Kraton Corporation Announces Second Quarter 2021 Results
Kraton Corporation (NYSE: KRA) reported a consolidated net income of $38.4 million for Q2 2021, a significant recovery from a net loss of $7.1 million in Q2 2020. Revenue soared to $493.6 million, driven by higher sales volumes and price increases. Adjusted EBITDA fell 11.1% to $61.8 million, impacted by $16.9 million in turnaround costs in France. The Polymer segment saw operating income rise to $42 million, while Chemical segment Adjusted EBITDA surged 126.2% to $35.5 million. Consolidated debt decreased by $14.1 million.
- Consolidated net income of $38.4 million compared to a net loss of $7.1 million in Q2 2020.
- Revenue increased to $493.6 million, a significant rise due to higher sales volumes and price adjustments.
- Polymer segment operating income rose to $42 million from $16.8 million in Q2 2020.
- Chemical segment Adjusted EBITDA increased by 126.2% to $35.5 million.
- Consolidated debt reduced by $14.1 million.
- Adjusted EBITDA decreased by 11.1% to $61.8 million, largely due to turnaround costs of $16.9 million.
- Polymer segment Adjusted EBITDA fell by 51.1% to $26.3 million, impacted by inflation in raw material costs.
HOUSTON, July 28, 2021 /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, 2021.
SECOND QUARTER 2021 SUMMARY
- Consolidated net income of
$38.4 million , compared to consolidated net loss of$7.1 million in the second quarter of 2020. - Adjusted EBITDA(1) of
$61.8 million , down$7.7 million or11.1% , compared to the second quarter of 2020. - The
$7.7 million decline in Adjusted EBITDA(1) reflects$16.9 million of costs associated with a significant turnaround at the Berre, France, site. - Polymer segment operating income of
$42.0 million , compared to$16.8 million in the second quarter of 2020, and Adjusted EBITDA(1) of$26.3 million , down$27.5 million or51.1% compared to$53.8 million in the second quarter of 2020. - The
$27.5 million decline in Adjusted EBITDA(1) reflects$16.9 million of costs associated with the aforementioned turnaround, higher raw materials costs, and the benefit of favorable raw material trends in the year ago quarter, partially offset by improved demand fundamentals and higher sales volumes. - Chemical segment operating income of
$22.0 million , compared to an operating loss of$3.9 million in the second quarter of 2020, and Adjusted EBITDA(1) of$35.5 million , up126.2% compared to$15.7 million in the second quarter of 2020. - Adjusted EBITDA(1) increase reflects factors including higher sales volumes associated with improved demand and continued favorable market fundamentals resulting in higher average selling prices, partially offset by higher costs for raw materials.
- Reduced consolidated debt during the quarter by
$14.1 million and consolidated net debt(1) by$11.5 million , including the unfavorable effect of foreign currency(1) of$6.3 million .
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||
(In thousands, except percentages and per share amounts) | |||||||||||||||
Revenue | $ | 493,623 | $ | 355,679 | $ | 930,894 | $ | 782,948 | |||||||
Polymer segment operating income | $ | 41,968 | $ | 16,762 | $ | 81,827 | $ | 34,687 | |||||||
Chemical segment operating income (loss) | $ | 22,039 | $ | (3,931) | $ | 35,553 | $ | 6,385 | |||||||
Consolidated net income (loss) | $ | 38,351 | $ | (7,081) | $ | 72,944 | $ | 201,939 | |||||||
Adjusted EBITDA (non-GAAP)(1)(3) | $ | 61,820 | $ | 69,536 | $ | 129,539 | $ | 147,415 | |||||||
Adjusted EBITDA margin (non-GAAP)(2)(3) | 12.5 | % | 19.6 | % | 13.9 | % | 18.8 | % | |||||||
Diluted earnings (loss) per share | $ | 1.11 | $ | (0.25) | $ | 2.14 | $ | 6.20 | |||||||
Adjusted diluted earnings per share (non-GAAP)(1) | $ | 0.32 | $ | 0.30 | $ | 0.86 | $ | 0.57 | |||||||
____________________________________ | |
(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. Adjusted EBITDA margin reflects approximately 340 and 210 basis points reduction for costs associated with the Berre turnaround for the three and six months ended June 30, 2021, respectively. |
(3) | Includes |
"We are pleased with our financial results for the second quarter of 2021, which were in line with our overall expectations. On a consolidated basis, second quarter Adjusted EBITDA was
Second quarter 2021 Adjusted EBITDA for the Polymer segment was
Chemical segment Adjusted EBITDA for the second quarter of 2021 was
"As evidence of progress in continuing to promote responsible and sustainable business practices throughout our organization, we are proud to note that Kraton recently achieved a Platinum rating for our sustainability management system from EcoVadis. The Platinum rating is the highest distinction in the EcoVadis supplier sustainability rating structure, and the Platinum rating places Kraton in the top one percent of all companies evaluated in its sector," said Fogarty. "In terms of innovation-based products that are facilitating the circular economy, during the second quarter, we continued to see favorable customer response and positive momentum for our REvolutionTM and CirKular+TM platforms that are addressing growing market needs for sustainable solutions. Moreover, Kraton's CirKular+ additives recently received Critical Guidance Recognition from the Association of Plastics Recyclers in recognition of Kraton's ongoing commitment to provide sustainable, high-performance solutions to address the plastics industry's needs for design recyclability," added Fogarty.
