Press Release
Kraton Polymers LLC Announces Second Quarter 2006 Results
Total Revenue Increased 6% to $285.3 million
LTM Adjusted Bank Covenant EBITDA Increased 2% to $115.6 million
HOUSTON, TX. – August 9, 2006 –Kraton Polymers LLC (Kraton), a leading global performance polymer producer, announces its financial results for the quarter and six months ended June 30, 2006. Total Revenues for the quarter were $285.3 million compared to $269.0 million in the comparable period of 2005, an increase of 6%. These increases were driven by increased volumes and prices. Through the first six months of 2006, Total Revenues increased 8% to $514.7 million.
Gross Profit for the quarter decreased $13.6 million or 21% to $52.5 million, as compared to $66.1 million in the comparable period of 2005, as raw material inflation outpaced price increases and Kraton incurred several one-time restructuring charges. Gross Profit for the first half decreased $11.0 million to $104.9 million.
Last Twelve Months (LTM) Adjusted Bank Covenant EBITDA, a measure used to determine compliance with our debt covenants, totaled $115.6 million, an increase of $2.3 million from the comparable period of 2005. A reconciliation of EBITDA and Adjusted Bank Covenant EBITDA to Net Income is attached. Cash and cash equivalents at June 30, 2006 was $32.4 million, an increase of $14.0 million from June 30, 2005.
Net Income for the quarter was $3.4 million, compared with $16.2 million in the comparable period of 2005. During the first six months of 2006, net income was $9.9 million versus $21.2 million for the same period of 2005.
"Kraton is responding to the increased cost of monomers by raising prices, driving increases in productivity, and improving service to our customers,” said George B. Gregory, President and Chief Executive Officer. “We also continue to make investments toward satisfying our long term commitment to our customers of delivering the highest quality products, bringing them exciting new innovations, and making capacity available for their growth worldwide. Our many recent successes in these areas and plans for more to come, give us confidence for the future.”
Other Quarterly Business 2006 Highlights:
- Second quarter sales volumes increased 1 kT over prior year to 97 kT. First half sales volumes increased 3 kT to 173 kT.
- Inventory volumes dropped by 15 kT as compared with June 30, 2005.
- Available liquidity increased to $108 million driven by higher cash balances and an increase to our revolver.
- New innovations announced in Kraton’s adhesives, sealants and coatings; compounding; and personal care end-use markets.
- As part of our ongoing efforts to improve efficiencies and increase productivity, Kraton has implemented a number of restructuring projects across the globe that will deliver benefits in the range of $8-11 million annually.
- Initial engineering for our new China Technical and Distribution Center has been completed.
- A new 20kT debottleneck project for 2007 in our European operations was announced.
- Our new logo, brand identity and website were launched.
- We successfully completed a tender offer for our holding company’s Senior Discount Notes and amendments to our bank facilities.
Kraton has scheduled an investor and analyst conference call for Thursday, August 10, 2006 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. To listen to the conference call and view the slide presentation, which will be broadcast live over the Internet, go to Kraton’s website at www.kraton.com, click on Investor Relations and then go to Presentations and Papers and select “Second Quarter 2006 Earnings Presentation Webcast.”
You may also 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 #: (888)552-9483. International Dial-In #: 210-234-0009. 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 10th through 5:00 p.m. CT on August 24th. To hear a telephonic replay of the call, dial 800-388-9075 or 203-369-3665 for international callers. To hear a replay of the call over the Internet, please access Kraton’s website at www.kraton.com.
About Kraton
Kraton is a leading global performance polymer company and is the world’s largest producer of styrenic block copolymers (SBCs), a family of products whose chemistry was pioneered by us over forty years ago. SBCs are highly-engineered thermoplastic elastomers, which enhance the performance of numerous 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 adhesives, coatings, consumer and personal care products, sealants, lubricants, medical, packaging, automotive, paving, roofing, 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.
Kraton, the Kraton logo and design, and “Giving Innovators their Edge” tagline 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.
