Kraton Performance Polymers, Inc. Announces Fourth Quarter and Full Year 2010 Results
2010 FOURTH QUARTER HIGHLIGHTS
- Sales volume increased 10% year-on-year to 67 kilotons
- Sales revenues increased 21% year-on-year to
$288 million - Net income was
$10 million in the fourth quarter 2010, compared to a net loss of$2 million in the fourth quarter 2009 - GAAP earnings were
$0.32 per fully-diluted share in the fourth quarter 2010 - Restructuring and other non-recurring charges in the quarter were approximately
$4 million or$0.12 per share - Adjusted EBITDA(1) ( 2) was
$34 million , reflecting a margin of 12% of revenues - LIFO to FIFO expense was
$8 million , as compared to$13 million income in the fourth quarter 2009 - Cash at quarter end was
$93 million , up$15 million fromSeptember 30, 2010
"We are pleased with our fourth quarter results, delivering strong volume and revenue growth year-on-year as we continued to make progress in our base business and with our key innovation programs," said
Three Months Ended Dec. 31, |
Twelve Months Ended Dec. 31, |
|||||||
(US $ in thousands, except per share amounts) |
2010 |
2009 |
2010 |
2009 |
||||
Revenues |
$ 288,165 |
$ 250,708 |
$ 1,228,425 |
$ 968,004 |
||||
Adjusted EBITDA(1) ( 2) |
$ 34,312 |
$ 35,045 |
$ 194,906 |
$ 91,359 |
||||
Net income / (loss) |
$ 10,299 |
$ (1,516) |
$ 96,725 |
$ (290) |
||||
Net income / (loss)per diluted share(3) |
$ 0.32 |
$ (0.07) |
$ 3.07 |
$ (0.01) |
||||
Net cash provided by operating activities |
$ 34,622 |
$ 31,656 |
$ 55,360 |
$ 72,805 |
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(1) |
A reconciliation of Adjusted EBITDA to Net income / (loss)is included in the accompanying financial tables. |
|
(2) |
Adjusted EBITDA is EBITDA less restructuring and related charges, non-cash expenses, management fees and gains on the extinguishment of debt. |
|
(3) |
Calculation of net income per diluted share for the periods shown is impacted by the increase in weighted average shares outstanding following the company's initial public offering in December 2009. |
|
4Q 2010 versus 4Q 2009 Results
Sales revenues in the fourth quarter 2010 were
Adjusted EBITDA in the fourth quarter 2010 was
Fourth quarter 2010 net income was
FY 2010 versus FY 2009 Results
Sales revenues in 2010 were
Adjusted EBITDA in 2010 was
Full-year 2010 net income was
Cash Flow
During the fourth quarter, net cash provided by operating activities was
END USE MARKET INFORMATION
Revenue in our Advanced Materials end use market increased
"Revenue in our Advanced Materials end use market increased, reflecting volume recovery in our base business as well as price improvement and incremental volume growth, led by personal care and consumer disposable applications," said Fogarty. "We also saw volume growth in our innovative product offerings such as alternatives for PVC used in wire and cable and medical applications."
Revenue in our Adhesives, Sealants and Coatings end use market increased
"In our Adhesives, Sealants and Coatings end use market, the increase in revenue was largely driven by increased pricing. We did experience volume growth in personal care and in specialty tape applications. In response to the industry shortage of certain tackifier resins which emerged in the second half of 2010, we completed development of alternative product formulations that work with a broad spectrum of available resins," said Fogarty. "We also continue to be encouraged by the increase in demand for our innovative products sold into protective film applications," Fogarty added.
