HOUSTON, May 4, 2011 /CNW/ -- Kraton Performance Polymers, Inc.
(NYSE: KRA), a leading global producer of styrenic block
copolymers, announces financial results for the quarter ended March
31, 2011. 2011 FIRST QUARTER HIGHLIGHTS -- Sales volume increased
12% year-on-year to 81 kilotons -- Sales revenue increased 26%
year-on-year to $345 million -- Net income was $22 million in the
first quarter 2011, compared to $20 million in the first quarter
2010 -- GAAP earnings were $0.68 per fully-diluted share in the
first quarter 2011 -- Restructuring and related charges, charges
associated with evaluating acquisition transactions, costs
associated with debt refinancing and costs associated with the
secondary offering in the first quarter were approximately $10
million or $0.30 per share -- Adjusted EBITDA(1) ( 2) was $56
million or 16% of sales revenue -- LIFO to FIFO income (3) was $21
million, as compared to $7 million income in the first quarter 2010
"Kraton continued to deliver solid operational results in the first
quarter of 2011, with sales volume up 12% year-on-year and sales
revenue up 26% compared to the first quarter 2010. The increase in
sales revenue reflects the impact of price increases implemented
during the fourth quarter 2010 in response to rising raw material
costs and other manufacturing inputs as well as higher sales volume
compared to the first quarter 2010," said Kevin M. Fogarty,
Kraton's President and Chief Executive Officer. "The trend of
higher prices for many of our key raw materials continued
throughout the first quarter, and in response we announced a number
of additional price increases, many of which have been implemented
already in the second quarter 2011," added Fogarty. "During the
quarter we continued our focus on expanding our innovation volumes
and on moving new innovation projects toward commercialization. We
are encouraged by the progress in our innovation programs, and on a
trailing twelve month basis at March 31, 2011, our Vitality Index
was 14%. We also completed a highly successful secondary offering
at quarter end, which completed the sale of all remaining shares
held by TPG Capital, L.P. and J.P. Morgan Partners, LLC. As a
result, we enter a new chapter in Kraton's history." Three Months
Ended March 31, ------------------ (US $ in thousands, except per
share amounts) 2011 2010 ---- ---- Sales revenue $344,828 $272,732
Adjusted EBITDA(1) ( 2) $56,018 $42,622 Net income $21,877 $19,795
Net income per diluted share(4) $0.68 $0.64 Net cash used in
operating activities $44,137 $72,836 (1) A reconciliation of
Adjusted EBITDA to Net Income is included in the accompanying
financial tables. (2) Adjusted EBITDA is EBITDA excluding
restructuring and related charges, non-cash compensation expenses
and loss on the extinguishment of debt. (3) The spread between the
first-in, first-out (FIFO) basis of accounting and the last-in,
first-out (LIFO) basis of accounting resulted in a decrease in cost
of goods sold of approximately $21.0 million and $7.3 million for
the three months ended March 31, 2011 and 2010, respectively. (4)
First quarter 2011 net income includes restructuring and related
charges, charges associated with evaluating acquisition
transactions, costs associated with debt refinancing and costs
associated with the secondary offering of approximately $10 million
or $0.30 per share. First quarter 2010 net income includes a
benefit of approximately $1 million or $0.02 per share associated
with restructuring activities. First Quarter 2011 versus First
Quarter 2010 Results Sales revenue in the first quarter 2011 was
$345 million, an increase of approximately 26% compared to the
first quarter 2010. The increase in sales revenue compared to the
first quarter 2010 was primarily the result of higher sales volumes
and the impact of price increases implemented in response to rising
raw material costs and other factors. Sales volume in the first
quarter 2011 was 81 kilotons, up 12% compared to the first quarter
2010. Adjusted EBITDA in the first quarter 2011 was $56 million, or
16% of revenue, compared to $43 million, or 16% of revenue in the
first quarter 2010. The spread between the LIFO and FIFO basis of
accounting had a positive impact on first quarter 2011 Adjusted
EBITDA of $21 million and a positive impact of $7 million in the
first quarter 2010. First quarter 2011 net income was $22 million
or $0.68 per diluted share, compared to first quarter 2010 net
income of $20 million or $0.64 per diluted share. First quarter
2011 earnings per share were negatively impacted by approximately
$0.30 per share associated with restructuring and related charges,
charges associated with evaluating acquisition transactions, costs
associated with debt refinancing and costs associated with the
secondary offering. First quarter 2010 net income includes a
benefit of approximately $1 million or $0.02 per share associated
with restructuring activities. Cash Flow During the first quarter
2011, net cash used in operating activities was $44 million,
compared to net cash used in operating activities of $73 million in
the first quarter of 2010. Net capital expenditures in the first
quarter 2011 were $17 million compared to $8 million in the first
quarter 2010. END USE MARKET INFORMATION Revenue in our Advanced
Materials end use market increased $19 million or approximately 21%
to $111 million in the first quarter 2011 compared to the first
quarter 2010. "Revenue in our Advanced Materials end use increased
in all markets, including HSBC-led growth in emerging markets,"
said Fogarty. "We continued to see positive momentum for innovation
product sales, which include personal care applications such as
diapers and adult incontinence products, and in PVC-free
alternatives for wire and cable applications such as computer data
and power cords and for medical applications such as IV bags and
tubing." Revenue in our Adhesives, Sealants and Coatings end use
market increased $18 million or approximately 19% to $110 million
in the first quarter 2011 compared to the first quarter 2010.
