KRATON CORPORATION HOUSTON, Oct. 28, 2015 /PRNewswire/ -- Kraton Performance Polymers, Inc. (NYSE: KRA), a leading global producer of styrenic block copolymers, announces financial results for the quarter ended September 30, 2015.
2015 THIRD QUARTER OVERVIEW
-- Sales volume was 81.0 kilotons in the third quarter 2015 compared to
80.7 kilotons in the third quarter 2014.
-- Gross profit was $67.8 million in the third quarter 2015 compared to
$63.8 million in the third quarter 2014.
-- Adjusted gross profit (non-GAAP) was $68.8 million, or $850 per ton, in
the third quarter 2015 compared to $64.8 million, or $803 per ton, in
the third quarter 2014.
-- Adjusted EBITDA (non-GAAP) was $42.4 million in the third quarter 2015
compared to $39.4 million in the third quarter 2014, an increase of $3.0
million.
-- Net income attributable to Kraton was $8.4 million, or $0.27 per diluted
share, in the third quarter 2015 compared to $16.6 million, or $0.50 per
diluted share, in the third quarter 2014.
-- Adjusted net income (non-GAAP) was $15.0 million, or $0.48 per diluted
share, in the third quarter 2015 compared to $11.6 million, or $0.35 per
diluted share, in the third quarter 2014.
-- Net cash provided by operating activities was $37.3 million in the third
quarter 2015 compared to $32.8 million in the third quarter 2014.
Three months ended Nine months ended
September 30, September 30,
------------- -------------
($ in thousands,
except per share
amounts) 2015 2014 2015 2014
---- ---- ----
Sales volume (in
kilotons) 81.0 80.7 231.6 233.4
Revenue $269,012 $318,971 $786,349 $954,394
EBITDA(1) $33,391 $40,090 $61,247 $90,693
Adjusted EBITDA(1) $42,393 $39,417 $116,773 $115,491
Net income (loss)
attributable to
Kraton (GAAP) $8,446 $16,615 $(6,574) $19,849
Adjusted net income
attributable to
Kraton(1) $14,955 $11,580 $39,846 $33,496
Earnings (loss) per
diluted share (GAAP) $0.27 $0.50 $(0.21) $0.60
Adjusted earnings per
diluted share(1) $0.48 $0.35 $1.26 $1.01
Net cash provided by
(used in) operating
activities $37,338 $32,781 $81,573 $(18,777)
(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.
"Kraton's results for the third quarter 2015 were in line with our expectations, with sales volume modestly above the third quarter 2014 on growth in Specialty Polymers and Performance Products. Sales volume in Specialty Polymers was up compared to the third quarter 2014 as higher sales into industrial, consumer and cable gel applications served to offset lower lubricant additive sales volume associated with an inventory adjustment program with a major customer. Sales volume in Performance Products was up compared to the third quarter 2014 on higher sales into paving applications, including growth in differentiated grades such as HiMA, which offset lower sales into roofing and lesser-differentiated adhesive applications," said Kevin M. Fogarty, Kraton's President and Chief Executive Officer. "With respect to Cariflex, sales volume was slightly below the record level posted in the third quarter 2014, due to variability in customer order patterns, which are typical for our Cariflex product group. Cariflex remains on its growth trend, with year-to-date sales volume up over 5% compared to the first nine months of 2014," added Fogarty.
"With respect to our outlook for full year 2015, we now expect adjusted gross profit per ton will be in the range of $900 to $915 per ton for the full year, which would translate into adjusted EBITDA of approximately $160 million," said Fogarty. "In the third quarter 2015, we repurchased 827 thousand shares at an average price of $20.77 per share, thereby completing our $50 million share repurchase program. For the program in total, we repurchased just over 2.5 million shares at an average price of $19.58 per share. During the quarter, we also continued to make progress on the various initiatives outlined for Kraton in our June investor day, which include the $70 million in cost reductions we have targeted by 2018, $18 million of which we expect to deliver in 2015," Fogarty said. "With regard to our recently announced agreement to acquire all of the capital stock of Arizona Chemical Holdings Corporation, we have already started work on the integration process, and we are working diligently to close the acquisition by the end of this year or first quarter of 2016. Post-close, and through the combined efforts of the Kraton and Arizona Chemical teams, we will begin work to deliver the $65 million in cost synergies we expect to be realized through the combination of our two companies."
Q3 2015 VERSUS Q3 2014 RESULTS
Revenue was $269.0 million for the three months ended September 30, 2015 compared to $319.0 million for the three months ended September 30, 2014, a decrease of $50.0 million or 15.7%. Excluding the $23.9 million negative effect from currency movements, revenue declined $26.0 million, or 8.2%, attributable to lower average selling prices resulting from lower raw material costs. Sales volumes were 81.0 kilotons for the third quarter of 2015 compared to 80.7 kilotons for the third quarter of 2014.
