HOUSTON, July 29, 2020 /PRNewswire/ -- Kraton Corporation
(NYSE: KRA), a leading global sustainable producer
of specialty polymers and high-value biobased products derived
from pine wood pulping co-products, announces financial results for
the quarter ended June 30, 2020.
SECOND QUARTER 2020 SUMMARY
- Strong Adjusted EBITDA result despite weaker demand environment
associated with COVID-19.
- Second quarter consolidated net loss of $7.1 million, compared to consolidated net income
of $43.4 million in the second
quarter of 2019.
- Second quarter consolidated Adjusted EBITDA(1) of
$69.5 million, down 31.9% compared to
the second quarter of 2019.
- Polymer segment operating income of $16.8 million, down 52.1% compared to the second
quarter of 2019, and Adjusted EBITDA(1) of $53.8 million, down 10.5% compared to
$60.2 million in the second quarter
of 2019.
-
- Excluding the Cariflex business, which was sold in early 2020,
Adjusted EBITDA up 17.7% compared to the second quarter of
2019.
- Chemical segment operating loss of $3.9
million, down 118.6% compared to the second quarter of 2019,
and Adjusted EBITDA(1) of $15.7
million, down 62.5% compared to $41.9
million in the second quarter of 2019.
-
- Decrease reflects lower sales volume due to market conditions
and the impact of COVID-19, and lower average sales prices in the
Crude Sulfate Turpentine chain, and to a lesser extent, for Tall
Oil Rosin upgrades.
- Strong liquidity position at quarter end with $137.4 million in cash and $208.4 million of borrowing availability under
the $250 million ABL Facility.
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(In thousands,
except percentages and per share amounts)
|
Revenue
|
$
|
355,679
|
|
|
$
|
495,280
|
|
|
$
|
782,948
|
|
|
$
|
951,691
|
|
Polymer segment
operating income
|
$
|
16,762
|
|
|
$
|
34,979
|
|
|
$
|
34,687
|
|
|
$
|
44,229
|
|
Chemical segment
operating income (loss)
|
$
|
(3,931)
|
|
|
$
|
21,189
|
|
|
$
|
6,385
|
|
|
$
|
47,074
|
|
Consolidated net
income (loss)
|
$
|
(7,081)
|
|
|
$
|
43,398
|
|
|
$
|
201,939
|
|
|
$
|
57,010
|
|
Adjusted EBITDA
(non-GAAP)(1)
|
$
|
69,536
|
|
|
$
|
102,060
|
|
|
$
|
147,415
|
|
|
$
|
191,492
|
|
Adjusted EBITDA
margin (non-GAAP)(2)(3)
|
19.6
|
%
|
|
20.6
|
%
|
|
18.8
|
%
|
|
20.1
|
%
|
Diluted earnings
(loss) per share
|
$
|
(0.25)
|
|
|
$
|
1.28
|
|
|
$
|
6.20
|
|
|
$
|
1.67
|
|
Adjusted diluted
earnings per share (non-GAAP)(1)
|
$
|
0.30
|
|
|
$
|
1.58
|
|
|
$
|
0.57
|
|
|
$
|
2.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 three and six
months ended June 30, 2020, Adjusted EBITDA margin excluding the
Isoprene Rubber Supply Agreement ("IRSA") entered into in
connection with the sale of our Cariflex business would be 18.9%
and 18.3%, respectively. For the six months ended June 30, 2019,
Adjusted EBITDA margin adjusted for lost revenues from Hurricane
Michael would be 19.9%.
|
"As the global impact of COVID-19 intensified in the second
quarter, Kraton continued to prioritize the health and safety of
employees, customers, stakeholders and the communities in which we
operate. During the quarter, our manufacturing sites and labs
maintained normal operations under expanded safety protocols, with
the majority of our employees continuing to work remotely," said
Kevin M. Fogarty, Kraton's President
and Chief Executive Officer. "While the progression of COVID-19
adversely affected demand in many end markets, Kraton again
delivered strong financial results with Adjusted EBITDA of
$69.5 million, a testament to the
resiliency of our broad market diversification and sustainability
of our business model. During the second quarter we continued to
see stable demand in many end markets including medical, personal
care, adhesives and infrastructure," said Fogarty.
"While the current market environment creates significant
uncertainty for the balance of the year, Kraton's long-term
operating and strategic objectives remain unchanged and we remain
optimistic about our long-term prospects. We will continue to
execute on development of our innovation pipeline to drive organic
growth and position Kraton for the future. Recently introduced
innovations include our REvolutionTM family of
biobased, low-color Rosin Ester formulations in our Chemical
segment, and our CirKular+TM family of polymers designed
to address compatibilization challenges for plastic waste streams
and facilitate recyclability and expansion of the circular economy,
demonstrating our commitment to sustainability," said Fogarty.
"With respect to capital allocation, debt reduction remains a
primary focus, and we continue to maintain flexibility and rigor
around capital spending. In addition, we continue to drive
operational improvements throughout the company and remain on track
to deliver $20 million of run rate
cost savings by year-end."
Polymer segment Adjusted EBITDA for the second quarter of 2020
was $53.8 million, down $6.3 million or 10.5% compared to the second
quarter of 2019. Excluding the operating results for the
Cariflex business that was sold in early 2020, Adjusted EBITDA for
the second quarter of 2020 would have been 17.7% compared to the
second quarter of 2019. Second quarter 2020 results for the Polymer
segment reflect continued stability in margins and higher sales
volume, compared to the second quarter of 2019. Sales volume for
Performance Products was up 6.7% compared to the second quarter of
2019 on higher sales into paving and roofing applications and
stronger sales of SIS into adhesive applications. Specialty Polymer
sales volume decreased 14.7% due to lower sales into lubricant
additive applications and the impact of current market conditions,
including COVID-19, on sales into consumer durables, oilfield, and
automotive applications, partially offset by higher sales into
medical applications.
