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Kraton Performance Polymers, Inc. Announces First Quarter 2014 Results

April 29, 2014

HOUSTON, April 29, 2014 /PRNewswire/ — Kraton Performance Polymers, Inc. (NYSE: KRA), a leading global producer of styrenic block copolymers, announces financial results for the quarter ended March 31, 2014.

2014 FIRST QUARTER OVERVIEW

    --  First quarter 2014 sales revenue was $311.7 million on sales volume of
        74.4 kilotons, down $28.5 million compared to sales revenue of $340.1
        million in the first quarter 2013 on sales volume of 78.2 kilotons.
    --  Adjusted EBITDA at estimated current replacement cost (" ECRC")
        (non-GAAP) was $37.5 million in the first quarter 2014, up $8.3 million
        compared to $29.2 million in the first quarter 2013.
    --  Gross profit per ton at ECRC (non-GAAP ), excluding certain costs
        associated with downtime at our Belpre, Ohio, and Berre, France,
        facilities was $880 per ton in the first quarter 2014 compared to $772
        per ton in the first quarter 2013.
    --  First quarter 2014 net loss attributable to Kraton was $7.9 million, or
        $0.24 per diluted share, compared to a net loss of $3.7 million, or
        $0.12 per diluted share, in the first quarter 2013.
    --  First quarter 2014 adjusted net income attributable to Kraton (non-GAAP)
        was $15.1 million, or $0.46 per diluted share, compared to adjusted net
        income of $2.1 million, or $0.07 per diluted share, in the first quarter
        2013.
    --  Net loss attributable to Kraton and adjusted net income attributable to
        Kraton includes a positive spread between FIFO and ECRC of $4.0 million
        or $0.12 per diluted share in the first quarter 2014 and a negative
        spread of $0.5 million or $0.02 per diluted share in the first quarter
        2013.

“Our first quarter 2014 sales volume of 74.4 kilotons reflects continued attractive growth in sales for our Cariflex(TM) isoprene rubber and isoprene rubber latex products, and overall innovation sales volume increased 17% compared to the first quarter of 2013. However, in the first quarter we incurred costs associated with the weather-related outage at our Belpre, Ohio facility and a small fire at our facility in Berre, France, both disclosed previously. Although, we were able to supply the majority of our customers’ requirements, the production outages did limit our ability to fully satisfy demand, particularly for certain USBC product grades,” said Kevin M. Fogarty, Kraton’s President and Chief Executive Officer. “We achieved two significant strategic milestones in the first quarter. First, Kraton and FPCC broke ground on the construction phase of the new 30 kiloton HSBC plant in Mailiao, Taiwan. Further, we started up the new semi-works facility in Belpre, which will benefit our product development capabilities,” added Fogarty. “Finally, relative to the proposed combination with the SBC business of LCY Chemical Corp., the shareholders of LCY have approved the combination, and we continue to make progress toward securing necessary regulatory approvals. Subject to the receipt of regulatory approvals and approval of Kraton shareholders, we anticipate that closing of the transaction could occur late in the fourth quarter of this year.”


    Financial Summary

                                  Three months ended

                                       March 31,
                                       ---------

    (US $ in thousands,
     except per share
     amounts)                       2014            2013
                                    ----            ----

    Sales volume (in
     kilotons)                      74.4            78.2

    Revenues                    $311,656        $340,107

    Adjusted EBITDA at
     ECRC(1)                     $37,494         $29,184

    Net loss attributable
     to Kraton                   $(7,909)        $(3,748)

    Loss per diluted share        $(0.24)         $(0.12)

    Adjusted net income
     attributable to
     Kraton(1)                   $15,143          $2,108

    Adjusted earnings per
     diluted share(1)              $0.46           $0.07

    Positive  (negative)
     spread between FIFO
     and ECRC - per diluted
     share                         $0.12          $(0.02)

    Net cash used in
     operating activities        $53,587         $20,774

    (1)      See Non-GAAP reconciliations
             included in the accompanying
             financial tables.

1Q 2014 VERSUS 1Q 2013 RESULTS

Sales revenue was $311.7 million on sales volumes of 74.4 kilotons for the three months ended March 31, 2014 compared to $340.1 million on sales volumes of 78.2 kilotons for the three months ended March 31, 2013. Sales revenue declined $28.5 million or 8.4% compared to the first quarter 2013, with $18.8 million of the decrease attributable to a reduction in global product sales prices associated with lower average raw material costs and $9.4 million resulting from lower sales volumes.

