Kraton Performance Polymers, Inc. Announces Second Quarter 2011 Results
2011 SECOND QUARTER HIGHLIGHTS
- Sales volume was 82 kilotons
- Sales revenue increased 16% year-on-year to
$386 million - Net income increased 21% year-on-year to $47 million
- GAAP earnings were
$1.44 per fully-diluted share in the second quarter 2011 - Adjusted EBITDA(1)(2)(3) was
$74 million or 19% of sales revenue
"In the second quarter of 2011 Kraton reported record Adjusted EBITDA and record earnings per share despite an extremely challenging raw material price environment," said Kevin M.
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||
(US $ in thousands, except per share amounts) |
2011 |
2010 |
2011 |
2010 |
||||
Sales Revenue |
$ 386,428 |
$ 332,086 |
$ 731,256 |
$ 604,818 |
||||
Adjusted EBITDA(1) (2) (3) |
$ 74,199 |
$ 63,025 |
$ 130,217 |
$ 105,647 |
||||
Net Income |
$ 46,977 |
$ 38,595 |
$ 68,854 |
$ 58,390 |
||||
Net Income per diluted share(4) |
$ 1.44 |
$ 1.24 |
$ 2.12 |
$ 1.88 |
||||
Net cash provided by(used in) operating activities |
$ 58,380 |
$ 21,799 |
$ 14,243 |
$ (51,037) |
||||
(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 $50 million and $15 million for the three months ended June 30, 2011 and 2010, respectively, and approximately $71 million and $22 million for the six months ended June 30, 2011 and 2010, respectively. |
|
(4) Net income for the three months ending June 30, 2011 includes charges associated with evaluating acquisition transactions of approximately $0.2 million or $0.01 per share. Net income for the three months ending June 30, 2010 includes charges associated with restructuring and related activities of approximately $0.6 million or $0.02 per share. Net income for the six months ending June 30, 2011 includes charges associated with restructuring and related activities, charges associated with evaluating acquisition transactions, costs associated with debt refinancing and costs associated with the secondary offering of approximately $9.0 million or $0.30 per share. Net income for the six months ending June 30, 2010 includes a net benefit of approximately $0.1 million comprised of charges associated with restructuring and related activities of approximately $0.8 million or $0.02 per share, offset by a reduction of depreciation associated with exiting the Pernis, the Netherlands facility of approximately $0.9 million or $0.03 per share. |
|
Second Quarter 2011 versus Second Quarter 2010 Results
Sales revenue in the second quarter 2011 was
Adjusted EBITDA in the second quarter 2011 was
Second quarter 2011 net income was
During the second quarter 2011, net cash provided by operating activities was
END USE MARKET INFORMATION
Sales revenue in our Advanced Materials end use market was
<p>"Revenue in our Advanced Materials end use increased in
Sales revenue in our Adhesives, Sealants and Coatings end use market was
"Revenue growth in our Adhesives, Sealants and Coatings end use market was the result of price increases implemented in response to rising raw material and other input costs, and innovation-led volume growth in European HSBC products, primarily in health and beauty applications," said Fogarty. "Revenue growth in this end use market was partially offset by modestly lower volumes in certain less-differentiated USBC products."
Sales revenue in our Paving and Roofing end use market was
"Revenue in our Paving and Roofing end use increased due to higher pricing and growth of innovation volumes in both paving and roofing applications," said
Sales revenue in our Emerging Businesses end use market was
"During the second quarter we commissioned the line conversion project at our
SECOND QUARTER 2011 AND RECENT DEVELOPMENTS
On
On March 11, 2011, operations of the USBC facility at the
On
During the second quarter the company successfully completed the isoprene rubber line conversion project at its
On
On
During the second quarter the company executed a contract with our supplier in
OUTLOOK
"Throughout 2011 we have continued to see prices increase for several of our key raw materials. The magnitude of price increases for inputs such as butadiene has been significant relative to historic trends, and the cost inflation is being driven by fundamentals that may continue for the foreseeable future," said
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, securities analysts and other interested parties in the evaluation of our performance and companies in our industry. Further, management uses these measures to evaluate operating performance; our executive compensation plan bases incentive compensation payments on our EBITDA performance; and our long-term debt agreements use EBITDA (with additional adjustments) to measure our compliance with certain financial covenants such as leverage and interest coverage. 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 "outlook", "believes," "estimates," "expects," "projects," "may," "intends," "plans" or "anticipates," or by discussions of strategy, plans or intentions, including statements regarding our ability to obtain raw materials; costs, timing and plans related to our planned joint venture with Formosa Petrochemical Corporation and the related facility; anticipated capital expenditures; and anticipated sales volumes or levels of demand for our products.