Second quarter 2020 Adjusted EBITDA for the Chemical segment was
$15.7 million, down $26.2 million or 62.5% compared to the second
quarter of 2019. The decrease in Adjusted EBITDA is associated with
lower sales volume reflecting current market conditions and the
adverse impact of COVID-19, lower average selling prices in our
Crude Sulfate Turpentine chain, and to a lesser extent, lower
pricing for Tall Oil Rosin upgrades, partially offset by lower raw
material costs and lower fixed costs, primarily due to timing.
Sales volume for Performance Chemicals was down 18.9% on lower
sales into oilfield applications and fuel additives, as well as the
impact of COVID-19 on other end markets. Sales volume in
Adhesives was down 7.9%, largely due to lower sales into road
marking applications. Sales volume for Tires was down 39.5%,
reflecting lower global automobile sales and the disruption in tire
production associated with COVID-19.
Polymer Segment
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(In thousands,
except percentages)
|
Performance
Products
|
$
|
118,339
|
|
|
$
|
143,181
|
|
|
$
|
237,099
|
|
|
$
|
281,273
|
|
Specialty
Polymers
|
76,305
|
|
|
103,487
|
|
|
154,222
|
|
|
185,497
|
|
Cariflex(1)
|
—
|
|
|
51,009
|
|
|
36,930
|
|
|
91,876
|
|
Isoprene
Rubber(1)
|
8,744
|
|
|
—
|
|
|
15,603
|
|
|
—
|
|
Other
|
464
|
|
|
184
|
|
|
378
|
|
|
270
|
|
Polymer Segment
Revenue
|
$
|
203,852
|
|
|
$
|
297,861
|
|
|
$
|
444,232
|
|
|
$
|
558,916
|
|
|
|
|
|
|
|
|
|
Operating
income
|
$
|
16,762
|
|
|
$
|
34,979
|
|
|
$
|
34,687
|
|
|
$
|
44,229
|
|
Operating income
margin
|
8.2
|
%
|
|
11.7
|
%
|
|
7.8
|
%
|
|
7.9
|
%
|
Adjusted EBITDA
(non-GAAP)(1)(2)
|
$
|
53,845
|
|
|
$
|
60,178
|
|
|
$
|
105,014
|
|
|
$
|
108,331
|
|
Adjusted EBITDA
margin (non-GAAP)(3)(4)
|
26.4
|
%
|
|
20.2
|
%
|
|
23.6
|
%
|
|
19.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Our Cariflex revenue
includes sales through March 6, 2020. We continued to sell Isoprene
Rubber to Daelim under an IRSA. Sales under the IRSA are transacted
at cost. Included in Adjusted EBITDA is the amortization of
non-cash deferred income of $3.9 million and $7.2 million for the
three and six months ended June 30, 2020, respectively, which
represents revenue deferred until the products are sold under the
IRSA.
|
(2)
|
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.
|
(3)
|
Defined as Adjusted
EBITDA as a percentage of revenue.
|
(4)
|
For the three and six
months ended June 30, 2020, Adjusted EBITDA margin excluding the
IRSA would be 25.6% and 22.8%, respectively.
|
Q2 2020 VERSUS Q2 2019 RESULTS
Revenue for the Polymer segment was $203.9 million for the three months ended
June 30, 2020 compared to
$297.9 million for the three months
ended June 30, 2019. The decrease was
driven by the divestiture of our Cariflex business in March 2020, lower average sales prices resulting
from lower raw material costs, partially offset by higher sales
volumes in our Performance Products product line.
Polymer Segment
Volume % Change
|
Three Months Ended
June 30, 2020
|
Performance
Products
|
6.7
|
%
|
Specialty
Polymers
|
(14.7)
|
%
|
Isoprene
Rubber
|
—
|
%
|
Subtotal
|
2.5
|
%
|
Cariflex
|
(100.0)
|
%
|
Total
|
(5.9)
|
%
|
Sales volumes of 75.5 kilotons for the three months ended
June 30, 2020 declined 5.9% compared
to the three months ended June 30,
2019, largely due to the aforementioned divestiture of our
Cariflex business. Performance Products sales volumes increased
6.7% due to stronger paving and roofing demand with improved
weather conditions and stronger sales of SIS into adhesives.
Specialty Polymers sales volumes decreased 14.7% primarily from
lower purchases by a significant lubricant additives customer and
weaker market fundamentals, including COVID-19, which negatively
impacted sales into consumer durables and oilfield applications,
primarily in North America, and
global automotive applications. These declines were partially
offset by sales into medical and other compound applications. The
IRSA provided $8.7 million of sales
revenue for the three months ended June 30,
2020. The negative effect from changes in currency exchange
rates between the periods was $3.3
million.
For the three months ended June 30,
2020, the Polymer segment generated Adjusted EBITDA
(non-GAAP) of $53.8 million compared
to $60.2 million for the three months
ended June 30, 2019. The decline in
Adjusted EBITDA was largely due to the divestiture of our Cariflex
business. However, on a comparative basis, excluding the operating
results of our Cariflex business, Adjusted EBITDA (non-GAAP) would
have been approximately $8.0 million
higher. The higher pro-forma Adjusted EBITDA (non-GAAP) is driven
by the factors described above. The positive effect from changes in
currency exchange rates between the periods was $1.3 million. See a reconciliation of GAAP
operating income to non-GAAP Adjusted EBITDA below.
