EX-99.2
3
exhibit992proformafina.htm
EXHIBIT 99.2
Exhibit
Exhibit 99.2
Summary of Unaudited Pro Forma Financial Information
On October 30, 2019, Kraton Polymers LLC and Kraton Polymers Holdings B.V., each a wholly owned subsidiary of Kraton Corporation (the "Company"), entered into an asset and stock purchase and sale agreement to sell the assets that are primarily used, primarily held for use, or intended to be primarily used in the Company's Cariflex™ business (the "Business") to Daelim Industrial Co, Ltd. ("Daelim") for gross proceeds of $530.0 million in cash. The transaction closed on March 6, 2020.
The transaction constitutes a significant disposition for purposes of Item 2.01 of Form 8-K. As a result, the following unaudited financial information has been prepared to reflect the pro forma consolidated statement of operations for the year ended December 31, 2019 and the related pro forma consolidated balance sheet as of December 31, 2019 of the Company, giving effect to the sale of the Business.
The unaudited pro forma consolidated statements of operations for the year ended December 31, 2019 give effect to the sale as if the sale transaction occurred at the beginning of the period presented. The unaudited pro forma consolidated balance sheet as of December 31, 2019 assumes the sale occurred on December 31, 2019. The amount of proceeds presented in the pro forma balance sheet as of December 31, 2019 reflects the estimated net proceeds received upon closing of $530.0 million, adjusted for incremental working capital of $5.8 million, less contractual capital contributions of $25.3 million. The net proceeds do not reflect a customary post-closing working capital adjustment nor the contractual capital contributions post-closing adjustment.
The pro forma information is not necessarily indicative of the financial position or results of operations of future periods or indicative of results that would have actually occurred had the transaction been completed as of the date of, or as of the beginning of the periods presented.
The unaudited pro forma consolidated financial statements have been derived from historical financial statements prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") and are presented based upon information currently available and certain assumptions the Company believes are reasonable. The unaudited pro forma consolidated financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's Form 10-K for the year ended December 31, 2019.
KRATON CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except par value)
December 31, 2019
Kraton Corporation
Pro Forma Adjustments
Pro Forma
ASSETS
Current assets:
Cash and cash equivalents
$
35,033
$
135,816
(a)
$
170,849
Receivables, net of allowances of $434
169,603
-
169,603
Inventories of products
332,457
-
332,457
Inventories of materials and supplies
32,211
-
32,211
Prepaid expense
6,991
-
6,991
Other current assets
22,385
-
22,385
Current assets held for sale
51,356
(51,356
)
(b)
-
Total current assets
650,036
84,460
734,496
Property, plant, and equipment, less accumulated depreciation of $639,197
925,940
-
925,940
Goodwill
772,418
-
772,418
Intangible assets, less accumulated amortization of $285,819
325,877
-
325,877
Investment in unconsolidated joint venture
11,971
-
11,971
Debt issuance costs
-
-
-
Deferred income taxes
8,863
-
8,863
Long-term operating lease assets, net
85,003
-
85,003
Other long-term assets
25,219
-
25,219
Long-term assets held for sale
27,058
(27,058
)
(b)
-
Total assets
$
2,832,385
$
57,402
$
2,889,787
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt
$
53,139
$
-
$
53,139
Accounts payable-trade
168,541
-
168,541
Other payables and accruals
112,645
22,351
(c)
134,996
Due to related party
17,470
-
17,470
Current liabilities held for sale
14,849
(14,849
)
(b)
-
Total current liabilities
366,644
7,502
374,146
Long-term debt, net of current portion
1,311,486
(374,692
)
(a)
936,794
Deferred income taxes
125,240
-
125,240
Long-term operating lease liabilities
66,624
-
66,624
Other long-term liabilities
172,960
158,248
(c)
331,208
Long-term liabilities held for sale
3
(3
)
(b)
-
Total liabilities
2,042,957
(208,945
)
1,834,012
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; 31,751 shares issued and outstanding at December 31, 2019
318
-
318
Additional paid in capital
392,208
-
392,208
Retained earnings
464,712
266,347
(d)
731,059
Accumulated other comprehensive loss
(105,795
)
-
(105,795
)
Total Kraton stockholders' equity
751,443
266,347
1,017,790
Noncontrolling interest
37,985
-
37,985
Total equity
789,428
266,347
1,055,775
Total liabilities and equity
$
2,832,385
$
57,402
$
2,889,787
Notes to Pro Forma Adjustments
(a)
Reflects net proceeds received upon closing of $510.5 million, less repayments of debt of $374.7 million, which debt repayments include (i) the repayment of the full outstanding balance of $290.0 million under the U.S. dollar denominated tranche of the Company's senior secured term loan facility (the "Term Loan Facility") and (ii) a repayment in the amount of €75.0 million, or approximately $84.7 million during March 2020, of borrowings under the Euro dollar denominated tranche of the Term Loan Facility. We may use the remaining proceeds in accordance with the terms of the Term Loan Facility to make additional repayments of debt, invest in strategic assets of the Company, and pay transaction costs.
