HOUSTON, TX. - June 23, 2008 - Kraton Polymers LLC (Kraton), a leading global producer of engineered polymers, announces interim 2008 preliminary results for the two and five months ended May 31, 2008.
Total revenues amounted to $225 million for the two months ended May 31, 2008, an increase of $32 million, or 17%, from $193 million in the two months ended May 31, 2007. For the five months ended May 31, 2008, revenue amounted to $492 million, an increase of $52 million, or 12%, from $440 million through May 31, 2007.
Gross profit amounted to $40 million for the two months ended May 31, 2008, an increase of $7 million or 21% from $33 million in 2007. For the five months ended May 31, 2008, gross profit amounted to $89 million compared to $66 million in 2007, an increase of $23 million, or 35%.
Net income (loss) for the two and five months ended May 31, 2008 was $6 million and $(3) million, respectively, compared to $2 million and $(11) million for the comparable periods in 2007.
Through May 31, 2008 we incurred approximately $7.3 million of costs associated with previously announced senior executive and other management changes, and the cost associated with the realignment of our research and technical service organizations. In the comparable 2007 period, we incurred $0.3 million of similar charges associated with 2007 initiatives.
Last Twelve Months (LTM) Bank EBITDA, a measure used to determine compliance with our debt covenants, totaled $111 million for the period ended May 31, 2008, an increase of $7 million and $13 million from the LTM periods ended March 31, 2008 and December 31, 2007, respectively. A reconciliation of net loss to LTM Bank EBITDA is attached. Kraton currently expects that its $75.5 million revolving credit facility will be undrawn at June 30, 2008 and that it will be in compliance with its financial covenants, taking into account our previously disclosed $9.6 million equity cure. Kraton is, however, exploring refinancing options to improve financial flexibility.
"While our improved financial results indicate progress relative to the comparable periods, our organization globally is committed to continue implementing previously communicated actions to improve pricing and margins, optimize our production assets, and enhance organizational productivity, to mitigate the headwinds associated with unprecedented rising energy and feedstock costs", said Kevin M. Fogarty, President and Chief Executive Officer. "By doing so, we will continue to provide industry-leading solutions to our innovative customers, to propel our respective growth expectations".
Recent Developments
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Announced June 1 and July 1 price increases in Asia and North America, and July 1 price increases in Europe.
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On June 20, 2008, received $4.6 million of proceeds associated with the sale of its interest rate swap secured in the first quarter.
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Experienced allocation from our butadiene suppliers that we believe is affecting the industry in general. The significant factors causing the shortfall are the continued run-up in the cost of crude oil and planned and unplanned outages by certain producers of butadiene. As a result, as of June 2008, we have had to allocate certain products among our customers. We are currently unable to estimate how long this situation will continue or if or when it might improve.
About Kraton
Kraton is a leading global producer of engineered polymers and, we believe, the world's largest producer of styrenic block copolymers (SBCs), a family of products whose chemistry was pioneered by us over forty years ago. SBCs are highly-engineered thermoplastic elastomers, which enhance the performance of numerous products by delivering a variety of attributes, including greater flexibility, resilience, strength, durability and processability. Kraton polymers are used in a wide range of applications including adhesives, coatings, consumer and personal care products, sealants, lubricants, medical, packaging, automotive, paving, roofing, and footwear products. Kraton has the leading position in nearly all of its core markets and is the only producer of SBCs with global manufacturing capability. Its production facilities are located in the United States, Germany, France, The Netherlands, Brazil, and Japan.
Kraton, the Kraton logo and design, and "Giving Innovators their Edge" tagline are trademarks of Kraton Polymers LLC.
Forward Looking Statements
This press release includes "forward-looking statements" as that term is defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are statements that could be deemed forward-looking statements and are often characterized by the use of words such as "believes," "expects," "estimates," "projects," "may," "will," "intends," "plans" or "anticipates," or by discussions of strategy, plans or intentions. In this press release, forward-looking information relates to covenant compliance, pricing trends, cost savings, production rates and other similar matters. All forward-looking statements in this press release are made based on management's current expectations and estimates, which involve risks, uncertainties and other factors that could cause results to differ materially from those expressed in forward-looking statements. Among these factors are changes in overall economic conditions, the cyclical nature of the chemical industry, changes in demand for our products, changes in inventories at our customers and distributors, technological and product development risks, availability and cost of raw materials, competitors' actions, pricing and gross margin pressures, loss of key customers, order cancellations or reduced bookings, the timing and cost of planned capital expenditures, changes in manufacturing yields, control of costs and expenses, significant litigation, risks associated with acquisitions and dispositions, risks associated with our substantial leverage and restrictive covenants in our debt agreements, risks associated with our international operations, the threat or occurrence of international armed conflict and terrorist activities both in the United States and internationally, risks and costs associated with increased and new regulation of corporate governance and disclosure standards (including pursuant to Section 404 of the Sarbanes-Oxley Act of 2002), and risks involving environmental or other governmental regulation. Readers are cautioned not to place undue reliance on forward-looking statements. We assume no obligation to update such information.
