INVESTOR RELATIONS

Press Release

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Kraton Corporation Announces First Quarter 2017 Results

HOUSTON, April 26, 2017 /PRNewswire/ -- Kraton Corporation (NYSE: KRA), a leading global producer of styrenic block copolymers, specialty polymers and high-value performance products derived from pine wood pulping co-products, announces financial results for the quarter ended March 31, 2017.

2017 FIRST QUARTER SUMMARY

  • Chemical segment sales volumes increased 15% and Polymer segment sales volumes increased 2%, compared to the first quarter 2016
  • Polymer segment raw material costs increased significantly in the first quarter 2017
    • As anticipated, Polymer segment margins were adversely impacted in the quarter, reflecting the timing lag in realization of announced price increases and, to a lesser extent, continued competitive market conditions for SIS product grades
  • Chemical segment margins for the first quarter 2017 reflect ongoing market pressures related to hydrocarbon-based C5 alternatives and competitive conditions for TOFA and TOR products
    • Outlook for TOFA market conditions has improved
  • Successful issuance of $400 million of 7.0% Senior Notes due 2025
    • Proceeds applied as prepayment of existing Term Loan Facility, eliminated all scheduled payments prior to final maturity under Term Loan Facility

 


Three Months Ended March 31,


2017


2016


(In thousands, except per share amounts)

Revenue

$

458,125



$

419,923


Polymer segment operating income

$

41,628



$

13,946


Chemical segment operating income (loss)

$

17,695



$

(10,720)


Net income attributable to Kraton

$

6,413



$

88,087


Adjusted EBITDA (non-GAAP)(1)

$

65,571



$

93,101


Adjusted EBITDA margin (non-GAAP)(2)

14.3

%


22.2

%

Diluted earnings per share

$

0.20



$

2.84


Adjusted diluted earnings (loss) per share (non-GAAP)(1)

$

(0.15)



$

0.80





(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.

"On a consolidated basis, first quarter 2017 Adjusted EBITDA was $65.6 million. As expected, during the quarter we saw unprecedented increases in raw material costs for our Polymer segment and, as a result, our Adjusted EBITDA was negatively impacted by the lag in realization of price increases. While we expect the full realization of price increases implemented to address the increase in raw material costs to be completed in the second quarter 2017, the raw material cost trend itself has also reversed as we move into the second quarter of the year. As we have pointed out previously, we continue to see competitive conditions for SIS polymer grades in our Performance Products business," said Kevin M. Fogarty, Kraton's President and Chief Executive Officer. "For our Chemical segment, we are encouraged by the 15% increase in sales volume compared to the first quarter 2016. However, segment margins continue to be adversely impacted by availability of low-cost C5 hydrocarbon alternatives, and pricing pressure for TOFA and TOR products in general. Regarding TOFA markets specifically, we implemented a global price increase of $120 per metric ton effective March 15th, reflecting an improving demand outlook for TOFA and, to a lesser extent, cost increases for CTO raw materials," Fogarty added.

"Strategically, we continue to make progress on our cost reduction and transaction synergy value realization initiatives. In the first quarter we delivered an incremental $13 million on top of the cumulative $68 million realized through year-end 2016. We expect that for the balance of 2017 we will deliver an additional $27 million in cost reductions towards our 2018 target of $135 million. In addition, during the first quarter we took steps to further refine our capital structure. In early January we repriced our Term Loan Facility, reducing the interest cost for amounts outstanding under the facility by 100 basis points, and in late March, we issued $400 million of 7.0% Senior Notes, using the proceeds to reduce borrowings under the Term Loan Facility. This issuance resulted in a more appropriate balance between secured and unsecured components of our outstanding debt, and effectively eliminated all scheduled amortization payments under the Term Loan Facility, enhancing financial flexibility," said Fogarty.

Status of Synergies, Operational Improvement, and Cost Reduction Initiatives

We previously announced synergies and operational improvement initiatives associated with our January 6, 2016 acquisition of Arizona Chemical (the "Arizona Chemical Acquisition") and a cost reduction initiative targeted at lowering costs in our Polymer segment. Following is a summary of the status of these initiatives:


Cumulative through


March 31, 2017


December 31, 2016


(In thousands)

General and administrative synergies

$

20,863



$

17,663


Operational improvements

27,007



19,223


Cost reduction

33,522



31,338



$

81,392



$

68,224


 

Three Months Ended March 31, 2017 compared to Three Months Ended March 31, 2016



Polymer Segment




Three Months Ended March 31,


2017


2016

Revenue

(In thousands)

CariflexTM

$

38,048



$

38,023


Specialty Polymers

90,920



85,029


Performance Products

141,718



119,919


Other

262



72



$

270,948



$

243,043






Operating income

$

41,628



$

13,946


Adjusted EBITDA (non-GAAP) (1)

$

32,055



$

52,244







(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.