Revenue in our Paving and Roofing end use market increased
"Revenue growth in our Paving & Roofing end use was driven by increased roofing volume in
Revenue in our Emerging Businesses end use market increased
"In the fourth quarter we continued to see strong demand for our Cariflex™ isoprene rubber and isoprene rubber latex, which is used in high-end surgical gloves, condoms and medical components," said Fogarty. "We look forward to completion of the isoprene rubber line conversion at our
OUTLOOK
"Based upon existing market trends, we currently expect that our first quarter 2011 sales volume will be up 5-7% compared to the first quarter 2010," said Fogarty. "In addition, we believe pricing for our three primary feedstocks, on average, will be higher in the first quarter of 2011 than in the fourth quarter of 2010, as monomer prices reflect factors such as higher crude oil prices and other supply/demand fundamentals such as the shortage of natural rubber, which has increased demand for butadiene and isoprene used in the production of natural rubber substitutes. As a result of the movement in raw material prices, we expect to recognize a LIFO to FIFO benefit in the first quarter of 2011. Finally, we expect capital expenditure to be
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/loss. 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
CONFERENCE CALL AND WEBCAST INFORMATION
Kraton has scheduled a conference call on
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./
For those unable to listen to the live call, a replay will be available beginning at approximately
ABOUT KRATON
Kraton, the Kraton logo and design, and the "Giving Innovators their Edge" tagline are all trademarks of
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 "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 covenant compliance, pricing trends, cost savings, production rates and other similar matters. All forward-looking statements in this press release are made based on management's current expectations and estimates, which involve risks, uncertainties and other factors that could cause 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
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For Further Information: |
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Investors: |
H. Gene Shiels 281-504-4886 |
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Media: |
Richard A. Ott 281-504-4720 |
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KRATON PERFORMANCE POLYMERS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) |
|||
Three months ended December 31, |
|||
2010 |
2009 |
||
Operating Revenues |
|||
Sales |
$ 288,165 |
$ 238,301 |
|
Other |
— |
12,407 |
|
Total operating revenues |
288,165 |
250,708 |
|
Cost of Goods Sold |
228,793 |
189,840 |
|
Gross Profit |
59,372 |
60,868 |
|
Operating Expenses |
|||
Research and development |
5,947 |
6,097 |
|
Selling, general and administrative |
23,652 |
22,919 |
|
Depreciation and amortization of identifiable intangibles |
13,178 |
25,169 |
|
Total operating expenses |
42,777 |
54,185 |
|
Earnings of Unconsolidated Joint Venture |
170 |
98 |
|
Interest Expense, Net |
5,506 |
9,179 |
|
Income (Loss) Before Income Taxes |
11,259 |
(2,398) |
|
Income Tax Expense (Benefit) |
960 |
(882) |
|
Net Income (Loss) |
$ 10,299 |
$ (1,516) |
|
Earnings (Loss) per common share |
|||
Basic |
$ 0.33 |
$ (0.07) |
|
Diluted |
$ 0.32 |
$ (0.07) |
|
Weighted average common shares outstanding |
|||
Basic |
31,147 |
21,064 |
|
Diluted |
31,910 |
21,064 |
|
KRATON PERFORMANCE POLYMERS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) |
|||
Years ended December 31, |
|||
2010 |
2009 |
||
Operating Revenues |
|||
Sales |
$ 1,228,425 |
$ 920,362 |
|
Other |
— |
47,642 |
|
Total operating revenues |
1,228,425 |
968,004 |
|
Cost of Goods Sold |
927,932 |
792,472 |
|
Gross Profit |
300,493 |
175,532 |
|
Operating Expenses |
|||
Research and development |
23,628 |
21,212 |
|
Selling, general and administrative |
92,305 |
79,504 |
|
Depreciation and amortization of identifiable intangibles |
49,220 |
66,751 |
|
Total operating expenses |
165,153 |
167,467 |
|
Gain on Extinguishment of Debt |
— |
23,831 |
|
Earnings of Unconsolidated Joint Venture |
487 |
403 |
|
Interest Expense, Net |
23,969 |
33,956 |
|
Income (Loss) Before Income Taxes |
111,858 |
(1,657) |
|
Income Tax Expense (Benefit) |
15,133 |
(1,367) |
|
Net Income (Loss) |
$ 96,725 |
$ (290) |
|
Earnings (Loss) per common share |
|||
Basic |
$ 3.13 |
$ (0.01) |
|
Diluted |
$ 3.07 |
$ (0.01) |
|
Weighted average common shares outstanding |
|||
Basic |
30,825 |
19,844 |
|
Diluted |
31,379 |
19,844 |
|
