HOUSTON--(BUSINESS WIRE)--Kraton Performance Polymers, Inc. (NYSE:KRA), a leading global producer of styrenic block copolymers, announces improved financial results for the quarter and year ended December 31, 2009.

“During 2009, our sales volume into key applications such as automotive, consumer electronics/appliances and personal care applications declined commensurate with global economic conditions; however, as market conditions improved late in the third quarter and continued through the fourth quarter of 2009, our volume began to recover as well”

2009 FOURTH QUARTER HIGHLIGHTS

• Sales volume increased 16% to 61 kilotons
• Revenues increased 8% to $251 million
• Adjusted EBITDA improved 23% to $35 million, reflecting 14% of revenues
• Record sales of Isoprene Rubber Latex
• IPO of KRA raised $138 million of net proceeds
• IPO proceeds used to reduce debt by $100 million, bringing full-year debt reduction to $190 million
• Shutdown Pernis, the Netherlands facility, expected saving of $12 million in annual fixed costs
• Completed SAP/ERP global migration

“We are pleased to report solid and improving results in our fourth quarter of 2009. After a challenging nine months, given the effects a weak global economy had on our business, we are beginning to experience clear indications of volume recovery,” said Kevin M. Fogarty, president and chief executive officer. “The increase in revenues reflects higher sales in our Emerging Businesses, Advanced Materials, and Adhesives, Sealants and Coatings end-uses which were partially offset by lower sales in our Paving and Roofing end-use. Moreover, we believe these fourth quarter results also reflect the strength and resiliency of the Kraton brand, and the drive within our global organization to empower our customers with Kraton’s leading innovative products and application solutions.”

4Q 2009 versus 4Q 2008 Results

Revenues in the fourth quarter 2009 were $251 million, an 8 percent increase compared to fourth quarter 2008. The increase in revenues was the result of increased sales volume and changes in foreign currency exchange rates, offset by lower selling prices reflecting lower raw material costs. Sales volume in the fourth quarter of 2009 was 61 kilotons, an increase of 16 percent compared to fourth quarter 2008.

Adjusted EBITDA in the fourth quarter 2009 was $35 million, an increase of 23 percent compared to fourth quarter 2008. Adjusted EBITDA margin improved 170 basis points to 14 percent indicative of the operating leverage associated with higher sales volume and lower costs.

Fourth-quarter 2009 net loss was $(2) million or $(0.07) per diluted share, compared with fourth quarter 2008 net loss of $(7) million or $(0.36) per diluted share.

FY 2009 versus FY 2008 results

Revenues in 2009 were $968 million, a 21 percent decrease compared to 2008. The decrease in revenues was the result of lower sales volume due to the global economic conditions, lower selling prices reflecting lower raw material costs, and changes in foreign currency exchange rates. Full-year 2009 sales volume declined 17 percent to 260 kilotons, compared with 313 kilotons in 2008.

Adjusted EBITDA in 2009 was $91 million, a decrease of 40 percent compared to 2008. Adjusted EBITDA margin was 9 percent in 2009 compared to 12 percent in 2008.

Full-year 2009 net loss was $(0.3) million or $(0.01) per share, compared to full-year 2008 net income of $28 million or $1.46 per share.

Cash Flow

Cash provided by operating activities was $73 million in 2009, compared with $40 million in 2008. The improvement in cash flow from operations was largely due to lower working capital. Net capital expenditures in 2009 were $50 million, versus $24 million in 2008. The increase in 2009 reflects the company’s strategic investments in its global ERP system and the systems and operating control upgrades at its Belpre, Ohio facility. We applied $100 million of our IPO proceeds to reduce debt, which along with the buyback of a portion of our 8.125 percent senior subordinated notes and other debt repayments, resulted in a reduction in total indebtedness of $190 million during 2009.

“I am extremely proud of our entire Kraton organization,” said Fogarty. “By remaining focused on critical activities and strategic initiatives, we have positioned Kraton very well for the future. Although the global economic slow-down had an impact on our full-year results, we achieved notable strategic milestones, including the initial public offering of Kraton Performance Polymers, Inc., further strengthening our balance sheet and raising additional capital to fund future strategic growth. Lastly, the effectiveness of our ‘smart pricing strategies’, the sustainable cost reduction initiatives we have implemented, and the innovation pipeline we have prioritized around, demonstrate once again Kraton’s resiliency, one of our six core values.”