With respect to sales revenue in each of our end uses:

    --  Cariflex(TM) sales revenue was $35.4 million for the three months ended
        March 31, 2014 compared to $27.0 million for the three months ended
        March 31, 2013. The $8.3 million or 30.8% revenue increase was primarily
        due to a 35.6% increase in sales volumes, mainly in the surgical glove
        market and other medical and innovation applications.
    --  Advanced Materials sales revenue was $82.7 million for the three months
        ended March 31, 2014 compared to $96.6 million for the three months
        ended March 31, 2013. The $13.9 million or 14.4% revenue decline (a
        decline of $14.4 million or 14.9% excluding a $0.5 million positive
        effect from currency fluctuations) was due to a 9.4% decline in sales
        volumes and, to a lesser extent, lower average selling prices reflective
        of lower raw material costs, primarily butadiene. The sales volume
        decline was primarily due to lower volume in consumer and personal care
        applications. However, innovation sales volumes were up, reflecting a
        trend Kraton has experienced over the past year of increasing demand for
        innovative USBC-based solutions as an alternative for HSBC-based
        solutions for certain personal care applications.
    --  Adhesives, Sealants and Coatings sales revenue was $123.3 million for
        the three months ended March 31, 2014 compared to $131.5 million for the
        three months ended March 31, 2013. The $8.2 million or 6.3% revenue
        decline (a decline of $7.4 million or 5.7% excluding a $0.8 million
        negative effect from currency fluctuations) was due to a 3.2% decline in
        sales volumes and lower average selling prices, reflective of lower raw
        material costs. The decline in volume was primarily due to lower sales
        into industrial and pressure sensitive adhesive applications, the
        latter, in part, reflecting the impact of production outages during the
        first quarter of 2014 at the Belpre facility. These declines were
        partially offset by increased sales into lubricant additive
        applications.
    --  Paving and Roofing sales revenue was $70.3 million for the three months
        ended March 31, 2014 compared to $84.7 million for the three months
        ended March 31, 2013. The $14.4 million or 17.0% revenue decline (a
        decline of $14.6 million or 17.2% excluding a $0.2 million positive
        effect from currency fluctuations) was due to an 8.0% decline in sales
        volumes and lower average selling prices reflective of lower raw
        material costs, primarily butadiene. Growth in European roofing
        applications partially offset volume declines in paving applications,
        principally in Europe, and to a lesser extent, North America. These
        declines were partially attributable to the production outages in the
        quarter.

Gross profit was $57.1 million in the first quarter 2014, compared to $59.9 million in the first quarter 2013. Gross profit in the first quarter 2014 includes the $12.4 million negative impact associated with the weather-related downtime in our Belpre, Ohio, facility and an operating disruption resulting from a small fire at our Berre, France facility. Lower cost of raw materials aggregating $26.4 million, more than offset the $18.8 million reduction in global selling prices. As a result of these primary factors, gross profit decreased by $2.8 million or 4.7%. Adjusting for the $4.0 million positive spread between FIFO and ECRC in the first quarter 2014 and the negative spread of $0.5 million in the first quarter 2013, gross profit at ECRC was $53.0 million in the first quarter 2014 compared to $60.4 million in the first quarter 2013. Gross profit per ton at ECRC, excluding the aforementioned costs at the Belpre and Berre sites, was $880 per ton in the first quarter 2014 compared to $772 per ton in the first quarter 2013.

Selling, general and administrative expenses and research and development costs aggregated $42.5 million in the first quarter 2014, an increase of $8.5 million compared to $34.0 million in the first quarter 2013. The $8.5 million increase reflects $9.2 million of professional fees and other costs associated with the proposed combination with the styrenic block copolymer business of LCY Chemical Corp. and $0.6 million of costs related to production downtime at our Belpre, Ohio, facility, partially offset by a $1.3 million decrease in other costs, primarily employee related costs.

Adjusted EBITDA at ECRC in the first quarter 2014 was $37.5 million, or 12.0% of revenue, compared to $29.2 million, or 8.6% of revenue in the first quarter 2013, an increase of $8.3 million, or 28.5%.

