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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Kraton Corporation | NYSE:KRA | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 46.49 | 0 | 01:00:00 |
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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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20-0411521
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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15710 John F. Kennedy Blvd.
Suite 300
Houston, TX 77032
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281-504-4700
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(Address of principal executive offices, including zip code)
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(Registrant’s telephone number, including area code)
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Large accelerated filer:
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ý
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Accelerated filer:
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¨
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Non-accelerated filer:
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¨
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Smaller reporting company:
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¨
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Emerging growth company:
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o
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PART I. FINANCIAL INFORMATION
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Page
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PART II. OTHER INFORMATION
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Item 1.
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Condensed Consolidated Financial Statements.
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March 31, 2017
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|
December 31, 2016
|
||||
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(unaudited)
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|
||||
ASSETS
|
|
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|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
104,066
|
|
|
$
|
121,749
|
|
Receivables, net of allowances of $929 and $814
|
216,330
|
|
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200,860
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|
||
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
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|
|
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
|
|
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$
|
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
|
|
||
Commitments and contingencies (note 10)
|
|
|
|
||||
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
|
|
|
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
|
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Diluted
|
$
|
0.20
|
|
|
$
|
2.84
|
|
Weighted average common shares outstanding:
|
|
|
|
||||
Basic
|
30,430
|
|
|
30,026
|
|
||
Diluted
|
30,851
|
|
|
30,289
|
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
Net income attributable to Kraton
|
$
|
6,413
|
|
|
$
|
88,087
|
|
Other comprehensive income:
|
|
|
|
||||
Foreign currency translation adjustments, net of tax of $0
|
12,135
|
|
|
25,567
|
|
||
Unrealized gain (loss) on cash flow hedges, net of tax expense of $450 and benefit of $1,000
|
843
|
|
|
(2,260
|
)
|
||
Reclassification of gain on cash flow hedge
|
(41
|
)
|
|
—
|
|
||
Other comprehensive income, net of tax
|
12,937
|
|
|
23,307
|
|
||
Comprehensive income attributable to Kraton
|
19,350
|
|
|
111,394
|
|
||
Comprehensive income (loss) attributable to noncontrolling interest
|
(338
|
)
|
|
204
|
|
||
Consolidated comprehensive income
|
$
|
19,012
|
|
|
$
|
111,598
|
|
|
Common Stock
|
|
Additional Paid in Capital
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Loss
|
|
Total Kraton Stockholders' Equity
|
|
Noncontrolling Interest
|
|
Total Equity
|
||||||||||||||
Balance at December 31, 2015
|
$
|
306
|
|
|
$
|
349,871
|
|
|
$
|
147,131
|
|
|
$
|
(138,568
|
)
|
|
$
|
358,740
|
|
|
$
|
34,252
|
|
|
$
|
392,992
|
|
Net income (loss)
|
—
|
|
|
—
|
|
|
88,087
|
|
|
—
|
|
|
88,087
|
|
|
(542
|
)
|
|
87,545
|
|
|||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
23,307
|
|
|
23,307
|
|
|
746
|
|
|
24,053
|
|
|||||||
Retired treasury stock from employee tax withholdings
|
(1
|
)
|
|
(953
|
)
|
|
—
|
|
|
—
|
|
|
(954
|
)
|
|
—
|
|
|
(954
|
)
|
|||||||
Exercise of stock options
|
—
|
|
|
169
|
|
|
—
|
|
|
—
|
|
|
169
|
|
|
—
|
|
|
169
|
|
|||||||
Non-cash compensation related to equity awards
|
3
|
|
|
3,080
|
|
|
—
|
|
|
—
|
|
|
3,083
|
|
|
—
|
|
|
3,083
|
|
|||||||
Balance at March 31, 2016
|
$
|
308
|
|
|
$
|
352,167
|
|
|
$
|
235,218
|
|
|
$
|
(115,261
|
)
|
|
$
|
472,432
|
|
|
$
|
34,456
|
|
|
$
|
506,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Balance at December 31, 2016
|
$
|
310
|
|
|
$
|
361,682
|
|
|
$
|
254,439
|
|
|
$
|
(158,530
|
)
|
|
$
|
457,901
|
|
|
$
|
32,336
|
|
|
$
|
490,237
|
|
Net income (loss)
|
—
|
|
|
—
|
|
|
6,413
|
|
|
—
|
|
|
6,413
|
|
|
(2,224
|
)
|
|
4,189
|
|
|||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
12,937
|
|
|
12,937
|
|
|
1,886
|
|
|
14,823
|
|
|||||||
Retired treasury stock from employee tax withholdings
|
(1
|
)
|
|
(1,510
|
)
|
|
—
|
|
|
—
|
|
|
(1,511
|
)
|
|
—
|
|
|
(1,511
|
)
|
|||||||
Exercise of stock options
|
—
|
|
|
1,051
|
|
|
—
|
|
|
—
|
|
|
1,051
|
|
|
—
|
|
|
1,051
|
|
|||||||
Non-cash compensation related to equity awards
|
3
|
|
|
2,971
|
|
|
—
|
|
|
—
|
|
|
2,974
|
|
|
—
|
|
|
2,974
|
|
|||||||
Balance at March 31, 2017
|
$
|
312
|
|
|
$
|
364,194
|
|
|
$
|
260,852
|
|
|
$
|
(145,593
|
)
|
|
$
|
479,765
|
|
|
$
|
31,998
|
|
|
$
|
511,763
|
|
|
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
|
|
•
|
the useful lives of long-lived assets;
|
•
|
estimates of fair value for assets acquired and liabilities assumed in business combinations;
|
•
|
allowances for doubtful accounts and sales returns;
|
•
|
the valuation of derivatives, deferred tax assets, property, plant and equipment, intangible assets, inventory, investments, and share-based compensation; and
|
•
|
liabilities for employee benefit obligations, environmental matters, asset retirement obligations, income tax uncertainties, and other contingencies.