"Our expectations for the balance of 2021 remain positive. We currently expect demand trends to remain favorable, and with continued implementation of our Price Right strategy expected to address raw material and logistics price increases, we anticipate meaningful margin improvement over the course of the third and fourth quarters. As we have now successfully completed the Berre turnaround, with costs known, and with better visibility into activity levels in the important summer paving season as we move into the third quarter, we now expect Adjusted EBITDA for the full-year 2021 to fall within the range of
Polymer Segment
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||
(In thousands, except percentages) | |||||||||||||||
Performance Products | $ | 177,154 | $ | 118,339 | $ | 305,099 | $ | 237,099 | |||||||
Specialty Polymers | 101,069 | 76,305 | 197,808 | 154,222 | |||||||||||
Cariflex(1) | — | — | — | 36,930 | |||||||||||
Isoprene Rubber(1) | (26) | 8,744 | 15,930 | 15,603 | |||||||||||
Other | 249 | 464 | 759 | 378 | |||||||||||
Polymer Segment Revenue | $ | 278,446 | $ | 203,852 | $ | 519,596 | $ | 444,232 | |||||||
Operating income | $ | 41,968 | $ | 16,762 | $ | 81,827 | $ | 34,687 | |||||||
Adjusted EBITDA (non-GAAP)(1)(2) | $ | 26,321 | $ | 53,845 | $ | 63,786 | $ | 105,014 | |||||||
Adjusted EBITDA margin (non-GAAP)(3) | 9.5 | % | 26.4 | % | 12.3 | % | 23.6 | % | |||||||
________________________________________ | |
(1) | Our Cariflex revenue includes sales through March 6, 2020. We continue to sell Isoprene Rubber to Daelim Industrial Co, Ltd. ("Daelim") under the Isoprene Rubber Supply Agreement ("IRSA"). Sales under the IRSA are transacted at cost and include the amortization of non-cash deferred income of |
(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. Adjusted EBITDA margin reflects approximately 600 and 380 basis points reduction for costs associated with the Berre turnaround for the three and six months ended June 30, 2021, respectively. |
Q2 2021 VERSUS Q2 2020 RESULTS
Revenue for the Polymer segment was
Polymer Segment Sales Volume % Change | Three Months Ended June 30, 2021 | |
Performance Products | 12.6 | % |
Specialty Polymers | 14.6 | % |
Isoprene Rubber | (100.0) | % |
Total | 10.9 | % |
Sales volumes of 83.8 kilotons for the three months ended June 30, 2021 increased
For the three months ended June 30, 2021, the Polymer segment generated Adjusted EBITDA (non-GAAP) of
Chemical Segment
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||
(In thousands, except percentages) | |||||||||||||||
Adhesives | $ | 74,330 | $ | 60,993 | $ | 146,056 | $ | 125,888 | |||||||
Performance Chemicals | 126,164 | 84,848 | 237,339 | 195,590 | |||||||||||
Tires | 14,683 | 5,986 | 27,903 | 17,238 | |||||||||||
Chemical Segment Revenue | $ | 215,177 | $ | 151,827 | $ | 411,298 | $ | 338,716 | |||||||
Operating income (loss) | $ | 22,039 | $ | (3,931) | $ | 35,553 | $ | 6,385 | |||||||
Adjusted EBITDA (non-GAAP)(1) | $ | 35,499 | $ | 15,691 | $ | 65,753 | $ | 42,401 | |||||||
Adjusted EBITDA margin (non-GAAP)(2) | 16.5 | % | 10.3 | % | 16.0 | % | 12.5 | % | |||||||
____________________________________ | |
(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. |
Q2 2021 VERSUS Q2 2020 RESULTS
Revenue for the Chemical segment was
Chemical Segment Sales Volume % Change | Three Months Ended June 30, 2021 | |
Adhesives | 17.4 | % |
Performance Chemicals | 37.5 | % |
Tires(1) | 108.0 | % |
Total | 32.3 | % |
____________________________________ | |
(1) | Tires volumes are less than |
Sales volumes were 115.3 kilotons for the three months ended June 30, 2021, an increase of 28.1 kilotons, or
For the three months ended June 30, 2021, the Chemical segment generated
CASH FLOW AND CAPITAL STRUCTURE
During the second quarter of 2021, we reduced consolidated debt by