"Revenue growth in our Adhesives, Sealants and Coatings end use
market was led by Europe and North America, and was primarily due
to higher pricing," said Fogarty. "European sales increases were
driven by the non-woven and industrial applications, as well as by
innovation sales in health and beauty applications. North American
sales were driven by specialty tape and printing plate
applications." Revenue in our Paving and Roofing end use market
increased $33 million or approximately 53% to $94 million in the
first quarter 2011 compared to the first quarter 2010. "Sales
growth was led by Europe, where we saw increased pricing and
volumes in both paving and roofing markets. In North America, sales
growth was driven by higher pricing in both the paving and roofing
markets, and by higher volume in the paving market. During the
quarter we also extended our sales into emerging markets such as
India and Russia," said Fogarty. "We estimate that North American
and European sales volumes in the first quarter included
approximately 7 kilotons associated with accelerated purchasing,
above the typical level of pre-season inventory accumulation, as
customers built inventories in advance of expected price
increases." Revenue in our Emerging Businesses end use market
increased $6 million or approximately 47% to $20 million in the
first quarter 2011 compared to the first quarter 2010. "The growth
in revenue in our Emerging Business end use reflects continued
volume growth in our Cariflex(TM) isoprene rubber latex business in
applications such as surgical gloves and condoms, as well as
Cariflex solid isoprene rubber in medical and coatings
applications," said Fogarty. "We are also pleased to announce that
we have completed the isoprene rubber latex expansion project at
our facility in Paulinia, Brazil." FIRST QUARTER 2011 DEVELOPMENTS
On April 6, 2011 Kraton announced the closing of a secondary
offering entailing the sale of 9,988,072 shares of Kraton's common
stock held by affiliates of TPG Capital, L.P. ("TPG") and J.P.
Morgan Partners, LLC ("JPMP"), which represented all of the shares
of Kraton's common stock held by TPG and JPMP, at a price to the
public of $37.75 per share. Prior to the sale, TPG owned
approximately 18.80% of our outstanding common stock, and JPMP
owned approximately 12.53%. Kraton did not receive any proceeds
from the secondary offering. On February 11, 2011 Kraton issued
$250 million in 6.75% senior unsecured notes due 2019. In
conjunction with the notes offering, Kraton entered into a new
senior secured credit facility with a syndicate of banks, comprised
of a $150 million term loan facility and a $200 million revolving
credit facility. Proceeds from the 6.75% notes offering and the new
senior secured term facility were used to retire the company's
outstanding 8.125% senior subordinated notes due 2014 and amounts
outstanding under the company's previous bank term loan facility.
Kraton continued its process of evaluating options for the 30
kiloton hydrogenated styrenic block copolymer plant it proposes to
build in Asia. As this process includes an in-depth review of
significant project variables such as proposed transaction
structure, commercial terms, operating agreements and feedstock
availability as well as an analysis of the impact these criteria
have on overall project economics, the company now expects to be in
a position to communicate site location in the second half of 2011.
Operations at Kraton's Kashima, Japan, chemical complex were shut
down on March 11, 2011, as part of a complex wide emergency
procedure in response to the recent earthquakes. Although the
facility was not damaged, it has been confirmed that there has been
damage to the broader infrastructure at the Kashima Petrochemical
Complex as a result of the earthquake and tsunami. Operations at
the facility remain suspended due to a lack of monomers and
utilities. Currently, it is impossible to give an accurate estimate
of when the facility will be back in operation. The company
continues to monitor the situation closely and is working with its
joint venture partner and other business counterparties to expedite
returning the facility to normal operations. At the present time,
the company is able to meet its customers' forecasted demand from
existing inventories and the company has initiated contingency
plans to provide its customers with products from its other global
manufacturing sites to mitigate any supply disruptions. OUTLOOK
"During the first quarter of 2011, prices for our key raw materials
increased and we currently expect this trend to continue as
evidenced by the cumulative April and May North American butadiene
contract price increase of $0.38 per pound or 36%," said Fogarty.