Chemical Segment
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
(In thousands,
except percentages)
|
Adhesives
|
$
|
60,993
|
|
|
$
|
68,818
|
|
|
$
|
125,888
|
|
|
$
|
134,394
|
|
Performance
Chemicals
|
84,848
|
|
|
115,646
|
|
|
195,590
|
|
|
232,399
|
|
Tires
|
5,986
|
|
|
12,955
|
|
|
17,238
|
|
|
25,982
|
|
Chemical Segment
Revenue
|
$
|
151,827
|
|
|
$
|
197,419
|
|
|
$
|
338,716
|
|
|
$
|
392,775
|
|
|
|
|
|
|
|
|
|
Operating
income
|
$
|
(3,931)
|
|
|
$
|
21,189
|
|
|
$
|
6,385
|
|
|
$
|
47,074
|
|
Operating income
margin
|
(2.6)
|
%
|
|
10.7
|
%
|
|
1.9
|
%
|
|
12.0
|
%
|
Adjusted EBITDA
(non-GAAP)(1)(2)
|
$
|
15,691
|
|
|
$
|
41,882
|
|
|
$
|
42,401
|
|
|
$
|
83,161
|
|
Adjusted EBITDA
margin (non-GAAP)(2)(3)
|
10.3
|
%
|
|
21.2
|
%
|
|
12.5
|
%
|
|
21.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 six months
ended June 30, 2019, Adjusted EBITDA margin adjusted for lost
revenues from Hurricane Michael would be 20.7%.
|
Q2 2020 VERSUS Q2 2019 RESULTS
Revenue for the Chemical segment was $151.8 million for the three months ended
June 30, 2020 compared to
$197.4 million for the three months
ended June 30, 2019. The decrease in
revenue was attributable to lower average sales prices in terpene
refinery upgrades and rosin esters driven by a decrease in gum
turpentine price and excess hydrocarbon supply compared to 2019
levels, combined with lower sales volumes in TOFA refined products
and TOR upgrade products as a result of COVID-19, primarily in
North America.
Chemical Segment
Volume % Change
|
Three Months Ended
June 30, 2020
|
Adhesives
|
(7.9)
|
%
|
Performance
chemical
|
(18.9)
|
%
|
Tires(1)
|
(39.5)
|
%
|
Total
|
(16.1)
|
%
|
|
|
|
(1)
|
Tires volumes are
less than 5% of total Chemical segment volumes.
|
Sales volumes were 87.1 kilotons for the three months ended
June 30, 2020, a decrease of 16.7
kilotons or 16.1%, due to market fundamentals, including the
decline in oilfield demand, and the impacts of COVID-19, primarily
in North America, largely within
applications such as tires, automotive, and road markings, and
timing of purchases by significant customers. The negative effect
from changes in currency exchange rates between the periods was
$1.4 million.
For the three months ended June 30,
2020, the Chemical segment generated $15.7 million of Adjusted EBITDA (non-GAAP)
compared to $41.9 million for the
three months ended June 30, 2019. The
decrease in Adjusted EBITDA was primarily driven by lower sales
volumes and sales prices as a result of market fundamentals and the
impacts from COVID-19, primarily in North
America. The positive 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 six months ended June 30,
2020, we reduced Kraton indebtedness by approximately
$369.7 million, and
consolidated net debt excluding the effect of foreign currency
(non-GAAP) by $474.1 million.
Further, we had approximately $346.0 million of
available liquidity, comprised of $137.4 million of cash on hand and a
borrowing base of $208.4 million
largely undrawn on our ABL facility as of June 30, 2020.
On March 6, 2020, we completed the
sale of our Cariflex business to Daelim for gross proceeds of
$530.0 million, adjusted for
incremental working capital of $5.8
million, less contractual capital contributions of
$25.3 million. The transaction is
subject to a customary post-closing working capital adjustment and
a contractual capital contribution post-closing adjustment. Upon
closing, we recognized a gain of $175.2
million, and as part of the consideration received, entered
into the multi-year IRSA with Daelim. As the IRSA product sales are
at cost, we deferred approximately $180.6
million of revenue, of which $158.2
million and $22.4 million are
recorded within deferred income and other payables and accruals,
respectively, on the condensed consolidated balance sheet. The
deferred income will be amortized into revenue as a non-cash
transaction when the products are sold. In accordance with the
IRSA, we will supply Isoprene Rubber to Daelim for a period of five
years, with an optional extension for an additional five years.
We used the $510.5 million net
proceeds from the transaction principally for repayment of the full
outstanding balance of $290.0 million
under the U.S. dollar denominated tranche (the "USD Tranche") of
the Company's senior secured term loan facility (the "Term Loan
Facility") and repayment in the amount of €75.0 million, or
approximately $84.7 million, of
borrowings under the Euro dollar denominated tranche (the "Euro
Tranche") of the Term Loan Facility. We intend to use the remaining
proceeds in accordance with the terms of the Term Loan Facility to
make additional repayments of debt, invest in strategic assets of
the Company, and/or pay transaction costs.