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, 2021 | March 31, 2021 | December 31, 2020 | |||||||||
(In thousands) | |||||||||||
Kraton debt | $ | 848,704 | $ | 859,334 | $ | 860,360 | |||||
KFPC loans(1)(2) | 80,255 | 83,771 | 89,733 | ||||||||
Consolidated debt | 928,959 | 943,105 | 950,093 | ||||||||
Kraton cash | 56,371 | 59,220 | 82,804 | ||||||||
KFPC cash(1)(3) | 1,761 | 1,561 | 3,097 | ||||||||
Consolidated cash | 58,132 | 60,781 | 85,901 | ||||||||
Consolidated net debt | $ | 870,827 | $ | 882,324 | $ | 864,192 | |||||
Effect of foreign currency on consolidated net debt | 13,918 | 20,186 | |||||||||
Consolidated net debt, excluding effect of foreign currency | $ | 884,745 | $ | 902,510 | |||||||
_____________________________________ | |
(1) | Kraton Formosa Polymers Corporation ("KFPC") joint venture, located in Mailiao, Taiwan, which we own a |
(2) | KFPC executed the KFPC Revolving 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. |
(3) | Cash at our KFPC joint venture. |
OUTLOOK
During the second quarter of 2021, we saw a continuation of favorable global demand fundamentals across the majority of our end markets. While we remain mindful of the potential for COVID-19 to adversely impact global demand in the second half of 2021, we currently expect demand trends to remain positive. We expect further realization of price increases over the course of the third and fourth quarters, and therefore, we expect these price increases to contribute to unit margin improvement for both our Polymer and Chemical segments, compared to the first half of 2021.
As a result of the successful completion of the significant statutory turnaround at our Berre, France, site, during the second quarter, with costs known, and given our current expectations for the 2021 paving and roofing season, as well as for overall demand trends as we move into the third quarter of the year, we now expect Adjusted EBITDA for the full year to fall in the range of
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 restructuring costs, costs associated with extinguishment of debt, and the spread between FIFO and ECRC, as certain of these items are out of our control and/or cannot be reasonably predicted. Accordingly, a reconciliation of the Adjusted EBITDA guidance to the corresponding U.S. GAAP measure 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 used are EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Diluted Earnings 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 first-in-first-out ("FIFO") 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, 2020.
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, Adjusted EBITDA excluding Cariflex, 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 prepare Adjusted EBITDA excluding Cariflex by eliminating from Adjusted EBITDA Cariflex sales, cost of sales, and direct specific fixed costs incurred from January 1, 2020 through March 6, 2020. 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, Adjusted Gross Profit Per Ton, and Adjusted Gross Profit Per Ton, excluding the Berre turnaround: 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 further calculate Adjusted Gross Profit Per Ton, excluding the Berre turnaround, by deducting out of gross profit costs associated with the Berre turnaround. 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 Per Share: We prepare Adjusted Diluted Earnings per Share by eliminating from Diluted Earnings 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 29, 2021 at 9:00 a.m. (Eastern Time) to discuss second quarter 2021 financial results. Kraton invites you to listen to the conference call, which will be broadcast live over the internet and will be available 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 29, 2021 through 1:59 a.m. (Eastern Time) on August 12, 2021. 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 800-391-9846 (toll free).