(b)
Reflects the disposition of the assets and liabilities of the Cariflex business (see Assets Held for Sale schedule below).
(c)
Reflects the deferred gain on a long term supply agreement ("LTSA") entered into as part of the transaction. We entered into this agreement pursuant to the asset and stock purchase and sale agreement in conjunction with the closing of the transaction, pursuant to which we will supply certain inventory to Daelim for a period of five years, with an optional extension for an additional five years, following the date of closing.
(d)
Reflects the preliminary gain on sale of approximately $266.3 million.
Assets Held for Sale
December 31, 2019
(In thousands)
ASSETS
Receivables, net of allowances of $51
$
20,397
Inventories of products, net
27,030
Inventories of materials and supplies, net
965
Prepaid expenses
1,913
Other current assets
1,051
Property, plant, and equipment, less accumulated depreciation of $27,146
26,891
Other long-term assets
93
Long-term operating lease assets, net
74
Total assets
$
78,414
LIABILITIES
Accounts payable-trade
$
9,180
Other payables and accruals
5,669
Long-term operating lease liabilities
3
Total liabilities
$
14,852
Net assets
$
63,562
KRATON CORPORATION
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
Years Ended December 31, 2019
Kraton Corporation
Pro Forma Adjustments
Pro Forma
Revenue
$
1,804,436
$
(151,948
)
(a)
$
1,652,488
Cost of goods sold
1,390,007
(118,552
)
(a)
1,271,455
Gross profit
414,429
(33,396
)
381,033
Operating expenses:
Research and development
41,073
(2,578
)
(a)
38,495
Selling, general, and administrative
149,800
(2,409
)
(a)
147,391
Depreciation and amortization
136,171
(2,601
)
(a)
133,570
Gain on insurance proceeds
(32,850
)
-
(32,850
)
Loss on disposal of fixed assets
773
-
773
Operating income
119,462
(25,808
)
93,654
Other income
3,339
-
3,339
Loss on extinguishment of debt
(3,521
)
-
(3,521
)
Earnings of unconsolidated joint venture
506
-
506
Interest expense, net
(75,782
)
14,741
(b)
(61,041
)
Income before income taxes
44,004
(11,067
)
32,937
Income tax benefit
11,813
2,324
(c)
14,137
Consolidated net income
55,817
(8,743
)
47,074
Net income attributable to noncontrolling interest
(4,512
)
-
(4,512
)
Net income attributable to Kraton
$
51,305
$
(8,743
)
$
42,562
Earnings per common share:
Basic
$
1.61
$
(0.27
)
$
1.34
Diluted
$
1.60
$
(0.27
)
$
1.33
Weighted average common shares outstanding:
Basic
31,581
31,581
31,581
Diluted
31,881
31,881
31,881
Notes to Pro Forma Adjustments
(a)
Reflects sales, cost of goods sold, and deferred income under the LTSA and the disposition of the Cariflex business as a result of the sale transaction.
Revenue
Cost of Goods Sold
Kraton Corporation
$
1,804,436
Kraton Corporation
$
1,390,007
LTSA contract
34,318
LTSA contract
11,967
Cariflex
(186,266
)
Cariflex
(130,519
)
Pro Forma
$
1,652,488
Pro Forma
$
1,271,455
(b)
Reflects the repayments of debt on our Term Loan Facility and the resulting impact to interest expense on an annualized basis.