Summary of principal amounts for indebtedness and a
reconciliation of Kraton debt to consolidated net debt (non-GAAP)
and consolidated net debt excluding the effect of foreign currency
(non-GAAP):
|
June 30,
2020
|
|
December 31,
2019
|
|
(In
thousands)
|
Kraton
debt
|
$
|
926,679
|
|
|
$
|
1,288,277
|
|
KFPC(1)(2)
loans
|
94,273
|
|
|
102,385
|
|
Consolidated
debt
|
1,020,952
|
|
|
1,390,662
|
|
|
|
|
|
Kraton
cash
|
132,935
|
|
|
24,631
|
|
KFPC(1)
cash
|
4,430
|
|
|
10,402
|
|
Consolidated
cash
|
137,365
|
|
|
35,033
|
|
|
|
|
|
Consolidated net
debt
|
$
|
883,587
|
|
|
$
|
1,355,629
|
|
|
|
|
|
Effect of foreign
currency on consolidated net debt
|
(2,071)
|
|
|
|
Consolidated net debt
excluding effect of foreign currency
|
$
|
881,516
|
|
|
|
|
|
|
|
|
|
(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
During the second quarter of 2020 the progression of COVID-19
had an adverse impact on market demand in various end markets,
particularly in North America, and
the outlook for the second half of 2020 remains uncertain. For the
second half of 2020, we expect that weaker demand related to
COVID-19, and other factors including lower planned plant operating
rates, the timing of turnarounds and maintenance activities as well
as the absence of the first half 2020 Cariflex contribution prior
to the first quarter 2020 sale, will have an adverse impact on our
financial results, compared to the first half of 2020.
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 used are
EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Diluted
Earnings (Loss) per Share, Consolidated Net Debt (including as
adjusted to exclude the effect of foreign currency), Adjusted Gross
Profit, and Adjusted Gross Profit Per Ton. 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 FIFO 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, 2019.
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 based
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 (loss) 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, which can vary from
the terms used herein. 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 Gross Profit and Adjusted Gross Profit Per
Ton: We define Adjusted Gross Profit Per Ton as Adjusted
Gross Profit divided by total sales volume (for each reporting
segment or on a consolidated basis, as applicable). We define
Adjusted Gross Profit as gross profit excluding certain charges and
expenses. Adjusted Gross Profit is limited because it often varies
substantially from gross profit calculated in accordance with U.S.
GAAP due to volatility in raw material prices.
Adjusted Diluted Earnings (Loss) 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 and Consolidated Net Debt excluding the
effect of foreign currency: 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. We also present Consolidated Net Debt,
as adjusted for foreign exchange impact accounts for the foreign
exchange effect on our foreign currency denominated debt
agreements.
CONFERENCE CALL AND WEBCAST INFORMATION
Kraton has scheduled a conference call on Thursday,
July 30, 2020 at 9:00 a.m. (Eastern
Time) to discuss second quarter 2020 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: 8680118. 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 July 30, 2020 through
1:59 a.m. (Eastern Time) on
August 13, 2020. 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 888-562-6891 (toll free) or 203-369-3496
(toll).
ABOUT KRATON CORPORATION
Kraton Corporation (NYSE: KRA) is a leading global sustainable
producer of specialty polymers and high-value biobased
products 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, REvolution and
CirKular+ are all trademarks of Kraton Polymers LLC or its
affiliates.
FORWARD LOOKING STATEMENTS
This press release contains "forward-looking statements" within
the meaning of the U.S. Private Securities Litigation Reform Act of
1995 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. The statements in this press
release that are not historical statements, including, but not
limited to, statements regarding our expectations as to the
continued impact of the COVID-19 pandemic (including governmental
and regulatory actions) on demand for our products, on the economy
and on our customers, suppliers, employees, business and results of
operations (including full-year 2020 Adjusted EBITDA), our ability
to execute our innovation pipeline and our plans for operation
improvements, our expectations with respect to debt reduction,
capital spending and run rate cost savings for 2020 and the
information and the matters described under the caption "Outlook,"
are forward-looking statements.
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.
Additional information concerning factors that could cause actual
results to differ materially from those expressed in
forward-looking statements is contained in our most recently filed
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and in
other filings made by us with the U.S. Securities and Exchange
Commission (the "SEC"), and include, but are not limited to, risks