"With respect to sales volume, we believe there was approximately 9
kilotons of first quarter 2011 sales volume attributable to
advanced purchases, particularly in our Paving and Roofing end use,
as customers pulled volume, primarily from the second quarter, into
the first quarter. As such, we currently anticipate that our second
quarter 2011 sales volume will be between 84 and 87 kilotons,
within the range of historical volume progression from the first
quarter to the second quarter, after taking into account the 9
kilotons of advanced purchasing in the first quarter 2011." USE OF
NON-GAAP FINANCIAL MEASURES This earnings release includes the use
of both GAAP (generally accepted accounting principles) and
non-GAAP financial measures. The non-GAAP financial measures are
EBITDA and Adjusted EBITDA. In each case the most directly
comparable GAAP financial measure is net income. A table included
in this earnings release reconciles these non-GAAP financial
measures with the most directly comparable GAAP financial measure.
We consider EBITDA and Adjusted EBITDA important supplemental
measures of our performance and believe they are frequently used by
investors and other interested parties in the evaluation of
companies in our industry. EBITDA and Adjusted EBITDA have
limitations as analytical tools, and you should not consider them
in isolation, or as a substitute for analysis of our results under
GAAP in the United States. EBITDA and Adjusted EBITDA presented in
this earnings release may differ from EBITDA amounts calculated by
us under our debt instruments. CONFERENCE CALL AND WEBCAST
INFORMATION Kraton has scheduled a conference call on Thursday May
5, 2011 at 9:00 a.m. (Eastern Time) to discuss first quarter 2011
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 left side of 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 #: 888-577-8992. International
dial-in #: 312-470-7060. For those unable to listen to the live
call, a replay will be available beginning at approximately 11:00
a.m. (Eastern Time) on May 5, 2011 through 11:59 p.m. Eastern Time
on May 19, 2011. 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 left
side of the Investor Relations page. To hear a telephonic replay of
the call, dial 866-454-1413 and International callers dial
203-369-1236. ABOUT KRATON Kraton Performance Polymers, Inc.,
through its operating subsidiary Kraton Polymers LLC and its
subsidiaries (collectively, "Kraton"), is a leading global producer
of engineered polymers and one of the world's largest producers of
styrenic block copolymers (SBCs), a family of products whose
chemistry was pioneered by Kraton almost 50 years ago. 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, roofing
and footwear products. The company offers approximately 800
products to more than 700 customers in over 60 countries worldwide,
and is the only SBC producer with manufacturing and service
capabilities on four continents. We manufacture products at five
plants globally, including our flagship plant in Belpre, Ohio, the
most diversified SBC plant in the world, as well as plants in
Germany, France, Brazil and Japan. The plant in Japan is operated
by an unconsolidated manufacturing joint venture. For more
information on the company, please visit www.kraton.com. Kraton,
the Kraton logo and design, and the "Giving Innovators their Edge"
tagline are all trademarks of Kraton Polymers LLC. Forward Looking
Statements 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 characterized by
the use of words such as "outlook", "believes," "estimates,"
"expects," "projects," "may," "intends," "plans" or "anticipates,"
or by discussions of strategy, plans or intentions. In this press
release, forward-looking information relates to, pricing trends,
expected second quarter financial results, expected volumes, 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
known and unknown risks, uncertainties and other important factors
that could cause actual results to differ materially from those
expressed in forward-looking statements. These risks and
uncertainties are more fully described in "Part I. Item 1A. Risk
Factors" contained in our Annual Report on 10-K, as filed with the
Securities and Exchange Commission and as subsequently updated in
our Quarterly Reports on Form 10-Q, and include the following risk
factors: conditions in the global economy and capital markets; our
reliance on LyondellBasell Industries for the provision of
significant operating and other services ; the failure of our raw
materials suppliers to perform their obligations under long-term
supply agreements, or our inability to replace or renew these
agreements when they expire; limitations in the availability of raw
materials we need to produce our products in the amounts or at the