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
For Further Information:
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KRATON PERFORMANCE POLYMERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data) |
||||
Three months ended June 30, |
||||
2011 |
2010 |
|||
Sales Revenue |
$ 386,428 |
$ 332,086 |
||
Cost of Goods Sold |
278,033 |
242,973 |
||
Gross Profit |
108,395 |
89,113 |
||
Operating Expenses |
||||
Research and development |
6,966 |
5,572 |
||
Selling, general and administrative |
27,912 |
21,772 |
||
Depreciation and amortization |
15,604 |
11,969 |
||
Total operating expenses |
50,482 |
39,313 |
||
Loss on Extinguishment of Debt |
— |
— |
||
Earnings (Loss) of Unconsolidated Joint Venture |
(880) |
|
||
Interest Expense, Net |
5,915 |
6,272 |
||
Income Before Income Taxes |
51,118 |
43,690 |
||
Income Tax Expense |
4,141 |
5,095 |
||
Net Income |
$ 46,977 |
$ 38,595 |
||
Earnings per common share |
||||
Basic |
$ 1.47 |
$ 1.25 |
||
Diluted |
$ 1.44 |
$ 1.24 |
||
Weighted average common shares outstanding |
||||
Basic |
31,757 |
30,668 |
||
Diluted |
32,339 |
31,106 |
||
KRATON PERFORMANCE POLYMERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data) |
|||
Six months ended June 30, |
|||
2011 |
2010 |
||
Sales Revenue |
$ 731,256 |
$ 604,818 |
|
Cost of Goods Sold |
536,010 |
446,578 |
|
Gross Profit |
195,246 |
158,240 |
|
Operating Expenses |
|||
Research and development |
13,568 |
11,556 |
|
Selling, general and administrative |
55,083 |
43,834 |
|
Depreciation and amortization |
30,230 |
23,015 |
|
Total operating expenses |
98,881 |
78,405 |
|
Loss on Extinguishment of Debt |
2,985 |
— |
|
Earnings (Loss) of Unconsolidated Joint Venture |
(739) |
236 |
|
Interest Expense, Net |
17,096 |
12,336 |
|
Income Before Income Taxes |
75,545 |
67,735 |
|
Income Tax Expense |
6,691 |
9,345 |
|
Net Income |
$ 68,854 |
$ 58,390 |
|
Earnings per common share |
|||
Basic |
$ 2.16 |
$ 1.90 |
|
Diluted |
$ 2.12 |
$ 1.88 |
|
Weighted average common shares outstanding |
|||
Basic |
31,683 |
30,615 |
|
Diluted |
32,271 |
30,887 |
|
KRATON PERFORMANCE POLYMERS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except par value) |
|||
June 30, 2011 |
December 31, 2010 |
||
ASSETS |
|||
Current Assets |
|||
Cash and cash equivalents |
$ 67,245 |
$ 92,750 |
|
Receivables, net of allowances of $734 and $947 |
179.694 |
136,132 |
|
Inventories of products, net |
402,167 |
325,120 |
|
Inventories of materials and supplies, net |
10,046 |
9,631 |
|
Other current assets |
35,033 |
38,749 |
|
Total current assets |
694,185 |
602,382 |
|
Property, plant and equipment, less accumulated depreciation of $286,770 and $252,387 |
389,598 |
365,366 |
|
Identifiable intangible assets, less accumulated amortization of $54,419 and $50,123 |
67,287 |
70,461 |
|
Investment in unconsolidated joint venture |
12,621 |
13,589 |
|
Debt issuance costs |
12,430 |
3,172 |
|
Other long-term assets |
27,969 |
25,753 |
|
Total Assets |
$ 1,204,090 |
$ 1,080,723 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||
Current Liabilities |
|||
Current portion of long-term debt |
$ 7,500 |
$ 2,304 |
|
Accounts payable-trade |
95,920 |
86,699 |
|
Other payables and accruals |
50,567 |
60,782 |
|
Deferred income taxes |
595 |
595 |
|
Due to related party |
17,753 |
19,264 |
|
Total current liabilities |
172,335 |
169,644 |
|
Long-term debt, net of current portion |
388,750 |
380,371 |
|
Deferred income taxes |
17,423 |
14,089 |
|
Long-term liabilities |
69,173 |
64,242 |
|
Total liabilities |
647,681 |
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; 32,052 shares issued and outstanding at June 30, 2011; 31,390 shares issued and outstanding at December 31, 2010 |
321 |
314 |
|
Additional paid in capital |
344,538 |
334,457 |
|
Retained earnings |
165,565 |
96,711 |
|
Accumulated other comprehensive income |
45,985 |
20,895 |
|
Total stockholders' equity |
556,409 |
452,377 |
|
