Consumables

Kraton Performance Polymers, Inc. Announces Fourth Quarter and Full Year 2010 Results

Thursday 03. March 2011 - Kraton Performance Polymers, Inc. (NYSE: KRA), a leading global producer of styrenic block copolymers, announces financial results for the quarter and year ended December 31, 2010.

2010 FOURTH QUARTER HIGHLIGHTS
Sales volume increased 10% year-on-year to 67 kilotons
Sales revenues increased 21% year-on-year to $288 million
Net income was $10 million in the fourth quarter 2010, compared to a net loss of $2 million in the fourth quarter 2009
GAAP earnings were $0.32 per fully-diluted share in the fourth quarter 2010
Restructuring and other non-recurring charges in the quarter were approximately $4 million or $0.12 per share
Adjusted EBITDA(1) ( 2) was $34 million, reflecting a margin of 12% of revenues
LIFO to FIFO expense was $8 million, as compared to $13 million income in the fourth quarter 2009
Cash at quarter end was $93 million, up $15 million from September 30, 2010
“We are pleased with our fourth quarter results, delivering strong volume and revenue growth year-on-year as we continued to make progress in our base business and with our key innovation programs,” said Kevin M. Fogarty, Kraton’s President and Chief Executive Officer. “In closing our first full calendar year as a public company, we posted revenue of $1.2 billion and Adjusted EBITDA of $195 million. Moreover, we continued to position the company for the future by delivering on key strategic initiatives we have established, including continuing our price right strategy, advancing our innovation-based revenue, adding critical capabilities within the company, flawlessly executing on our capital investment programs and developing plans for future expansion, including Asian hydrogenated styrenic block copolymer capacity,” added Fogarty. “Building upon the momentum of 2010, in February we completed a very successful refinancing of our bank and public debt, extending our maturities and adding significant liquidity and financial flexibility. As a result, we enter 2011 as an even stronger company, well-positioned for further growth.”



Three Months Ended Dec. 31,

Twelve Months Ended Dec. 31,
(US $ in thousands, except per share amounts)
2010

2009

2010

2009
Revenues
$ 288,165

$ 250,708

$ 1,228,425

$ 968,004
Adjusted EBITDA(1) ( 2)
$ 34,312

$ 35,045

$ 194,906

$ 91,359
Net income / (loss)
$ 10,299

$ (1,516)

$ 96,725

$ (290)
Net income / (loss)per diluted share(3)
$ 0.32

$ (0.07)