With respect to revenue for each of our product groups:
-- Cariflex(TM) revenue was $34.0 million for the three months ended
September 30, 2015 compared to $40.0 million for the three months ended
September 30, 2014, a decline of $5.9 million, or 14.8%. The negative
effect of currency fluctuations accounted for $2.1 million of the
decline. The remaining $3.8 million, or 9.6%, of the decline was
primarily due to lower sales volume. Sales volume decreased compared to
record sales volume for this product group in the third quarter of 2014
primarily due to lower sales into surgical glove applications associated
with variability in customer order patterns which are typical in the
Cariflex product group.
-- Specialty Polymers revenue was $86.8 million for the three months ended
September 30, 2015 compared to $98.7 million for the three months ended
September 30, 2014. Of the $11.9 million, or 12.1%, revenue decline,
$4.7 million is associated with the negative effect of currency
fluctuations, and the balance of the decline is primarily due to lower
average selling prices resulting from lower raw material costs. Compared
to the third quarter of 2014, sales volumes increased modestly due to
growth in industrial, consumer, and cable gel applications partially
offset by lower volumes into lubricant additives.
-- Performance Products revenue was $148.0 million for the three months
ended September 30, 2015 compared to $180.1 million for the three months
ended September 30, 2014. Of the $32.1 million, or 17.8%, revenue
decline, $17.1 million is associated with the negative effect of
currency fluctuations, and the balance of the decline is primarily due
to lower average selling prices resulting from lower raw material costs.
With respect to sales volume, we experienced strong demand for our
paving applications, largely in North America, where we experienced
share gains and higher sales of differentiated grades. These sales
volume gains were offset by lower sales into roofing applications in
Europe and lower sales into less differentiated pressure sensitive and
construction adhesive applications.
Gross profit was $67.8 million for the three months ended September 30, 2015 compared to $63.8 million for the three months ended September 30, 2014. Adjusted gross profit (non-GAAP) was $68.8 million, or $850 per ton, for the three months ended September 30, 2015 compared to $64.8 million, or $803 per ton, for the three months ended September 30, 2014, an increase in adjusted gross profit of $47 per ton despite a negative impact from currency fluctuations of $30 per ton.
Research and development expenses were $7.6 million for the three months ended September 30, 2015 compared to $7.4 million for the three months ended September 30, 2014, an increase of $0.2 million, or 2.1%.
Selling, general and administrative expenses were $26.9 million for the three months ended September 30, 2015 compared to $16.4 million for the three months ended September 30, 2014, an increase of $10.5 million, or 64.4%. This increase was primarily due to $5.0 million of transaction and acquisition related costs incurred in the third quarter 2015, a $4.2 million reduction in the accrual for fees related to the terminated Combination Agreement with LCY in the third quarter 2014, and a $2.9 million increase in variable employee compensation costs. These increases were partially offset by a $1.0 million positive effect from currency fluctuations and a $1.0 million decrease associated with cost reduction initiatives. Adjusted selling, general and administrative expenses were $20.8 million and $20.1 million for the three months ended September 30, 2015 and 2014, respectively.
Adjusted EBITDA (non-GAAP) in the third quarter 2015 was $42.4 million, or 15.8% of revenue, compared to $39.4 million, or 12.4% of revenue, in the third quarter 2014, an increase of $3.0 million, or 7.6%.
Third quarter 2015 net income attributable to Kraton was $8.4 million, or $0.27 per diluted share, compared to the third quarter 2014 net income attributable to Kraton of $16.6 million, or $0.50 per diluted share. Adjusted net income attributable to Kraton (non-GAAP) was $15.0 million, or $0.48 per diluted share, in the third quarter 2015 compared to adjusted net income attributable to Kraton of $11.6 million, or $0.35 per diluted share, in the third quarter 2014, an increase of $0.13 per diluted share.
YTD 2015 VERSUS YTD 2014 RESULTS
Revenue was $786.3 million for the nine months ended September 30, 2015 compared to $954.4 million for the nine months ended September 30, 2014, a decrease of $168.0 million or 17.6%. The negative effect from currency movements accounted for $72.7 million of the decrease. The remaining $95.3 million, or 10.0%, decline was due to lower average selling prices amounting to $86.3 million driven by lower average raw material costs and $9.0 million due to lower sales volumes. Sales volumes were 231.6 kilotons for the nine months ended September 30, 2015, a decrease of 1.8 kilotons compared to the nine months ended September 30, 2014.
With respect to revenue for each of our product groups:
-- Cariflex(TM) revenue was $102.1 million for the nine months ended
September 30, 2015 compared to $104.6 million for the nine months ended
September 30, 2014, a decrease of $2.5 million or 2.4%. Cariflex sales
volumes increased 5.2% compared to the nine months ended September 30,
2014, driven primarily by higher sales into surgical glove applications.
The $6.1 million positive impact on revenue from higher sales volume was
more than offset by a $6.6 million negative effect from currency
fluctuations and a decline of $2.0 million associated with lower selling
prices resulting from lower isoprene costs. Excluding the negative
impact from currency fluctuations, revenue would have increased $4.1
million, or 3.9%.
