HOUSTON, Oct. 23, 2019 /PRNewswire/ -- Kraton
Corporation (NYSE: KRA), a leading global specialty chemicals
company that manufactures styrenic block copolymers, specialty
polymers, and high-value performance products primarily derived
from pine wood pulping co-products, announces financial results for
the quarter ended September 30, 2019.
THIRD QUARTER 2019 SUMMARY
- Third quarter consolidated net income of $20.9 million, compared to $43.3 million in the third quarter of 2018.
- Third quarter consolidated Adjusted EBITDA(1) of
$80.1 million, down 18.8% compared to
the third quarter of 2018.
- Polymer segment operating income of $18.3 million, down 59.3% compared to Q3 2018,
and Adjusted EBITDA(1) of $50.3
million, down 11.8% compared to $57.0
million in the third quarter of 2018.
-
- Average segment unit margins improved compared to Q3 2018.
- Chemical segment operating income of $19.8 million, down 27.9% compared to Q3 2018,
and Adjusted EBITDA(1) of $29.8
million, down 28.6% compared to $41.6
million in the third quarter of 2018.
-
- During the third quarter of 2019 the Chemical segment closed
its first commercial sale of its next generation low-color Rosin
Ester formulation.
- During the third quarter, consolidated debt was reduced by
$61.2 million and consolidated net
debt(1) was reduced by $80.6
million ($52.1 million
excluding the effect of foreign currency).
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(In thousands,
except percentages and per share amounts)
|
Revenue
|
$
|
444,221
|
|
|
$
|
523,105
|
|
|
$
|
1,395,912
|
|
|
$
|
1,563,892
|
|
Polymer segment
operating income
|
$
|
18,269
|
|
|
$
|
44,899
|
|
|
$
|
62,498
|
|
|
$
|
137,930
|
|
Chemical segment
operating income
|
$
|
19,834
|
|
|
$
|
27,495
|
|
|
$
|
66,908
|
|
|
$
|
79,406
|
|
Consolidated net
income
|
$
|
20,915
|
|
|
$
|
43,277
|
|
|
$
|
77,925
|
|
|
$
|
51,234
|
|
Adjusted EBITDA
(non-GAAP)(1)
|
$
|
80,056
|
|
|
$
|
98,651
|
|
|
$
|
271,548
|
|
|
$
|
292,900
|
|
Adjusted EBITDA
margin (non-GAAP)(2)(3)
|
18.0
|
%
|
|
18.9
|
%
|
|
19.5
|
%
|
|
18.7
|
%
|
Diluted earnings per
share
|
$
|
0.58
|
|
|
$
|
1.31
|
|
|
$
|
2.26
|
|
|
$
|
1.53
|
|
Adjusted diluted
earnings per share (non-GAAP)(1)
|
$
|
0.52
|
|
|
$
|
1.02
|
|
|
$
|
2.99
|
|
|
$
|
2.49
|
|
__________________________________________________
|
(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.
|
(2)
|
Defined as Adjusted
EBITDA as a percentage of revenue.
|
(3)
|
For the nine months
ended September 30, 2019, Adjusted EBITDA margin adjusted for lost
revenues from Hurricane Michael would be 19.3%.
|
"As previously disclosed, deterioration in macroeconomic
fundamentals driving softer demand in China, broader Asia, and Europe had a direct impact on weaker than
expected results for the third quarter of 2019. As a result,
Kraton's consolidated Adjusted EBITDA for the third quarter was
$80.1 million, down 18.8% compared to
the third quarter of 2018," said Kevin M.
Fogarty, Kraton's President and Chief Executive Officer.
The further weakening of demand in China, broader Asia and Europe in the third quarter of 2019 impacted
sales volume for the Polymer segment, while unit margins were
resilient. Polymer segment Adjusted EBITDA was $50.3 million for the third quarter, down 11.8%
compared to the third quarter of 2018. The decrease was primarily
driven by lower sales into paving and roofing applications in our
Performance Polymers business associated with market conditions
that included high customer inventory levels resulting from a
delayed start to the paving & roofing season, as well as lower
sales into lubricant additive applications in the Specialty
Polymers business attributable to an ongoing inventory management
program by a significant customer. These factors were partially
offset by an 18.9% increase in Cariflex™ sales volume,
associated with increased sales into surgical glove applications.
Although Polymer segment sales volume fell below third quarter 2018
levels, unit margins were strong, and the Adjusted EBITDA margin
for the Polymer segment was 19.2%, an improvement of 140 basis
points compared to the third quarter of 2018.
Weaker global demand fundamentals and the compounding effect of
significant declines in Asian market pricing for gum rosin and gum
turpentine led to a more difficult operating environment for the
Chemical segment during the third quarter. Third quarter 2019
Adjusted EBITDA for the Chemical segment was $29.8 million, down 28.6% compared to the third
quarter of 2018. Performance Chemicals sales volume was down 15.0%
compared to the third quarter of 2018 reflecting weakness in demand
for Tall Oil Rosin and lower sales of Tall Oil Fatty Acid upgrades,
principally into mining, oilfield demand, and automotive
applications. Sales volume for Adhesives was down 7.5% compared to
the third quarter of 2018 on weaker demand for Rosin Esters in
global adhesive markets and weaker market conditions and demand in
road marking applications. During the third quarter, demand was
lower in aroma markets, which impacted sales for certain upgraded
products in the Crude Sulfate Turpentine chain. Specifically to
address competition with hydrocarbon based C5 tackifiers, during
the third quarter Kraton realized its first commercial sales of a
newly developed, low-color Rosin Ester formulation.