END-USE MARKET INFORMATION

Revenue in our Adhesives, Sealants and Coatings end-use market increased $9 million to $82 million in the fourth quarter of 2009 compared to 2008 and decreased $76 million to $297 million on a full-year basis.

“2009 revenue was down on a full-year basis due primarily to the general weak demand this end-use faced in the first half of the year in the wake of the global economic crisis,” said Fogarty. “However, the end-use did experience several positive trends during the year that are encouraging, including increased demand for non-woven adhesive applications such as for diapers and hygiene products, along with continued growth in commercial and specialty tapes and labels.”

Revenue in our Advanced Materials end-use market increased $12 million to $75 million in the fourth quarter of 2009 compared to 2008 and decreased $73 million to $282 million on full-year basis.

“During 2009, our sales volume into key applications such as automotive, consumer electronics/appliances and personal care applications declined commensurate with global economic conditions; however, as market conditions improved late in the third quarter and continued through the fourth quarter of 2009, our volume began to recover as well,” said Fogarty. “Likewise, we were pleased that the HSBC revenue in this end-use was up 20 percent in the fourth quarter of 2009 from a year ago as demand for consumer electronics and personal care items returned. We were also pleased to see innovation programs that were delayed during the first half of 2009 beginning to move forward by year end.”

Revenue in our Paving and Roofing end-use market decreased $18 million to $49 million in the fourth quarter of 2009 compared to 2008 and decreased $122 million to $243 million on a full-year basis. Roofing applications were lower due to the overall decline in construction activity, particularly in the commercial sector. The company also experienced a decline in its paving business, largely due to delays associated with the uncertainty with respect to the impact of the U.S. Government’s economic stimulus spending and due to budgetary constraints on state and local government spending.

Revenue in our Emerging Businesses end-use was $24 million in the fourth quarter of 2009 and $61 million for full-year 2009, representing an increase of $14 million and $26 million, respectively, compared to 2008. The steady increase in revenue throughout the year was due to the continued penetration of Kraton’s Isoprene Rubber (IR) and Isoprene Rubber Latex (IRL) products in applications such as surgical gloves and condoms.

“2009 represented a significant step forward for our IRL business,” said Fogarty. “Not only did we achieve record sales, but our supply capabilities also successfully demonstrated new elevated output levels necessary to meet our customers’ impressive demand growth.”

FOURTH QUARTER 2009 DEVELOPMENTS

• On December 16, 2009 we completed an initial public offering of common shares. Including the underwriters’ exercise of their over-allotment option in January 2010, we issued 11,181,200 shares of common stock at an offering price of $13.50 per share generating net proceeds of $138 million.
• On December 31, 2009, the company ceased production at its Pernis, the Netherlands, facility, which is expected to provide Kraton with annual cost savings of $12 million. The company will satisfy customer demand for IR with inventory currently on hand while it migrates production to another facility. The company accrued the costs associated with the exit in the third quarter of 2009. In January 2010, the company paid $8 million of the $10 million total cash costs associated with the exit, with the remaining balance scheduled to be paid by May 2010.
• In November 2009, the company amended and extended its revolving credit facility which increased the maximum borrowings from $75.5 million to $80.0 million and extended the maturity on $79.8 million of the facility from May 2011 to May 2013.
• In November 2009 we completed the ERP software systems migration utilizing a single global system, implementing best practices for our industry. In addition to providing increased reliability, the company anticipates ongoing cost savings of $5 million to $10 million will be achieved as a result of the new ERP system. Total cost for the ERP system was $18 million, of which $15 million is included in 2009 capital expenditures and $3 million is included in SG&A expenses in 2009.

OUTLOOK

“Although economic conditions around the globe seem to be improving, there remains a level of uncertainty as to how strong the economic recovery will be in the near-term,” said Fogarty. “That said, given the operating leverage momentum we created for the company in the latter part of 2009 resulting from smart pricing, fixed cost reductions, and productivity enhancement initiatives, we remain optimistic about the impact even modest economic recovery will have on our business results in 2010. Additionally, we will continue to drive Kraton top-line growth from commercializing our exciting innovation portfolio with our valued customers. As a result, we currently expect 2010 first-quarter sales volume will continue the double-digit growth trend experienced in the fourth quarter of 2009, as compared to the previous year’s applicable calendar quarter.”