Revenue for the Polymer segment was $270.9 million for the three months ended March 31, 2017 compared to $243.0 million for the three months ended March 31, 2016. The increase in revenue was driven by a $22.7 million higher average selling price primarily resulting from higher raw material costs and a $7.6 million increase in sales volumes, partially offset by a $2.4 million negative effect from changes in currency exchange rates. Sales volumes were 76.6 kilotons for the three months ended March 31, 2017, an increase of 1.5 kilotons or 2.1%.

With respect to revenue for the Polymer segment product groups:

  • Cariflex revenue was $38.0 million for the three months ended March 31, 2017 and was unchanged compared to the three months ended March 31, 2016.
  • Specialty Polymers revenue was $90.9 million for the three months ended March 31, 2017 compared to $85.0 million for the three months ended March 31, 2016. The revenue increase reflects the 8.1% increase in sales volumes.
  • Performance Products revenue was $141.7 million for the three months ended March 31, 2017 compared to $119.9 million for the three months ended March 31, 2016. The $21.8 million increase was primarily driven by higher average selling prices resulting from higher raw material costs.

For the three months ended March 31, 2017, the Polymer segment operating income was $41.6 million compared to $13.9 million for the three months ended March 31, 2016.

For the three months ended March 31, 2017, the Polymer segment generated $32.1 million of Adjusted EBITDA (non-GAAP) compared to $52.2 million for the three months ended March 31, 2016, a decrease of $20.2 million or 38.6%. The decline in Adjusted EBITDA was primarily due to lower margins indicative of the increase in raw material prices which were only partially offset by increases in selling prices in the first quarter and the continued pressure on SIS margins overall. The quarter-over-quarter comparison was also negatively impacted by the first quarter 2016 raw material market conditions which led to margin expansion in the prior year. See a reconciliation of GAAP operating income to non-GAAP Adjusted EBITDA below.

Chemical Segment

The following results of operations for the Chemical segment have been included in our consolidated results since January 6, 2016.


Three Months Ended
March 31, 2017


For the period
January 6, 2016
through March 31,
2016

Revenue

(In thousands)

Adhesives

$

64,372



$

62,943


Roads and Construction

10,766



10,670


Tires

11,719



8,981


Performance Chemicals

100,320



94,286



$

187,177



$

176,880






Operating income (loss)

$

17,695



$

(10,720)


Adjusted EBITDA (non-GAAP) (1)

$

33,516



$

40,857







(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.

Revenue for the Chemical segment was $187.2 million for the three months ended March 31, 2017 compared to $176.9 million for the three months ended March 31, 2016. The increase in revenue was driven by a $33.7 million increase in sales volumes, partially offset by lower average selling prices aggregating $19.9 million and a $3.5 million negative effect from changes in currency exchange rates. Sales volumes were 109.1 kilotons for the three months ended March 31, 2017, an increase of 14.2 kilotons or 15.0%.

With respect to revenue for the Chemical segment product groups:

  • Adhesives revenue was $64.4 million for the three months ended March 31, 2017 compared to $62.9 million for the three months ended March 31, 2016. A 14.3% increase in sales volumes was largely offset by lower average selling prices.
  • Roads and Construction revenue was $10.8 million for the three months ended March 31, 2017 compared to $10.7 million for the three months ended March 31, 2016. A 10.8% increase in sales volumes was offset by lower average selling prices.
  • Tires revenue was $11.7 million for the three months ended March 31, 2017 compared to $9.0 million for the three months ended March 31, 2016. A 24.6% increase in sales volumes was largely offset by lower average selling prices.
  • Performance Chemicals (formerly Chemical Intermediates) revenue was $100.3 million for the three months ended March 31, 2017 compared to $94.3 million for the three months ended March 31, 2016. A 15.2% increase in sales volumes was partially offset by lower average selling prices.

For the three months ended March 31, 2017, the Chemical segment operating income was $17.7 million compared to an operating loss of $10.7 million for the three months ended March 31, 2016.