"Despite weaker than anticipated operating results in the third
quarter of 2019, cash generation remained positive, and we reduced
consolidated net debt by $81 million
in the quarter, or by $52 million
excluding the effect of foreign currency. Our focus remains on debt
reduction and we expect to continue to further reduce outstanding
indebtedness during the fourth quarter. On a full-year basis we are
now targeting a reduction in consolidated net debt of $120 - $140
million, excluding the effect of foreign currency and
activity under our share repurchase authorization. In this
difficult environment we are actively managing costs and optimizing
cash generation, while continuing our innovation efforts to drive
market growth, particularly with respect to new bio-based products
being introduced within our Chemical segment and we are realizing
success in driving new innovation-based HSBC product offerings for
our customers, notably in North
America," remarked Fogarty.
"Sustainability is at the core of our values, strategy and
products. Kraton's pine chemical product offering is a real
and cost competitive alternative to hydrocarbons while delivering a
sustainable solution to our customers. Likewise, our polymer
portfolio provides compelling alternatives to non-recyclable
materials in various industrial applications. Our goal and
focus is to continue to deliver innovation led growth and
demonstrate to our customers the value of our sustainable product
offerings. Despite significant societal demand for our industry to
advance renewable solutions, we continue to see our industry
defaulting to hydrocarbon-based and non-recyclable solutions. It is
therefore incumbent on us, as a leading supplier of sustainable
solutions, to continue advancing our renewable offerings in terms
of both cost and quality. In doing so, we believe the ultimate
consumer will value Kraton's sustainable offerings," said
Fogarty.
Polymer Segment
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(In thousands,
except percentages)
|
Performance
Products
|
$
|
141,267
|
|
|
$
|
179,684
|
|
|
$
|
422,539
|
|
|
$
|
506,151
|
|
Specialty
Polymers
|
$
|
70,986
|
|
|
$
|
99,349
|
|
|
256,483
|
|
|
311,657
|
|
Cariflex
|
$
|
49,241
|
|
|
$
|
41,818
|
|
|
141,117
|
|
|
130,319
|
|
Other
|
99
|
|
|
114
|
|
|
370
|
|
|
59
|
|
Polymer Segment
Revenue
|
$
|
261,593
|
|
|
$
|
320,965
|
|
|
$
|
820,509
|
|
|
$
|
948,186
|
|
|
|
|
|
|
|
|
|
Operating
income
|
$
|
18,269
|
|
|
$
|
44,899
|
|
|
$
|
62,498
|
|
|
$
|
137,930
|
|
Adjusted EBITDA
(non-GAAP)(1)
|
$
|
50,304
|
|
|
$
|
57,008
|
|
|
$
|
158,635
|
|
|
$
|
170,469
|
|
Adjusted EBITDA
margin (non-GAAP)(2)
|
19.2
|
%
|
|
17.8
|
%
|
|
19.3
|
%
|
|
18.0
|
%
|
__________________________________________________
|
(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.
|
(2)
|
Defined as Adjusted
EBITDA as a percentage of revenue.
|
Q3 2019 VERSUS Q3 2018 RESULTS
Revenue for the Polymer segment was $261.6 million for the three months ended
September 30, 2019 compared to
$321.0 million for the three months
ended September 30, 2018. The
decrease was driven by lower sales volumes and lower average sales
prices resulting from lower raw material costs. Sales volumes of
75.8 kilotons for the three months ended September 30, 2019 declined 10.0% compared to the
three months ended September 30, 2018
sales volumes of 84.2 kilotons. Performance Products sales volumes
decreased 9.8% due to weaker paving and roofing demand. Specialty
Polymers sales volumes decreased 18.9% primarily from a previously
announced inventory management program by a significant lubricant
additives customer and lower demand in Asia and Europe, partially offset by higher
innovation-led volume in North
America. Cariflex sales volumes increased 18.9% primarily
from higher latex sales into surgical glove applications. The
negative effect from changes in currency exchange rates between the
periods was $3.3 million.
For the three months ended September 30,
2019, the Polymer segment generated Adjusted EBITDA
(non-GAAP) of $50.3 million compared
to $57.0 million for the three months
ended September 30, 2018. The decline
in Adjusted EBITDA was due to lower sales volumes as noted in the
aforementioned weaker paving and roofing season, a previously
announced inventory management program by a significant lubricant
additives customer, coupled with lower demand in Asia and Europe, partially offset by higher
innovation-led volume in North
America. This was partially offset by higher sales volumes
in the Cariflex product group. The effect from changes in currency
exchange rates between the periods was immaterial. See a
reconciliation of GAAP operating income to non-GAAP Adjusted EBITDA
below.
Chemical Segment
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
(In thousands,
except percentages)
|
Adhesives
|
$
|
64,391
|
|
|
$
|
73,781
|
|
|
$
|
198,785
|
|
|
$
|
220,907
|
|
Performance
Chemicals
|
105,367
|
|
|
118,193
|
|
|
337,766
|
|
|
355,947
|
|
Tires
|
12,870
|
|
|
10,166
|
|
|
38,852
|
|
|
38,852
|
|
Chemical Segment
Revenue
|
$
|
182,628
|
|
|
$
|
202,140
|
|
|
$
|
575,403
|
|
|
$
|
615,706
|
|
|
|
|
|
|
|
|
|
Operating
income
|
$
|
19,834
|
|
|
$
|
27,495
|
|
|
$
|
66,908
|
|
|
$
|
79,406
|
|
Adjusted EBITDA
(non-GAAP)(1)
|
$
|
29,752
|
|
|
$
|
41,643
|
|
|
$
|
112,913
|
|
|
$
|
122,431
|
|
Adjusted EBITDA
margin (non-GAAP)(2)(3)
|
16.3
|
%
|
|
20.6
|
%
|
|
19.6
|
%
|
|
19.9
|
%
|
__________________________________________________
|
(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.
|
(2)
|
Defined as Adjusted
EBITDA as a percentage of revenue.
|
(3)
|
For the nine months
ended September 30, 2019, Adjusted EBITDA margin adjusted for lost
revenues from Hurricane Michael would be 19.3%.
|
Q3 2019 VERSUS Q3 2018 RESULTS
Revenue for the Chemical segment was $182.6 million for the three months ended
September 30, 2019 compared to
$202.1 million for the three months
ended September 30, 2018. The
decrease in revenue was attributable to lower sales volumes and
pricing in rosin end markets such as adhesives and road marking.