prices necessary for us to effectively and profitably operate our
business; competition in our end-use markets, from other producers
of SBCs and from producers of products that can be substituted for
our products; our ability to produce and commercialize
technological innovations; our ability to protect our intellectual
property, on which our business is substantially dependent;
infringement of our products on the intellectual property rights of
others; seasonality in our Paving and Roofing business; financial
and operating constraints related to our substantial level of
indebtedness; the inherently hazardous nature of chemical
manufacturing; product liability claims and other lawsuits arising
from environmental damage or personal injuries associated with
chemical manufacturing; political and economic risks in the various
countries in which we operate; health, safety and environmental
laws, including laws that govern our employees' exposure to
chemicals deemed harmful to humans; regulation of our customers,
which could affect the demand for our products or result in
increased compliance costs; customs, international trade, export
control, antitrust, zoning and occupancy and labor and employment
laws that could require us to modify our current business practices
and incur increased costs; fluctuations in currency exchange rates;
our relationship with our employees; loss of key personnel or our
inability to attract and retain new qualified personnel; the fact
that we typically do not enter into long-term contracts with our
customers; a decrease in the fair value of our pension assets,
which could require us to materially increase future funding of the
pension plan; future sales of our shares could adversely affect the
market price of our common stock; Delaware law and some provisions
of our organizational documents make a takeover of our company more
difficult; and other risks, factors and uncertainties described in
this press release and our other reports and documents; and other
factors of which we are currently unaware or deem immaterial.
Readers are cautioned not to place undue reliance on
forward-looking statements. We assume no obligation to update such
information in light of new information or future events. Further
information concerning issues that could materially affect
financial performance related to forward-looking statements can be
found in Kraton's periodic filings with the Securities and Exchange
Commission. KRATON PERFORMANCE POLYMERS, INC. CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands,
except per share data) Three months ended March 31,
------------------ 2011 2010 ---- ---- Sales Revenue $344,828
$272,732 Cost of Goods Sold 257,977 203,605 ------- ------- Gross
Profit 86,851 69,127 ------ ------ Operating Expenses Research and
development 6,602 5,984 Selling, general and administrative 27,171
22,062 Depreciation and amortization of identifiable intangibles
14,626 11,046 ------ ------ Total operating expenses 48,399 39,092
------ ------ Loss on Extinguishment of Debt 2,985 - Earnings of
Unconsolidated Joint Venture 141 74 Interest Expense, Net 11,181
6,064 ------ ----- Income Before Income Taxes 24,427 24,045 Income
Tax Expense 2,550 4,250 ----- ----- Net Income $21,877 $19,795
Earnings per common share Basic $0.69 $0.64 Diluted $0.68 $0.64
Weighted average common shares outstanding Basic 31,609 30,539
Diluted 32,197 30,728 KRATON PERFORMANCE POLYMERS, INC. CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except par
value) December March 31, 31, 2011 2010 ---- ---- ASSETS Current
Assets Cash and cash equivalents $36,031 $92,750 Receivables, net
of allowances of $1,147 and $947 177,760 136,132 Inventories of
products, net 364,257 325,120 Inventories of materials and
supplies, net 9,829 9,631 Other current assets 46,699 38,749 ------
------ Total current assets 634,576 602,382 ------- -------
Property, plant and equipment, less accumulated depreciation of
$270,908 and $252,387 381,209 365,366 Identifiable intangible
assets, less accumulated amortization of $52,268 and $50,123 68,449
70,461 Investment in unconsolidated joint venture 13,204 13,589
Deferred financing costs 12,838 3,172 Other long-term assets 26,885
25,753 ------ ------ Total Assets $1,137,161 $1,080,723 ==========
========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities
Current portion of long-term debt $9,375 $2,304 Accounts
payable-trade 84,054 86,699 Other payables and accruals 43,970
60,782 Deferred income taxes 595 595 Insurance note payable 4,260 -
Due to related party 17,379 19,264 ------ ------ Total current
liabilities 159,633 169,644 Long-term debt, net of current portion
390,625 380,371 Deferred income taxes 14,823 14,089 Long-term
liabilities 72,987 64,242 ------ ------ Total liabilities 638,068