USE OF NON-GAAP FINANCIAL MEASURES

This earnings release includes the use of both GAAP (generally accepted accounting principles) and non-GAAP financial measures. The non-GAAP financial measures are EBITDA, Adjusted EBITDA and LTM Bank EBITDA. In each case the most directly comparable GAAP financial measure is net income/loss. A table included in this earnings release reconciles these non-GAAP financial measures with the most directly comparable GAAP financial measure.

We consider EBITDA and Adjusted EBITDA important supplemental measures of our performance and believe they are frequently used by investors and other interested parties in the evaluation of companies in our industry. EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our results under GAAP in the United States. EBITDA and Adjusted EBITDA presented in this earnings release may differ from amounts calculated by us under our debt instruments.

We have presented in a table at the end of this earnings release LTM Bank EBITDA calculated under our senior credit facility. We consider LTM Bank EBITDA to be an important measure in calculating compliance with the covenants contained in that facility.

CONFERENCE CALL AND WEBCAST INFORMATION

Kraton has scheduled a conference call on Thursday March 4, 2010 at 9:00 a.m. (Eastern Time) to discuss fourth quarter and full-year 2009 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 left side of the Investor Relations page. Participating on the call from Kraton will be Kevin M. Fogarty, president and chief executive officer; Stephen E. Tremblay, chief financial officer; and David A. Bradley, chief operating officer.

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 #: 888-577-8992. International dial-in #: 312-470-7060.

For those unable to listen to the live call, a replay will be available beginning at approximately 11:00 a.m. (Eastern Time) on March 4, 2010 through 11:59 p.m. Eastern Time on March 18, 2010. 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 left side of the Investor Relations page. To hear a telephonic replay of the call, dial 866-492-3861 and International callers dial 203-369-1748.

ABOUT KRATON

Kraton Performance Polymers, Inc., through its operating subsidiary Kraton Polymers LLC and its subsidiaries, is a leading global producer of engineered polymers and one of the world’s largest producers of styrenic block copolymers (SBCs), a family of products whose chemistry was pioneered by the company more than 40 years ago. 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, roofing and footwear products. The company, offers approximately 800 products to more than 700 customers in over 60 countries worldwide, is the only SBC producer with manufacturing and service capabilities on four continents. We manufacture products at five plants globally, including our flagship plant in Belpre, Ohio, the largest and most diversified SBC plant in the world, as well as plants in Germany, France, Brazil, and Japan. The plant in Japan is operated by an unconsolidated manufacturing joint venture. For more information on the company, please visit www.kraton.com.

Kraton, the Kraton logo and design, and the "Giving Innovators their Edge" tagline are all trademarks of Kraton Performance Polymers, Inc.

Forward Looking Statements

This press release includes forward-looking statements that reflect our plans, beliefs, expectations and current views with respect to, among other things, future events and financial performance. Forward-looking statements are often characterized by the use of words such as “believes,” “estimates,” “expects,” “projects,” “may,” “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 actual results to differ materially from those expressed in forward-looking statements. Among these factors are conditions in the global economy and capital markets, our dependence on LyondellBasell, Shell Chemicals and other suppliers to perform their obligations to us, failure of our suppliers to perform their obligations under long-term supply agreements, or our inability to replace or renew these agreements when they expire, which could increase our cost for these materials and interrupt production, limited availability or increases in prices of raw materials used in our business, our substantial level of indebtedness and the operating and financial restrictions imposed by our debt instruments and related indentures, competitive pressures in the specialty chemicals industry, our ability to continue technological innovation and successful commercial introduction of new products, our ability to protect intellectual property and other proprietary information, losses due to lawsuits arising out of intellectual property infringement and product liability claims, losses due to lawsuits arising out of environmental damage or personal injuries associated with chemical manufacturing, compliance with extensive environmental, health and safety laws, including regulation of our employees’ exposure to butadiene, which could require material expenditures or changes in our operations, the risk of accidents that could disrupt our operations or expose us to significant losses or liabilities, governmental regulations and trade restrictions, exposure to interest rate and currency fluctuations, acts of war or terrorism in the United States or worldwide, political or financial instability in the countries where our goods are manufactured and sold, and other risks and uncertainties described in this press release and our other reports and documents. Readers are cautioned not to place undue reliance on forward-looking statements. We assume no obligation to update such information. Further information concerning issues that could materially affect financial performance related to forward-looking statements can be found in Kraton’s periodic filings with the Securities and Exchange Commission.