|
|
March 31, 2017
|
|
December 31, 2016
|
||||
|
(In thousands)
|
||||||
Inventories of products:
|
|
|
|
||||
Finished products
|
$
|
281,597
|
|
|
$
|
237,698
|
|
Work in progress
|
7,643
|
|
|
5,648
|
|
||
Raw materials
|
97,660
|
|
|
84,650
|
|
||
Total inventories of products
|
$
|
386,900
|
|
|
$
|
327,996
|
|
Intangible assets:
|
|
|
|
||||
Contractual agreements
|
$
|
258,592
|
|
|
$
|
258,646
|
|
Technology
|
145,756
|
|
|
145,320
|
|
||
Customer relationships
|
59,972
|
|
|
59,977
|
|
||
Tradenames/trademarks
|
78,039
|
|
|
77,666
|
|
||
Software
|
43,565
|
|
|
42,535
|
|
||
Intangible assets
|
585,924
|
|
|
584,144
|
|
||
Less accumulated amortization:
|
|
|
|
||||
Contractual agreements
|
25,537
|
|
|
20,757
|
|
||
Technology
|
46,749
|
|
|
44,698
|
|
||
Customer relationships
|
32,775
|
|
|
31,863
|
|
||
Tradenames/trademarks
|
26,933
|
|
|
25,363
|
|
||
Software
|
23,601
|
|
|
22,265
|
|
||
Total accumulated amortization
|
155,595
|
|
|
144,946
|
|
||
Intangible assets, net of accumulated amortization
|
$
|
430,329
|
|
|
$
|
439,198
|
|
Other payables and accruals:
|
|
|
|
||||
Employee related
|
$
|
23,520
|
|
|
$
|
33,947
|
|
Interest payable
|
21,952
|
|
|
10,135
|
|
||
Property, plant, and equipment accruals
|
20,149
|
|
|
26,260
|
|
||
Other
|
46,501
|
|
|
60,056
|
|
||
Total other payables and accruals
|
$
|
112,122
|
|
|
$
|
130,398
|
|
Other long-term liabilities:
|
|
|
|
||||
Pension and other post-retirement benefits
|
$
|
138,630
|
|
|
$
|
138,188
|
|
Other
|
33,057
|
|
|
32,151
|
|
||
Total other long-term liabilities
|
$
|
171,687
|
|
|
$
|
170,339
|
|
|
Cumulative Foreign Currency Translation
|
|
Net Unrealized Gain (Loss) on Cash Flow Hedges
|
|
Net Unrealized Loss on Net Investment Hedges
|
|
Benefit Plans Liability, Net of Tax
|
|
Total
|
||||||||||
|
(In thousands)
|
||||||||||||||||||
December 31, 2015
|
$
|
(65,995
|
)
|
|
$
|
—
|
|
|
$
|
(1,926
|
)
|
|
$
|
(70,647
|
)
|
|
$
|
(138,568
|
)
|
Other comprehensive income (loss) before reclassifications
|
25,567
|
|
|
(2,260
|
)
|
|
—
|
|
|
—
|
|
|
23,307
|
|
|||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Net other comprehensive income (loss) for the year
|
25,567
|
|
|
(2,260
|
)
|
|
—
|
|
|
—
|
|
|
23,307
|
|
|||||
March 31, 2016
|
$
|
(40,428
|
)
|
|
$
|
(2,260
|
)
|
|
$
|
(1,926
|
)
|
|
$
|
(70,647
|
)
|
|
$
|
(115,261
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2016
|
$
|
(72,731
|
)
|
|
$
|
515
|
|
|
$
|
(1,926
|
)
|
|
$
|
(84,388
|
)
|
|
$
|
(158,530
|
)
|
Other comprehensive income before reclassifications
|
12,135
|
|
|
843
|
|
|
—
|
|
|
—
|
|
|
12,978
|
|
|||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
—
|
|
|
(41
|
)
|
|
—
|
|
|
—
|
|
|
(41
|
)
|
|||||
Net other comprehensive income for the year
|
12,135
|
|
|
802
|
|
|
—
|
|
|
—
|
|
|
12,937
|
|
|||||
March 31, 2017
|
$
|
(60,596
|
)
|
|
$
|
1,317
|
|
|
$
|
(1,926
|
)
|
|
$
|
(84,388
|
)
|
|
$
|
(145,593
|
)
|
|
Three Months Ended March 31, 2017
|
|
Three Months Ended March 31, 2016
|
||||||||||||||||||
|
Net Income Attributable to Kraton
|
|
Weighted Average Shares Outstanding
|
|
Earnings Per Share
|
|
Net Income Attributable to Kraton
|
|
Weighted Average Shares Outstanding
|
|
Earnings Per Share
|
||||||||||
|
(In thousands, except per share data)
|
||||||||||||||||||||
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
As reported
|
$
|
6,413
|
|
|
31,032
|
|
|
|
|
$
|
88,087
|
|
|
30,710
|
|
|
|
||||
Amounts allocated to unvested restricted shares
|
(124
|
)
|
|
(602
|
)
|
|
|
|
(1,962
|
)
|
|
(684
|
)
|
|
|
||||||
Amounts available to common stockholders
|
6,289
|
|
|
30,430
|
|
|
$
|
0.21
|
|
|
86,125
|
|
|
30,026
|
|
|
$
|
2.87
|
|
||
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Amounts allocated to unvested restricted shares
|
124
|
|
|
602
|
|
|
|
|
1,962
|
|
|
684
|
|
|
|
||||||
Non participating share units
|
—
|
|
|
187
|
|
|
|
|
—
|
|
|
216
|
|
|
|
||||||
Stock options added under the treasury stock method
|
—
|
|
|
234
|
|
|
|
|
—
|
|
|
47
|
|
|
|
||||||
Amounts reallocated to unvested restricted shares
|
(123
|
)
|
|
(602
|
)
|
|
|
|
(1,945
|
)
|
|
(684
|
)
|
|
|
||||||
Amounts available to stockholders and assumed conversions
|
$
|
6,290
|
|
|
30,851
|
|
|
$
|
0.20
|
|
|
$
|
86,142
|
|
|
30,289
|
|
|
$
|
2.84
|
|
|
March 31, 2017
|
|
December 31, 2016
|
||||||||||||||||||||||||||||
|
Principal
|
|
Discount
|
|
Debt Issuance Costs
|
|
Total
|
|
Principal
|
|
Premium
|
|
Debt Issuance Costs
|
|
Total
|
||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||||||||
Term Loan
|
$
|
886,000
|
|
|
$
|
(22,497
|
)
|
|
$
|
(22,269
|
)
|
|
$
|
841,234
|
|
|
$
|
1,278,000
|
|
|
$
|
(34,085
|
)
|
|
$
|
(31,662
|
)
|
|
$
|
1,212,253
|
|
10.5% Senior Notes
|
440,000
|
|
|
(14,595
|
)
|
|
(15,849
|
)
|
|
409,556
|
|
|
440,000
|
|
|
(15,038
|
)
|
|
(16,329
|
)
|
|
408,633
|
|
||||||||
7.0% Senior Notes
|
400,000
|
|
|
—
|
|
|
(7,789
|
)
|
|
392,211
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
KFPC Loan Agreement
|
136,001
|
|
|
—
|
|
|
(233
|
)
|
|
135,768
|
|
|
115,854
|
|
|
—
|
|
|
(257
|
)
|
|
115,597
|
|
||||||||
Capital lease obligation
|
2,805
|
|
|
—
|
|
|
—
|
|
|
2,805
|
|
|
3,042
|
|
|
—
|
|
|
—
|
|
|
3,042
|
|
||||||||
Total debt
|
1,864,806
|
|
|
(37,092
|
)
|
|
(46,140
|
)
|
|
1,781,574
|
|
|
1,836,896
|
|
|
(49,123
|
)
|
|
(48,248
|
)
|
|
1,739,525
|
|
||||||||
Less current portion of total debt
|
28,192
|
|
|
—
|
|
|
—
|
|
|
28,192
|
|
|
41,825
|
|
|
—
|
|
|
—
|
|
|
41,825
|
|
||||||||
Long-term debt
|
$
|
1,836,614
|
|
|
$
|
(37,092
|
)
|
|
$
|
(46,140
|
)
|
|
$
|
1,753,382
|
|
|
$
|
1,795,071
|
|
|
$
|
(49,123
|
)
|
|
$
|
(48,248
|
)
|
|
$
|
1,697,700
|
|
|
Principal Payments
|
||
|
(In thousands)
|
||
April 1, 2017 through March 31, 2018
|
$
|
28,192
|
|
April 1, 2018 through March 31, 2019
|
27,871
|
|
|
April 1, 2019 through March 31, 2020
|
81,772
|
|
|
April 1, 2020 through March 31, 2021
|
182
|
|
|
April 1, 2021 through March 31, 2022
|
886,193
|
|
|
Thereafter
|
840,596
|
|
|
Total debt
|
$
|
1,864,806
|
|
•
|
Level 1—Inputs that are quoted prices (unadjusted) for identical assets or liabilities in active markets;
|
•
|
Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability, including:
|
•
|
Quoted prices for similar assets or liabilities in active markets
|
•
|
Quoted prices for identical or similar assets or liabilities in markets that are not active
|
•
|
Inputs other than quoted prices that are observable for the asset or liability
|
•
|
Inputs that are derived principally from or corroborated by observable market data by correlation or other means; and
|
•
|
Level 3—Inputs that are unobservable and reflect our assumptions used in pricing the asset or liability based on the best information available under the circumstances (e.g., internally derived assumptions surrounding the timing and amount of expected cash flows).