First quarter 2014 net loss attributable to Kraton was $7.9 million, or $0.24 per diluted share, compared to the first quarter 2013 net loss of $3.7 million, or $0.12 per diluted share. Adjusted net income attributable to Kraton was $15.1 million or $0.46 per diluted share in the first quarter of 2014 compared to adjusted net income of $2.1 million or $0.07 per diluted share in the first quarter of 2013. Included in these results are the accretive effect of the spread between FIFO and ECRC which amounted to $0.12 per diluted share in the first quarter of 2014 and the dilutive effect of $(0.02) per diluted share in the first quarter of 2013.

CASH FLOW

Due to the seasonal nature of portions of our business, we generally use cash in operating activities in the first quarter. In the first quarter of 2014 and 2013, cash used in operating activities totalled $53.6 million and $20.8 million, respectively. The decline in operating cash flow in the first quarter of 2014 compared to the first quarter of 2013 was primarily the result of the timing of payments of current liabilities and the decline in earnings, partially offset by the effect of sales volume and revenue per ton, which resulted in a smaller increase in accounts receivable in 2014 as compared to 2013.

OUTLOOK

We currently estimate that our results in the second quarter of 2014 will reflect a positive spread between FIFO and ECRC of approximately $6.0 million.

USE OF NON-GAAP FINANCIAL MEASURES

This earnings release includes the use of both GAAP and non-GAAP financial measures. The non-GAAP financial measures are EBITDA, Adjusted EBITDA, Adjusted EBITDA at ECRC, Gross Profit at ECRC and Adjusted Net Income (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. 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 year ended December 31, 2013.

We consider these non-GAAP financial measures 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 at ECRC, 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 our cash expenditures, or future requirements for capital expenditures or contractual commitments; EBITDA does not reflect changes in, or cash requirements for, our working capital needs; EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements; EBITDA calculations under the terms of our debt agreements may vary from EBITDA presented herein, and our presentation of EBITDA herein is not for purposes of assessing compliance or non-compliance with financial covenants under our debt agreements; and other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure; and EBITDA is not a measure of discretionary cash available to us to invest in the growth of our business. As an analytical tool, Adjusted EBITDA is subject to all the limitations applicable to EBITDA. In addition, we prepare Adjusted EBITDA by adjusting EBITDA to eliminate the impact of a number of items we do not consider indicative of our on-going performance, but you should be aware that in the future we may incur expenses similar to the adjustments in this presentation. As an analytical tool, Adjusted EBITDA at ECRC is subject to all the limitations applicable to EBITDA, as well as the following limitations: due to volatility in raw material prices, Adjusted EBITDA at ECRC may, and often does, vary substantially from EBITDA and other performance measures, including net income calculated in accordance with GAAP; and Adjusted EBITDA at ECRC 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, Adjusted EBITDA and ECRC 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, Gross Profit at ECRC is limited because it often varies substantially from gross profit calculated in accordance with GAAP due to volatility in raw material prices. Finally, we prepare Adjusted Net Income by adjusting net income to eliminate the impact of a number of items we do not consider indicative of our on-going performance. 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 Wednesday, April 30, 2014 at 9:00 a.m. (Eastern Time) to discuss first quarter 2014 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 888-857-6511. 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 April 30, 2014 through 1:01 a.m. (Eastern Time) on May 14, 2014. To hear a replay of the call over the Internet, access Kraton’s Website at www.kraton.com by selecting the “Investor Relations” link at the top of the home page and then selecting “Events” from the Investor Relations menu on the Investor Relations page. To hear a telephonic replay of the call, dial 800-879-6113 and International callers dial 402-220-4741.

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 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 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, including statements regarding expected timing of closing the combination with LCY; and 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 I, 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: material regulatory conditions to closing the combination with LCY; business uncertainties and contractual restrictions while the proposed LCY combination is pending; failure to successfully combine with the SBC business of LCY in the expected timeframe; failure to complete the LCY combination; significant delays in completing the LCY combination; inability to realize the benefits we anticipate from the proposed redomestication of our company from Delaware to the United Kingdom; our expectations regarding the startup of our semi-works facility in Belpre, Ohio and its role in future innovation programs; 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 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; 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 forward-looking statements. Forward-looking statements speak only as of the date they are made, and we assume no obligation to update such information in light of new information or future events.


              KRATON PERFORMANCE POLYMERS, INC.

       CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

            (In thousands, except per share data)

                         (Unaudited)

                                         Three months
                                            ended

                                         March 31,
                                         ---------

                                    2014                2013
                                    ----                ----

    Sales revenue                         $311,656            $340,107

    Cost of goods sold                     254,583             280,196
                                           -------             -------

    Gross profit                            57,073              59,911
                                            ------              ------

    Operating expenses:

    Research and development                 8,297               7,913

    Selling, general and
     administrative                         34,218              26,114

    Depreciation and amortization           16,409              15,098
                                            ------              ------

    Total operating expenses                58,924              49,125

    Earnings of unconsolidated joint
     venture                                   117                 134

    Interest expense, net                    6,338              13,298
                                             -----              ------

    Loss before income taxes                (8,072)             (2,378)

    Income tax expense                         122               1,446
                                               ---               -----

    Consolidated net loss                   (8,194)             (3,824)

    Net loss attributable to
     noncontrolling interest                  (285)                (76)
                                              ----                 ---

    Net loss attributable to
     Kraton                                $(7,909)            $(3,748)
                                            ======              ======

    Loss per common share:

    Basic                                    (0.24)              (0.12)

    Diluted                                  (0.24)              (0.12)

    Weighted average common shares
     outstanding:

    Basic                                   32,162              32,062

    Diluted                                 32,162              32,062


                 KRATON PERFORMANCE POLYMERS, INC.

               CONDENSED CONSOLIDATED BALANCE SHEETS

                 (In thousands, except par value)

                            (Unaudited)

                                    March 31,              December
                                                              31,

                                         2014                 2013
                                         ----                 ----

    ASSETS

    Current assets:

    Cash and cash
     equivalents                                  $97,319             $175,872

    Receivables, net of
     allowances of $402 and
     $315                                         150,848              129,356

    Inventories of products                       343,511              328,772

    Inventories of materials
     and supplies                                  11,261               10,947

    Deferred income taxes                           9,764                7,596

    Other current assets                           20,234               20,665
                                                   ------               ------

    Total current assets                          632,937              673,208

    Property, plant and
     equipment, less
     accumulated depreciation
     of $367,223 and $353,428                     433,817              414,257

    Intangible assets, less
     accumulated amortization
     of $81,489 and $78,784                        55,696               57,488

    Investment in
     unconsolidated joint
     venture                                       13,721               14,074

    Debt issuance costs                             8,642                9,213

    Deferred income taxes                           1,452                1,326

    Other long-term assets                         25,738               25,231
                                                   ------               ------

    Total assets                               $1,172,003           $1,194,797
                                                 ========             ========

    LIABILITIES AND EQUITY

    Current liabilities:

    Current portion of long-
     term debt                                     $2,996        $           -

    Accounts payable-trade                        101,319              115,736

    Other payables and
     accruals                                      43,256               54,539

    Deferred income taxes                             183                  182

    Due to related party                           26,295               24,603
                                                   ------               ------

    Total current liabilities                     174,049              195,060

    Long-term debt, net of
     current portion                              351,975              350,989

    Deferred income taxes                          18,232               18,359

    Other long-term
     liabilities                                   76,605               75,991
                                                   ------               ------

    Total liabilities                             620,861              640,399
                                                  -------              -------

    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; 32,774 shares
     issued and outstanding at
     March 31, 2014; 32,547
     shares issued and
     outstanding at December
     31, 2013                                         328                  325

    Additional paid in capital                    367,307              363,590

    Retained earnings                             162,918              170,827

    Accumulated other
     comprehensive loss                           (19,453)             (21,252)
                                                  -------              -------

    Total Kraton stockholders'
     equity                                       511,100              513,490

    Noncontrolling interest                        40,042               40,908
                                                   ------               ------

    Total equity                                  551,142              554,398
                                                  -------              -------

    Total liabilities and
     equity                                    $1,172,003           $1,194,797
                                                 ========             ========


                  KRATON PERFORMANCE POLYMERS, INC.