These results were related to softness in gum rosin Asian pricing,
which declined by 20.0% in the third quarter of 2019. Sales volumes
were 93.1 kilotons for the three months ended September 30, 2019, a decrease of 12.8 kilotons
or 12.1%, due to a decline in the rosin and upgrade derivatives is
attributable to weak demand globally for adhesives and road
markings applications. Price remained under pressure from
competitive alternative pricing in gum rosin and hydrocarbons. In
addition, sales in the TOFA and derivatives were negatively
impacted by weakness in mining, oilfield demand, and automotive
applications. The revenue decline resulted in a 15.0% and 7.5%
decrease in Performance Chemicals and Adhesives sales volumes,
respectively, partially offset by a 2.4% increase in Tires sales
volumes. The negative effect from changes in currency exchange
rates between the periods was $3.8
million.
For the three months ended September 30,
2019, the Chemical segment generated $29.8 million of Adjusted EBITDA (non-GAAP)
compared to $41.6 million for the
three months ended September 30,
2018. The decrease in Adjusted EBITDA was primarily driven
by lower sales volumes and rosin ester pricing, and to a lesser
degree higher average raw material costs. The negative effect from
changes in currency exchange rates between the periods was
$0.1 million. See a reconciliation of
GAAP operating income to non-GAAP Adjusted EBITDA below.
CASH FLOW AND CAPITAL STRUCTURE
During the nine months ended September
30, 2019, consolidated net debt (total debt less cash)
decreased by $59.1 million compared
to December 31, 2018.
Summary of principal amounts for indebtedness and a
reconciliation of Kraton debt to Kraton net debt (non-GAAP) and
consolidated net debt (non-GAAP):
|
September 30,
2019
|
|
June 30,
2019
|
|
December 31,
2018
|
|
(In
thousands)
|
Kraton
debt
|
$
|
1,401,027
|
|
|
$
|
1,456,625
|
|
|
$
|
1,441,614
|
|
KFPC(1)(2)
loans
|
104,328
|
|
|
109,931
|
|
|
125,501
|
|
Consolidated
debt
|
1,505,355
|
|
|
1,566,556
|
|
|
1,567,115
|
|
|
|
|
|
|
|
Kraton
cash
|
77,047
|
|
|
58,650
|
|
|
79,251
|
|
KFPC(1)
cash
|
6,213
|
|
|
5,204
|
|
|
6,640
|
|
Consolidated
cash
|
83,260
|
|
|
63,854
|
|
|
85,891
|
|
|
|
|
|
|
|
Consolidated net
debt
|
$
|
1,422,095
|
|
|
$
|
1,502,702
|
|
|
$
|
1,481,224
|
|
|
|
|
|
|
|
Effect of foreign
currency on consolidated net debt
|
32,331
|
|
|
3,800
|
|
|
|
Consolidated net debt
excluding effect of foreign currency
|
$
|
1,454,426
|
|
|
$
|
1,506,502
|
|
|
|
Effect of share
buyback program
|
(10,000)
|
|
|
(5,000)
|
|
|
|
Consolidated net debt
excluding effect of foreign currency and share buyback
program
|
$
|
1,444,426
|
|
|
$
|
1,501,502
|
|
|
|
__________________________________________________
|
(1)
|
Kraton Formosa
Polymers Corporation (KFPC) joint venture, located in Mailiao,
Taiwan, which we own a 50% stake in and consolidate within our
financial statements.
|
(2)
|
KFPC executed
revolving credit facilities to provide funding for working capital
requirements and/or general corporate purposes. These are in
addition to the 5.5 billion NTD KFPC Loan Agreement.
|
OUTLOOK
Market fundamentals including demand in China and broader Asia, as well as in Europe and North
America, weakened notably as the third quarter of 2019
progressed. Based upon our expectation that market conditions will
not improve for the balance of the year, we now expect full year
2019 Adjusted EBITDA to be 10-15% below the lower end of our
previous guidance range of $370 to
$390 million.
On a full-year basis we now expect to reduce consolidated net
debt by $120 to $140 million, excluding the effect of foreign
currency and activity under our share repurchase authorization.
With regard to the strategic review of our
Cariflex™ business, the process is still ongoing, and
we are targeting completion of the review process within the next
few weeks.
We have not reconciled Adjusted EBITDA guidance to net income
(loss) because we do not provide guidance for net income (loss) or
for items that we do not consider indicative of our on-going
performance, including, but not limited to, transaction costs and
production downtime, as certain of these items are out of our
control and/or cannot be reasonably predicted. We have not
reconciled consolidated net debt guidance to debt due to high
variability and difficulty in making accurate forecasts and
projections that are impacted by future decisions and actions. The
actual amount of such reconciling items will have a significant
impact if they were included in our Adjusted EBITDA and net debt.