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, roads 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, 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," "reflect," "remain," "expects," "projects," "may," "intends," "plans," "on track", "forsees", "future," 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 national and global economy and on our customers, suppliers, employees, business and results of operations, our expectations for our business demand, margin improvements, and growth in 2021, market factors and transportation and logistics trends, our 2021 Adjusted EBITDA, the timing of the incurrence of costs associated with our Berre, France, turnaround, the impact of our diversified portfolio and broad geographic exposure, the impact of and expected realization of announced and future price increases, continued momentum for our REvolution and CirKular+ platforms, 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 energy, transportation, and logistics costs; the potential for charges related to our goodwill or other assets; 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, | ||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||
Revenue | $ | 493,623 | $ | 355,679 | $ | 930,894 | $ | 782,948 | |||||||
Cost of goods sold | 354,098 | 262,635 | 655,336 | 570,704 | |||||||||||
Gross profit | 139,525 | 93,044 | 275,558 | 212,244 | |||||||||||
Operating expenses: | |||||||||||||||
Research and development | 9,723 | 9,912 | 19,243 | 20,704 | |||||||||||
Selling, general, and administrative | 34,037 | 38,402 | 75,316 | 87,460 | |||||||||||
Depreciation and amortization | 31,716 | 31,342 | 63,273 | 62,515 | |||||||||||
Loss on disposal of fixed assets | 42 | 557 | 346 | 493 | |||||||||||
Operating income | 64,007 | 12,831 | 117,380 | 41,072 | |||||||||||
Other income (expense) | (2,493) | 251 | (1,685) | 578 | |||||||||||
Disposition and exit of business activities | — | (25) | — | 175,189 | |||||||||||
Loss on extinguishment of debt | — | (141) | — | (14,095) | |||||||||||
Earnings of unconsolidated joint venture | 135 | 128 | 255 | 229 | |||||||||||
Interest expense, net | (10,417) | (13,466) | (21,364) | (30,927) | |||||||||||
Income (loss) before income taxes | 51,232 | (422) | 94,586 | 172,046 | |||||||||||
Income tax benefit (expense) | (12,881) | (6,659) | (21,642) | 29,893 | |||||||||||
Consolidated net income (loss) | 38,351 | (7,081) | 72,944 | 201,939 | |||||||||||
Net income attributable to noncontrolling interest | (1,940) | (887) | (3,304) | (1,821) | |||||||||||
Net income (loss) attributable to Kraton | $ | 36,411 | $ | (7,968) | $ | 69,640 | $ | 200,118 | |||||||
Earnings (loss) per common share: | |||||||||||||||
Basic | $ | 1.13 | $ | (0.25) | $ | 2.17 | $ | 6.29 | |||||||
Diluted | $ | 1.11 | $ | (0.25) | $ | 2.14 | $ | 6.20 | |||||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 32,146 | 31,782 | 32,037 | 31,698 | |||||||||||
Diluted | 32,679 | 31,782 | 32,569 | 32,133 | |||||||||||
KRATON CORPORATION | |||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(In thousands, except par value) | |||||||
June 30, 2021 | December 31, 2020 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 58,132 | $ | 85,901 | |||
Receivables, net of allowance for doubtful accounts of | 257,567 | 180,258 | |||||
Inventories of products, net | 364,329 | 318,885 | |||||
Inventories of materials and supplies, net | 34,658 | 34,164 | |||||
Prepaid expenses | 16,202 | 11,844 | |||||
Other current assets | 17,150 | 15,338 | |||||
Total current assets | 748,038 | 646,390 | |||||
Property, plant, and equipment, net of accumulated depreciation of | 937,544 | 942,703 | |||||
Goodwill | 374,089 | 375,061 | |||||
Intangible assets, net of accumulated amortization of | 276,166 | 294,734 | |||||
Investment in unconsolidated joint venture | 12,201 | 12,723 | |||||
Deferred income taxes | 79,531 | 83,534 | |||||