           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                            (In thousands)

                             (Unaudited)

                                               Three months
                                                   ended

                                                March 31,
                                                ---------

                                      2014                     2013
                                      ----                     ----

    CASH FLOWS FROM OPERATING
     ACTIVITIES

    Consolidated net loss                     $(8,194)                $(3,824)

    Adjustments to reconcile
     consolidated net loss to net
     cash used in operating
     activities:

    Depreciation and amortization              16,409                  15,098

    Amortization of debt premium                  (40)                    (38)

    Amortization of debt issuance
     costs                                        553                   5,781

    Gain on property, plant and
     equipment                                    (17)                    (16)

    Earnings from unconsolidated
     joint venture, net of dividends
     received                                     370                     288

    Deferred income tax benefit                (2,393)                   (921)

    Share-based compensation                    3,614                   2,523

    Decrease (increase) in:

    Accounts receivable                       (20,748)                (32,078)

    Inventories of products,
     materials and supplies                   (14,300)                (14,148)

    Other assets                                  573                    (588)

    Increase (decrease) in:

    Accounts payable-trade                    (24,362)                 12,926

    Other payables and accruals                (6,617)                (15,767)

    Other long-term liabilities                   582                   2,196

    Due to related party                          983                   7,794
                                                  ---                   -----

    Net cash used in operating
     activities                               (53,587)                (20,774)
                                              -------                 -------

    CASH FLOWS FROM INVESTING
     ACTIVITIES

    Purchase of property, plant and
     equipment                                (20,185)                (14,455)

    Purchase of software and other
     intangibles                               (1,062)                   (707)

    Settlement of net investment
     hedge                               -                   (2,225)
                                       ---                   ------

    Net cash used in investing
     activities                               (21,247)                (17,387)
                                              -------                 -------

    CASH FLOWS FROM FINANCING
     ACTIVITIES

    Proceeds from debt                   -                   40,000

    Repayments of debt                   -                  (96,875)

    Capital lease payments                     (3,011)                   (950)

    Contribution from noncontrolling
     interest                            -                   15,174

    Purchase of treasury stock                   (429)                      -

    Proceeds from the exercise of
     stock options                                535                     310

    Debt issuance costs                  -                   (3,117)
                                       ---                   ------

    Net cash used in financing
     activities                                (2,905)                (45,458)
                                               ------                 -------

    Effect of exchange rate
     differences on cash                         (814)                 (3,429)
                                                 ----                  ------

    Net decrease in cash and cash
     equivalents                              (78,553)                (87,048)

    Cash and cash equivalents,
     beginning of period                     $175,872                 223,166
                                             --------                 -------

    Cash and cash equivalents, end
     of period                                $97,319                $136,118
                                              =======                ========

    Supplemental disclosures:

    Cash paid during the period
     for income taxes, net of
     refunds received                          $2,293                  $4,643

    Cash paid during the period
     for interest, net of
     capitalized interest                     $11,608                 $13,639

    Capitalized interest                         $636                    $961

    Supplemental non-cash
     disclosures:

    Property, plant and equipment
     accruals                                 $15,168                  $3,495

    Asset acquired through capital
     lease                                     $7,033                       -





                                   KRATON PERFORMANCE POLYMERS, INC.

            RECONCILIATION OF NET LOSS ATTRIBUTABLE TO KRATON TO NON-GAAP FINANCIAL MEASURES

                                (In thousands, except per share amounts)

                                              (Unaudited)

                                                 Three months ended                 Three months ended

                                                   March 31, 2014                     March 31, 2013
                                                   --------------                     --------------

                                             After Tax                     Per             After Tax    Per

                                                           Diluted                           Diluted
                                                            Share                             Share

    Net loss
     attributable
     to Kraton
     and loss
     per diluted
     share                                     $(7,909)                       $(0.24)          $(3,748)   $(0.12)

     Restructuring
      and other
      charges(a)                                   422                          0.01                55      0.00

    Transaction
     and
     acquisition
     related
     costs(b)                                    9,236                          0.28                81      0.00

    Production
     downtime(c)                                13,013                          0.40                 0      0.00

    Asia JV(d)                                     381                          0.01                 0      0.00

    Settlement
     of interest
     rate
     swap(e)                                         0                          0.00               697      0.02

    Write-off
     of debt
     issuance
     cost(f)                                         0                          0.00             5,023      0.16
                                                   ---                          ----             -----      ----

    Adjusted net
     income and
     adjusted
     earnings
     per diluted
     share                                     $15,143                         $0.46            $2,108     $0.07
                                               =======                         =====            ======     =====

    (a)      Severance expenses which are
             primarily recorded in cost
             of goods sold for 2014 and
             in selling, general and
             administrative expenses in
             2013.

    (b)      In 2014, primarily
             professional fees related
             to our proposed combination
             with the styrenic block
             copolymer business of LCY
             Chemical Corp., which are
             recorded in selling,
             general and administrative
             expenses.

