
|
—
|
|
|
45,251
|
|
|
—
|
|
|
45,251
|
|
Loss on
extinguishment of debt
|
(19,738)
|
|
|
—
|
|
|
(19,738)
|
|
|
(13,423)
|
|
|
—
|
|
|
(13,423)
|
|
Earnings of
unconsolidated joint venture
|
127
|
|
|
—
|
|
|
127
|
|
|
78
|
|
|
—
|
|
|
78
|
|
EBITDA
|
38,341
|
|
|
34,514
|
|
|
72,855
|
|
|
60,444
|
|
|
4,842
|
|
|
65,286
|
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
|
|
|
Transaction,
acquisition related costs, restructuring, and other costs
(a)
|
4,674
|
|
|
220
|
|
|
4,894
|
|
|
6,477
|
|
|
5,199
|
|
|
11,676
|
|
Disposition and exit
of business activities
|
—
|
|
|
—
|
|
|
—
|
|
|
(45,251)
|
|
|
—
|
|
|
(45,251)
|
|
Loss on
extinguishment of debt
|
19,738
|
|
|
—
|
|
|
19,738
|
|
|
13,423
|
|
|
—
|
|
|
13,423
|
|
Effect of purchase
price accounting on inventory valuation (b)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24,719
|
|
|
24,719
|
|
KFPC startup costs
(c)
|
2,821
|
|
|
—
|
|
|
2,821
|
|
|
840
|
|
|
—
|
|
|
840
|
|
Non-cash compensation
expense
|
2,974
|
|
|
—
|
|
|
2,974
|
|
|
3,083
|
|
|
—
|
|
|
3,083
|
|
Spread between FIFO
and ECRC
|
(36,493)
|
|
|
(1,218)
|
|
|
(37,711)
|
|
|
13,228
|
|
|
6,097
|
|
|
19,325
|
|
Adjusted
EBITDA
|
$
|
32,055
|
|
|
$
|
33,516
|
|
|
$
|
65,571
|
|
|
$
|
52,244
|
|
|
$
|
40,857
|
|
|
$
|
93,101
|
|
|
|
|
|
|
(a)
|
Charges related to
the evaluation of acquisition transactions, severance expenses, and
other restructuring related charges.
|
(b)
|
Higher costs of goods
sold for our Chemical segment related to the fair value adjustment
in purchase accounting for their inventory.
|
(c)
|
Startup costs related
to the joint venture company, KFPC.
|
KRATON
CORPORATION
RECONCILIATION OF DILUTED EARNINGS PER SHARE TO ADJUSTED DILUTED
EARNINGS (LOSS) PER SHARE (Unaudited)
(In thousands, except per share data)
|
|
|
|
Three Months Ended
March 31,
|
|
2017
|
|
2016
|
Diluted earnings per
share
|
$
|
0.20
|
|
|
$
|
2.84
|
|
Transaction,
acquisition related costs, restructuring, and other costs
(a)
|
0.12
|
|
|
0.33
|
|
Disposition and exit
of business activities
|
—
|
|
|
(0.94)
|
|
Loss on
extinguishment of debt
|
0.41
|
|
|
0.28
|
|
Effect of purchase
price accounting on inventory valuation (b)
|
—
|
|
|
0.63
|
|
KFPC startup costs
(c)
|
0.06
|
|
|
0.01
|
|
Valuation allowance
(d)
|
—
|
|
|
(2.80)
|
|
Spread between FIFO
and ECRC
|
(0.94)
|
|
|
0.45
|
|
Adjusted diluted
earnings (loss) per share (non-GAAP)
|
$
|
(0.15)
|
|
|
$
|
0.80
|
|
|
|
|
|
|
(a)
|
Charges related to
the evaluation of acquisition transactions, severance expenses, and
other restructuring related charges.
|
(b)
|
We had higher costs
of goods sold for our Chemical segment related to the fair value
adjustment in purchase accounting for their inventory.
|
(c)
|
Startup costs related
to the joint venture company, KFPC.
|
(d)
|
Reduction of income
tax valuation allowance related to the assessment of our ability to
utilize net operating losses in future periods.
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/kraton-corporation-announces-first-quarter-2017-results-300446595.html
SOURCE Kraton Corporation