For the three months ended March 31, 2017, the Chemical segment generated $33.5 million of Adjusted EBITDA (non-GAAP) compared to $40.9 million for the three months ended March 31, 2016. The decline in Adjusted EBITDA was primarily due to lower margins indicative of the continued impact of low-cost C5 hydrocarbon alternatives and pricing pressure for TOFA and TOR products, which more than offset the 15.0% increase in sales volumes. See a reconciliation of GAAP operating income (loss) to non-GAAP Adjusted EBITDA below.

CASH FLOW AND CAPITAL STRUCTURE

During the three months ended March 31, 2017 (excluding borrowings under the Kraton Formosa Polymers Corporation (KFPC) Loan Agreement) we increased Kraton Corporation indebtedness by $7.8 million, while decreasing cash on hand (excluding KFPC cash) by approximately $21.5 million.

Summary of principal amounts for indebtedness and a reconciliation of Kraton debt to Kraton net debt and consolidated net debt (non-GAAP):


As of March 31, 2017


As of December 31, 2016


(In thousands)

Term Loan

$

886,000



$

1,278,000


10.5% Senior Notes

440,000



440,000


7.0% Senior Notes

400,000




ABL




Capital lease

2,805



3,042


Kraton debt

1,728,805



1,721,042


Kraton cash

86,134



107,599


Kraton net debt

1,642,671



1,613,443






KFPC(1) loan

136,001



115,854


KFPC(1) cash

17,932



14,150


KFPC(1) net debt

118,069



101,704






Consolidated net debt

$

1,760,740



$

1,715,147







(1)

This amount includes all of the indebtedness of our Kraton Formosa Polymers Corporation (KFPC) joint venture, located in Mailiao, Taiwan, which we own a 50% stake in and consolidate within our financial statements.

OUTLOOK

We continue to estimate that our 2017 Adjusted EBITDA will be approximately $350 million and we expect to reduce net indebtedness by $100-$150 million in 2017.

We currently estimate that our results in the second quarter 2017 will reflect a positive spread between FIFO and ECRC of approximately $10 million.

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 and acquisition costs and costs associated with dispositions, business exits, and production downtime, as certain of these items are out of our control and/or cannot be reasonably predicted. We have not reconciled 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 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 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, 2016.

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, 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, disposition and exit of business activities 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 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.

Net Debt: We define net debt for Kraton as total debt (excluding debt of KFPC) less cash and cash equivalents. We define consolidated net debt as Kraton net debt plus debt of KFPC less KFPC's cash and cash equivalents. Management uses 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 net debt is useful to investors in determining our leverage since we could choose to use cash and cash equivalents to retire debt. In addition, management believes that presenting Kraton's net debt excluding KFPC is useful because KFPC has its own capital structure.

CONFERENCE CALL AND WEBCAST INFORMATION

Kraton has scheduled a conference call on Thursday, April 27, 2017 at 9:00 a.m. (Eastern Time) to discuss first quarter 2017 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 800-839-6511. 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 April 27, 2017 through 1:59 a.m. (Eastern Time) on May 11, 2017. 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 800-839-2290.

ABOUT KRATON CORPORATION

Kraton Corporation (NYSE: KRA) is a leading global producer of styrenic block copolymers, specialty polymers and high-value performance 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 adhesive, road and construction and tire markets, and it produces and sells a broad range of performance chemicals into markets that include fuel additives, oilfield chemicals, coatings, metalworking fluids and lubricants, inks, flavors and fragrances 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 and information 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 identified by 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 all matters described on the section titled "Outlook" including, but not limited to, our outlook for full year 2017 guidance for Adjusted EBITDA, expectations of Kraton net debt at December 31, 2017 and second quarter 2017 guidance on the positive spread between FIFO and ECRC.

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, performance or our achievements, or industry 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: the integration of Arizona Chemical (now, AZ Chem Holdings LP); Kraton's ability to repay its indebtedness; Kraton's reliance on third parties for the provision of significant operating and other services; conditions in the global economy and capital markets; fluctuations in raw material costs; limitations in the availability of raw materials; competition in Kraton's end-use markets; and other factors of which we are currently unaware or deem immaterial. There may be other factors of which we are currently unaware or deem immaterial that may cause our actual results to differ materially from the forward-looking statements. 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 supersedes 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.