KRATON PERFORMANCE POLYMERS, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except par value) |
|||
December 31, |
December 31, |
||
ASSETS |
|||
Current Assets |
|||
Cash and cash equivalents |
$ 92,750 |
$ 69,291 |
|
Receivables, net of allowances of $947 and $1,335 |
136,132 |
115,329 |
|
Inventories of products, net |
325,120 |
284,258 |
|
Inventories of materials and supplies, net |
9,631 |
10,862 |
|
Deferred income taxes |
— |
3,107 |
|
Other current assets |
38,749 |
16,770 |
|
Total current assets |
602,382 |
499,617 |
|
Property, plant and equipment, less accumulated depreciation of $252,387 and $236,558 |
365,366 |
354,860 |
|
Identifiable intangible assets, less accumulated amortization of $50,123 and $42,741 |
70,461 |
75,801 |
|
Investment in unconsolidated joint venture |
13,589 |
12,078 |
|
Deferred financing costs |
3,172 |
7,318 |
|
Other long-term assets |
25,753 |
24,825 |
|
Total Assets |
$ 1,080,723 |
$ 974,499 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||
Current Liabilities |
|||
Current portion of long-term debt |
$ 2,304 |
$ 2,304 |
|
Accounts payable-trade |
86,699 |
93,494 |
|
Deferred income taxes |
595 |
— |
|
Other payables and accruals |
60,782 |
68,271 |
|
Due to related party |
19,264 |
19,006 |
|
Total current liabilities |
169,644 |
183,075 |
|
Long-term debt, net of current portion |
380,371 |
382,675 |
|
Deferred income taxes |
14,089 |
13,488 |
|
Long-term liabilities |
64,242 |
46,477 |
|
Total liabilities |
628,346 |
625,715 |
|
Stockholders' Equity |
|||
Preferred stock, $0.01 par value; 100,000 shares authorized; none issued |
|||
Common stock, $0.01 par value; 500,000 shares authorized; 31,390 shares issued and outstanding at December 31, 2010; 29,709 shares issued and outstanding at December 31, 2009 |
314 |
297 |
|
Additional paid in capital |
334,457 |
311,665 |
|
Retained earnings |
96,711 |
(14) |
|
Accumulated other comprehensive income |
20,895 |
36,836 |
|
Total stockholders' equity |
452,377 |
348,784 |
|
Total Liabilities and Stockholders' Equity |
$ 1,080,723 |
$ 974,499 |
|
KRATON PERFORMANCE POLYMERS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) |
|||
Years ended December 31, |
|||
2010 |
2009 |
||
CASH FLOWS FROM OPERATING ACTIVITIES |
|||
Net income (loss) |
$ 96,725 |
$ (290) |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|||
Depreciation and amortization of identifiable intangibles |
49,220 |
66,751 |
|
Accretion of debt discount |
— |
5 |
|
Inventory impairment |
— |
1,769 |
|
Amortization of deferred financing costs |
2,071 |
4,090 |
|
(Gain) loss on disposal of fixed assets |
(54) |
348 |
|
Gain on extinguishment of debt |
— |
(23,831) |
|
Gain on settlement of insurance note payable |
(131) |
— |
|
Change in fair value of interest rate swaps |
(450) |
(2,827) |
|
Distributed (undistributed) earnings in unconsolidated joint venture |
(84) |
30 |
|
Deferred income tax expense (benefit) |
6,389 |
(4,623) |
|
Non-cash compensation related to equity awards |
3,472 |
2,160 |
|
Decrease (increase) in |
|||
Accounts receivable |
(22,315) |
(16,680) |
|
Inventories of products, materials and supplies |
(46,711) |
44,060 |
|
Other assets |
(24,871) |
(305) |
|
Increase (decrease) in |
|||
Accounts payable-trade, other payables and accruals, and other long-term liabilities |
(6,055) |
8,328 |
|
Due to related party |
(1,846) |
(6,180) |
|
Net cash provided by operating activities |
55,360 |
72,805 |
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|||
Purchase of property, plant and equipment |
(53,435) |
(38,101) |
|
Purchase of software |
(2,242) |
(15,322) |
|
Proceeds from sale of property, plant and equipment |
30 |
3,870 |
|
Net cash used in investing activities |
(55,647) |
(49,553) |
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|||
Proceeds from debt |
69,000 |
144,000 |
|
Repayment of debt |
(71,304) |
(308,131) |
|
Cash contribution from member |
— |
— |
|
Proceeds from issuance of common stock |
11,197 |
126,725 |
|
Costs associated with the issuance of common stock |
(534) |
— |
|
Proceeds from stock based compensation |
7,974 |
— |
|
Proceeds from insurance note payable |
3,518 |
3,706 |
|
Repayment of insurance note payable |
(3,387) |
(3,706) |
|
Deferred financing costs |
— |
(3,216) |
|
Net cash provided by (used in) financing activities |
16,464 |
(40,622) |
|
Effect of exchange rate differences on cash |
7,282 |
(14,735) |
|
Net increase (decrease) in cash and cash equivalents |
23,459 |
(32,105) |
|
Cash and cash equivalents at beginning of period |
69,291 |
101,396 |
|
Cash and cash equivalents at end of period |
$ 92,750 |
$ 69,291 |
|
Supplemental Disclosures |
|||