Accordingly, a reconciliation of the non-GAAP financial measure
guidance to the corresponding U.S. GAAP measures is not available
without unreasonable effort.
USE OF NON-GAAP FINANCIAL MEASURES
This press release includes the use of both GAAP and non-GAAP
financial measures. The non-GAAP financial measures are EBITDA,
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Diluted Earnings
per Share and, Consolidated Net Debt. Tables included in this
earnings release reconcile each of these non-GAAP financial
measures with the most directly comparable U.S. GAAP financial
measure. For additional information on the impact of the spread
between the first-in, first-out ("FIFO") basis of accounting and
estimated current replacement cost ("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, 2018.
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
and attainment of net debt reduction, 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 U.S. GAAP in
the United States.
EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin: For
our consolidated results, EBITDA represents net income (loss)
before interest, taxes, depreciation, and amortization. For each
reporting segment, EBITDA represents operating income before
depreciation and amortization, and earnings of unconsolidated joint
ventures. Among other limitations EBITDA does not: reflect the
significant interest expense on our debt or reflect the significant
depreciation and amortization expense associated with our
long-lived assets; and 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 our 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. 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, 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. We define Adjusted EBITDA Margin as Adjusted EBITDA as a
percentage of revenue (for each reporting segment or on a
consolidated basis, if applicable). 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.
Adjusted Diluted Earnings Per Share: We prepare Adjusted
Diluted Earnings (Loss) per Share by eliminating from Diluted
Earnings (Loss) per Share the impact of a number of non-recurring
items we do not consider indicative of our on-going performance,
including the spread between FIFO and ECRC.
Consolidated Net Debt: We define consolidated net debt as
total consolidated debt (including debt of KFPC) less consolidated
cash and cash equivalents. Management uses consolidated net debt to
determine our outstanding debt obligations that would not readily
be satisfied by its cash and cash equivalents on hand. Management
believes that using consolidated net debt is useful to investors in
determining our leverage since we could choose to use cash and cash
equivalents to retire debt. Consolidated Net Debt, as adjusted for
foreign exchange impact accounts for the FX effect on the Euro
Tranche of our Term Loan.
CONFERENCE CALL AND WEBCAST INFORMATION
Kraton has scheduled a conference call on Thursday,
October 24, 2019 at 9:00 a.m. (Eastern
Time) to discuss third quarter 2019 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 24, 2019 through
1:59 a.m. (Eastern Time) on
November 25, 2019. 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 800-480-3547 (toll free) or 203-369-1551
(toll).
ABOUT KRATON CORPORATION
Kraton Corporation (NYSE: KRA) is a leading global specialty
chemicals company that manufactures styrenic block copolymers,
specialty polymers, and high-value performance products primarily
derived from pine wood pulping co-products. 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 and roofing
applications. As the largest global provider in the pine chemicals
industry, the company's pine-based specialty products are sold into
adhesives and tire markets, and it produces and sells a broad range
of performance chemicals into markets that include fuel additives,
oilfield chemicals, coatings, roads, construction, metalworking
fluids and lubricants, inks, and mining. Kraton offers its products
to a diverse customer base in numerous countries worldwide.
Kraton, the Kraton logo and design, and Cariflex are all
trademarks of Kraton Polymers LLC or its affiliates.
FORWARD LOOKING STATEMENTS
Some of the statements in this press release contain
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. 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," "target," "estimates,"
"expects," "projects," "may," "intends," "plans", "on track", or
"anticipates," or by discussions of strategy, plans or intentions,
including, but not limited to, our expectations with respect to
full-year 2019 Adjusted EBITDA results, 2019 consolidated net debt
reduction, the impact to us of global market conditions, and the
timeline of our strategic review of our Cariflex business.
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, assumptions, 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 II, 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: Kraton's ability to repay its indebtedness and risk
associated with incurring additional indebtedness; Kraton's
reliance on third parties for the provision of significant
operating and other services; conditions in, and risk associated
with operating in, the global economy and capital markets;
fluctuations in raw material costs; natural disasters and weather
conditions; limitations in the availability of raw materials;
competition in Kraton's end-use markets; fluctuations in global
tariffs and logistics costs, and other factors of which we are
currently unaware or deem immaterial. In addition, to the extent
any inconsistency or conflict exists between the information
included in this report and the information included in our prior
reports and other filings with the SEC, the information contained
in this report updates and supersede such information. 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 assume no obligation to update such
information in light of new information or future events.