Long-term operating lease assets, net | 86,274 | 84,042 | |||||
Other long-term assets | 21,019 | 21,770 | |||||
Total assets | $ | 2,534,862 | $ | 2,460,957 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Current portion of long-term debt | $ | 80,974 | $ | 72,347 | |||
Accounts payable-trade | 211,571 | 176,229 | |||||
Other payables and accruals | 166,981 | 167,364 | |||||
Due to related party | 16,086 | 17,147 | |||||
Total current liabilities | 475,612 | 433,087 | |||||
Long-term debt, net of current portion | 836,804 | 865,516 | |||||
Deferred income taxes | 128,191 | 125,559 | |||||
Long-term operating lease liabilities | 70,748 | 67,898 | |||||
Deferred income | 140,375 | 151,329 | |||||
Other long-term liabilities | 157,217 | 168,566 | |||||
Total liabilities | 1,808,947 | 1,811,955 | |||||
Equity: | |||||||
Kraton stockholders' equity: | |||||||
Preferred stock, | — | — | |||||
Common stock, | 321 | 319 | |||||
Additional paid in capital | 407,189 | 401,445 | |||||
Retained earnings | 309,038 | 240,464 | |||||
Accumulated other comprehensive loss | (38,947) | (37,865) | |||||
Total Kraton stockholders' equity | 677,601 | 604,363 | |||||
Noncontrolling interest | 48,314 | 44,639 | |||||
Total equity | 725,915 | 649,002 | |||||
Total liabilities and equity | $ | 2,534,862 | $ | 2,460,957 | |||
KRATON CORPORATION | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(Unaudited) | |||||||
(In thousands) | |||||||
Six Months Ended June 30, | |||||||
2021 | 2020 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||
Consolidated net income | $ | 72,944 | $ | 201,939 | |||
Adjustments to reconcile consolidated net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 63,273 | 62,515 | |||||
Lease amortization | 12,082 | 12,428 | |||||
Amortization of debt original issue discount | — | 148 | |||||
Amortization of debt issuance costs | 1,240 | 1,724 | |||||
Amortization of deferred income | (8,103) | (7,799) | |||||
Loss on disposal of property, plant, and equipment | 346 | 108 | |||||
Loss on extinguishment of debt | — | 14,095 | |||||
Earnings from unconsolidated joint venture, net of dividends received | 211 | 279 | |||||
Deferred income tax (benefit) provision | 2,693 | (66,441) | |||||
Release of uncertain tax positions | — | (3,316) | |||||
Gain on disposition and exit of business activities | — | (175,189) | |||||
Share-based compensation | 5,519 | 4,745 | |||||
Decrease (increase) in: | |||||||
Accounts receivable | (77,466) | 1,859 | |||||
Inventories of products, materials, and supplies | (50,008) | (36,024) | |||||
Other assets | (6,092) | (4,366) | |||||
Increase (decrease) in: | |||||||
Accounts payable-trade | 40,609 | (14,765) | |||||
Other payables and accruals | (14,703) | 30,767 | |||||
Other long-term liabilities | (9,589) | (2,824) | |||||
Due to related party | 143 | (888) | |||||
Net cash provided by operating activities | 33,099 | 18,995 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
Kraton purchase of property, plant, and equipment | (43,012) | (39,122) | |||||
KFPC purchase of property, plant, and equipment | (345) | (3,224) | |||||
Purchase of software and other intangibles | (3,938) | (3,456) | |||||
Cash proceeds (payments) from disposition and exit of business activities | (876) | 510,500 | |||||
Net cash provided by (used in) investing activities | (48,171) | 464,698 | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
Proceeds from debt | 43,000 | 77,000 | |||||
Repayments of debt | (43,000) | (437,174) | |||||
KFPC proceeds from debt | 32,004 | 49,967 | |||||
KFPC repayments of debt | (42,157) | (59,769) | |||||
Finance lease payments | (616) | (88) | |||||
Purchase of treasury stock | (4,931) | (744) | |||||
Proceeds from the exercise of stock options | 4,092 | — | |||||
Settlement of interest rate swap | — | (1,295) | |||||
Debt issuance costs | — | (1,234) | |||||
Net cash used in financing activities | (11,608) | (373,337) | |||||
