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| 8-K - FORM 8-K - Kraton Corp | kra102820158k.htm |
Exhibit 99.1
Kraton Performance Polymers, Inc. Announces Third Quarter 2015 Results, Provides Full Year 2015 Adjusted EBITDA Guidance of $160 million
HOUSTON, October 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 $32.8 million in the third quarter 2014. |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
($ 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™ 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™ 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.
KRATON PERFORMANCE POLYMERS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share data) | |||||||||||||||
Three months ended September 30, | Nine months ended 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 September 30, | Nine Months Ended 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 | |||||||
____________________________________________________
(a) | Severance expenses and other restructuring related 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 September 30, | Nine Months Ended 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 Tax | Income Taxes | Noncontrolling Interest | Diluted EPS | Income Before Income Tax | Income Taxes | Noncontrolling Interest | Diluted 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) Before Income Tax | Income Taxes | Noncontrolling Interest | Diluted EPS | Income Before Income Tax | Income Taxes | Noncontrolling Interest | Diluted EPS | |||||||||||||||||||||||||
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 ECRC Adjustment | Adjusted | ||||||||||||
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 ECRC Adjustment | Adjusted | ||||||||||||
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. |
(c) | Valuation allowance and 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 LOSS ATTRIBUTABLE TO KRATON TO NON-GAAP FINANCIAL MEASURES (Unaudited) (In thousands) | |||||||||||||||
Nine Months Ended September 30, 2015 | |||||||||||||||
As Reported | Other Adjustments | FIFO TO ECRC Adjustment | Adjusted | ||||||||||||
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 ECRC Adjustment | Adjusted | ||||||||||||
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. |
(c) | Valuation allowance and tax effect of other adjustments. |
(d) | Portion of the adjustment associated with the KFPC startup costs which is attributed to the non-controlling interest. |