KRATON
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Unaudited)
|
(In thousands,
except per share data)
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenue
|
$
|
444,221
|
|
|
$
|
523,105
|
|
|
$
|
1,395,912
|
|
|
$
|
1,563,892
|
|
Cost of goods
sold
|
342,942
|
|
|
368,844
|
|
|
1,058,429
|
|
|
1,091,844
|
|
Gross
profit
|
101,279
|
|
|
154,261
|
|
|
337,483
|
|
|
472,048
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Research and
development
|
10,367
|
|
|
10,597
|
|
|
31,091
|
|
|
31,868
|
|
Selling, general, and
administrative
|
32,272
|
|
|
36,150
|
|
|
111,623
|
|
|
116,848
|
|
Depreciation and
amortization
|
34,804
|
|
|
35,117
|
|
|
98,230
|
|
|
105,633
|
|
Gain on insurance
proceeds
|
(14,250)
|
|
|
—
|
|
|
(32,850)
|
|
|
—
|
|
(Gain) loss on
disposal of fixed assets
|
(17)
|
|
|
3
|
|
|
(17)
|
|
|
363
|
|
Operating
income
|
38,103
|
|
|
72,394
|
|
|
129,406
|
|
|
217,336
|
|
Other income
(expense)
|
4,235
|
|
|
(740)
|
|
|
3,559
|
|
|
(2,960)
|
|
Gain (loss) on
extinguishment of debt
|
—
|
|
|
—
|
|
|
210
|
|
|
(79,921)
|
|
Earnings of
unconsolidated joint venture
|
102
|
|
|
100
|
|
|
363
|
|
|
357
|
|
Interest expense,
net
|
(19,214)
|
|
|
(20,143)
|
|
|
(57,494)
|
|
|
(74,835)
|
|
Income before income
taxes
|
23,226
|
|
|
51,611
|
|
|
76,044
|
|
|
59,977
|
|
Income tax benefit
(expense)
|
(2,311)
|
|
|
(8,334)
|
|
|
1,881
|
|
|
(8,743)
|
|
Consolidated net
income
|
20,915
|
|
|
43,277
|
|
|
77,925
|
|
|
51,234
|
|
Net income
attributable to noncontrolling interest
|
(2,222)
|
|
|
(928)
|
|
|
(5,356)
|
|
|
(1,743)
|
|
Net income
attributable to Kraton
|
$
|
18,693
|
|
|
$
|
42,349
|
|
|
$
|
72,569
|
|
|
$
|
49,491
|
|
Earnings per common
share:
|
|
|
|
|
|
|
|
Basic
|
$
|
0.59
|
|
|
$
|
1.33
|
|
|
$
|
2.28
|
|
|
$
|
1.55
|
|
Diluted
|
$
|
0.58
|
|
|
$
|
1.31
|
|
|
$
|
2.26
|
|
|
$
|
1.53
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
31,486
|
|
|
31,459
|
|
|
31,603
|
|
|
31,381
|
|
Diluted
|
31,823
|
|
|
31,834
|
|
|
31,914
|
|
|
31,810
|
|
KRATON
CORPORATION
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(In thousands,
except par value)
|
|
|
September 30,
2019
|
|
December 31,
2018
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
83,260
|
|
|
$
|
85,891
|
|
Receivables, net of
allowances of $614 and $784
|
212,387
|
|
|
198,046
|
|
Inventories of
products, net
|
407,317
|
|
|
410,640
|
|
Inventories of
materials and supplies, net
|
32,119
|
|
|
30,843
|
|
Prepaid
expenses
|
12,253
|
|
|
10,156
|
|
Other current
assets
|
23,651
|
|
|
29,980
|
|
Total current
assets
|
770,987
|
|
|
765,556
|
|
Property, plant, and
equipment, less accumulated depreciation of $646,242 and
$597,785
|
932,649
|
|
|
941,476
|
|
Goodwill
|
771,739
|
|
|
772,886
|
|
Intangible assets,
less accumulated amortization of $279,639 and $246,648
|
335,238
|
|
|
362,038
|
|
Investment in
unconsolidated joint venture
|
11,577
|
|
|
12,070
|
|
Debt issuance
costs
|
293
|
|
|
1,170
|
|
Deferred income
taxes
|
5,955
|
|
|
10,434
|
|
Long-term operating
lease assets, net
|
69,925
|
|
|
—
|
|
Other long-term
assets
|
26,143
|
|
|
29,074
|
|
Total
assets
|
$
|
2,924,506
|
|
|
$
|
2,894,704
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Current portion of
long-term debt
|
$
|
56,784
|
|
|
$
|
45,321
|
|
Accounts
payable-trade
|
161,848
|
|
|
182,153
|
|
Other payables and
accruals
|
104,597
|
|
|
100,695
|
|
Due to related
party
|
17,564
|
|
|
20,918
|
|
Total current
liabilities
|
340,793
|
|
|
349,087
|
|
Long-term debt, net
of current portion
|
1,417,794
|
|
|
1,487,298
|
|
Deferred income
taxes
|
132,496
|
|
|
127,827
|
|
Long-term operating
lease liabilities
|
52,594
|
|
|
—
|
|
Other long-term
liabilities
|
161,063
|
|
|
182,893
|
|
Total
liabilities
|
2,104,740
|
|
|
2,147,105
|
|
|
|
|
|
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; 31,707 shares issued and
outstanding at September 30, 2019; 31,917 shares issued and
outstanding at December 31, 2018
|
317
|
|
|
319
|
|
Additional paid in
capital
|
390,207
|
|
|
385,921
|
|
Retained
earnings
|
485,955
|
|
|
420,597
|
|
Accumulated other
comprehensive loss
|
(94,209)
|
|
|
(91,699)
|
|
Total Kraton
stockholders' equity
|
782,270
|
|
|
715,138
|
|
Noncontrolling
interest
|
37,496
|
|
|
32,461
|
|
Total
equity
|
819,766
|
|
|
747,599
|
|
Total liabilities and
equity
|
$
|
2,924,506
|
|
|
$
|
2,894,704
|
|
KRATON
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
(In
thousands)
|
|
|
Nine Months Ended
September 30,
|
|
2019
|
|
2018
|
CASH FLOWS FROM
OPERATING ACTIVITIES
|
|
|
|
Consolidated net
income
|
$
|
77,925
|
|
|
$
|
51,234
|
|
Adjustments to
reconcile consolidated net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
98,230
|
|
|
105,633
|
|
Lease
amortization
|
17,164
|
|
|
—
|
|
Amortization of debt
original issue discount
|
808
|
|
|
1,938
|
|
Amortization of debt