|
|
March 31, 2017
|
|
December 31, 2016
|
||||||||||||
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
||||||||
|
(In thousands)
|
||||||||||||||
Term Loan (significant other observable inputs – level 2)
|
$
|
886,000
|
|
|
$
|
900,951
|
|
|
$
|
1,278,000
|
|
|
$
|
1,293,975
|
|
10.5% Senior Notes (quoted prices in active market for identical assets – level 1)
|
$
|
440,000
|
|
|
$
|
505,019
|
|
|
$
|
440,000
|
|
|
$
|
501,600
|
|
7.0% Senior Notes (quoted prices in active market for identical assets – level 1)
|
$
|
400,000
|
|
|
$
|
405,368
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Capital lease obligation (significant other observable inputs – level 2)
|
$
|
2,805
|
|
|
$
|
2,805
|
|
|
$
|
3,042
|
|
|
$
|
3,042
|
|
KFPC Loan Agreement
|
$
|
136,001
|
|
|
$
|
136,001
|
|
|
$
|
115,854
|
|
|
$
|
115,854
|
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
|
(In thousands)
|
||||||
Income taxes at the statutory rate
|
$
|
(1,892
|
)
|
|
$
|
(453
|
)
|
State taxes, net of federal benefit
|
(139
|
)
|
|
(41
|
)
|
||
Foreign tax rate differential
|
1,790
|
|
|
1,229
|
|
||
Permanent differences
|
(330
|
)
|
|
(925
|
)
|
||
Uncertain tax positions
|
(575
|
)
|
|
(295
|
)
|
||
Valuation allowance
|
(75
|
)
|
|
86,732
|
|
||
Return to provision adjustments
|
3
|
|
|
—
|
|
||
Other
|
—
|
|
|
4
|
|
||
Income tax benefit (expense)
|
$
|
(1,218
|
)
|
|
$
|
86,251
|
|
|
Three Months Ended March 31,
|
||||
|
2017
|
|
2016
|
||
Income taxes at the statutory rate
|
(35.0
|
)%
|
|
(35.0
|
)%
|
State taxes, net of federal benefit
|
(2.6
|
)
|
|
(3.2
|
)
|
Foreign tax rate differential
|
33.1
|
|
|
95.0
|
|
Permanent differences
|
(6.1
|
)
|
|
(71.5
|
)
|
Uncertain tax positions
|
(10.6
|
)
|
|
(22.8
|
)
|
Valuation allowance
|
(1.4
|
)
|
|
6,702.9
|
|
Return to provision adjustments
|
0.1
|
|
|
—
|
|
Other
|
—
|
|
|
0.1
|
|
Effective tax rate
|
(22.5
|
)%
|
|
6,665.5
|
%
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
|
(In thousands)
|
||||||
Beginning balance
|
$
|
8,863
|
|
|
$
|
10,078
|
|
Obligations assumed in Arizona Chemical Acquisition
|
—
|
|
|
1,908
|
|
||
Accretion expense
|
73
|
|
|
112
|
|
||
Obligations settled
|
(177
|
)
|
|
(1,021
|
)
|
||
Foreign currency translation, net
|
61
|
|
|
190
|
|
||
Ending Balance
|
$
|
8,820
|
|
|
$
|
11,267
|
|
|
Three Months Ended March 31,
|
||||||||||||||
|
2017
|
|
2016
|
||||||||||||
|
U.S Plans
|
|
Non-U.S. Plans
|
|
U.S Plans
|
|
Non-U.S. Plans
|
||||||||
|
(In thousands)
|
||||||||||||||
Service cost
|
$
|
830
|
|
|
$
|
646
|
|
|
$
|
932
|
|
|
$
|
521
|
|
Interest cost
|
1,814
|
|
|
721
|
|
|
1,847
|
|
|
793
|
|
||||
Expected return on plan assets
|
(2,353
|
)
|
|
(827
|
)
|
|
(2,335
|
)
|
|
(920
|
)
|
||||
Amortization of prior service cost
|
907
|
|
|
56
|
|
|
763
|
|
|
6
|
|
||||
Net periodic benefit cost
|
$
|
1,198
|
|
|
$
|
596
|
|
|
$
|
1,207
|
|
|
$
|
400
|
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
2016
|
|||||
|
U.S Plans
|
|
U.S Plans
|
||||
|
(In thousands)
|
||||||
Service cost
|
$
|
145
|
|
|
$
|
143
|
|
Interest cost
|
340
|
|
|
335
|
|
||
Amortization of prior service cost
|
150
|
|
|
132
|
|
||
Net periodic benefit cost
|
$
|
635
|
|
|
$
|
610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2017
|
|
Three Months Ended March 31, 2016
|
||||||||||||||||||||
|
Polymer
|
|
Chemical
|
|
Total
|
|
Polymer
|
|
Chemical
(1)
|
|
Total
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Revenue
|
$
|
270,948
|
|
|
$
|
187,177
|
|
|
$
|
458,125
|
|
|
$
|
243,043
|
|
|
$
|
176,880
|
|
|
$
|
419,923
|
|
Cost of goods sold
|
181,911
|
|
|
132,848
|
|
|
314,759
|
|
|
177,518
|
|
|
148,587
|
|
|
326,105
|
|
||||||
Gross profit
|
89,037
|
|
|
54,329
|
|
|
143,366
|
|
|
65,525
|
|
|
28,293
|
|
|
93,818
|
|
||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Research and development
|
7,513
|
|
|
2,832
|
|
|
10,345
|
|
|
7,852
|
|
|
2,724
|
|
|
10,576
|
|
||||||
Selling, general, and administrative
|
23,572
|
|
|
16,983
|
|
|
40,555
|
|
|
29,135
|
|
|
20,727
|
|
|
49,862
|
|
||||||
Depreciation and amortization
|
16,324
|
|
|
16,819
|
|
|
33,143
|
|
|
14,592
|
|
|
15,562
|
|
|
30,154
|
|
||||||
Operating income (loss)
|
$
|
41,628
|
|
|
$
|
17,695
|
|
|
59,323
|
|
|
$
|
13,946
|
|
|
$
|
(10,720
|
)
|
|
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
|
|
|
March 31, 2017
|
|
December 31, 2016
|
||||||||||||||||||||
|
Polymer
|
|
Chemical
|
|
Total
|
|
Polymer
|
|
Chemical
|
|
Total
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
Property, plant, and equipment, net
|
$
|
559,700
|
|
|
$
|
361,711
|
|
|
$
|
921,411
|
|
|
$
|
548,994
|
|
|
$
|
357,728
|
|
|
$
|
906,722
|
|
Investment in unconsolidated joint venture
|
$
|
11,003
|
|
|
$
|
—
|
|
|
$
|
11,003
|
|
|
$
|
11,195
|
|
|
$
|
—
|
|
|
$
|
11,195
|
|
Goodwill
|
$
|
—
|
|
|
$
|
770,525
|
|
|
$
|
770,525
|
|
|
$
|
—
|
|
|
$
|
770,012
|
|
|
$
|
770,012
|
|
Total assets
|
$
|
1,189,163
|
|
|
$
|
1,786,050
|
|
|
$
|
2,975,213
|
|
|
$
|
1,127,273
|
|
|
$
|
1,779,372
|
|
|
$
|
2,906,645
|
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
|
(In thousands)
|
||||||
Revenue:
|
|
|
|
||||
United States
|
$
|
168,302
|
|
|
$
|
163,044
|
|
Germany
|
46,951
|
|
|
41,121
|
|
||
All other countries
|
242,872
|
|
|
215,758
|
|
||
|
$
|
458,125
|
|
|
$
|
419,923
|
|
|
March 31, 2017
|
|
December 31, 2016
|
||||
|
(In thousands)
|
||||||
Cash and cash equivalents
|
$
|
17,932
|
|
|
$
|
14,150
|
|
Other current assets
|
16,300
|
|
|
13,385
|
|
||
Property, plant, and equipment, net
|
175,571
|
|
|
167,579
|
|
||
Intangible assets
|
9,969
|
|
|