(c)
Reflects the income tax expense recorded at the U.S. statutory rate of 21.0% related to the operations of the Business that were disposed of as a result of the sale transaction.
The above proforma statement of operations does not reflect the one time gain on sale of approximately $266.3 million and loss on extinguishment of debt of $13.0 million (related to the Term Loan Facility repayments), as these are one time non-recurring charges.

EX - 99 . 2 3 exhibit992proformafina . htm EXHIBIT 99 . 2 Exhibit Exhibit 99 . 2 Summary of Unaudited Pro Forma Financial Information On October 30 , 2019 , Kraton Polymers LLC and Kraton Polymers Holdings B . V . , each a wholly owned subsidiary of Kraton Corporation ( the " Company " ) , entered into an asset and stock purchase and sale agreement to sell the assets that are primarily used , primarily held for use , or intended to be primarily used in the Company 's Cariflex ™ business ( the " Business " ) to Daelim Industrial Co , Ltd . ( " Daelim " ) for gross proceeds of $ 530.0 million in cash . The transaction closed on March 6 , 2020 . The transaction constitutes a significant disposition for purposes of Item 2 . 01 of Form 8 - K . As a result , the following unaudited financial information has been prepared to reflect the pro forma consolidated statement of operations for the year ended December 31 , 2019 and the related pro forma consolidated balance sheet as of December 31 , 2019 of the Company , giving effect to the sale of the Business . The unaudited pro forma consolidated statements of operations for the year ended December 31 , 2019 give effect to the sale as if the sale transaction occurred at the beginning of the period presented . The unaudited pro forma consolidated balance sheet as of December 31 , 2019 assumes the sale occurred on December 31 , 2019 . The amount of proceeds presented in the pro forma balance sheet as of December 31 , 2019 reflects the estimated net proceeds received upon closing of $ 530.0 million , adjusted for incremental working capital of $ 5.8 million , less contractual capital contributions of $ 25.3 million . The net proceeds do not reflect a customary post - closing working capital adjustment nor the contractual capital contributions post - closing adjustment . The pro forma information is not necessarily indicative of the financial position or results of operations of future periods or indicative of results that would have actually occurred had the transaction been completed as of the date of , or as of the beginning of the periods presented . The unaudited pro forma consolidated financial statements have been derived from historical financial statements prepared in accordance with U . S . generally accepted accounting principles ( " U . S . GAAP " ) and are presented based upon information currently available and certain assumptions the Company believes are reasonable . The unaudited pro forma consolidated financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes and " Management 's Discussion and Analysis of Financial Condition and Results of Operations " included in the Company 's Form 10 - K for the year ended December 31 , 2019 . KRATON CORPORATION PRO FORMA CONSOLIDATED BALANCE SHEETS ( UNAUDITED ) ( In thousands , except par value ) December 31 , 2019 Kraton Corporation Pro Forma Adjustments Pro Forma ASSETS Current assets : Cash and cash equivalents $ 35,033 $ 135,816 ( a ) $ 170,849 Receivables , net of allowances of $ 434 169,603 - 169,603 Inventories of products 332,457 - 332,457 Inventories of materials and supplies 32,211 - 32,211 Prepaid expense 6,991 - 6,991 Other current assets 22,385 - 22,385 Current assets held for sale 51,356 ( 51,356 ) ( b ) - Total current assets 650,036 84,460 734,496 Property , plant , and equipment , less accumulated depreciation of $ 639,197 925,940 - 925,940 Goodwill 772,418 - 772,418 Intangible assets , less accumulated amortization of $ 285,819 325,877 - 325,877 Investment in unconsolidated joint venture 11,971 - 11,971 Debt issuance costs - - - Deferred income taxes 8,863 - 8,863 Long - term operating lease assets , net 85,003 - 85,003 Other long - term assets 25,219 - 25,219 Long - term assets held for sale 27,058 ( 27,058 ) ( b ) - Total assets $ 2,832,385 $ 57,402 $ 2,889,787 