related to: our ability to repay or re-finance indebtedness and
risk associated with incurring additional indebtedness; our
reliance on third parties for the provision of significant
operating and other services; the impact of extraordinary events,
including health epidemics or pandemics such as COVID-19 (including
governmental and regulatory actions relating thereto), natural
disasters and other weather conditions and terrorist attacks;
conditions in the global economy and capital markets; fluctuations
in raw material costs; limitations in the availability of raw
materials; competition in our end-use markets; fluctuations in
global tariffs and logistics costs; and other factors of which we
are currently unaware or deem immaterial. Many of these risks and
uncertainties are currently amplified by and will continue to be
amplified by, or in the future may be amplified by, the COVID-19
pandemic. To the extent any inconsistency or conflict exists
between the information included in this press release and the
information included in our prior reports and other filings with
the SEC, the information contained in this press release updates
and supersede such information. Readers are cautioned not to place
undue reliance on forward-looking statements. Forward-looking
statements contained herein speak only as of the date of this press
release, and we assume no obligation to publicly update or revise
such forward-looking statements 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
June 30,
|
|
Six Months Ended
June 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Revenue
|
$
|
355,679
|
|
|
$
|
495,280
|
|
|
$
|
782,948
|
|
|
$
|
951,691
|
|
Cost of goods
sold
|
262,635
|
|
|
366,078
|
|
|
570,704
|
|
|
715,487
|
|
Gross
profit
|
93,044
|
|
|
129,202
|
|
|
212,244
|
|
|
236,204
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Research and
development
|
9,912
|
|
|
10,173
|
|
|
20,704
|
|
|
20,724
|
|
Selling, general, and
administrative
|
38,402
|
|
|
38,457
|
|
|
87,460
|
|
|
79,351
|
|
Depreciation and
amortization
|
31,342
|
|
|
31,904
|
|
|
62,515
|
|
|
63,426
|
|
Gain on insurance
proceeds
|
—
|
|
|
(7,500)
|
|
|
—
|
|
|
(18,600)
|
|
Loss on disposal of
fixed assets
|
557
|
|
|
—
|
|
|
493
|
|
|
—
|
|
Operating
income
|
12,831
|
|
|
56,168
|
|
|
41,072
|
|
|
91,303
|
|
Other income
(expense)
|
251
|
|
|
(417)
|
|
|
578
|
|
|
(676)
|
|
Disposition and exit
of business activities
|
(25)
|
|
|
—
|
|
|
175,189
|
|
|
—
|
|
Gain (loss) on
extinguishment of debt
|
(141)
|
|
|
—
|
|
|
(14,095)
|
|
|
210
|
|
Earnings of
unconsolidated joint venture
|
128
|
|
|
140
|
|
|
229
|
|
|
261
|
|
Interest expense,
net
|
(13,466)
|
|
|
(19,339)
|
|
|
(30,927)
|
|
|
(38,280)
|
|
Income (loss) before
income taxes
|
(422)
|
|
|
36,552
|
|
|
172,046
|
|
|
52,818
|
|
Income tax benefit
(expense)
|
(6,659)
|
|
|
6,846
|
|
|
29,893
|
|
|
4,192
|
|
Consolidated net
income (loss)
|
(7,081)
|
|
|
43,398
|
|
|
201,939
|
|
|
57,010
|
|
Net income
attributable to noncontrolling interest
|
(887)
|
|
|
(2,190)
|
|
|
(1,821)
|
|
|
(3,134)
|
|
Net income (loss)
attributable to Kraton
|
$
|
(7,968)
|
|
|
$
|
41,208
|
|
|
$
|
200,118
|
|
|
$
|
53,876
|
|
Earnings (loss) per
common share:
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.25)
|
|
|
$
|
1.29
|
|
|
$
|
6.29
|
|
|
$
|
1.69
|
|
Diluted
|
$
|
(0.25)
|
|
|
$
|
1.28
|
|
|
$
|
6.20
|
|
|
$
|
1.67
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
31,782
|
|
|
31,692
|
|
|
31,698
|
|
|
31,663
|
|
Diluted
|
31,782
|
|
|
32,017
|
|
|
32,133
|
|
|
31,959
|
|
KRATON
CORPORATION
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(In thousands,
except par value)
|
|
|
June 30,
2020
|
|
December 31,
2019
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
137,365
|
|
|
$
|
35,033
|
|
Receivables, net of
allowances of $471 and $434
|
167,843
|
|
|
169,603
|
|
Inventories of
products, net
|
362,066
|
|
|
332,457
|
|
Inventories of
materials and supplies, net
|
32,955
|
|
|
32,211
|
|
Prepaid
expenses
|
18,977
|
|
|
6,991
|
|
Other current
assets
|
14,497
|
|
|
22,385
|
|
Current assets held
for sale
|
—
|
|
|
51,356
|
|
Total current
assets
|
733,703
|
|
|
650,036
|
|
Property, plant, and
equipment, less accumulated depreciation of $676,878 and
$639,197
|
912,541
|
|
|
925,940
|
|
Goodwill
|
772,380
|
|
|
772,418
|
|
Intangible assets,
less accumulated amortization of $307,142 and $285,819
|
307,414
|
|
|
325,877
|
|
Investment in
unconsolidated joint venture
|
11,687
|
|
|
11,971
|
|
Deferred income
taxes
|
72,609
|
|
|
8,863
|
|
Long-term operating
lease assets, net
|
87,619
|
|
|
85,003
|
|
Other long-term
assets
|
20,869
|
|
|
25,219
|
|
Long-term assets held
for sale
|
—
|
|
|
27,058
|
|
Total
assets
|
$
|
2,918,822
|
|
|
$
|
2,832,385
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Current portion of
long-term debt
|
$
|
60,924
|
|
|
$
|
53,139
|
|
Accounts
payable-trade
|
151,400
|
|
|
168,541
|
|
Other payables and
accruals
|
170,263
|
|
|
112,645
|
|
Due to related
party
|
16,731
|
|
|
17,470
|
|
Current liabilities
held for sale