9,403
|
|
||
Other long-term assets
|
2,740
|
|
|
2,495
|
|
||
Total assets
|
$
|
222,512
|
|
|
$
|
207,012
|
|
|
|
|
|
||||
Current portion of long-term debt
|
$
|
27,200
|
|
|
$
|
11,585
|
|
Current liabilities
|
22,748
|
|
|
26,743
|
|
||
Long-term debt
|
108,568
|
|
|
104,012
|
|
||
Total liabilities
|
$
|
158,516
|
|
|
$
|
142,340
|
|
|
Kraton Corporation
|
|
Kraton Polymers LLC
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
404
|
|
|
$
|
8,806
|
|
|
$
|
94,856
|
|
|
$
|
—
|
|
|
$
|
104,066
|
|
Receivables, net of allowances
|
—
|
|
|
673
|
|
|
90,673
|
|
|
124,984
|
|
|
—
|
|
|
216,330
|
|
||||||
Inventories of products
|
—
|
|
|
(5,600
|
)
|
|
214,447
|
|
|
178,053
|
|
|
—
|
|
|
386,900
|
|
||||||
Inventories of materials and supplies
|
—
|
|
|
—
|
|
|
13,612
|
|
|
10,059
|
|
|
—
|
|
|
23,671
|
|
||||||
Prepaid expenses
|
—
|
|
|
6,828
|
|
|
21,553
|
|
|
8,247
|
|
|
—
|
|
|
36,628
|
|
||||||
Other current assets
|
—
|
|
|
808
|
|
|
8,074
|
|
|
30,385
|
|
|
—
|
|
|
39,267
|
|
||||||
Total current assets
|
—
|
|
|
3,113
|
|
|
357,165
|
|
|
446,584
|
|
|
—
|
|
|
806,862
|
|
||||||
Property, plant, and equipment, less accumulated depreciation
|
—
|
|
|
25,375
|
|
|
458,393
|
|
|
437,643
|
|
|
—
|
|
|
921,411
|
|
||||||
Goodwill
|
—
|
|
|
—
|
|
|
740,391
|
|
|
30,134
|
|
|
—
|
|
|
770,525
|
|
||||||
Intangible assets, less accumulated amortization
|
—
|
|
|
31,035
|
|
|
343,463
|
|
|
55,831
|
|
|
—
|
|
|
430,329
|
|
||||||
Investment in consolidated subsidiaries
|
625,358
|
|
|
3,005,346
|
|
|
—
|
|
|
—
|
|
|
(3,630,704
|
)
|
|
—
|
|
||||||
Investment in unconsolidated joint venture
|
—
|
|
|
813
|
|
|
—
|
|
|
10,190
|
|
|
—
|
|
|
11,003
|
|
||||||
Debt issuance costs
|
—
|
|
|
—
|
|
|
3,218
|
|
|
—
|
|
|
—
|
|
|
3,218
|
|
||||||
Deferred income taxes
|
—
|
|
|
213
|
|
|
—
|
|
|
6,900
|
|
|
—
|
|
|
7,113
|
|
||||||
Other long-term assets
|
—
|
|
|
90,385
|
|
|
1,861,691
|
|
|
1,010,678
|
|
|
(2,938,002
|
)
|
|
24,752
|
|
||||||
Total assets
|
$
|
625,358
|
|
|
$
|
3,156,280
|
|
|
$
|
3,764,321
|
|
|
$
|
1,997,960
|
|
|
$
|
(6,568,706
|
)
|
|
$
|
2,975,213
|
|
LIABILITIES AND STOCKHOLDERS' AND MEMBER'S EQUITY
|
|||||||||||||||||||||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Current portion of long-term debt
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
992
|
|
|
$
|
27,200
|
|
|
$
|
—
|
|
|
$
|
28,192
|
|
Accounts payable-trade
|
—
|
|
|
4,810
|
|
|
80,070
|
|
|
80,912
|
|
|
—
|
|
|
165,792
|
|
||||||
Other payables and accruals
|
—
|
|
|
28,736
|
|
|
39,668
|
|
|
43,718
|
|
|
—
|
|
|
112,122
|
|
||||||
Due to related party
|
—
|
|
|
—
|
|
|
—
|
|
|
20,895
|
|
|
—
|
|
|
20,895
|
|
||||||
Total current liabilities
|
—
|
|
|
33,546
|
|
|
120,730
|
|
|
172,725
|
|
|
—
|
|
|
327,001
|
|
||||||
Long-term debt, net of current portion
|
—
|
|
|
1,643,001
|
|
|
1,813
|
|
|
108,568
|
|
|
—
|
|
|
1,753,382
|
|
||||||
Deferred income taxes
|
—
|
|
|
(108,005
|
)
|
|
279,749
|
|
|
39,636
|
|
|
—
|
|
|
211,380
|
|
||||||
Other long-term liabilities
|
—
|
|
|
962,946
|
|
|
1,126,731
|
|
|
1,020,012
|
|
|
(2,938,002
|
)
|
|
171,687
|
|
||||||
Total liabilities
|
—
|
|
|
2,531,488
|
|
|
1,529,023
|
|
|
1,340,941
|
|
|
(2,938,002
|
)
|
|
2,463,450
|
|
||||||
Commitments and contingencies (note 10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Stockholders' and member's equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Preferred stock, $0.01 par value; 100,000 shares authorized; none issued
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Common stock, $0.01 par value; 500,000 shares authorized
|
312
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
312
|
|
||||||
Additional paid in capital
|
364,194
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
364,194
|
|
||||||
Member's equity
|
—
|
|
|
625,358
|
|
|
2,302,038
|
|
|
703,308
|
|
|
(3,630,704
|
)
|
|
—
|
|
||||||
Retained earnings
|
260,852
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
260,852
|
|
||||||
Accumulated other comprehensive loss
|
—
|
|
|
(566
|
)
|
|
(66,740
|
)
|
|
(78,287
|
)
|
|
—
|
|
|
(145,593
|
)
|
||||||
Kraton Corporation stockholders' and member's equity
|
625,358
|
|
|
624,792
|
|
|
2,235,298
|
|
|
625,021
|
|
|
(3,630,704
|
)
|
|
479,765
|
|
||||||
Noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
31,998
|
|
|
—
|
|
|
31,998
|
|
||||||
Total stockholders' and member's equity
|
625,358
|
|
|
624,792
|
|
|
2,235,298
|
|
|
657,019
|
|
|
(3,630,704
|
)
|
|
511,763
|
|
||||||
Total liabilities and stockholders' and member's equity
|
$
|
625,358
|
|
|
$
|
3,156,280
|
|
|
$
|
3,764,321
|
|
|
$
|
1,997,960
|
|
|
$
|
(6,568,706
|
)
|
|
$
|
2,975,213
|
|
|
Kraton Corporation
|
|
Kraton Polymers LLC
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||||
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
214
|
|
|
$
|
6,280
|
|
|
$
|
115,255
|
|
|
$
|
—
|
|
|
$
|
121,749
|
|
Receivables, net of allowances
|
—
|
|
|
468
|
|
|
95,398
|
|
|
104,994
|
|
|
—
|
|
|
200,860
|
|
||||||
Inventories of products
|
—
|
|
|
(1,634
|
)
|
|
176,301
|
|
|
153,329
|
|
|
—
|
|
|
327,996
|
|
||||||
Inventories of materials and supplies
|
—
|
|
|
—
|
|
|
13,521
|
|
|
8,871
|
|
|
—
|
|
|
22,392
|
|
||||||
Prepaid expenses
|
—
|
|
|
6,077
|
|
|
20,635
|
|
|
9,139
|
|
|
—
|
|
|
35,851
|
|
||||||
Other current assets
|
—
|
|
|
253
|
|
|
8,209
|
|
|
29,196
|
|
|
—
|
|
|
37,658
|
|
||||||
Total current assets
|
—
|
|
|
5,378
|
|
|
320,344
|
|
|
420,784
|
|
|
—
|
|
|
746,506
|
|
||||||
Property, plant, and equipment, less accumulated depreciation
|
—
|
|
|
27,123
|
|
|
457,031
|
|
|