Total Liabilities and Stockholders' Equity |
$ 1,204,090 |
$ 1,080,723 |
|
KRATON PERFORMANCE POLYMERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) |
|||
Six months ended June 30, |
|||
2011 |
2010 |
||
CASH FLOWS FROM OPERATING ACTIVITIES |
|||
Net income |
$ 68,854 |
$ 58,390 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|||
Depreciation and amortization |
30,230 |
23,015 |
|
Amortization of debt issuance costs |
5,413 |
1,036 |
|
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 |
1,255 |
167 |
|
Deferred income tax expense |
3,335 |
3,853 |
|
Share-based compensation |
2,949 |
1,771 |
|
Decrease (Increase) in |
|||
Accounts receivable |
(37,028) |
(60,335) |
|
Inventories of products, materials and supplies |
(65,425) |
(39,002) |
|
Other assets |
3,605 |
(30,167) |
|
Decrease in |
|||
Accounts payable-trade, other payables and accruals, and other long-term liabilities |
(29) |
(6,444) |
|
Due to related party |
(1,906) |
(2,874) |
|
Net cash provided by (used in) operating activities |
14,243 |
(51,037) |
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|||
Purchase of property, plant and equipment |
(35,060) |
(17,545) |
|
Purchase of software |
(1,121) |
(1,857) |
|
Net cash used in investing activities |
(36,181) |
(19,402) |
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|||
Proceeds from debt |
400,000 |
69,000 |
|
Repayments of debt |
(389,410) |
(70,152) |
|
Proceeds from issuance of common stock |
— |
11,197 |
|
Costs associated with the issuance of common stock |
— |
(534) |
|
Proceeds from the exercise of stock options |
7,865 |
1,087 |
|
Proceeds from insurance note payable |
4,734 |
3,518 |
|
Repayment of insurance note payable |
(4,734) |
(952) |
|
Debt issuance costs |
(15,231) |
— |
|
Net cash provided by financing activities |
3,224 |
13,164 |
|
Effect of exchange rate differences on cash |
(6,791) |
27,389 |
|
Net decrease in cash and cash equivalents |
(25,505) |
(29,886) |
|
Cash and cash equivalents at beginning of period |
92,750 |
69,291 |
|
Cash and cash equivalents at end of period |
$ 67,245 |
$ 39,405 |
|
Supplemental Disclosures |
|||
Cash paid during the period for income taxes, net of refunds received |
$ 5,744 |
$ 2,026 |
|
Cash paid during the period for interest |
$ 12,327 |
$ 12,192 |
|
KRATON PERFORMANCE POLYMERS, INC. EBITDA AND ADJUSTED EBITDA (In thousands) We reconcile Net Income to EBITDA and Adjusted EBITDA as follows: |
|||||
Three months ended June 30, |
Six months ended June 30, |
||||
2011 |
2010 |
2011 |
2010 |
||
(in thousands) |
(in thousands) |
||||
Net income |
$ 46,977 |
$ 38,595 |
$ 68,854 |
$ 58,390 |
|
Plus |
|||||
Interest expense, net |
5,915 |
6,272 |
17,096 |
12,336 |
|
Income tax expense |
4,141 |
5,095 |
6,691 |
9,345 |
|
Depreciation and amortization expenses |
15,604 |
11,969 |
30,230 |
23,015 |
|
EBITDA (a) |
$ 72,637 |
$ 61,931 |
$ 122,871 |
$ 103,086 |
|
Add |
|||||
Restructuring and related costs (b) |
(93) |
655 |
1,412 |
790 |
|
Other non-cash expense (c) |
1,655 |
439 |
2,949 |
1,771 |
|
Loss on extinguishment of debt (d) |
0 |
0 |
2,985 |
0 |
|
Adjusted EBITDA (a) |
$ 74,199 |
$ 63,025 |
$ 130,217 |
$ 105,647 |
|
(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 (by reducing Cost of Goods Sold) to EBITDA and Adjusted EBITDA of approximately $49.8 million and $14.7 million for the three months ended and $70.9 million and $21.9 million for the six months ended June 30, 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 primarily 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. |
|||
Restructuring and related charges discussed above were recorded in our Condensed Consolidated Statements of Operations, as follows. |
|||
Three months ended June 30, |
Six months ended June 30, |
||||
2011 |
2010 |
2011 |
2010 |
||
(in thousands) |
(in thousands) |
||||
Selling, general and administrative |
(93) |
655 |
1,412 |
790 |
|
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