|
—
|
|
|
14,849
|
|
Total current
liabilities
|
399,318
|
|
|
366,644
|
|
Long-term debt, net
of current portion
|
948,043
|
|
|
1,311,486
|
|
Deferred income
taxes
|
121,961
|
|
|
125,240
|
|
Long-term operating
lease liabilities
|
70,676
|
|
|
66,624
|
|
Deferred
income
|
159,965
|
|
|
11,049
|
|
Other long-term
liabilities
|
154,901
|
|
|
161,911
|
|
Long-term liabilities
held for sale
|
—
|
|
|
3
|
|
Total
liabilities
|
1,854,864
|
|
|
2,042,957
|
|
|
|
|
|
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; 31,862 shares issued and
outstanding at June 30, 2020; 31,751 shares issued and outstanding
at December 31, 2019
|
319
|
|
|
318
|
|
Additional paid in
capital
|
394,865
|
|
|
392,208
|
|
Retained
earnings
|
666,173
|
|
|
464,712
|
|
Accumulated other
comprehensive loss
|
(37,947)
|
|
|
(105,795)
|
|
Total Kraton
stockholders' equity
|
1,023,410
|
|
|
751,443
|
|
Noncontrolling
interest
|
40,548
|
|
|
37,985
|
|
Total
equity
|
1,063,958
|
|
|
789,428
|
|
Total liabilities and
equity
|
$
|
2,918,822
|
|
|
$
|
2,832,385
|
|
KRATON
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
(In
thousands)
|
|
|
Six Months Ended
June 30,
|
|
2020
|
|
2019
|
CASH FLOWS FROM
OPERATING ACTIVITIES
|
|
|
|
Consolidated net
income
|
$
|
201,939
|
|
|
$
|
57,010
|
|
Adjustments to
reconcile consolidated net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
62,515
|
|
|
63,426
|
|
Lease
amortization
|
12,428
|
|
|
11,315
|
|
Amortization of debt
original issue discount
|
148
|
|
|
536
|
|
Amortization of debt
issuance costs
|
1,724
|
|
|
2,310
|
|
Amortization of
deferred income
|
(7,799)
|
|
|
—
|
|
Loss on disposal of
property, plant, and equipment
|
108
|
|
|
—
|
|
(Gain) loss on
extinguishment of debt
|
14,095
|
|
|
(210)
|
|
Earnings from
unconsolidated joint venture, net of dividends received
|
279
|
|
|
183
|
|
Deferred income tax
(benefit) provision
|
(66,441)
|
|
|
2,948
|
|
Release of uncertain
tax positions
|
(3,316)
|
|
|
(13,457)
|
|
Gain on disposition
and exit of business activities
|
(175,189)
|
|
|
—
|
|
Share-based
compensation
|
4,745
|
|
|
5,499
|
|
Decrease (increase)
in:
|
|
|
|
Accounts
receivable
|
1,859
|
|
|
(64,657)
|
|
Inventories of
products, materials, and supplies
|
(36,024)
|
|
|
(22,048)
|
|
Other
assets
|
(4,366)
|
|
|
3,794
|
|
Increase (decrease)
in:
|
|
|
|
Accounts
payable-trade
|
(14,765)
|
|
|
13,491
|
|
Other payables and
accruals
|
30,767
|
|
|
(13,470)
|
|
Other long-term
liabilities
|
(2,824)
|
|
|
(6,744)
|
|
Due to related
party
|
(888)
|
|
|
(3,968)
|
|
Net cash provided by
operating activities
|
18,995
|
|
|
35,958
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES
|
|
|
|
Kraton purchase of
property, plant, and equipment
|
(39,122)
|
|
|
(49,985)
|
|
KFPC purchase of
property, plant, and equipment
|
(3,224)
|
|
|
(425)
|
|
Purchase of software
and other intangibles
|
(3,456)
|
|
|
(4,821)
|
|
Cash proceeds from
disposition and exit of business activities
|
510,500
|
|
|
—
|
|
Net cash provided by
(used in) investing activities
|
464,698
|
|
|
(55,231)
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES
|
|
|
|
Proceeds from
debt
|
77,000
|
|
|
40,250
|
|
Repayments of
debt
|
(437,174)
|
|
|
(22,560)
|
|
KFPC proceeds from
debt
|
49,967
|
|
|
14,600
|
|
KFPC repayments of
debt
|
(59,769)
|
|
|
(26,400)
|
|
Capital lease
payments
|
(88)
|
|
|
(83)
|
|
Purchase of treasury
stock
|
(744)
|
|
|
(7,725)
|
|
Proceeds from the
exercise of stock options
|
—
|
|
|
1,639
|
|
Settlement of interest
rate swap
|
(1,295)
|
|
|
—
|
|
Debt issuance
costs
|
(1,234)
|
|
|
—
|
|
Net cash used in
financing activities
|
(373,337)
|
|
|
(279)
|
|
Effect of exchange
rate differences on cash
|
(8,024)
|
|
|
(2,485)
|
|
Net increase
(decrease) in cash and cash equivalents
|
102,332
|
|
|
(22,037)
|
|
Cash and cash
equivalents, beginning of period
|
35,033
|
|
|
85,891
|
|
Cash and cash
equivalents, end of period
|
$
|
137,365
|
|
|
$
|
63,854
|
|
KRATON
CORPORATION
|
RECONCILIATION OF
NET INCOME (LOSS) ATTRIBUTABLE TO KRATON AND OPERATING INCOME
TO
|
NON-GAAP FINANCIAL
MEASURES
|
(Unaudited)
|
(In
thousands)
|
|
|
Three Months Ended
June 30, 2020
|
|
Three Months Ended
June 30, 2019
|
|
Polymer
|
|
Chemical
|
|
Total
|
|
Polymer
|
|
Chemical
|
|
Total
|
Net income (loss)
attributable to Kraton
|
|
|
|
|
$
|
(7,968)
|
|
|
|
|
|
|
$
|
41,208
|
|
Net income
attributable to noncontrolling interest
|
|
|
|
|
887
|
|
|
|
|
|
|
2,190
|
|
Consolidated net
income (loss)
|
|
|
|
|
(7,081)
|
|
|
|
|
|
|
43,398
|
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
(benefit)
|
|
|
|
|
6,659
|
|
|
|
|
|
|
(6,846)
|
|
Interest expense,
net
|
|
|
|
|
13,466
|
|
|
|
|
|
|
19,339
|
|
Earnings of
unconsolidated joint venture
|
|
|
|
|
(128)
|
|
|
|
|
|
|
(140)
|
|
Gain (loss) on
extinguishment of debt
|
|
|
|
|
141
|
|
|
|
|
|
|
—
|
|
Other income
(expense)
|
|
|
|
|
(251)
|
|
|
|
|
|
|
417
|
|
Disposition and exit
of business activities
|
|
|
|
|
25
|
|
|
|
|
|
|
—
|
|
Operating
income
|
$
|
16,762
|
|
|
$
|
(3,931)
|
|
|
$
|
12,831
|
|
|
$
|
34,979
|
|
|
$
|
21,189