422,568
|
|
|
—
|
|
|
906,722
|
|
||||||
Goodwill
|
—
|
|
|
—
|
|
|
740,394
|
|
|
29,618
|
|
|
—
|
|
|
770,012
|
|
||||||
Intangible assets, less accumulated amortization
|
—
|
|
|
32,493
|
|
|
351,155
|
|
|
55,550
|
|
|
—
|
|
|
439,198
|
|
||||||
Investment in consolidated subsidiaries
|
616,431
|
|
|
2,952,279
|
|
|
—
|
|
|
—
|
|
|
(3,568,710
|
)
|
|
—
|
|
||||||
Investment in unconsolidated joint venture
|
—
|
|
|
813
|
|
|
—
|
|
|
10,382
|
|
|
—
|
|
|
11,195
|
|
||||||
Debt issuance costs
|
—
|
|
|
—
|
|
|
3,511
|
|
|
—
|
|
|
—
|
|
|
3,511
|
|
||||||
Deferred income taxes
|
—
|
|
|
213
|
|
|
—
|
|
|
6,694
|
|
|
—
|
|
|
6,907
|
|
||||||
Other long-term assets
|
—
|
|
|
77,963
|
|
|
1,876,402
|
|
|
1,006,230
|
|
|
(2,938,001
|
)
|
|
22,594
|
|
||||||
Total assets
|
$
|
616,431
|
|
|
$
|
3,096,262
|
|
|
$
|
3,748,837
|
|
|
$
|
1,951,826
|
|
|
$
|
(6,506,711
|
)
|
|
$
|
2,906,645
|
|
LIABILITIES AND STOCKHOLDERS’ AND MEMBER’S EQUITY
|
|||||||||||||||||||||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Current portion of long-term debt
|
$
|
—
|
|
|
$
|
29,250
|
|
|
$
|
990
|
|
|
$
|
11,585
|
|
|
$
|
—
|
|
|
$
|
41,825
|
|
Accounts payable-trade
|
—
|
|
|
5,318
|
|
|
73,501
|
|
|
71,262
|
|
|
—
|
|
|
150,081
|
|
||||||
Other payables and accruals
|
—
|
|
|
22,266
|
|
|
51,488
|
|
|
56,644
|
|
|
—
|
|
|
130,398
|
|
||||||
Due to related party
|
—
|
|
|
—
|
|
|
—
|
|
|
14,669
|
|
|
—
|
|
|
14,669
|
|
||||||
Total current liabilities
|
—
|
|
|
56,834
|
|
|
125,979
|
|
|
154,160
|
|
|
—
|
|
|
336,973
|
|
||||||
Long-term debt, net of current portion
|
—
|
|
|
1,591,637
|
|
|
2,051
|
|
|
104,012
|
|
|
—
|
|
|
1,697,700
|
|
||||||
Deferred income taxes
|
—
|
|
|
(104,841
|
)
|
|
277,756
|
|
|
38,481
|
|
|
—
|
|
|
211,396
|
|
||||||
Other long-term liabilities
|
—
|
|
|
937,569
|
|
|
1,142,952
|
|
|
1,027,819
|
|
|
(2,938,001
|
)
|
|
170,339
|
|
||||||
Total liabilities
|
—
|
|
|
2,481,199
|
|
|
1,548,738
|
|
|
1,324,472
|
|
|
(2,938,001
|
)
|
|
2,416,408
|
|
||||||
Commitments and contingencies (note 10)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Stockholders’ and member’s equity:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Preferred stock, $.01 par value; 100,000 shares authorized; none issued
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Common stock, $.01 par value; 500,000 shares authorized
|
310
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
310
|
|
||||||
Additional paid in capital
|
361,682
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
361,682
|
|
||||||
Member’s equity
|
—
|
|
|
616,431
|
|
|
2,266,840
|
|
|
685,439
|
|
|
(3,568,710
|
)
|
|
—
|
|
||||||
Retained earnings
|
254,439
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
254,439
|
|
||||||
Accumulated other comprehensive loss
|
—
|
|
|
(1,368
|
)
|
|
(66,741
|
)
|
|
(90,421
|
)
|
|
—
|
|
|
(158,530
|
)
|
||||||
Kraton Corporation stockholders’ and member’s equity
|
616,431
|
|
|
615,063
|
|
|
2,200,099
|
|
|
595,018
|
|
|
(3,568,710
|
)
|
|
457,901
|
|
||||||
Noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
32,336
|
|
|
—
|
|
|
32,336
|
|
||||||
Total stockholders’ and member’s equity
|
616,431
|
|
|
615,063
|
|
|
2,200,099
|
|
|
627,354
|
|
|
(3,568,710
|
)
|
|
490,237
|
|
||||||
Total liabilities and stockholders’ and member’s equity
|
$
|
616,431
|
|
|
$
|
3,096,262
|
|
|
$
|
3,748,837
|
|
|
$
|
1,951,826
|
|
|
$
|
(6,506,711
|
)
|
|
$
|
2,906,645
|
|
|
Kraton Corporation
|
|
Kraton Polymers LLC
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||||
Revenue
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
220,817
|
|
|
$
|
277,194
|
|
|
$
|
(39,886
|
)
|
|
$
|
458,125
|
|
Cost of goods sold
|
—
|
|
|
(25,959
|
)
|
|
134,566
|
|
|
246,038
|
|
|
(39,886
|
)
|
|
314,759
|
|
||||||
Gross profit
|
—
|
|
|
25,959
|
|
|
86,251
|
|
|
31,156
|
|
|
—
|
|
|
143,366
|
|
||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Research and development
|
—
|
|
|
3,909
|
|
|
2,530
|
|
|
3,906
|
|
|
—
|
|
|
10,345
|
|
||||||
Selling, general, and administrative
|
—
|
|
|
15,181
|
|
|
13,610
|
|
|
11,764
|
|
|
—
|
|
|
40,555
|
|
||||||
Depreciation and amortization
|
—
|
|
|
5,581
|
|
|
18,380
|
|
|
9,182
|
|
|
—
|
|
|
33,143
|
|
||||||
Other (income) expense
|
—
|
|
|
16
|
|
|
11,557
|
|
|
(11,573
|
)
|
|
—
|
|
|
—
|
|
||||||
Operating income (expense)
|
—
|
|
|
1,272
|
|
|
40,174
|
|
|
17,877
|
|
|
—
|
|
|
59,323
|
|
||||||
Loss on extinguishment of debt
|
—
|
|
|
(19,738
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(19,738
|
)
|
||||||
Earnings in consolidated subsidiaries
|
4,189
|
|
|
52,909
|
|
|
—
|
|
|
—
|
|
|
(57,098
|
)
|
|
—
|
|
||||||
Earnings of unconsolidated joint venture
|
—
|
|
|
—
|
|
|
—
|
|
|
127
|
|
|
—
|
|
|
127
|
|
||||||
Interest expense, net
|
—
|
|
|
(34,046
|
)
|
|
(209
|
)
|
|
(50
|
)
|
|
—
|
|
|
(34,305
|
)
|
||||||
Income (loss) before income taxes
|
4,189
|
|
|
397
|
|
|
39,965
|
|
|
17,954
|
|
|
(57,098
|
)
|
|
5,407
|
|
||||||
Income tax benefit (expense)
|
—
|
|
|
3,792
|
|
|
(2,702
|
)
|
|
(2,308
|
)
|
|
—
|
|
|
(1,218
|
)
|
||||||
Consolidated net income
|
4,189
|
|
|
4,189
|
|
|
37,263
|
|
|
15,646
|
|
|
(57,098
|
)
|
|
4,189
|
|
||||||
Net loss attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
2,224
|
|
|
—
|
|
|
2,224
|
|
||||||
Net income attributable to Kraton
|
$
|
4,189
|
|
|
$
|
4,189
|
|
|
$
|
37,263
|
|
|
$
|
17,870
|
|
|
$
|
(57,098
|
)
|
|
$
|
6,413
|
|
|
Kraton Corporation
|
|
Kraton Polymers LLC
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||||
Revenue
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