-- Specialty Polymers revenue was $263.1 million for the nine months ended
September 30, 2015 compared to $317.6 million for the nine months ended
September 30, 2014. Of the $54.5 million, or 17.2%, revenue decrease,
$15.9 million was associated with the negative effect of currency
fluctuations. The balance of the decline was due to lower average
selling prices resulting from lower raw material costs and a 5.5%
decrease in sales volumes. The decrease in sales volume was largely due
to lower sales into lubricant additive applications associated with
inventory reduction measures by a significant customer, and, to a lesser
extent, lower sales into personal care applications. Partially
offsetting these declines were higher sales into industrial, medical,
and cable gel applications.
-- Performance Products revenue was $420.9 million for the nine months
ended September 30, 2015 compared to $531.9 million for the nine months
ended September 30, 2014. Of the $111.1 million, or 20.9%, revenue
decrease, $50.2 million was associated with the negative effect of
currency fluctuations, and the balance of the decline was primarily due
to lower average selling prices resulting from lower raw material costs.
Sales volume increased modestly, despite the previously disclosed seven
kilotons of lost production at our Wesseling and Berre facilities in the
second quarter 2015. The net increase in sales volume was driven by
higher sales into paving applications in North America and personal care
applications, largely offset by lower sales into roofing applications in
Europe and adhesives applications.
Gross profit was $161.8 million for the nine months ended September 30, 2015 compared to $193.0 million for the nine months ended September 30, 2014. Adjusted gross profit (non-GAAP) was $202.0 million, or $872 per ton, for the nine months ended September 30, 2015 compared to $199.0 million, or $852 per ton, for the nine months ended September 30, 2014, an increase in adjusted gross profit of $20 per ton despite a negative impact from currency fluctuations of $43 per ton.
Research and development expenses were $23.3 million for the nine months ended September 30, 2015 compared to $23.7 million for the nine months ended September 30, 2014, a decrease of $0.4 million, or 1.6%. This decrease was primarily driven by a $1.4 million positive effect from currency fluctuations, and a $1.3 million decrease related to cost reduction initiatives. These decreases were partially offset by a $1.2 million increase in variable employee compensation and $0.8 million of higher costs associated with the new semi-works facility.
Selling, general and administrative expenses were $77.5 million for the nine months ended September 30, 2015 compared to $78.9 million for the nine months ended September 30, 2014, a decrease of $1.4 million or 1.8%. This decrease was primarily due to a $3.0 million positive effect from currency fluctuations, a $3.0 million reduction in transaction and acquisition related costs, a $3.1 million decrease from cost reduction initiatives, and $0.9 million of lower marketing costs. These decreases were partially offset by a $5.9 million increase in employee related costs, primarily variable compensation, and a $2.3 million increase in professional fees. Adjusted selling, general and administrative expenses were $68.4 million and $68.0 million for the nine months ended September 30, 2015 and 2014, respectively.
Adjusted EBITDA (non-GAAP) was $116.8 million, or 14.9% of revenue for the nine months ended September 30, 2015, compared to $115.5 million, or 12.1% of revenue for the nine months ended September 30, 2014, representing a $1.3 million, or 1.1%, increase, despite a $5.7 million negative impact from foreign currency fluctuations.
Net loss attributable to Kraton was $6.6 million, or $0.21 per diluted share for the nine months ended September 30, 2015, compared to the nine months ended September 30, 2014 net income of $19.8 million, or $0.60 per diluted share. Adjusted net income attributable to Kraton (non-GAAP) was $39.8 million, or $1.26 per diluted share, for the nine months ended September 30, 2015 compared to adjusted net income attributable to Kraton of $33.5 million, or $1.01 per diluted share, for the nine months ended September 30, 2014, an increase of $0.25 per diluted share.
CASH FLOW
Net cash provided by operating activities was $37.3 million for the third quarter 2015 compared to $32.8 million for the third quarter 2014. For the nine months ended September 30, 2015, net cash provided by operating activities was $81.6 million compared to net cash used in operating activities of $18.8 million for the nine months ended September 30, 2014. The $100.4 million year-over-year increase in operating cash flows was primarily driven by changes in working capital which provided cash flows of $36.5 million for the nine months ended September 30, 2015 compared to a use of cash of $94.3 million for the nine months ended September 30, 2014. This period-over-period change includes a $79.3 million increase in cash flows associated with inventories due to a reduction in inventory volumes and raw material costs in the nine months ended September 30, 2015 compared with increases in the nine months ended September 30, 2014.
OUTLOOK
We currently estimate that our results in the fourth quarter of 2015 will reflect a negative spread between FIFO and ECRC of approximately $10.0 million. We now expect adjusted gross profit will be in the range of $900 to $915 per ton for the full year 2015, which would translate into full year 2015 adjusted EBITDA of $160 million. We believe the current raw material price environment is positive for our business, as lower average selling prices, in combination with the performance qualities of Kraton's product offering, provide a strong value proposition relative to competing materials.
USE OF NON-GAAP FINANCIAL MEASURES
This earnings release includes the use of both U.S. generally accepted accounting principles ("GAAP") and non-GAAP financial measures. The non-GAAP financial measures are EBITDA, Adjusted EBITDA, Adjusted Gross Profit and Adjusted Net Income attributable to Kraton (or earnings per share). Tables included in this earnings release reconcile each of these non-GAAP financial measures with the most directly comparable GAAP financial measure.