    (c)      Production downtime at our
             Belpre, Ohio and Berre,
             France facilities, of
             which, $12.4 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,
             Kraton Formosa Polymers
             Corporation, which are
             recorded in selling,
             general and administrative
             expenses.

    (e)      Reflects interest expense
             related to the termination
             and settlement of an
             interest rate swap
             agreement in connection
             with the refinancing of our
             credit facility.

    (f)      Reflects interest expense
             related to the write-off
             of unamortized debt
             issuance costs in
             connection with the
             refinancing of our credit
             facility.



        KRATON PERFORMANCE POLYMERS, INC.

    RECONCILIATION OF GROSS PROFIT TO GROSS PROFIT AT ECRC
                        AND

          ADJUSTED GROSS PROFIT AT ECRC

                  (In Thousands)

                   (Unaudited)

                               Three months
                                  ended

                               March 31,
                               ---------

                           2014             2013
                           ----             ----

    Gross profit                  $57,073         $59,911

    Add (deduct):

    Spread between FIFO and
     ECRC                          (4,024)            507
                                   ------             ---

    Gross profit at ECRC          $53,049         $60,418
                                  =======           =====

    Add:

           Production downtime     12,413               -
                                   ------             ---

    Adjusted gross profit
     at ECRC                      $65,462         $60,418
                                  =======           =====


            KRATON PERFORMANCE POLYMERS, INC.

    RECONCILIATION OF NET LOSS ATTRIBUTABLE TO KRATON TO NON-GAAP
                    FINANCIAL MEASURES

                      (In thousands)

                       (Unaudited)

                                      Three months
                                         ended

                                      March 31,
                                      ---------

                                 2014                2013
                                 ----                ----

    Net loss attributable to
     Kraton                             $(7,909)            $(3,748)

    Net loss attributable to
     noncontrolling interest               (285)                (76)
                                           ----                 ---

    Consolidated net loss                (8,194)             (3,824)

    Add:

    Interest expense, net                 6,338              13,298

    Income tax expense                      122               1,446

    Depreciation and amortization
     expenses                            16,409              15,098
                                         ------              ------

    EBITDA                               14,675              26,018
                                         ------              ------

    Add:

    Restructuring and other
     charges (a)                            521                  55

    Transaction and acquisition
     related costs (b)                    9,236                  81

    Production downtime (c)              13,013                   -

    Asia JV (d)                             459                   -

    Non-cash compensation expense
     (e)                                  3,614               2,523
                                          -----               -----

    Adjusted EBITDA                      41,518              28,677

    Add (deduct):

    Spread between FIFO and ECRC         (4,024)                507
                                         ------                 ---

    Adjusted EBITDA at ECRC             $37,494             $29,184
                                        =======             =======

    (a)      Severance
             expenses
             which are
             primarily
             recorded
             in cost of
             goods sold
             for 2014
             and in
             selling,
             general
             and
             administrative
             expenses
             in 2013.

    (b)      In 2014,
             primarily
             professional
             fees
             related to
             our
             proposed
             combination
             with the
             styrenic
             block
             copolymer
             business
             of LCY
             Chemical
             Corp.,
             which are
             recorded
             in
             selling,
             general
             and
             administrative
             expenses.

    (c)      Production
             downtime
             at our
             Belpre,
             Ohio and
             Berre,
             France
             facilities,
             of which,
             $12.4
             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,
             Kraton
             Formosa
             Polymers
             Corporation,
             which are
             recorded
             in
             selling,
             general
             and
             administrative
             expenses.

    (e)      For the
             three
             months
             ended
             March 31,
             2014, $3.1
             million is
             recorded
             in
             selling,
             general
             and
             administrative
             expenses,
             $0.3
             million is
             recorded
             in
             research
             and
             development
             expenses,
             and $0.2
             million is
             recorded
             in cost of
             goods
             sold. In
             2013, all
             non-cash
             compensation
             expenses
             were
             recorded
             in
             selling,
             general
             and
             administrative
             expenses.

For Further Information:

Investors: H. Gene Shiels 281-504-4886

http://photos.prnewswire.com/prnvar/20100728/DA42514LOGO

Photo – http://photos.prnewswire.com/prnh/20100728/DA42514LOGO

SOURCE Kraton Performance Polymers, Inc.


Source: PR Newswire



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