211,040
|
|
|
$
|
247,495
|
|
|
$
|
(38,612
|
)
|
|
$
|
419,923
|
|
Cost of goods sold
|
—
|
|
|
2,239
|
|
|
160,825
|
|
|
201,653
|
|
|
(38,612
|
)
|
|
326,105
|
|
||||||
Gross profit
|
—
|
|
|
(2,239
|
)
|
|
50,215
|
|
|
45,842
|
|
|
—
|
|
|
93,818
|
|
||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Research and development
|
—
|
|
|
4,045
|
|
|
2,749
|
|
|
3,782
|
|
|
—
|
|
|
10,576
|
|
||||||
Selling, general, and administrative
|
—
|
|
|
21,676
|
|
|
14,874
|
|
|
13,312
|
|
|
—
|
|
|
49,862
|
|
||||||
Depreciation and amortization
|
—
|
|
|
5,591
|
|
|
18,926
|
|
|
5,637
|
|
|
—
|
|
|
30,154
|
|
||||||
Other (income) expense
|
—
|
|
|
(34,256
|
)
|
|
20,438
|
|
|
13,818
|
|
|
—
|
|
|
—
|
|
||||||
Operating income (loss)
|
—
|
|
|
705
|
|
|
(6,772
|
)
|
|
9,293
|
|
|
—
|
|
|
3,226
|
|
||||||
Disposition and exit of business activities
|
—
|
|
|
—
|
|
|
45,251
|
|
|
—
|
|
|
—
|
|
|
45,251
|
|
||||||
Loss on extinguishment of debt
|
—
|
|
|
(13,423
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13,423
|
)
|
||||||
Earnings in consolidated subsidiaries
|
87,545
|
|
|
49,979
|
|
|
—
|
|
|
—
|
|
|
(137,524
|
)
|
|
—
|
|
||||||
Earnings of unconsolidated joint venture
|
—
|
|
|
—
|
|
|
—
|
|
|
78
|
|
|
—
|
|
|
78
|
|
||||||
Interest income (expense), net
|
—
|
|
|
(33,369
|
)
|
|
(741
|
)
|
|
272
|
|
|
—
|
|
|
(33,838
|
)
|
||||||
Income before income taxes
|
87,545
|
|
|
3,892
|
|
|
37,738
|
|
|
9,643
|
|
|
(137,524
|
)
|
|
1,294
|
|
||||||
Income tax benefit (expense)
|
—
|
|
|
83,653
|
|
|
3,154
|
|
|
(556
|
)
|
|
—
|
|
|
86,251
|
|
||||||
Consolidated net income
|
87,545
|
|
|
87,545
|
|
|
40,892
|
|
|
9,087
|
|
|
(137,524
|
)
|
|
87,545
|
|
||||||
Net loss attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
542
|
|
|
—
|
|
|
542
|
|
||||||
Net income attributable to Kraton
|
$
|
87,545
|
|
|
$
|
87,545
|
|
|
$
|
40,892
|
|
|
$
|
9,629
|
|
|
$
|
(137,524
|
)
|
|
$
|
88,087
|
|
|
Kraton Corporation
|
|
Kraton Polymers LLC
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||||
Net income attributable to Kraton
|
$
|
4,189
|
|
|
$
|
4,189
|
|
|
$
|
37,263
|
|
|
$
|
17,870
|
|
|
$
|
(57,098
|
)
|
|
$
|
6,413
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency translation adjustments, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
12,135
|
|
|
—
|
|
|
12,135
|
|
||||||
Unrealized gain on cash flow hedges, net of tax
|
—
|
|
|
843
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
843
|
|
||||||
Reclassification of gain on cash flow hedge
|
—
|
|
|
(41
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(41
|
)
|
||||||
Other comprehensive income, net of tax
|
—
|
|
|
802
|
|
|
—
|
|
|
12,135
|
|
|
—
|
|
|
12,937
|
|
||||||
Comprehensive income attributable to Kraton
|
4,189
|
|
|
4,991
|
|
|
37,263
|
|
|
30,005
|
|
|
(57,098
|
)
|
|
19,350
|
|
||||||
Comprehensive loss attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
(338
|
)
|
|
—
|
|
|
(338
|
)
|
||||||
Consolidated comprehensive income
|
$
|
4,189
|
|
|
$
|
4,991
|
|
|
$
|
37,263
|
|
|
$
|
29,667
|
|
|
$
|
(57,098
|
)
|
|
$
|
19,012
|
|
|
Kraton Corporation
|
|
Kraton Polymers LLC
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||||
Net income attributable to Kraton
|
$
|
87,545
|
|
|
$
|
87,545
|
|
|
$
|
40,892
|
|
|
$
|
9,629
|
|
|
$
|
(137,524
|
)
|
|
$
|
88,087
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign currency translation adjustments, net of tax
|
—
|
|
|
—
|
|
|
76,424
|
|
|
(50,857
|
)
|
|
—
|
|
|
25,567
|
|
||||||
Unrealized loss on cash flow hedges, net of tax
|
—
|
|
|
(2,104
|
)
|
|
—
|
|
|
(156
|
)
|
|
—
|
|
|
(2,260
|
)
|
||||||
Other comprehensive income (loss), net of tax
|
—
|
|
|
(2,104
|
)
|
|
76,424
|
|
|
(51,013
|
)
|
|
—
|
|
|
23,307
|
|
||||||
Comprehensive income (loss) attributable to Kraton
|
87,545
|
|
|
85,441
|
|
|
117,316
|
|
|
(41,384
|
)
|
|
(137,524
|
)
|
|
111,394
|
|
||||||
Comprehensive income attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
204
|
|
|
—
|
|
|
204
|
|
||||||
Consolidated comprehensive income (loss)
|
$
|
87,545
|
|
|
$
|
85,441
|
|
|
$
|
117,316
|
|
|
$
|
(41,180
|
)
|
|
$
|
(137,524
|
)
|
|
$
|
111,598
|
|
|
Kraton Corporation
|
|
Kraton Polymers LLC
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||||
Cash flows provided by (used in) operating activities
|
$
|
—
|
|
|
$
|
(7,138
|
)
|
|
$
|
29,990
|
|
|
$
|
(19,411
|
)
|
|
$
|
—
|
|
|
$
|
3,441
|
|
Cash flows provided by (used in) investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Proceeds from intercompany loans
|
—
|
|
|
11,482
|
|
|
—
|
|
|
—
|
|
|
(11,482
|
)
|
|
—
|
|
||||||
Kraton purchase of property, plant and equipment
|
—
|
|
|
(1,182
|
)
|
|
(15,218
|
)
|
|
(10,879
|
)
|
|
—
|
|
|
(27,279
|
)
|
||||||
KFPC purchase of property, plant and equipment
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,558
|
)
|
|
—
|
|
|
(5,558
|
)
|
||||||
Purchase of software and other intangibles
|
—
|
|
|
(1,194
|
)
|
|
(320
|
)
|
|
—
|
|
|
—
|
|
|
(1,514
|
)
|
||||||
Net cash provided by (used in) investing activities
|
—
|
|
|
9,106
|
|
|
(15,538
|
)
|
|
(16,437
|
)
|
|
(11,482
|
)
|
|
(34,351
|
)
|
||||||
Cash flows provided (used in) by financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Proceeds from debt
|
—
|
|
|
400,000
|
|
|
15,000
|
|
|
—
|
|
|
—
|
|
|
415,000
|
|
||||||
Repayments of debt
|
—
|
|
|
(392,000
|
)
|
|
(15,000
|
)
|
|
—
|
|
|
—
|
|
|
(407,000
|
)
|
||||||
KFPC proceeds from debt
|
—
|
|
|
—
|
|
|
—
|
|
|
13,244
|
|
|
—
|
|
|
13,244
|
|
||||||
Capital lease payments
|
—
|
|
|
—
|
|
|
(237
|
)
|
|
—