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, 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 GAAP in the United States. For EBITDA, these limitations include: EBITDA does not reflect the significant interest expense on our debt; EBITDA does not reflect the significant depreciation and amortization expense associated with our long-lived assets; 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 the 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; and 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 (for additional information on the impact of the spread between the FIFO basis of accounting and 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, 2014), 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; and Adjusted EBITDA may, and often will, vary significantly from EBITDA calculations under the terms of our debt agreements and should not be used for assessing compliance or non-compliance with financial covenants under our debt agreements. 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. As a measure of our performance, Adjusted Gross Profit is limited because it often will vary substantially from gross profit calculated in accordance with U.S. GAAP due to volatility in raw material prices. Finally, we prepare Adjusted Net Income attributable to Kraton by eliminating from net income (loss) the impact of a number of items we do not consider indicative of our on-going performance, including the spread between FIFO and ECRC. Our presentation of non-GAAP financial measures and the adjustments made therein should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items, and in the future we may incur expenses or charges similar to the adjustments made in the presentation of our non-GAAP financial measures.
CONFERENCE CALL AND WEBCAST INFORMATION
Kraton has scheduled a conference call on Thursday, October 29, 2015 at 9:00 a.m. (Eastern Time) to discuss third quarter 2015 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 800-857-6511. 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 October 29, 2015 through 1:59 a.m. (Eastern Time) on November 12, 2015. 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 866-554-3817.
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 over 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. Kraton offers products to more than 800 customers in over 60 countries worldwide. We manufacture products at five plants globally, including our flagship plant in Belpre, Ohio, which we believe is 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 Kraton, 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, including the matters described under the caption "Outlook."
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 our latest Annual Report on Form 10-K, including but not limited to "Part II, Item 1A. Risk Factors" and "Part I, 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: our pending acquisition of Arizona Chemical Holdings Corporation; conditions in the global economy and capital markets; declines in raw material costs; 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 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; hazards inherent to the chemical manufacturing business; 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 our forward-looking statements. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update such information in light of new information or future events.
Contact:
H. Gene Shiels
Director of Investor Relations
(281) 504-4886
KRATON PERFORMANCE POLYMERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
------------- -------------
2015 2014 2015 2014
---- ---- ---- ----
Revenue $269,012 $318,971 $786,349 $954,394
Cost of goods sold 201,202 255,147 624,542 761,417
Gross profit 67,810 63,824 161,807 192,977
------ ------ ------- -------
Operating expenses:
Research and development 7,597 7,440 23,345 23,736
Selling, general and
administrative 26,917 16,374 77,488 78,872
Depreciation and
amortization 16,145 16,552 46,852 49,630
------ ------ ------ ------
Total operating expenses 50,659 40,366 147,685 152,238
Earnings of
unconsolidated joint
venture 95 80 273 324
Interest expense, net 6,151 6,099 17,975 18,667
----- ----- ------ ------
Income (loss) before
income taxes 11,095 17,439 (3,580) 22,396
Income tax expense 3,076 1,122 4,135 3,405
----- ----- ----- -----
Consolidated net income
(loss) 8,019 16,317 (7,715) 18,991
Net loss attributable to
noncontrolling interest (427) (298) (1,141) (858)
Net income (loss)
attributable to Kraton $8,446 $16,615 $(6,574) $19,849
====== ======= ======= =======
Earnings (loss) per common share:
Basic $0.27 $0.51 $(0.21) $0.61
Diluted $0.27 $0.50 $(0.21) $0.60
Weighted average common shares outstanding:
Basic 30,503 32,315 30,779 32,249
Diluted 30,849 32,600 30,779 32,590
KRATON PERFORMANCE POLYMERS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except par value)
September 30, 2015 December 31, 2014
ASSETS
Current assets:
Cash and cash equivalents $63,799 $53,818
Receivables, net of allowances of
$263 and $245 110,803 107,432
Inventories of products 264,105 326,992
Inventories of materials and supplies 11,345 10,968
Deferred income taxes 6,976 7,247
Other current assets 27,275 24,521
------ ------