|
|
|
$
|
56,168
|
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
12,948
|
|
|
18,394
|
|
|
31,342
|
|
|
14,343
|
|
|
17,561
|
|
|
31,904
|
|
Disposition and exit
of business activities
|
(25)
|
|
|
—
|
|
|
(25)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other income
(expense)
|
(16)
|
|
|
267
|
|
|
251
|
|
|
(618)
|
|
|
201
|
|
|
(417)
|
|
Gain (loss) on
extinguishment of debt
|
(141)
|
|
|
—
|
|
|
(141)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Earnings of
unconsolidated joint venture
|
128
|
|
|
—
|
|
|
128
|
|
|
140
|
|
|
—
|
|
|
140
|
|
EBITDA (a)
|
29,656
|
|
|
14,730
|
|
|
44,386
|
|
|
48,844
|
|
|
38,951
|
|
|
87,795
|
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
|
|
|
Transaction,
acquisition related costs, restructuring, and other costs
(b)
|
1,551
|
|
|
468
|
|
|
2,019
|
|
|
2,395
|
|
|
166
|
|
|
2,561
|
|
Disposition and exit
of business activities
|
25
|
|
|
—
|
|
|
25
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Loss on extinguishment
of debt
|
141
|
|
|
—
|
|
|
141
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Hurricane related
costs (c)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,944
|
|
|
6,944
|
|
Hurricane
reimbursements (d)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,500)
|
|
|
(7,500)
|
|
Non-cash compensation
expense
|
1,897
|
|
|
—
|
|
|
1,897
|
|
|
2,190
|
|
|
—
|
|
|
2,190
|
|
Spread between FIFO
and ECRC
|
20,575
|
|
|
493
|
|
|
21,068
|
|
|
6,749
|
|
|
3,321
|
|
|
10,070
|
|
Adjusted
EBITDA
|
$
|
53,845
|
|
|
$
|
15,691
|
|
|
$
|
69,536
|
|
|
$
|
60,178
|
|
|
$
|
41,882
|
|
|
$
|
102,060
|
|
|
|
(a)
|
Included in EBITDA is
a $7.5 million gain on insurance for the three months ended June
30, 2019, a reimbursement for a portion of the direct costs we have
incurred to date related to Hurricane Michael.
|
|
Also included in
EBITDA are Isoprene Rubber sales to Daelim under the IRSA. Sales
under the IRSA are transacted at cost. Included in Adjusted EBITDA
is the amortization of non-cash deferred income of $3.9 million for
the three months ended June 30, 2020, which represents revenue
deferred until the products are sold under the IRSA.
|
(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.
|
(d)
|
Reimbursement of
incremental costs related to Hurricane Michael, which is recorded
in gain on insurance proceeds.
|
|
Six Months Ended
June 30, 2020
|
|
Six Months Ended
June 30, 2019
|
|
Polymer
|
|
Chemical
|
|
Total
|
|
Polymer
|
|
Chemical
|
|
Total
|
Net income
attributable to Kraton
|
|
|
|
|
$
|
200,118
|
|
|
|
|
|
|
$
|
53,876
|
|
Net income
attributable to noncontrolling interest
|
|
|
|
|
1,821
|
|
|
|
|
|
|
3,134
|
|
Consolidated net
income
|
|
|
|
|
201,939
|
|
|
|
|
|
|
57,010
|
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit)
expense
|
|
|
|
|
(29,893)
|
|
|
|
|
|
|
(4,192)
|
|
Interest expense,
net
|
|
|
|
|
30,927
|
|
|
|
|
|
|
38,280
|
|
Earnings of
unconsolidated joint venture
|
|
|
|
|
(229)
|
|
|
|
|
|
|
(261)
|
|
(Gain) loss on
extinguishment of debt
|
|
|
|
|
14,095
|
|
|
|
|
|
|
(210)
|
|
Other (income)
expense
|
|
|
|
|
(578)
|
|
|
|
|
|
|
676
|
|
Disposition and exit
of business activities
|
|
|
|
|
(175,189)
|
|
|
|
|
|
|
—
|
|
Operating
income
|
$
|
34,687
|
|
|
$
|
6,385
|
|
|
$
|
41,072
|
|
|
$
|
44,229
|
|
|
$
|
47,074
|
|
|
$
|
91,303
|
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
26,295
|
|
|
36,220
|
|
|
62,515
|
|
|
28,314
|
|
|
35,112
|
|
|
63,426
|
|
Disposition and exit
of business activities
|
175,189
|
|
|
—
|
|
|
175,189
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other income
(expense)
|
39
|
|
|
539
|
|
|
578
|
|
|
(1,045)
|
|
|
369
|
|
|
(676)
|
|
Gain (loss) on
extinguishment of debt
|
(14,095)
|
|
|
—
|
|
|
(14,095)
|
|
|
210
|
|
|
—
|
|
|
210
|
|
Earnings of
unconsolidated joint venture
|
229
|
|
|
—
|
|
|
229
|
|
|
261
|
|
|
—
|
|
|
261
|
|
EBITDA (a)
|
222,344
|
|
|
43,144
|
|
|
265,488
|
|
|
71,969
|
|
|
82,555
|
|
|
154,524
|
|
Add
(deduct):
|
|
|
|
|
|
|
|
|
|
|
|
Transaction,
acquisition related costs, restructuring, and other costs
(b)
|
11,699
|
|
|
1,230
|
|
|
12,929
|
|
|
3,109
|
|
|
564
|
|
|
3,673
|
|
Disposition and exit
of business activities
|
(175,189)
|
|
|
—
|
|
|
(175,189)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(Gain) loss on
extinguishment of debt
|
14,095
|
|
|
—
|
|
|
14,095
|
|
|
(210)
|
|
|
—
|
|
|
(210)
|
|
Hurricane related
costs (c)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,805
|
|
|
12,805
|
|
Hurricane
reimbursements (d)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,720)
|
|
|
(12,720)
|
|
Non-cash compensation
expense
|
4,745
|
|
|
—
|
|
|
4,745
|
|
|
5,499
|
|
|
—
|
|
|
5,499
|
|
Spread between FIFO
and ECRC
|
27,320
|
|
|
(1,973)
|
|
|
25,347
|
|
|
27,964
|
|
|
(43)
|
|
|
27,921
|
|
Adjusted
EBITDA
|
$
|
105,014
|
|
|
$
|
42,401
|
|
|
$
|
147,415
|
|
|
$
|
108,331
|
|
|
$
|
83,161
|
|
|
$
|
191,492
|
|
|
|
(a)
|
Included in EBITDA is
an $18.6 million gain on insurance for the six months ended June
30, 2019, 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.