|
|
|
—
|
|
|
(237
|
)
|
||||||
Purchase of treasury stock
|
(1,511
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,511
|
)
|
||||||
Cash contributions from member
|
—
|
|
|
(1,511
|
)
|
|
—
|
|
|
—
|
|
|
1,511
|
|
|
—
|
|
||||||
Cash distributions to member
|
460
|
|
|
1,051
|
|
|
—
|
|
|
—
|
|
|
(1,511
|
)
|
|
—
|
|
||||||
Proceeds from the exercise of stock options
|
1,051
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,051
|
|
||||||
Debt issuance costs
|
—
|
|
|
(9,318
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,318
|
)
|
||||||
Payments on intercompany loans
|
—
|
|
|
—
|
|
|
(11,689
|
)
|
|
207
|
|
|
11,482
|
|
|
—
|
|
||||||
Net cash provided by (used in) financing activities
|
—
|
|
|
(1,778
|
)
|
|
(11,926
|
)
|
|
13,451
|
|
|
11,482
|
|
|
11,229
|
|
||||||
Effect of exchange rate differences on cash
|
—
|
|
|
—
|
|
|
—
|
|
|
1,998
|
|
|
—
|
|
|
1,998
|
|
||||||
Net increase (decrease) in cash and cash equivalents
|
—
|
|
|
190
|
|
|
2,526
|
|
|
(20,399
|
)
|
|
—
|
|
|
(17,683
|
)
|
||||||
Cash and cash equivalents, beginning of period
|
—
|
|
|
214
|
|
|
6,280
|
|
|
115,255
|
|
|
—
|
|
|
121,749
|
|
||||||
Cash and cash equivalents, end of period
|
$
|
—
|
|
|
$
|
404
|
|
|
$
|
8,806
|
|
|
$
|
94,856
|
|
|
$
|
—
|
|
|
$
|
104,066
|
|
|
Kraton Corporation
|
|
Kraton Polymers LLC
|
|
Guarantor Subsidiaries
|
|
Non-Guarantor Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
||||||||||||
Cash flows provided by (used in) operating activities
|
$
|
—
|
|
|
$
|
(37,824
|
)
|
|
$
|
31,765
|
|
|
$
|
(20,556
|
)
|
|
$
|
—
|
|
|
$
|
(26,615
|
)
|
Cash flows provided by (used in) investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Proceeds from intercompany loans
|
—
|
|
|
149,939
|
|
|
—
|
|
|
—
|
|
|
(149,939
|
)
|
|
—
|
|
||||||
Kraton purchase of property, plant, and equipment
|
—
|
|
|
(309
|
)
|
|
(11,395
|
)
|
|
(6,798
|
)
|
|
—
|
|
|
(18,502
|
)
|
||||||
KFPC purchase of property, plant, and equipment
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,325
|
)
|
|
—
|
|
|
(8,325
|
)
|
||||||
Purchase of software and other intangibles
|
—
|
|
|
(352
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(352
|
)
|
||||||
Acquisition, net of cash acquired
|
—
|
|
|
(1,367,088
|
)
|
|
6,443
|
|
|
43,393
|
|
|
—
|
|
|
(1,317,252
|
)
|
||||||
Sale of assets
|
—
|
|
|
—
|
|
|
72,000
|
|
|
—
|
|
|
—
|
|
|
72,000
|
|
||||||
Net cash provided by (used in) investing activities
|
—
|
|
|
(1,217,810
|
)
|
|
67,048
|
|
|
28,270
|
|
|
(149,939
|
)
|
|
(1,272,431
|
)
|
||||||
Cash flows provided by (used in) financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Proceeds from debt
|
—
|
|
|
1,732,890
|
|
|
50,075
|
|
|
—
|
|
|
—
|
|
|
1,782,965
|
|
||||||
Repayments of debt
|
—
|
|
|
(430,058
|
)
|
|
(75
|
)
|
|
—
|
|
|
—
|
|
|
(430,133
|
)
|
||||||
KFPC proceeds from debt
|
—
|
|
|
—
|
|
|
—
|
|
|
12,100
|
|
|
—
|
|
|
12,100
|
|
||||||
Capital lease payments
|
—
|
|
|
—
|
|
|
(35
|
)
|
|
—
|
|
|
—
|
|
|
(35
|
)
|
||||||
Purchase of treasury stock
|
(954
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(954
|
)
|
||||||
Cash contributions from member
|
—
|
|
|
(954
|
)
|
|
—
|
|
|
—
|
|
|
954
|
|
|
—
|
|
||||||
Cash distributions to member
|
785
|
|
|
169
|
|
|
—
|
|
|
—
|
|
|
(954
|
)
|
|
—
|
|
||||||
Proceeds from the exercise of stock options
|
169
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
169
|
|
||||||
Settlement of interest rate swap
|
—
|
|
|
—
|
|
|
(5,155
|
)
|
|
—
|
|
|
—
|
|
|
(5,155
|
)
|
||||||
Debt issuance costs
|
—
|
|
|
(53,527
|
)
|
|
(3,589
|
)
|
|
—
|
|
|
—
|
|
|
(57,116
|
)
|
||||||
Payments on intercompany loans
|
—
|
|
|
—
|
|
|
(149,939
|
)
|
|
—
|
|
|
149,939
|
|
|
—
|
|
||||||
Net cash provided by (used in) financing activities
|
—
|
|
|
1,248,520
|
|
|
(108,718
|
)
|
|
12,100
|
|
|
149,939
|
|
|
1,301,841
|
|
||||||
Effect of exchange rate differences on cash
|
—
|
|
|
—
|
|
|
—
|
|
|
5,534
|
|
|
—
|
|
|
5,534
|
|
||||||
Net increase (decrease) in cash and cash equivalents
|
—
|
|
|
(7,114
|
)
|
|
(9,905
|
)
|
|
25,348
|
|
|
—
|
|
|
8,329
|
|
||||||
Cash and cash equivalents, beginning of period
|
—
|
|
|
7,256
|
|
|
11,595
|
|
|
51,198
|
|
|
—
|
|
|
70,049
|
|
||||||
Cash and cash equivalents, end of period
|
$
|
—
|
|
|
$
|
142
|
|
|
$
|
1,690
|
|
|
$
|
76,546
|
|
|
$
|
—
|
|
|
$
|
78,378
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
|
Cumulative through
|
||||||
|
March 31, 2017
|
|
December 31, 2016
|
||||
|
|
||||||
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
|
|
2016
|
||||
Revenue by Geography:
|
(In thousands)
|
||||||
Americas
|
$
|
197,558
|
|
|
$
|
183,137
|
|
Europe, Middle East, and Africa
|
163,302
|
|
|
147,605
|
|
||
Asia Pacific
|
97,265
|
|
|
89,181
|
|
||
Total Revenue
|
$
|
458,125
|
|
|
$
|
419,923
|
|
|
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
|
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
Revenue
|
(In thousands)
|
||||||
Performance Products
|
$
|
141,718
|
|
|
$
|
119,919
|
|
Specialty Polymers
|
90,920
|
|
|
85,029
|
|
||
Cariflex
|
38,048
|
|
|
38,023
|
|
||
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 below for the reconciliation of each non-GAAP measure to its most directly comparable GAAP measure.
|
•
|
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.
|
|
|
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 below for the reconciliation of each non-GAAP measure to its most directly comparable GAAP measure.
|
•
|
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
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.