Total current assets 484,303 530,978
Property, plant and equipment, less
accumulated depreciation of $376,294
and $387,463 493,711 451,765
Intangible assets, less accumulated
amortization of $97,295 and $88,939 43,360 49,610
Investment in unconsolidated joint
venture 11,725 12,648
Debt issuance costs 6,992 7,153
Deferred income taxes 2,973 2,176
Other long-term assets 21,335 28,122
Total assets $1,064,399 $1,082,452
========== ==========
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt $139 $87
Accounts payable-trade 64,169 72,786
Other payables and accruals 66,604 50,888
Deferred income taxes 1,549 1,633
Due to related party 15,396 18,121
------ ------
Total current liabilities 147,857 143,515
Long-term debt, net of current
portion 404,799 351,785
Deferred income taxes 12,693 15,262
Other long-term liabilities 103,107 103,739
Total liabilities 668,456 614,301
------- -------
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; 30,524
shares issued and outstanding at
September 30, 2015; 31,831 shares
issued and outstanding at December
31, 2014 305 318
Additional paid in capital 347,462 361,342
Retained earnings 151,092 168,041
Accumulated other comprehensive loss (138,005) (99,218)
-------- -------
Total Kraton stockholders' equity 360,854 430,483
Noncontrolling interest 35,089 37,668
------ ------
Total equity 395,943 468,151
Total liabilities and equity $1,064,399 $1,082,452
========== ==========
KRATON PERFORMANCE POLYMERS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine months ended
September 30,
-------------
2015 2014
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Consolidated net income (loss) $(7,715) $18,991
Adjustments to reconcile consolidated net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 46,852 49,630
Amortization of debt premium (130) (121)
Amortization of debt issuance costs 1,668 1,665
Gain on disposal of property, plant and equipment (60) (33)
Earnings from unconsolidated joint venture, net of dividends
received 90 163
Deferred income tax benefit (2,270) (3,222)
Share-based compensation 6,601 8,468
Decrease (increase) in:
Accounts receivable (9,693) (11,179)
Inventories of products, materials and supplies 50,462 (28,796)
Other assets (2,022) (4,606)
Increase (decrease) in:
Accounts payable-trade (2,988) (30,007)
Other payables and accruals 1,548 (5,915)
Other long-term liabilities 1,536 (4,937)
Due to related party (2,306) (8,878)
------ ------
Net cash provided by (used in) operating activities 81,573 (18,777)
------ -------
CASH FLOWS FROM INVESTING ACTIVITIES
Kraton purchase of property, plant and equipment (42,384) (47,539)
KFPC purchase of property, plant and equipment (46,097) (33,807)
Purchase of software and other intangibles (1,763) (2,724)
------ ------
Net cash used in investing activities (90,244) (84,070)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt 30,000 29,000
Repayments of debt (30,000) (29,000)
KFPC proceeds from debt 55,622 -
Capital lease payments (99) (6,007)
Purchase of treasury stock (31,891) (704)
Proceeds from the exercise of stock options 1,022 1,429
Debt issuance costs - (485)
--- ----
Net cash provided by (used in) financing activities 24,654 (5,767)
------ ------
Effect of exchange rate differences on cash (6,002) (4,971)
------ ------
Net increase (decrease) in cash and cash equivalents 9,981 (113,585)
Cash and cash equivalents, beginning of period 53,818 175,872
------ -------
Cash and cash equivalents, end of period $63,799 $62,287
======= =======
Supplemental disclosures:
Cash paid during the period for income taxes, net of refunds
received $5,435 $9,267
Cash paid during the period for interest, net of capitalized
interest $21,690 $23,053
Capitalized interest $3,342 $2,214
Supplemental non-cash disclosures:
Property, plant and equipment accruals $16,023 $6,057
Asset acquired through capital lease $681 $7,033
KRATON PERFORMANCE POLYMERS, INC.
CONSOLIDATING SUMMARY OF CASH FLOW AND DEBT
(Unaudited)
(In millions)
Nine Months Ended September 30, 2015
------------------------------------
Kraton KFPC Consolidated
Operating
activities $87.1 $(5.5) $81.6
Investing
activities $(44.1) $(46.1) $(90.2)
Financing
activities $(30.9) $55.6 $24.7
Foreign
currency
impact $(5.0) $(1.0) $(6.0)
Beginning
cash $45.8 $8.0 $53.8
Ending
cash $52.8 $11.0 $63.8
Debt $352.4 $52.6 $404.9
Net
Debt $299.6 $41.6 $341.1
RECONCILIATION OF GROSS PROFIT TO ADJUSTED GROSS PROFIT
(Unaudited)
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2015 2014 2015 2014
---- ---- ---- ----
Gross profit $67,810 $63,824 $161,807 $192,977
Add (deduct):
Restructuring and other
charges (a) 61 - 142 558
Production downtime (b) (146) (990) (474) 11,423
Non-cash compensation
expense 122 136 396 508
Spread between FIFO and
ECRC 926 1,816 40,144 (6,508)
--- ----- ------ ------
Adjusted gross profit $68,773 $64,786 $202,015 $198,958
======= ======= ======== ========
Severance
expenses and
other
restructuring
related
(a) charges.
(b) In 2015 and
the three
months ended
September
30, 2014,
the
reduction in
costs is due
to insurance
recoveries
related to
the Belpre
production
downtime. In
the nine
months ended
September
30, 2014,
production
downtime at
our Belpre,
Ohio and
Berre,
France
facilities.
KRATON PERFORMANCE POLYMERS, INC.