issuance costs
|
3,501
|
|
|
4,571
|
|
(Gain) loss on
disposal of property, plant, and equipment
|
(17)
|
|
|
363
|
|
(Gain) loss on
extinguishment of debt
|
(210)
|
|
|
79,921
|
|
Earnings from
unconsolidated joint venture, net of dividends received
|
80
|
|
|
188
|
|
Deferred income tax
provision
|
8,604
|
|
|
3,581
|
|
Release of uncertain
tax positions
|
(17,739)
|
|
|
—
|
|
Gain on insurance
proceeds of capital expenditures
|
(3,948)
|
|
|
—
|
|
Share-based
compensation
|
8,158
|
|
|
7,620
|
|
Decrease
(increase) in:
|
|
|
|
Accounts
receivable
|
(19,682)
|
|
|
(63,068)
|
|
Inventories of
products, materials, and supplies
|
(5,550)
|
|
|
(47,393)
|
|
Other
assets
|
4,295
|
|
|
8,065
|
|
Increase
(decrease) in:
|
|
|
|
Accounts
payable-trade
|
(16,187)
|
|
|
5,869
|
|
Other payables and
accruals
|
(20,715)
|
|
|
(19,057)
|
|
Other long-term
liabilities
|
(12,317)
|
|
|
(2,584)
|
|
Due to related
party
|
(3,634)
|
|
|
(292)
|
|
Net cash provided by
operating activities
|
118,766
|
|
|
136,589
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES
|
|
|
|
Kraton purchase of
property, plant, and equipment
|
(76,298)
|
|
|
(66,047)
|
|
KFPC purchase of
property, plant, and equipment
|
(319)
|
|
|
(1,592)
|
|
Purchase of software
and other intangibles
|
(7,274)
|
|
|
(4,630)
|
|
Gain on insurance
proceeds
|
3,948
|
|
|
—
|
|
Net cash used in
investing activities
|
(79,943)
|
|
|
(72,269)
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES
|
|
|
|
Proceeds from
debt
|
57,941
|
|
|
731,540
|
|
Repayments of
debt
|
(67,251)
|
|
|
(796,863)
|
|
KFPC proceeds from
debt
|
33,262
|
|
|
24,918
|
|
KFPC repayments of
debt
|
(53,147)
|
|
|
(48,084)
|
|
Capital lease
payments
|
(126)
|
|
|
(785)
|
|
Purchase of treasury
stock
|
(12,727)
|
|
|
(6,051)
|
|
Proceeds from the
exercise of stock options
|
1,642
|
|
|
3,133
|
|
Settlement of
interest rate swap
|
—
|
|
|
2,584
|
|
Debt issuance
costs
|
—
|
|
|
(11,113)
|
|
Net cash used in
financing activities
|
(40,406)
|
|
|
(100,721)
|
|
Effect of exchange
rate differences on cash
|
(1,048)
|
|
|
(1,143)
|
|
Net decrease in cash
and cash equivalents
|
(2,631)
|
|
|
(37,544)
|
|
Cash and cash
equivalents, beginning of period
|
85,891
|
|
|
89,052
|
|
Cash and cash
equivalents, end of period
|
$
|
83,260
|
|
|
$
|
51,508
|
|
KRATON
CORPORATION
|
RECONCILIATION OF
NET INCOME (LOSS) ATTRIBUTABLE TO KRATON AND OPERATING INCOME TO
NON-GAAP FINANCIAL MEASURES
|
(Unaudited)
|
(In
thousands)
|
|
|
Three Months Ended
September 30, 2019
|
|
Three Months Ended
September 30, 2018
|
|
Polymer
|
|
Chemical
|
|
Total
|
|
Polymer
|
|
Chemical
|
|
Total
|
Net income
attributable to Kraton
|
|
|
|
|
18,693
|
|
|
|
|
|
|
42,349
|
|
Net income
attributable to noncontrolling interest
|
|
|
|
|
2,222
|
|
|
|
|
|
|
928
|
|
Consolidated net
income
|
|
|
|
|
20,915
|
|
|
|
|
|
|
43,277
|
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
benefit
|
|
|
|
|
2,311
|
|
|
|
|
|
|
8,334
|
|
Interest expense,
net
|
|
|
|
|
19,214
|
|
|
|
|
|
|
20,143
|
|
Earnings of
unconsolidated joint venture
|
|
|
|
|
(102)
|
|
|
|
|
|
|
(100)
|
|
Other income
(expense)
|
|
|
|
|
(4,235)
|
|
|
|
|
|
|
740
|
|
Operating
income
|
18,269
|
|
|
19,834
|
|
|
38,103
|
|
|
44,899
|
|
|
27,495
|
|
|
72,394
|
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
14,982
|
|
|
19,822
|
|
|
34,804
|
|
|
17,554
|
|
|
17,563
|
|
|
35,117
|
|
Other income
(expense)
|
(502)
|
|
|
4,737
|
|
|
4,235
|
|
|
(958)
|
|
|
218
|
|
|
(740)
|
|
Earnings of
unconsolidated joint venture
|
102
|
|
|
—
|
|
|
102
|
|
|
100
|
|
|
—
|
|
|
100
|
|
EBITDA (a)
|
32,851
|
|
|
44,393
|
|
|
77,244
|
|
|
61,595
|
|
|
45,276
|
|
|
106,871
|
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
|
|
|
Transaction,
acquisition related costs, restructuring, and other costs
(b)
|
1,672
|
|
|
244
|
|
|
1,916
|
|
|
689
|
|
|
(177)
|
|
|
512
|
|
Hurricane related
costs (c)
|
—
|
|
|
2,220
|
|
|
2,220
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Hurricane
reimbursements (d)
|
—
|
|
|
(13,841)
|
|
|
(13,841)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
KFPC startup costs
(e)
|
3,019
|
|
|
—
|
|
|
3,019
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Sale of emissions
credits (f)
|
—
|
|
|
(4,601)
|
|
|
(4,601)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Non-cash compensation
expense
|
2,659
|
|
|
—
|
|
|
2,659
|
|
|
2,495
|
|
|
—
|
|
|
2,495
|
|
Spread between FIFO
and ECRC
|
10,103
|
|
|
1,337
|
|
|
11,440
|
|
|
(7,771)
|
|
|
(3,456)
|
|
|
(11,227)
|
|
Adjusted
EBITDA
|
50,304
|
|
|
29,752
|
|
|
80,056
|
|
|
57,008
|
|
|
41,643
|
|
|
98,651
|
|
__________________________________________________
|
(a)
|
We finalized our
claim associated with Hurricane Michael during the third quarter of
2019. We received proceeds of $14.3 million, which is included in
EBITDA as a gain on insurance.