Effect of exchange rate differences on cash | (1,089) | (8,024) | |||||
Net increase (decrease) in cash and cash equivalents | (27,769) | 102,332 | |||||
Cash and cash equivalents, beginning of period | 85,901 | 35,033 | |||||
Cash and cash equivalents, end of period | $ | 58,132 | $ | 137,365 | |||
KRATON CORPORATION | |||||||||||||||||||||||
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO KRATON AND OPERATING INCOME TO NON- | |||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | ||||||||||||||||||||||
Polymer | Chemical | Total | Polymer | Chemical | Total | ||||||||||||||||||
Net income (loss) attributable to Kraton | $ | 36,411 | $ | (7,968) | |||||||||||||||||||
Net income attributable to noncontrolling interest | 1,940 | 887 | |||||||||||||||||||||
Consolidated net income (loss) | 38,351 | (7,081) | |||||||||||||||||||||
Add (deduct): | |||||||||||||||||||||||
Income tax expense | 12,881 | 6,659 | |||||||||||||||||||||
Interest expense, net | 10,417 | 13,466 | |||||||||||||||||||||
Earnings of unconsolidated joint venture | (135) | (128) | |||||||||||||||||||||
Loss on extinguishment of debt | — | 141 | |||||||||||||||||||||
Other (income) expense | 2,493 | (251) | |||||||||||||||||||||
Disposition and exit of business activities | — | 25 | |||||||||||||||||||||
Operating income (loss) | $ | 41,968 | $ | 22,039 | 64,007 | $ | 16,762 | $ | (3,931) | 12,831 | |||||||||||||
Add (deduct): | |||||||||||||||||||||||
Depreciation and amortization | 12,776 | 18,940 | 31,716 | 12,948 | 18,394 | 31,342 | |||||||||||||||||
Disposition and exit of business activities | — | — | — | (25) | — | (25) | |||||||||||||||||
Other income (expense) | (3,015) | 522 | (2,493) | (16) | 267 | 251 | |||||||||||||||||
Loss on extinguishment of debt | — | — | — | (141) | — | (141) | |||||||||||||||||
Earnings of unconsolidated joint venture | 135 | — | 135 | 128 | — | 128 | |||||||||||||||||
EBITDA (a) | 51,864 | 41,501 | 93,365 | 29,656 | 14,730 | 44,386 | |||||||||||||||||
Add (deduct): | |||||||||||||||||||||||
Transaction, acquisition related costs, | (103) | 780 | 677 | 1,551 | 468 | 2,019 | |||||||||||||||||
Disposition and exit of business activities (c) | — | — | — | 25 | — | 25 | |||||||||||||||||
Loss on extinguishment of debt | — | — | — | 141 | — | 141 | |||||||||||||||||
Non-cash compensation expense | 2,595 | — | 2,595 | 1,897 | — | 1,897 | |||||||||||||||||
Spread between FIFO and ECRC | (28,035) | (6,782) | (34,817) | 20,575 | 493 | 21,068 | |||||||||||||||||
Adjusted EBITDA | $ | 26,321 | $ | 35,499 | $ | 61,820 | $ | 53,845 | $ | 15,691 | $ | 69,536 | |||||||||||
_____________________________________________ | |
(a) | Included in EBITDA are Isoprene Rubber sales to Daelim under the IRSA. Sales under the IRSA are transacted at cost and include the amortization of non-cash deferred income of |
(b) | Charges related to the evaluation of acquisition transactions, severance expenses, and other restructuring related charges. |
(c) | Reflects adjustment to assets disposed of in the Cariflex transaction. |
Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | ||||||||||||||||||||||
Polymer | Chemical | Total | Polymer | Chemical | Total | ||||||||||||||||||
Net income attributable to Kraton | $ | 69,640 | $ | 200,118 | |||||||||||||||||||
Net income attributable to noncontrolling interest | 3,304 | 1,821 | |||||||||||||||||||||
Consolidated net income | 72,944 | 201,939 | |||||||||||||||||||||
Add (deduct): | |||||||||||||||||||||||
Income tax (benefit) expense | 21,642 | (29,893) | |||||||||||||||||||||
Interest expense, net | 21,364 | 30,927 | |||||||||||||||||||||
Earnings of unconsolidated joint venture | (255) | (229) | |||||||||||||||||||||
Loss on extinguishment of debt | — | 14,095 | |||||||||||||||||||||
Other (income) expense | 1,685 | (578) | |||||||||||||||||||||
Disposition and exit of business activities | — | (175,189) | |||||||||||||||||||||