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
|
(In thousands, except per share amounts)
|
||||||
EBITDA
(2)
|
$
|
72,855
|
|
|
$
|
65,286
|
|
Adjusted EBITDA
(1) (3)
|
$
|
65,571
|
|
|
$
|
93,101
|
|
Adjusted Diluted Earnings Per Share
(1)
|
$
|
(0.15
|
)
|
|
$
|
0.80
|
|
(1)
|
The majority of our consolidated inventory is measured using the FIFO basis of accounting. As part of our pricing strategy, we measure our business performance using the estimated current replacement cost (“ECRC”) of our inventory and cost of goods sold. Our ECRC is based on our current expectation of the current cost of our significant raw material inputs. ECRC is developed monthly based on actual market-based contracted rates and spot market purchase rates that are expected to occur in the period. We then adjust the value of the significant raw material inputs and their associated impact to finished goods to the current replacement cost to arrive at an ECRC value for inventory and cost of goods sold. The result of this revaluation from the GAAP carrying value creates the spread between GAAP and ECRC. We maintain our perpetual inventory in our global enterprise resource planning system, where the carrying value of our inventory is determined. With inventory valued under GAAP and ECRC, we then have the ability to report cost of goods sold and therefore Adjusted EBITDA and Adjusted Diluted Earnings Per Share under both our GAAP convention and ECRC.
|
(2)
|
On a consolidated basis, EBITDA represents net income before interest, taxes, depreciation and amortization. On a reporting segment basis, EBITDA represents segment operating income before depreciation and amortization, disposition and exit of business activities, loss on extinguishment of debt, and earnings of unconsolidated joint venture. Limitations for EBITDA as an analytical tool include the following:
|
•
|
EBITDA does not reflect the significant interest expense on our debt;
|
•
|
EBITDA does not reflect the significant depreciation and amortization expense associated with our long-lived assets;
|
•
|
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 the 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; and
|
•
|
other companies in our industry may calculate EBITDA differently than we do, limiting its usefulness as a comparative measure.
|
(3)
|
Adjusted EBITDA is EBITDA net of the impact of the spread between the FIFO basis of accounting and ECRC and net of the impact of items we do not consider indicative of our ongoing operating performance. We explain how each adjustment is derived and why we believe it is helpful and appropriate in the reconciliation below. You are encouraged to evaluate each adjustment and the reasons we consider it appropriate for supplemental analysis. As an analytical tool, Adjusted EBITDA is subject to the limitations applicable to EBITDA described above, as well as the following limitations:
|
•
|
due to volatility in raw material prices, Adjusted EBITDA may, and often does, vary substantially from EBITDA, net income and other performance measures, including net income calculated in accordance with GAAP; and
|
•
|
Adjusted EBITDA may, and often will, vary significantly from EBITDA calculations under the terms of our debt agreements and should not be used for assessing compliance or non-compliance with financial covenants under our debt agreements.
|
|
Three Months Ended March 31, 2017
|
|
Three Months Ended March 31, 2016
|
||||||||||||||||||||
|
Polymer
|
|
Chemical
|
|
Total
|
|
Polymer
|
|
Chemical
|
|
Total
|
||||||||||||
|
(In thousands)
|
||||||||||||||||||||||
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.
|
|
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.
|
•
|
$83.3 million
decrease in cash flows associated with inventories of products, materials, and supplies, due to higher raw material costs; partially offset by
|
•
|
$30.5 million
increase in cash flows associated with trade accounts payable due to higher raw material costs and timing of payments;
|
•
|
$13.8 million
increase in cash flows associated with other payables and accruals primarily related to the timing of payments for transaction related costs; and
|
•
|
$9.1 million
net increase in cash flows due to the timing of payments of other items, including accounts receivable, related party transactions, taxes, and pension costs.
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk.
|
Item 4.
|
Controls and Procedures.
|
Item 1.
|
Legal Proceedings.
|
Item 1A.
|
Risk Factors.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds.
|
Item 3.
|
Default Upon Senior Securities.
|
Item 4.
|
Mine Safety Disclosures.
|
Item 5.
|
Other Information.
|
Item 6.
|
Exhibits.
|
Exhibit
Number
|
|
|
|
Indenture, dated as of March 24, 2017, among Kraton Polymers LLC and Kraton Polymers Capital Corporation, as Issuers, the Guarantors named therein and Wells Fargo Bank, National Association, as Trustee, relating to the 7.000% Senior Notes due 2025 (incorporated by reference to Exhibit 4.1 to Kraton Corporation’s Current Report on Form 8-K filed with the SEC on March 27, 2017)
|
|
|
Form of Global Note for the 7.000% Senior Notes due 2025 (incorporated by reference to Exhibit A of Exhibit 4.1 to Kraton Corporation’s Current Report on Form 8-K filed with the SEC on March 27, 2017)
|
|
|
Second Amendment to Credit and Guarantee Agreement, dated as of January 9, 2017, relating to the Credit and Guarantee Agreement dated as of January 6, 2016, among Kraton Polymers LLC, as the Borrower, Kraton Performance Polymers, Inc., as Parent, certain subsidiaries of Parent, as Guarantors, the Lenders party thereto from time to time, Credit Suisse AG, Cayman Islands Branch, as Administrative Agent and as Collateral Agent and Nomura Securities International, Inc. and Deutsche Bank Securities Inc., as Syndication Agents (incorporated by reference to Exhibit 10.1 to Kraton Corporation's Current Report on Form 8-K filed with the SEC on January 10, 2017)
|
|
|
Kraton Corporation 2016 Equity and Cash Incentive Plan (as amended and restated)
|
|
|
Certification of Chief Executive Officer under Section 302 of Sarbanes—Oxley Act of 2002
|
|
|
Certification of Chief Financial Officer under Section 302 of Sarbanes—Oxley Act of 2002
|
|
|
Certification Pursuant to Section 906 of Sarbanes—Oxley Act of 2002
|
|
|
The following materials from Kraton Corporation Quarterly Report on Form 10-Q for the three months ended March 31, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016 (Unaudited), (ii) Condensed Consolidated Statements of Operations for the three months ended March 31, 2017 and 2016 (Unaudited), (iii) Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2017 and 2016 (Unaudited), (iv) Condensed Consolidated Statements of Changes in Equity for the three months ended March 31, 2017 and 2016 (Unaudited), (v) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016 (Unaudited) and (vi) Notes to Condensed Consolidated Financial Statements (Unaudited)
|
*
|
Filed herewith.
|
+
|
Denotes management contract or compensatory plan or arrangement.
|
|
|
KRATON CORPORATION
|
|
|
|
Date:
|
April 27, 2017
|
/s/
Kevin M. Fogarty
|
|
|
Kevin M. Fogarty
|
|
|
President and Chief Executive Officer
|
|
|
|
Date:
|
April 27, 2017
|
/s/
Stephen E. Tremblay
|
|
|
Stephen E. Tremblay
|
|
|
Executive Vice President and Chief Financial Officer
|
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