628,346 ------- ------- Stockholders' Equity Preferred stock, $0.01
par value; 100,000 shares authorized; none issued Common stock,
$0.01 par value; 500,000 shares authorized; 31,881 shares issued
and outstanding at March 31, 2011; 31,390 shares issued and
outstanding at December 31, 2010 319 314 Additional paid in capital
340,913 334,457 Retained earnings 118,588 96,711 Accumulated other
comprehensive income 39,273 20,895 ------ ------ Total
stockholders' equity 499,093 452,377 ------- ------- Total
Liabilities and Stockholders' Equity $1,137,161 $1,080,723
========== ========== KRATON PERFORMANCE POLYMERS, INC. CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)
Three months ended March 31, ------------------ 2011 2010 ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES Net income $21,877 $19,795
Adjustments to reconcile net income to net cash used in operating
activities: Depreciation and amortization of identifiable
intangibles 14,626 11,046 Amortization of deferred financing costs
4,762 518 Loss on disposal of fixed assets 5 3 Loss on
extinguishment of debt 2,985 - Change in fair value of interest
rate swaps - (450) Distributed earnings in unconsolidated joint
venture 374 328 Deferred income tax expense 735 909 Share-based
compensation 1,294 1,332 Increase in Accounts receivable (36,792)
(38,811) Inventories of products, materials and supplies (31,359)
(26,949) Other assets (12,626) (18,139) Decrease in Accounts
payable-trade, other payables and accruals, and other long-term
liabilities (8,150) (20,160) Due to related party (1,868) (2,258)
------ ------ Net cash used in operating activities (44,137)
(72,836) ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (16,518) (6,466) Purchase
of software (132) (1,188) ---- ------ Net cash used in investing
activities (16,650) (7,654) ------- ------ CASH FLOWS FROM
FINANCING ACTIVITIES Proceeds from debt 400,000 25,000 Repayment of
debt (385,660) (25,576) Proceeds from issuance of common stock -
11,197 Costs associated with the issuance of common stock - (484)
Proceeds from the exercise of stock options 5,896 - Proceeds from
insurance note payable 4,734 3,201 Repayment of insurance note
payable (474) - Debt issuance costs (14,948) - ------- --- Net cash
provided by financing activities 9,548 13,338 ----- ------ Effect
of exchange rate differences on cash (5,480) 9,911 ------ ----- Net
decrease in cash and cash equivalents (56,719) (57,241) Cash and
cash equivalents at beginning of period 92,750 69,291 ------ ------
Cash and cash equivalents at end of period $36,031 $12,050 =======
======= Supplemental Disclosures Cash paid during the period for
income taxes, net of refunds received $3,703 $894 Cash paid during
the period for interest $10,647 $9,989 KRATON PERFORMANCE POLYMERS,
INC. EBITDA AND ADJUSTED EBITDA (In thousands) We reconcile Net
Income to EBITDA and Adjusted EBITDA as follows Three months ended
March 31, --------- 2011 2010 ---- ---- (in thousands) Net Income
$21,877 $19,795 Plus Interest expense, net 11,181 6,064 Income tax
expense 2,550 4,250 Depreciation and amortization expenses 14,626
11,046 ------ ------ EBITDA (a) $50,234 $41,155 ------- ------- Add
Restructuring and related costs (b) 1,505 135 Other non-cash
expense (c) 1,294 1,332 Loss on extinguishment of debt (d) 2,985 -
----- --- Adjusted EBITDA (a) $56,018 $42,622 ======= ======= (a)
EBITDA and Adjusted EBITDA are impacted by the spread between the
FIFO basis of accounting and the LIFO basis of accounting. The
spread between the LIFO and FIFO basis resulted in a positive
impact to EBITDA and Adjusted EBITDA of approximately $21.0 million
and $7.3 million for the quarters ended March 31, 2011 and 2010,
respectively. (b) 2011 restructuring and related charges consisted
primarily of consulting fees, severance expenses, and other charges
associated with the restructuring of our European organization,
expenses associated with the March 2011 secondary public offering,
and charges associated with evaluating acquisition transactions.
2010 charges consisted of consulting fees associated with the
restructuring of our European organization. (c) For both periods,
consists of non-cash compensation. (d) In 2011, reflects the loss
on extinguishment of debt related to the refinancing of Kraton's
debt in February 2011. HOUSTON, May 4, 2011 /CNW/ -- Restructuring
and related charges discussed above were recorded in the Condensed
Consolidated Statements of Operations, as follows. Three months
ended March 31, ---------- 2011 2010 ---- ---- (in thousands)
Selling, general and administrative $1,505 $135 For Further
Information:Investors: H. Gene Shiels 281-504-4886Media: Richard A.
Ott 281-504-4720 (Logo:
http://photos.prnewswire.com/prnh/20100728/DA42514LOGO) Web Site:
http://www.kraton.com
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