Cash paid during the period for income taxes |
$ 4,625 |
$ 9,164 |
|
Cash paid during the period for interest |
$ 23,723 |
$ 34,707 |
|
KRATON PERFORMANCE POLYMERS, INC. EBITDA AND ADJUSTED EBITDA (In thousands) |
|||
We reconcile Net Income/(Net Loss) to EBITDA and Adjusted EBITDA as follows: |
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Three months ended December 31, |
|||
2010 |
2009 |
||
Net Income/(Net Loss) |
$ 10,299</p> |
$ (1,516) |
|
Plus |
|||
Interest expense, Net |
5,506 |
9,179 |
|
Income tax expense (benefit) |
960 |
(882) |
|
Depreciation and amortization expenses |
13,178 |
25,170 |
|
EBITDA (a) |
$ 29,943 |
$ 31,951 |
|
Add (deduct): |
|||
Management fees and expenses |
— |
500 |
|
Restructuring and related charges (b) |
3,733 |
2,144 |
|
Other non-cash expenses (c) |
636 |
450 |
|
Adjusted EBITDA (a) |
$ 34,312 |
$ 35,045 |
|
(a) |
EBITDA and Adjusted EBITDA are impacted by the spread between the first-in, first-out (FIFO) basis of accounting and the last-in, first-out (LIFO) basis of accounting. The spread between the LIFO and FIFO basis resulted in a negative impact to EBITDA and Adjusted EBITDA of approximately $8 million for the three months ended December 31, 2010. Conversely, EBITDA and Adjusted EBITDA, as reflected above, were positively impacted by approximately $13 million for the three months ended December 31, 2009. |
|
(b) |
2010 restructuring and related charges consisted primarily of consulting fees, severance expenses and other charges associated with the restructuring of our European organization. 2009 charges consisted primarily of a one-time charge to terminate the management fee arrangement. Both periods also reflect charges associated with evaluating merger and acquisition transactions and potential debt refinancing. |
|
(c) |
For both periods, charges consisted primarily of non-cash compensation. |
|
Restructuring and related charges discussed above were recorded in the Consolidated Statements of Operations, as follows:
Three months ended December 31, |
|||
2010 |
2009 |
||
Cost of goods sold |
$ — |
$ 440 |
|
Research and development |
— |
— |
|
Selling, general and administrative |
3,733 |
1,704 |
|
Total restructuring and related charges |
$ 3,733 |
$ 2,144 |
|
KRATON PERFORMANCE POLYMERS, INC. EBITDA AND ADJUSTED EBITDA (In thousands) |
|||
We reconcile Net Income/(Net Loss) to EBITDA and Adjusted EBITDA as follows: |
|||
Years ended December 31, |
|||
2010 |
2009 |
||
Net Income/(Net Loss) |
$ 96,725 |
$ (290) |
|
Plus |
|||
Interest expense, Net |
23,969 |
33,956 |
|
Income tax expense (benefit) |
15,133 |
(1,367) |
|
Depreciation and amortization expenses |
49,220 |
66,751 |
|
EBITDA (a) |
$ 185,047 |
$ 99,050 |
|
Add (deduct): |
|||
Management fees and expenses |
—</p> |
2,000 |
|
Restructuring and related charges (b) |
6,387 |
9,677 |
|
Other non-cash expenses (c) |
3,472 |
4,463 |
|
Gain on extinguishment of debt (d) |
— |
(23,831) |
|
Adjusted EBITDA (a) |
$ 194,906 |
$ 91,359 |
|
(a) |
EBITDA and Adjusted EBITDA are impacted by the spread between the first-in, first-out (FIFO) basis of accounting and the last-in, first-out (LIFO) basis of accounting. The spread between the LIFO and FIFO basis resulted in a positive impact to EBITDA and Adjusted EBITDA of approximately $12 million for the year ended December 31, 2010. Conversely, EBITDA and Adjusted EBITDA, as reflected above, were negatively impacted by approximately $18 million for the year ended December 31, 2009. |
|
(b) |
2010 restructuring and related charges consisted primarily of consulting fees, severance expenses, and other charges associated with the restructuring of our European organization as well as expenses associated with our secondary public offering. 2009 charges consisted primarily of costs associated with the exit of the Pernis facility. Both periods also reflect charges associated with evaluating merger and acquisition transactions and potential debt refinancing. |
|
(c) |
For both periods, consists primarily of non-cash compensation. For 2009, also reflects the non-cash inventory impairment to lower inventory from FIFO cost to market value and losses on the sale of fixed assets. |
|
(d) |
In 2009, reflects the non-recurring cash gain related to bond repurchases. |
|
Restructuring and related charges discussed above were recorded in the Consolidated Statements of Operations, as follows:
Years ended December 31, |
|||
2010 |
2009 |
||
Cost of goods sold |
$ — |
$ 6,747 |
|
Research and development |
— |
— |
|
Selling, general and administrative |
6,387 |
2,930 |
|
Total restructuring and related charges |
$ 6,387 |
$ 9,677 |
|
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