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KRATON TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
2015 2014 2015 2014
---- ---- ---- ----
Net income (loss)
attributable to Kraton $8,446 $16,615 $(6,574) $19,849
Net loss attributable to
noncontrolling interest (427) (298) (1,141) (858)
---- ---- ------ ----
Consolidated net income
(loss) 8,019 16,317 (7,715) 18,991
Add:
Interest expense, net 6,151 6,099 17,975 18,667
Income tax expense 3,076 1,122 4,135 3,405
Depreciation and
amortization 16,145 16,552 46,852 49,630
EBITDA 33,391 40,090 61,247 90,693
------ ------ ------ ------
Add (deduct):
Restructuring and other
charges (a) 533 - 1,499 653
Transaction and
acquisition related costs
(b) 4,968 (4,221) 5,798 8,822
Production downtime (c) (134) (990) (343) 12,023
KFPC startup costs (d) 677 448 1,827 1,340
Non-cash compensation
expense (e) 2,032 2,274 6,601 8,468
Spread between FIFO and
ECRC 926 1,816 40,144 (6,508)
Adjusted EBITDA $42,393 $39,417 $116,773 $115,491
======= ======= ======== ========
(a) Severance
expenses,
professional
fees and other
restructuring
related
charges which
are primarily
recorded in
selling,
general and
administrative
expenses in
2015 and
primarily
recorded in
cost of goods
sold in 2014.
(b) Charges related
to the
evaluation of
acquisition
transactions
which are
recorded in
selling,
general and
administrative
expenses. In
2015, charges
are primarily
related to the
proposed
acquisition of
Arizona
Chemical, and
in 2014,
charges are
primarily
related to the
terminated
Combination
Agreement with
LCY Chemical
Corp. ("LCY").
(c) In 2015 and the
three months
ended
September 30,
2014, the
reduction in
costs is due
to insurance
recoveries
related to the
Belpre
production
downtime,
which are
primarily
recorded in
cost of goods
sold. In the
nine months
ended
September 30,
2014,
production
downtime at
our Belpre,
Ohio and
Berre, France
facilities, of
which, $11.4
million is
recorded in
cost of goods
sold and $0.6
million is
recorded in
selling,
general and
administrative
expenses.
(d) Startup costs
related to the
joint venture
company, KFPC,
which are
recorded in
selling,
general and
administrative
expenses.
(e) For the three
months ended
September 30,
2015 and 2014,
respectively,
$1.7 million
and $2.0
million is
recorded in
selling,
general and
administrative
expenses, $0.2
million and
$0.2 million
is recorded in
research and
development
expenses, and
$0.1 million
and $0.1
million is
recorded in
cost of goods
sold. For the
nine months
ended
September 30,
2015 and 2014,
respectively,
$5.7 million
and $7.3
million is
recorded in
selling,
general and
administrative
expenses, $0.5
million and
$0.7 million
is recorded in
research and
development
expenses, and
$0.4 million
and $0.5
million is
recorded in
cost of goods
sold.
KRATON PERFORMANCE POLYMERS, INC.
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KRATON TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
(In thousands)
Three Months Ended September 30, 2015 Three Months Ended September 30, 2014
------------------------------------- -------------------------------------
Income Before Income Taxes Noncontrolling Diluted EPS Income Before Income Taxes Noncontrolling
Income Interest Income Interest Diluted
Tax Tax EPS
--- --- ---
GAAP Earnings $11,095 $3,076 $(427) $0.27 $17,439 $1,122 $(298) $0.50
Restructuring and other
charges (a) 533 15 - 0.02 - - - -
Transaction and acquisition
related costs (b) 4,968 99 - 0.16 (4,221) - - (0.13)
Production downtime (c) (134) (3) - (0.01) (990) - - (0.03)
KFPC startup costs (d) 677 115 281 0.01 448 76 186 0.01
Valuation Allowance (e) - - - - - 1,853 - (0.06)
Spread between FIFO and ECRC 926 (46) - 0.03 1,816 (27) - 0.06
Adjusted Earnings $18,065 $3,256 $(146) $0.48 $14,492 $3,024 $(112) $0.35
======= ====== ===== ===== ======= ====== ===== =====
Nine Months Ended September 30, 2015 Nine Months Ended September 30, 2014
------------------------------------ ------------------------------------
Income (Loss) Income Taxes Noncontrolling Diluted Income Before Income Taxes Noncontrolling
Interest Income Interest Diluted
Before Income EPS Tax EPS
Tax
---
GAAP Earnings (Loss) $(3,580) $4,135 $(1,141) $(0.21) $22,396 $3,405 $(858) $0.60
Restructuring and other
charges (a) 1,499 61 - 0.05 653 121 - 0.02
Transaction and acquisition
related costs (b) 5,798 116 - 0.18 8,822 - - 0.27
Production downtime (c) (343) (7) - (0.01) 12,023 - - 0.36
KFPC startup costs (d) 1,827 311 758 0.02 1,340 228 556 0.02
Valuation Allowance (e) - - - - - 1,853 - (0.06)
Spread between FIFO and ECRC 40,144 1,266 - 1.23 (6,508) (75) - (0.19)
------ ----- --- ---- ------ --- --- -----
Adjusted Earnings $45,345 $5,882 $(383) $1.26 $38,726 $5,532 $(302) $1.01
======= ====== ===== ===== ======= ====== ===== =====
(a) Severance
expenses,
professional
fees and
other
restructuring
related
charges which
are primarily
recorded in
selling,
general and
administrative
expenses in
2015 and
primarily in
cost of goods
sold in 2014.