|
(b)
|
Charges related to
the evaluation of acquisition transactions, severance expenses, and
other restructuring related charges.
|
(c)
|
Incremental costs
related to Hurricane Michael, which are recorded in cost of goods
sold. As we finalized our claim for reimbursement of incremental
costs incurred, we have identified an additional $1.4 million of
costs incurred during the nine months ended September 30, 2019.
Additionally, we incurred direct costs due to the impacts of
Hurricane Dorian of $0.8 million which are recorded in cost of
goods sold. The Hurricane Dorian direct costs are limited to the
three months ended September 30, 2019 and will not continue into
the fourth quarter of 2019.
|
(d)
|
Reimbursement of
incremental costs related to Hurricane Michael, which is recorded
in gain on insurance proceeds.
|
(e)
|
Startup costs related
to the joint venture company, KFPC.
|
(f)
|
We recorded a gain of
$4.6 million in other income (expense) related to the sale of
emissions credits accumulated by our Swedish Chemical legal
entity.
|
KRATON
CORPORATION
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KRATON AND
OPERATING INCOME TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
(In thousands)
|
|
|
Nine Months Ended
September 30, 2019
|
|
Nine Months Ended
September 30, 2018
|
|
Polymer
|
|
Chemical
|
|
Total
|
|
Polymer
|
|
Chemical
|
|
Total
|
Net income
attributable to Kraton
|
|
|
|
|
$
|
72,569
|
|
|
|
|
|
|
$
|
49,491
|
|
Net income
attributable to noncontrolling interest
|
|
|
|
|
5,356
|
|
|
|
|
|
|
1,743
|
|
Consolidated net
income
|
|
|
|
|
77,925
|
|
|
|
|
|
|
51,234
|
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit)
expense
|
|
|
|
|
(1,881)
|
|
|
|
|
|
|
8,743
|
|
Interest expense,
net
|
|
|
|
|
57,494
|
|
|
|
|
|
|
74,835
|
|
Earnings of
unconsolidated joint venture
|
|
|
|
|
(363)
|
|
|
|
|
|
|
(357)
|
|
(Gain) loss on
extinguishment of debt
|
|
|
|
|
(210)
|
|
|
|
|
|
|
79,921
|
|
Other income
(expense)
|
|
|
|
|
(3,559)
|
|
|
|
|
|
|
2,960
|
|
Operating
income
|
$
|
62,498
|
|
|
$
|
66,908
|
|
|
$
|
129,406
|
|
|
$
|
137,930
|
|
|
$
|
79,406
|
|
|
$
|
217,336
|
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
43,296
|
|
|
54,934
|
|
|
98,230
|
|
|
52,914
|
|
|
52,719
|
|
|
105,633
|
|
Other income
(expense)
|
(1,547)
|
|
|
5,106
|
|
|
3,559
|
|
|
(3,600)
|
|
|
640
|
|
|
(2,960)
|
|
Gain (loss) on
extinguishment of debt
|
210
|
|
|
—
|
|
|
210
|
|
|
(79,921)
|
|
|
—
|
|
|
(79,921)
|
|
Earnings of
unconsolidated joint venture
|
363
|
|
|
—
|
|
|
363
|
|
|
357
|
|
|
—
|
|
|
357
|
|
EBITDA (a)
|
104,820
|
|
|
126,948
|
|
|
231,768
|
|
|
107,680
|
|
|
132,765
|
|
|
240,445
|
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
|
|
|
Transaction,
acquisition related costs, restructuring, and other costs
(b)
|
4,781
|
|
|
808
|
|
|
5,589
|
|
|
2,062
|
|
|
(963)
|
|
|
1,099
|
|
(Gain) loss on
extinguishment of debt
|
(210)
|
|
|
—
|
|
|
(210)
|
|
|
79,921
|
|
|
—
|
|
|
79,921
|
|
Hurricane related
costs (c)
|
—
|
|
|
15,025
|
|
|
15,025
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Hurricane
reimbursements (d)
|
—
|
|
|
(26,561)
|
|
|
(26,561)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
KFPC startup costs
(e)
|
3,019
|
|
|
—
|
|
|
3,019
|
|
|
897
|
|
|
—
|
|
|
897
|
|
Sale of emissions
credits (f)
|
—
|
|
|
(4,601)
|
|
|
(4,601)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Non-cash compensation
expense
|
8,158
|
|
|
—
|
|
|
8,158
|
|
|
7,620
|
|
|
—
|
|
|
7,620
|
|
Spread between FIFO
and ECRC
|
38,067
|
|
|
1,294
|
|
|
39,361
|
|
|
(27,711)
|
|
|
(9,371)
|
|
|
(37,082)
|
|
Adjusted
EBITDA
|
$
|
158,635
|
|
|
$
|
112,913
|
|
|
$
|
271,548
|
|
|
$
|
170,469
|
|
|
$
|
122,431
|
|
|
$
|
292,900
|
|
__________________________________________________
|
(a)
|
Included in EBITDA is
a $32.9 million gain on insurance, fully offsetting the lost margin
in the first quarter of 2019, and reimbursement for a portion of
the direct costs we have incurred to date related to Hurricane
Michael.
|
(b)
|
Charges related to
the evaluation of acquisition transactions, severance expenses, and
other restructuring related charges.
|
(c)
|
Incremental costs
related to Hurricane Michael, which are recorded in cost of goods
sold. As we finalized our claim for reimbursement of incremental
costs incurred, we have identified an additional $14.2 million of
costs incurred during the nine months ended September 30, 2019.