|
|
Also included in
EBITDA are Isoprene Rubber sales to Daelim under the IRSA. Sales
under the IRSA are transacted at cost. Included in Adjusted EBITDA
is the amortization of non-cash deferred income of $7.2 million for
the six months ended June 30, 2020, which represents revenue
deferred until the products are sold under the IRSA.
|
(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.
|
(d)
|
Reimbursement of
incremental costs related to Hurricane Michael, which is recorded
in gain on insurance proceeds.
|
KRATON
CORPORATION
|
RECONCILIATION OF
DILUTED EARNINGS (LOSS) PER SHARE TO ADJUSTED DILUTED EARNINGS
PER
|
SHARE
|
(Unaudited)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Diluted Earnings
(Loss) Per Share
|
$
|
(0.25)
|
|
|
$
|
1.28
|
|
|
$
|
6.20
|
|
|
$
|
1.67
|
|
Transaction,
acquisition related costs, restructuring, and other costs
(a)
|
0.05
|
|
|
0.06
|
|
|
0.31
|
|
|
0.09
|
|
Disposition and exit
of business activities
|
0.02
|
|
|
—
|
|
|
(4.94)
|
|
|
—
|
|
(Gain) loss on
extinguishment of debt
|
—
|
|
|
—
|
|
|
0.34
|
|
|
(0.01)
|
|
Tax
restructuring
|
(0.09)
|
|
|
—
|
|
|
(2.03)
|
|
|
—
|
|
Hurricane related
costs (b)
|
—
|
|
|
0.22
|
|
|
—
|
|
|
0.40
|
|
Hurricane
reimbursements (c)
|
—
|
|
|
(0.23)
|
|
|
—
|
|
|
(0.39)
|
|
Spread between FIFO
and ECRC
|
0.57
|
|
|
0.25
|
|
|
0.69
|
|
|
0.70
|
|
Adjusted Diluted
Earnings (Loss) Per Share (non-GAAP)
|
$
|
0.30
|
|
|
$
|
1.58
|
|
|
$
|
0.57
|
|
|
$
|
2.46
|
|
|
|
(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.
|
(c)
|
Reimbursement of
incremental costs related to Hurricane Michael, which is recorded
in gain on insurance proceeds.
|
POLYMER SEGMENT
RECONCILIATION OF GROSS PROFIT TO ADJUSTED GROSS PROFIT
(Unaudited)
(In thousands)
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Gross
profit
|
$
|
57,845
|
|
|
$
|
78,866
|
|
|
$
|
126,576
|
|
|
$
|
132,752
|
|
|
|
|
|
|
|
|
|
Add
(deduct):
|
|
|
|
|
|
|
|
Transaction,
acquisition related costs, restructuring, and other
costs
|
—
|
|
|
491
|
|
|
387
|
|
|
491
|
|
Non-cash compensation
expense
|
114
|
|
|
131
|
|
|
285
|
|
|
330
|
|
Spread between FIFO
and ECRC
|
20,575
|
|
|
6,749
|
|
|
27,320
|
|
|
27,964
|
|
Adjusted gross profit
(non-GAAP) (a)
|
$
|
78,534
|
|
|
$
|
86,237
|
|
|
$
|
154,568
|
|
|
$
|
161,537
|
|
|
|
|
|
|
|
|
|
Sales volume
(kilotons)
|
75.5
|
|
|
80.2
|
|
|
146.3
|
|
|
154.0
|
|
Adjusted gross profit
per ton (a)
|
$
|
1,040
|
|
|
$
|
1,075
|
|
|
$
|
1,056
|
|
|
$
|
1,049
|
|
|
|
(a)
|
For the three
and six months ended June 30, 2020, adjusted gross profit and
adjusted gross profit per ton, adjusted for the IRSA, would be
$74.7 million and $147.3 million and $1,008 and $1,024,
respectively.
|
For further information:
H. Gene Shiels
(281) 504-4886
View original content to download
multimedia:http://www.prnewswire.com/news-releases/kraton-corporation-announces-second-quarter-2020-results-301102565.html
SOURCE Kraton Corporation