(b) Charges
related to
the
evaluation of
acquisition
transactions
which are
recorded in
selling,
general and
administrative
expenses. In
2015, charges
are primarily
related to
the proposed
acquisition
of Arizona
Chemical, and
in 2014,
charges are
primarily
related to
the
terminated
Combination
Agreement
with LCY.
(c) In 2015 and
the three
months ended
September 30,
2014, the
reduction in
costs is due
to insurance
recoveries
related to
the Belpre
production
downtime,
which are
primarily
recorded in
cost of goods
sold. In the
nine months
ended
September 30,
2014,
production
downtime at
our Belpre,
Ohio and
Berre, France
facilities,
of which,
$11.4 million
is recorded
in cost of
goods sold
and $0.6
million is
recorded in
selling,
general and
administrative
expenses.
(d) Startup costs
related to
the joint
venture
company,
KFPC, which
are recorded
in selling,
general and
administrative
expenses.
(e) Reduction of
income tax
valuation
allowance
related to
the
assessment of
our ability
to utilize
net operating
losses in
future
periods.
KRATON PERFORMANCE POLYMERS, INC.
RECONCILIATION OF NET LOSS ATTRIBUTABLE TO KRATON TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
(In thousands)
Three Months Ended September 30, 2015
-------------------------------------
As Reported Other
Adjustments FIFO TO Adjusted
ECRC
Adjustment
---
Revenue $269,012 $ - $ - $269,012
Cost of goods sold 201,202 86 (a) (926) 200,362
------- --- ---- -------
Gross profit 67,810 (86) 926 68,650
------ --- --- ------
Operating expenses:
Research and development 7,597 - - 7,597
Selling, general and
administrative 26,917 (6,130) (b) - 20,787
Depreciation and
amortization 16,145 - - 16,145
------
Total operating expenses 50,659 (6,130) - 44,529
Earnings of
unconsolidated joint
venture 95 - - 95
Interest expense, net 6,151 - - 6,151
----- --- --- -----
Income before income
taxes 11,095 6,044 926 18,065
Income tax expense 3,076 226 (c) (46) 3,256
----- --- --- -----
Consolidated net income 8,019 5,818 972 14,809
Net loss attributable to
noncontrolling interest (427) 281 (d) - (146)
Net income attributable
to Kraton $8,446 $5,537 $972 $14,955
====== ====== ==== =======
Earnings per common share:
Basic 0.27 0.18 0.03 0.48
Diluted 0.27 0.18 0.03 0.48
Weighted average common shares outstanding:
Basic 30,503 30,503 30,503 30,503
Diluted 30,849 30,849 30,849 30,849
(a) Reduction of
costs due to
additional
insurance
recoveries
associated
with the
first
quarter 2014
production
downtime at
our Belpre,
Ohio,
facility.
(b) $5.0 million of transaction related costs, $0.4 million of restructuring and other charges, and $0.7 million of KFPC startup costs.
(c) Tax effect of
other
adjustments.
(d) Portion of
the
adjustment
associated
with the
KFPC startup
costs which
is
attributed
to the non-
controlling
interest.
KRATON PERFORMANCE POLYMERS, INC.
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO KRATON TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
(In thousands)
Three Months Ended September 30, 2014
-------------------------------------
As Reported Other Adjustments FIFO TO Adjusted
ECRC Adjustment
---
Revenue $318,971 $ - $ - $318,971
Cost of goods sold 255,147 990 (a) (1,816) 254,321
------- --- ------ -------
Gross profit 63,824 (990) 1,816 64,650
------ ---- ----- ------
Operating expenses:
Research and development 7,440 - - 7,440
Selling, general and
administrative 16,374 3,773 (b) - 20,147
Depreciation and
amortization 16,552 - - 16,552
------ --- --- ------
Total operating expenses 40,366 3,773 - 44,139
Earnings of
unconsolidated joint
venture 80 - - 80
Interest expense, net 6,099 - - 6,099
----- --- --- -----
Income before income
taxes 17,439 (4,763) 1,816 14,492
Income tax expense 1,122 1,929 (c) (27) 3,024
----- ----- --- -----
Consolidated net income 16,317 (6,692) 1,843 11,468
Net loss attributable to
noncontrolling interest (298) 186 (d) - (112)
---- --- --- ----
Net income attributable
to Kraton $16,615 $(6,878) $1,843 $11,580
======= ======= ====== =======
Earnings per common share:
Basic $0.51 $(0.21) $0.06 $0.36
Diluted $0.50 $(0.21) $0.06 $0.35
Weighted average common shares outstanding:
Basic 32,315 32,315 32,315 32,315
Diluted 32,600 32,600 32,600 32,600
(a) Reduction of
costs due to
additional
insurance
recoveries
associated
with the
first
quarter 2014
production
downtime at
our Belpre,
Ohio,
facility.