Additionally, we incurred direct costs due to the impacts of
Hurricane Dorian of $0.8 million which are recorded in cost of
goods sold. The Hurricane Dorian direct costs are limited to the
three months ended September 30, 2019 and will not continue into
the fourth quarter of 2019.
|
(d)
|
Reimbursement of
incremental costs related to Hurricane Michael, which is recorded
in gain on insurance proceeds.
|
(e)
|
Startup costs related
to the joint venture company, KFPC.
|
(f)
|
We recorded a gain of
$4.6 million in other income (expense) related to the sale of
emissions credits accumulated by our Swedish Chemical legal
entity.
|
KRATON
CORPORATION
|
RECONCILIATION OF
DILUTED EARNINGS (LOSS) PER SHARE TO ADJUSTED DILUTED EARNINGS PER
SHARE
|
(Unaudited)
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Diluted Earnings Per
Share
|
$
|
0.58
|
|
|
$
|
1.31
|
|
|
$
|
2.26
|
|
|
$
|
1.53
|
|
Transaction,
acquisition related costs, restructuring, and other costs
(a)
|
0.04
|
|
|
0.02
|
|
|
0.13
|
|
|
0.03
|
|
(Gain) loss on
extinguishment of debt
|
—
|
|
|
—
|
|
|
(0.01)
|
|
|
1.89
|
|
Hurricane related
costs (b)
|
0.15
|
|
|
—
|
|
|
0.55
|
|
|
—
|
|
Hurricane
reimbursements (c)
|
(0.44)
|
|
|
—
|
|
|
(0.83)
|
|
|
—
|
|
KFPC startup costs
(d)
|
0.04
|
|
|
—
|
|
|
0.04
|
|
|
0.01
|
|
Sale of emissions
credits (e)
|
(0.14)
|
|
|
—
|
|
|
(0.14)
|
|
|
—
|
|
Spread between FIFO
and ECRC
|
0.29
|
|
|
(0.31)
|
|
|
0.99
|
|
|
(0.97)
|
|
Adjusted Diluted
Earnings Per Share (non-GAAP)
|
$
|
0.52
|
|
|
$
|
1.02
|
|
|
$
|
2.99
|
|
|
$
|
2.49
|
|
__________________________________________________
|
(a)
|
Charges related to
the evaluation of acquisition transactions, severance expenses, and
other restructuring related charges.
|
(b)
|
Incremental costs
related to Hurricane Michael, which are recorded in cost of goods
sold. As we finalized our claim for reimbursement of incremental
costs incurred, we have identified an additional $14.2 million of
costs incurred during the nine months ended September 30, 2019.
Additionally, we incurred direct costs due to the impacts of
Hurricane Dorian of $0.8 million which are recorded in cost of
goods sold. The Hurricane Dorian direct costs are limited to the
three months ended September 30, 2019 and will not continue into
the fourth quarter of 2019.
|
(c)
|
Reimbursement of
incremental costs related to Hurricane Michael, which is recorded
in gain on insurance proceeds.
|
(d)
|
Startup costs related
to the joint venture company, KFPC.
|
(e)
|
We recorded a gain of
$4.6 million in other income (expense) related to the sale of
emissions credits accumulated by our Swedish Chemical legal
entity.
|
POLYMER SEGMENT
RECONCILIATION OF GROSS PROFIT TO ADJUSTED GROSS
PROFIT
|
(Unaudited)
|
(In
thousands)
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Gross
profit
|
$
|
58,478
|
|
|
$
|
90,205
|
|
|
$
|
191,230
|
|
|
$
|
281,482
|
|
|
|
|
|
|
|
|
|
Add
(deduct):
|
|
|
|
|
|
|
|
KFPC startup costs
(a)
|
3,019
|
|
|
—
|
|
|
3,019
|
|
|
—
|
|
Non-cash compensation
expense
|
159
|
|
|
149
|
|
|
489
|
|
|
457
|
|
Spread between FIFO
and ECRC
|
10,103
|
|
|
(7,771)
|
|
|
38,067
|
|
|
(27,711)
|
|
Adjusted gross profit
(non-GAAP)
|
$
|
71,759
|
|
|
$
|
82,583
|
|
|
$
|
232,805
|
|
|
$
|
254,228
|
|
|
|
|
|
|
|
|
|
Sales volume
(kilotons)
|
75.8
|
|
|
84.2
|
|
|
229.8
|
|
|
249.5
|
|
Adjusted gross profit
per ton
|
$
|
947
|
|
|
$
|
981
|
|
|
$
|
1,013
|
|
|
$
|
1,019
|
|
__________________________________________________
|
(a)
|
Startup costs related
to the joint venture company, KFPC.
|
For further information:
H. Gene Shiels
Director of Investor Relations
(218) 504-4886
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SOURCE Kraton Corporation