For Further Information:
H. Gene Shiels
Director of Investor Relations
(281) 504-4886

 

KRATON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)




Three Months Ended March 31,


2017


2016

Revenue

$

458,125



$

419,923


Cost of goods sold

314,759



326,105


Gross profit

143,366



93,818


Operating expenses:




Research and development

10,345



10,576


Selling, general, and administrative

40,555



49,862


Depreciation and amortization

33,143



30,154


Operating income

59,323



3,226


Disposition and exit of business activities



45,251


Loss on extinguishment of debt

(19,738)



(13,423)


Earnings of unconsolidated joint venture

127



78


Interest expense, net

(34,305)



(33,838)


Income before income taxes

5,407



1,294


Income tax benefit (expense)

(1,218)



86,251


Consolidated net income

4,189



87,545


Net loss attributable to noncontrolling interest

2,224



542


Net income attributable to Kraton

$

6,413



$

88,087


Earnings per common share:




Basic

$

0.21



$

2.87


Diluted

$

0.20



$

2.84


Weighted average common shares outstanding:




Basic

30,430



30,026


Diluted

30,851



30,289


 

KRATON CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)



March 31, 2017


December 31, 2016


(unaudited)



ASSETS




Current assets:




Cash and cash equivalents

$

104,066



$

121,749


Receivables, net of allowances of $929 and $814

216,330



200,860


Inventories of products

386,900



327,996


Inventories of materials and supplies

23,671



22,392


Prepaid expenses

36,628



35,851


Other current assets

39,267



37,658


Total current assets

806,862



746,506


Property, plant, and equipment, less accumulated depreciation of $438,005 and $411,418

921,411



906,722


Goodwill

770,525



770,012


Intangible assets, less accumulated amortization of $155,595 and $144,946

430,329



439,198


Investment in unconsolidated joint venture

11,003



11,195


Debt issuance costs

3,218



3,511


Deferred income taxes

7,113



6,907


Other long-term assets

24,752



22,594


Total assets

$

2,975,213



$

2,906,645


LIABILITIES AND EQUITY




Current liabilities:




Current portion of long-term debt

$

28,192



$

41,825


Accounts payable-trade

165,792



150,081


Other payables and accruals

112,122



130,398


Due to related party

20,895



14,669


Total current liabilities

327,001



336,973


Long-term debt, net of current portion

1,753,382



1,697,700


Deferred income taxes

211,380



211,396


Other long-term liabilities

171,687



170,339


Total liabilities

2,463,450



2,416,408






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; 31,176 shares issued and outstanding at March 31, 2017; 30,960 shares issued and outstanding at December 31, 2016

312



310


Additional paid in capital

364,194



361,682


Retained earnings

260,852



254,439


Accumulated other comprehensive loss

(145,593)



(158,530)


Total Kraton stockholders' equity

479,765



457,901


Noncontrolling interest

31,998



32,336


Total equity

511,763



490,237


Total liabilities and equity

$

2,975,213



$

2,906,645


 

KRATON CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)




Three Months Ended March 31,


2017


2016

CASH FLOWS FROM OPERATING ACTIVITIES




Consolidated net income

$

4,189



$

87,545


Adjustments to reconcile consolidated net income to net cash provided by (used in) operating activities:




Depreciation and amortization

33,143



30,154


Amortization of original issue discount

2,093



1,655


Amortization of debt issuance costs

2,381



1,959


(Gain) loss on disposal of property, plant, and equipment

(29)



82


Disposition and exit of business activities



(45,251)


Loss on extinguishment of debt

19,738



13,423


Earnings from unconsolidated joint venture, net of dividends received

309



369


Deferred income tax benefit

(1,177)



(2,643)


Release of valuation allowance



(86,631)


Share-based compensation

2,974



3,083


Decrease (increase) in:




Accounts receivable

(13,188)



(15,551)


Inventories of products, materials, and supplies

(56,818)



26,478


Other assets

(1,584)



(10,393)


Increase (decrease) in:




Accounts payable-trade

20,262



(10,272)


Other payables and accruals

(14,122)



(27,952)


Other long-term liabilities

(157)



6,176


Due to related party

5,427



1,154


Net cash provided by (used in) operating activities

3,441



(26,615)


CASH FLOWS FROM INVESTING ACTIVITIES




Kraton purchase of property, plant, and equipment

(27,279)



(18,502)


KFPC purchase of property, plant, and equipment

(5,558)



(8,325)


Purchase of software and other intangibles

(1,514)



(352)


Acquisition, net of cash acquired



(1,317,252)


Sale of assets



72,000


Net cash used in investing activities

(34,351)



(1,272,431)


CASH FLOWS FROM FINANCING ACTIVITIES




Proceeds from debt

415,000



1,782,965


Repayments of debt

(407,000)



(430,133)