Operating income | $ | 81,827 | $ | 35,553 | 117,380 | $ | 34,687 | $ | 6,385 | 41,072 | |||||||||||||
Add (deduct): | |||||||||||||||||||||||
Depreciation and amortization | 25,600 | 37,673 | 63,273 | 26,295 | 36,220 | 62,515 | |||||||||||||||||
Disposition and exit of business activities | — | — | — | 175,189 | — | 175,189 | |||||||||||||||||
Other income (expense) | (2,733) | 1,048 | (1,685) | 39 | 539 | 578 | |||||||||||||||||
Loss on extinguishment of debt | — | — | — | (14,095) | — | (14,095) | |||||||||||||||||
Earnings of unconsolidated joint venture | 255 | — | 255 | 229 | — | 229 | |||||||||||||||||
EBITDA (a) | 104,949 | 74,274 | 179,223 | 222,344 | 43,144 | 265,488 | |||||||||||||||||
Add (deduct): | |||||||||||||||||||||||
Transaction, acquisition related costs, | 2,228 | 2,752 | 4,980 | 11,699 | 1,230 | 12,929 | |||||||||||||||||
Disposition and exit of business activities | — | — | — | (175,189) | — | (175,189) | |||||||||||||||||
Loss on extinguishment of debt | — | — | — | 14,095 | — | 14,095 | |||||||||||||||||
Non-cash compensation expense | 5,519 | — | 5,519 | 4,745 | — | 4,745 | |||||||||||||||||
Spread between FIFO and ECRC | (48,910) | (11,273) | (60,183) | 27,320 | (1,973) | 25,347 | |||||||||||||||||
Adjusted EBITDA | $ | 63,786 | $ | 65,753 | $ | 129,539 | $ | 105,014 | $ | 42,401 | $ | 147,415 | |||||||||||
Adjusted EBITDA excluding Cariflex | $ | 63,786 | $ | 65,753 | $ | 129,539 | $ | 94,670 | $ | 42,401 | $ | 137,071 | |||||||||||
______________________________________ | |
(a) | Included in EBITDA are Isoprene Rubber sales to Daelim under the IRSA. Sales under the IRSA are transacted at cost and include the amortization of non-cash deferred income of |
(b) | Charges related to the evaluation of acquisition transactions, severance expenses, and other restructuring related charges. |
KRATON CORPORATION | |||||||||||||||
RECONCILIATION OF DILUTED EARNINGS PER SHARE TO ADJUSTED DILUTED EARNINGS PER SHARE | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||
Diluted Earnings (Loss) Per Share | $ | 1.11 | $ | (0.25) | $ | 2.14 | $ | 6.20 | |||||||
Transaction, acquisition related costs, restructuring, and | 0.02 | 0.05 | 0.12 | 0.31 | |||||||||||
Disposition and exit of business activities | — | 0.02 | — | (4.94) | |||||||||||
Loss on extinguishment of debt | — | — | — | 0.34 | |||||||||||
Tax restructuring | — | (0.09) | — | (2.03) | |||||||||||
Spread between FIFO and ECRC | (0.81) | 0.57 | (1.40) | 0.69 | |||||||||||
Adjusted Diluted Earnings Per Share (non-GAAP) | $ | 0.32 | $ | 0.30 | $ | 0.86 | $ | 0.57 | |||||||
____________________________________________ | |
(a) | Charges related to the evaluation of acquisition transactions, severance expenses, and other restructuring related charges. |
POLYMER SEGMENT RECONCILIATION OF GROSS PROFIT TO NON-GAAP FINANCIAL MEASURES (Unaudited) (In thousands) | |||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||
Gross profit | $ | 79,436 | $ | 57,845 | $ | 161,421 | $ | 126,576 | |||||||
Add (deduct): | |||||||||||||||
Transaction, acquisition related costs, restructuring, and | — | — | — | 387 | |||||||||||
Non-cash compensation expense | 130 | 114 | 276 | 285 | |||||||||||
Spread between FIFO and ECRC | (28,035) | 20,575 | (48,910) | 27,320 | |||||||||||
Adjusted gross profit (non-GAAP) | $ | 51,531 | $ | 78,534 | $ | 112,787 | $ | 154,568 | |||||||
Sales volume (kilotons) | 83.8 | 75.5 | 158.5 | 146.3 | |||||||||||
Adjusted gross profit per ton (non-GAAP)(a) | $ | 615 | $ | 1,040 | $ | 711 | $ | 1,056 | |||||||
______________________________________ | |
(a) | Adjusted gross profit per ton for the three months ended June 30, 2021, excluding |
For further information:
H. Gene Shiels
Director of Investor Relations
281 504-4886
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SOURCE Kraton Corporation
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