$ 3.07

$ (0.01)
Net cash provided by operating activities
$ 34,622

$ 31,656

$ 55,360

$ 72,805

(1)
A reconciliation of Adjusted EBITDA to Net income / (loss)is included in the accompanying financial tables.
(2)
Adjusted EBITDA is EBITDA less restructuring and related charges, non-cash expenses, management fees and gains on the extinguishment of debt.
(3)
Calculation of net income per diluted share for the periods shown is impacted by the increase in weighted average shares outstanding following the company’s initial public offering in December 2009.
4Q 2010 versus 4Q 2009 Results
Sales revenues in the fourth quarter 2010 were $288 million, an increase of approximately 21% compared to the fourth quarter 2009. The increase in sales revenues compared to the fourth quarter 2009 was primarily the result of higher sales volumes and the impact of price increases implemented in response to rising raw material costs and other factors. Sales volume in the fourth quarter 2010 was 67 kilotons, up 10% compared to the fourth quarter 2009.
Adjusted EBITDA in the fourth quarter 2010 was $34 million, or 12% of revenue, compared to $35 million, or 14% of revenue in the fourth quarter 2009. The spread between LIFO and FIFO had a negative impact on fourth quarter 2010 Adjusted EBITDA of $8 million, and a positive impact of $13 million in the fourth quarter 2009.
Fourth quarter 2010 net income was $10 million or $0.32 per diluted share, compared to a fourth quarter 2009 net loss of $2 million or $(0.07) per diluted share. Fourth quarter 2010 earnings per share were negatively impacted by approximately $0.12 per share associated with restructuring costs and other non-recurring charges.
FY 2010 versus FY 2009 Results
Sales revenues in 2010 were $1,228 million, an increase of approximately 33% compared to 2009. The increase in sales revenues compared 2009 was primarily the result of higher sales volumes and increased pricing in response to rising raw material costs and other factors. Full year 2010 sales volume was 307 kilotons, up 18% compared to 2009.
Adjusted EBITDA in 2010 was $195 million or 16% of revenue, compared to $91 million or 9% of revenue in 2009.
Full-year 2010 net income was $97 million or $3.07 per diluted share, compared to a full-year 2009 net loss of $0.3 million or $(0.01) per diluted share. Full-year 2010 earnings per share were negatively impacted by approximately $0.19 per share associated with restructuring costs and other non-recurring charges.
Cash Flow
During the fourth quarter, net cash provided by operating activities was $35 million, compared to net cash provided by operating activities of $32 million in the fourth quarter of 2009 and $72 million in the third quarter of 2010. Net capital expenditures in the fourth quarter 2010 were $23 million versus $17 million in the fourth quarter 2009 and $13 million in the third quarter 2010. Net capital expenditures in 2010 were $56 million, compared to $50 million in 2009.
END USE MARKET INFORMATION
Revenue in our Advanced Materials end use market increased $17 million or approximately 23% to $92 million in the fourth quarter 2010 compared to the fourth quarter 2009.
“Revenue in our Advanced Materials end use market increased, reflecting volume recovery in our base business as well as price improvement and incremental volume growth, led by personal care and consumer disposable applications,” said Fogarty. “We also saw volume growth in our innovative product offerings such as alternatives for PVC used in wire and cable and medical applications.”
Revenue in our Adhesives, Sealants and Coatings end use market increased $11 million or approximately 13% to $93 million in the fourth quarter 2010 compared to the fourth quarter 2009.
“In our Adhesives, Sealants and Coatings end use market, the increase in revenue was largely driven by increased pricing. We did experience volume growth in personal care and in specialty tape applications.In response to the industry shortage of certain tackifier resins which emerged in the second half of 2010, we completed development of alternative product formulations that work with a broad spectrum of available resins,” said Fogarty. “We also continue to be encouraged by the increase in demand for our innovative products sold into protective film applications,” Fogarty added.
Revenue in our Paving and Roofing end use market increased $15 million or approximately 31% to $64 million in the fourth quarter 2010 compared to the fourth quarter 2009.
“Revenue growth in our Paving & Roofing end use was driven by increased roofing volume in Europe and to a lesser extent in North America, and by price increases implemented to offset higher monomer costs,” said Fogarty. “In North America, paving activity was hindered by a lack of incremental funding available for infrastructure projects.”
Revenue in our Emerging Businesses end use market increased $3 million or approximately 14% to $27 million in the fourth quarter 2010 compared to the fourth quarter 2009.
“In the fourth quarter we continued to see strong demand for our Cariflex(TM) isoprene rubber and isoprene rubber latex, which is used in high-end surgical gloves, condoms and medical components,” said Fogarty. “We look forward to completion of the isoprene rubber line conversion at our Belpre, Ohio facility and completion of the isoprene rubber latex capacity expansion in Paulinia, Brazil in the coming months, and we are anticipating our next expansion project to support further growth in this business.”
OUTLOOK
“Based upon existing market trends, we currently expect that our first quarter 2011 sales volume will be up 5-7% compared to the first quarter 2010,” said Fogarty.”In addition, we believe pricing for our three primary feedstocks, on average, will be higher in the first quarter of 2011 than in the fourth quarter of 2010, as monomer prices reflect factors such as higher crude oil prices and other supply/demand fundamentals such as the shortage of natural rubber, which has increased demand for butadiene and isoprene used in the production of natural rubber substitutes. As a result of the movement in raw material prices, we expect to recognize a LIFO to FIFO benefit in the first quarter of 2011. Finally, we expect capital expenditure to be $80 to $85 million in 2011, largely driven by completion of the Cariflex(TM) isoprene rubber and latex projects in Belpre, Ohio and Paulinia, Brazil respectively, on-going expenditures in our four-year process control system upgrades also in Belpre, and initial expenditures associated with our anticipated Asian HSBC expansion project.”