KFPC proceeds from debt

13,244



12,100


Capital lease payments

(237)



(35)


Purchase of treasury stock

(1,511)



(954)


Proceeds from the exercise of stock options

1,051



169


Settlement of interest rate swap



(5,155)


Debt issuance costs

(9,318)



(57,116)


Net cash provided by financing activities

11,229



1,301,841


Effect of exchange rate differences on cash

1,998



5,534


Net increase (decrease) in cash and cash equivalents

(17,683)



8,329


Cash and cash equivalents, beginning of period

121,749



70,049


Cash and cash equivalents, end of period

$

104,066



$

78,378


Supplemental disclosures:




Cash paid during the period for income taxes, net of refunds received

$

6,523



$

3,792


Cash paid during the period for interest, net of capitalized interest

$

17,741



$

19,690


Capitalized interest

$

1,215



$

797


Supplemental non-cash disclosures:




Property, plant, and equipment accruals

$

23,796



$

15,121


 

KRATON CORPORATION
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO KRATON AND OPERATING INCOME (LOSS) TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
(In thousands)






Three Months Ended March 31, 2017


Three Months Ended March 31, 2016


Polymer


Chemical


Total


Polymer


Chemical


Total

Net income attributable to Kraton





$

6,413







$

88,087


Net loss attributable to noncontrolling interest





(2,224)







(542)


Consolidated net income





4,189







87,545


Add (deduct):












Income tax (benefit) expense





1,218







(86,251)


Interest expense, net





34,305







33,838


Earnings of unconsolidated joint venture





(127)







(78)


Loss on extinguishment of debt





19,738







13,423


Disposition and exit of business activities











(45,251)


Operating income (loss)

$

41,628



$

17,695



$

59,323



$

13,946



$

(10,720)



$

3,226


Add (deduct):












Depreciation and amortization

16,324



16,819



33,143



14,592



15,562



30,154


Disposition and exit of business activities







45,251





45,251


Loss on extinguishment of debt

(19,738)





(19,738)



(13,423)





(13,423)


Earnings of unconsolidated joint venture

127





127



78





78


EBITDA

38,341



34,514



72,855



60,444



4,842



65,286


Add (deduct):












Transaction, acquisition related costs, restructuring, and other costs (a)

4,674



220



4,894



6,477



5,199



11,676


Disposition and exit of business activities







(45,251)





(45,251)


Loss on extinguishment of debt

19,738





19,738



13,423





13,423


Effect of purchase price accounting on inventory valuation (b)









24,719



24,719


KFPC startup costs (c)

2,821





2,821



840





840


Non-cash compensation expense

2,974





2,974



3,083





3,083


Spread between FIFO and ECRC

(36,493)



(1,218)



(37,711)



13,228



6,097



19,325


Adjusted EBITDA

$

32,055



$

33,516



$

65,571



$

52,244



$

40,857



$

93,101







(a)   

Charges related to the evaluation of acquisition transactions, severance expenses, and other restructuring related charges.

(b)   

Higher costs of goods sold for our Chemical segment related to the fair value adjustment in purchase accounting for their inventory.

(c)   

Startup costs related to the joint venture company, KFPC.

 

KRATON CORPORATION
RECONCILIATION OF DILUTED EARNINGS PER SHARE TO ADJUSTED DILUTED EARNINGS (LOSS) PER SHARE
(Unaudited)
(In thousands, except per share data)




Three Months Ended March 31,


2017


2016

Diluted earnings per share

$

0.20



$

2.84


Transaction, acquisition related costs, restructuring, and other costs (a)

0.12



0.33


Disposition and exit of business activities



(0.94)


Loss on extinguishment of debt

0.41



0.28


Effect of purchase price accounting on inventory valuation (b)



0.63


KFPC startup costs (c)

0.06



0.01


Valuation allowance (d)



(2.80)


Spread between FIFO and ECRC

(0.94)



0.45


Adjusted diluted earnings (loss) per share (non-GAAP)

$

(0.15)



$

0.80







(a)    

Charges related to the evaluation of acquisition transactions, severance expenses, and other restructuring related charges. 

(b)    

We had higher costs of goods sold for our Chemical segment related to the fair value adjustment in purchase accounting for their inventory.

(c)    

Startup costs related to the joint venture company, KFPC.

(d)   

Reduction of income tax valuation allowance related to the assessment of our ability to utilize net operating losses in future periods.

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/kraton-corporation-announces-first-quarter-2017-results-300446595.html

SOURCE Kraton Corporation

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