Press Release
Kraton Announces
Second Quarter 2005 Earnings
Total Revenue Increases 30%
versus Second Quarter 2004
Gross Profit and Net Income Improve
HOUSTON, TX. – August 10, 2005 –Kraton Polymers LLC (Kraton) today announces its financial results for the second quarter 2005. Kraton’s Total Revenues for the quarter were $269.0 million compared with $206.5 million in the year ago period, an increase of 30%. This improvement was primarily driven by an increase in average prices. Net Income for the quarter was $14.8 million, compared with a loss of $10.0 million in the year ago period.
Gross Profit for the second quarter increased $40.7 million to $66.1 million, as compared to $25.4 million in the year ago period. After adjusting for period to period differences in the amortization of the step-up in inventory value related to the acquisition of the company in December 2003, the improvement in gross profit was $29.7 million. At the end of the second quarter 2005, Last Twelve Months (LTM) Adjusted Bank Covenant EBITDA, a measure used to determine compliance with Kraton’s debt covenants, totaled $113.3 million, an increase of $4.3 million from the year ago period. A reconciliation of EBITDA and Adjusted Bank Covenant EBITDA to Net Income or Net Loss, as applicable, is attached.
Kraton ended the quarter with $18.4 million in cash and cash equivalents, a decrease of $28 million from December 31, 2004. The decrease was primarily due to a first half build in inventories and an increase in accounts receivable.
George Gregory, President and Chief Executive Officer said, "Financial results in the second quarter of 2005 were strong. Our second quarter performance is a validation of our strategy and a confirmation that the priorities we set in mid to late 2004 were correct. Our second quarter performance is also a reflection of the extremely hard and effective work of our employees around the globe. We are comfortably in compliance with all of our debt covenants at the end of the quarter. Concerning our top priorities, we will continue to ensure that our products are "Priced Right" and to drive bottom line performance through "Cost Out" and Lean Six Sigma initiatives. As we look forward, we intend to generate cash through prudent management of inventories, aggressively pursue new product innovation and focus more of our resources to growth opportunities. While we are pleased with our second quarter results, we realize that our cost of raw materials are at near record levels, our customers’ expectations continue to increase, and competition in our industry remains intense. Given these realities, we will continue to press ahead with the same level of urgency, focusing our energy on the right priorities, as we have during the past year."
Kraton has scheduled an investor and analyst conference call for August 11th to discuss the results of today"s earnings announcement. The call will begin at 2:00 p.m. central time, 3:00 p.m. eastern time. You may listen to the analyst conference call by telephone by contacting the conference call operator 5-10 minutes prior to the scheduled start time and asking for the "Earnings Conference Call". US Dial-In #: (800) 857-0373. International Dial-In #: (517) 623-4705. For those unable to listen to the live call, a replay will be available 24 hours a day beginning at approximately 6:00 p.m. CT August 11th through 10:00 p.m. CT on August 25th. To hear a telephonic replay of the call, dial 888-567-0419 or 203-369-3439 for international callers.
About Kraton
Kraton Polymers LLC is a premier, global specialty chemicals company and is the world’s largest producer of styrenic block copolymers (“SBCs”), a family of products whose chemistry was pioneered by Kraton over forty years ago. SBCs are highly-engineered synthetic elastomers, which enhance the performance of products by delivering a variety of attributes, including greater flexibility, resilience, strength, durability and processability. Kraton polymers are used in a wide range of applications including road and roofing materials, numerous consumer products (e.g., diapers, tool handles and toothbrushes), tapes, labels, medical applications, packaging, automotive and footwear products. Kraton has the leading position in nearly all of its core markets and is the only producer of SBCs with global manufacturing capability. Its production facilities are located in the United States, The Netherlands, Germany, France, Brazil, and Japan.
Polymer Holdings LLC is the parent company of Kraton Polymers LLC and has no material assets other than its investment in Kraton Polymers LLC.
Kraton, the Kraton logo and design are trademarks of Kraton Polymers LLC.
Forward Looking Statements
This press release includes “forward-looking statements” as that term is defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are statements that could be deemed forward-looking statements and are often characterized by the use of words such as “believes,” “expects,” “estimates,” “projects,” “may,” “will,” “intends,” “plans” or “anticipates,” or by discussions of strategy, plans or intentions. In this press release, forward-looking information relates to covenant compliance, pricing trends, cost savings, production rates and other similar matters. All forward-looking statements in this press release are made based on management’s current expectations and estimates, which involve risks, uncertainties and other factors that could cause results to differ materially from those expressed in forward-looking statements. Among these factors are changes in overall economic conditions, the cyclical nature of the chemical industry, changes in demand for our products, changes in inventories at our customers and distributors, technological and product development risks, availability and cost of raw materials, competitors’ actions, pricing and gross margin pressures, loss of key customers, order cancellations or reduced bookings, the timing and cost of planned capital expenditures, changes in manufacturing yields, control of costs and expenses, significant litigation, risks associated with acquisitions and dispositions, risks associated with our substantial leverage and restrictive covenants in our debt agreements, risks associated with our international operations, the threat or occurrence of international armed conflict and terrorist activities both in the United States and internationally, risks and costs associated with increased and new regulation of corporate governance and disclosure standards (including pursuant to Section 404 of the Sarbanes-Oxley Act of 2002), and risks involving environmental or other governmental regulation. Readers are cautioned not to place undue reliance on forward-looking statements. We assume no obligation to update such information.
Please Click here to view attached Financials.