(b) $4.2 million benefit from reduction in accrued transaction fees offset by $0.4 million of KFPC startup costs.
Valuation
allowance
and tax
effect of
other
(c) adjustments.
(d) Portion of
the
adjustment
associated
with the
KFPC startup
costs which
is
attributed
to the non-
controlling
interest.
KRATON PERFORMANCE POLYMERS, INC.
RECONCILIATION OF NET LOSS ATTRIBUTABLE TO KRATON TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
(In thousands)
Nine Months Ended September 30, 2015
------------------------------------
As Reported Other
Adjustments FIFO TO Adjusted
ECRC Adjustment
---
Revenue $786,349 $ - $ - $786,349
Cost of goods sold 624,542 333 (a) (40,144) 584,731
------- --- ------- -------
Gross profit 161,807 (333) 40,144 201,618
------- ---- ------ -------
Operating expenses:
Research and development 23,345 - - 23,345
Selling, general and
administrative 77,488 (9,114) (b) - 68,374
Depreciation and
amortization 46,852 - - 46,852
------ --- --- ------
Total operating expenses 147,685 (9,114) - 138,571
Earnings of
unconsolidated joint
venture 273 - - 273
Interest expense, net 17,975 - - 17,975
------ --- --- ------
Income (loss) before
income taxes (3,580) 8,781 40,144 45,345
Income tax expense 4,135 481 (c) 1,266 5,882
----- --- ----- -----
Consolidated net income
(loss) (7,715) 8,300 38,878 39,463
Net loss attributable to
noncontrolling interest (1,141) 758 (d) - (383)
------ --- --- ----
Net income (loss)
attributable to Kraton $(6,574) $7,542 $38,878 $39,846
======= ====== ======= =======
Earnings (loss) per common share:
Basic $(0.21) $0.24 $1.24 $1.27
Diluted $(0.21) $0.24 $1.23 $1.26
Weighted average common shares outstanding:
Basic 30,779 30,779 30,779 30,779
Diluted 30,779 31,121 31,121 31,121
(a) $0.5 million reduction of costs due to additional insurance recoveries associated with the first quarter 2014 production downtime at our Belpre, Ohio facility, partially offset by $0.2 million of restructuring and other charges.
(b) $5.8 million of transaction related costs, $1.8 million of KFPC startup costs, $1.4 million of restructuring and other charges, and $0.1 million of production downtime costs.
(c) Tax effect of
other
adjustments.
(d) Portion of
the
adjustment
associated
with the
KFPC startup
costs which
is
attributed
to the non-
controlling
interest.
KRATON PERFORMANCE POLYMERS, INC.
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO KRATON TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
(In thousands)
Nine Months Ended September 30, 2014
------------------------------------
As Reported Other Adjustments FIFO TO Adjusted
ECRC Adjustment
---
Revenue $954,394 $ - $ - $954,394
Cost of goods sold 761,417 (11,981) (a) 6,508 755,944
------- ------- ----- -------
Gross profit 192,977 11,981 (6,508) 198,450
------- ------ ------ -------
Operating expenses:
Research and development 23,736 - - 23,736
Selling, general and
administrative 78,872 (10,857) (b) - 68,015
Depreciation and
amortization 49,630 - - 49,630
------ --- --- ------
Total operating expenses 152,238 (10,857) - 141,381
Earnings of
unconsolidated joint
venture 324 - - 324
Interest expense, net 18,667 - - 18,667
------ --- --- ------
Income before income
taxes 22,396 22,838 (6,508) 38,726
Income tax expense 3,405 2,202 (c) (75) 5,532
----- ----- --- -----
Consolidated net income 18,991 20,636 (6,433) 33,194
Net loss attributable to
noncontrolling interest (858) 556 (d) - (302)
---- --- --- ----
Net income attributable
to Kraton $19,849 $20,080 $(6,433) $33,496
======= ======= ======= =======
Earnings per common share:
Basic $0.61 $0.62 $(0.20) $1.04
Diluted $0.60 $0.61 $(0.19) $1.01
Weighted average common shares outstanding:
Basic 32,249 32,249 32,249 32,249
Diluted 32,590 32,590 32,590 32,590
(a) $11.4 million of production downtime at our Belpre, Ohio, and Berre, France, facilities, and $0.6 million of restructuring and other charges.
(b) $8.8 million of transaction related costs, $1.3 million of KFPC startup costs, $0.6 million of production downtime at our Belpre, Ohio, and Berre, France, facilities, and $0.1 million of restructuring and other charges.
Valuation
allowance
and tax
effect of
other
(c) adjustments.
(d) Portion of
the
adjustment
associated
with the
KFPC startup
costs which
is
attributed
to the non-
controlling
interest.
http://photos.prnewswire.com/prnvar/20100728/DA42514LOGO
Logo - http://photos.prnewswire.com/prnh/20100728/DA42514LOGO
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/kraton-performance-polymers-inc-announces-third-quarter-2015-results-provides-full-year-2015-adjusted-ebitda-guidance-of-160-million-300168229.html
SOURCE Kraton Performance Polymers, Inc.