LIABILITIES AND EQUITY Current liabilities : Current portion of long - term debt $ 53,139 $ - $ 53,139 Accounts payable - trade 168,541 - 168,541 Other payables and accruals 112,645 22,351 ( c ) 134,996 Due to related party 17,470 - 17,470 Current liabilities held for sale 14,849 ( 14,849 ) ( b ) - Total current liabilities 366,644 7,502 374,146 Long - term debt , net of current portion 1,311,486 ( 374,692 ) ( a ) 936,794 Deferred income taxes 125,240 - 125,240 Long - term operating lease liabilities 66,624 - 66,624 Other long - term liabilities 172,960 158,248 ( c ) 331,208 Long - term liabilities held for sale 3 ( 3 ) ( b ) - Total liabilities 2,042,957 ( 208,945 ) 1,834,012 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 ; 31,751 shares issued and outstanding at December 31 , 2019 318 - 318 Additional paid in capital 392,208 - 392,208 Retained earnings 464,712 266,347 ( d ) 731,059 Accumulated other comprehensive loss ( 105,795 ) - ( 105,795 ) Total Kraton stockholders ' equity 751,443 266,347 1,017,790 Non controlling interest 37,985 - 37,985 Total equity 789,428 266,347 1,055,775 Total liabilities and equity $ 2,832,385 $ 57,402 $ 2,889,787 Notes to Pro Forma Adjustments ( a ) Reflects net proceeds received upon closing of $ 510.5 million , less repayments of debt of $ 374.7 million , which debt repayments include ( i ) the repayment of the full outstanding balance of $ 290.0 million under the U . S . dollar denominated tranche of the Company 's senior secured term loan facility ( the " Term Loan Facility " ) and ( ii ) a repayment in the amount of € 75.0 million , or approximately $ 84.7 million during March 2020 , of borrowings under the Euro dollar denominated tranche of the Term Loan Facility . We may use the remaining proceeds in accordance with the terms of the Term Loan Facility to make additional repayments of debt , invest in strategic assets of the Company , and pay transaction costs . ( b ) Reflects the disposition of the assets and liabilities of the Cariflex business ( see Assets Held for Sale schedule below ) . ( c ) Reflects the deferred gain on a long term supply agreement ( " LTSA " ) entered into as part of the transaction . We entered into this agreement pursuant to the asset and stock purchase and sale agreement in conjunction with the closing of the transaction , pursuant to which we will supply certain inventory to Daelim for a period of five years , with an optional extension for an additional five years , following the date of closing . ( d ) Reflects the preliminary gain on sale of approximately $ 266.3 million . Assets Held for Sale December 31 , 2019 ( In thousands ) ASSETS Receivables , net of allowances of $ 51 $ 20,397 Inventories of products , net 27,030 Inventories of materials and supplies , net 965 Prepaid expenses 1,913 Other current assets 1,051 Property , plant , and equipment , less accumulated depreciation of $ 27,146 26,891 Other long - term assets 93 Long - term operating lease assets , net 74 Total assets $ 78,414 LIABILITIES Accounts payable - trade $ 9,180 Other payables and accruals 5,669 Long - term operating lease liabilities 3 Total liabilities $ 14,852 Net assets $ 63,562 KRATON CORPORATION PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS ( UNAUDITED ) ( In thousands , except per share data ) Years Ended December 31 , 2019 Kraton Corporation Pro Forma Adjustments Pro Forma Revenue $ 1,804,436 $ ( 151,948 ) ( a ) $ 1,652,488 Cost of goods sold 1,390,007 ( 118,552 ) ( a ) 1,271,455 Gross profit 414,429 ( 33,396 ) 381,033 Operating expenses : Research and development 41,073 ( 2,578 ) ( a ) 38,495 Selling , general , and administrative 149,800 ( 2,409 ) ( a ) 147,391 Depreciation and amortization 136,171 ( 2,601 ) ( a ) 133,570 Gain on insurance proceeds ( 32,850 ) - ( 32,850 ) Loss on disposal of fixed assets 773 - 773 Operating income 119,462 ( 25,808 ) 93,654 Other income 3,339 - 3,339 Loss on extinguishment of debt ( 3,521 ) - ( 3,521 ) Earnings of unconsolidated joint venture 506 - 506 Interest expense , net ( 75,782 ) 14,741 ( b ) ( 61,041 ) Income before income taxes 44,004 ( 11,067 ) 32,937 Income tax benefit 11,813 2,324 ( c ) 14,137 Consolidated net income 55,817 ( 8,743 ) 47,074 Net income attributable to non controlling interest ( 4,512 ) - ( 4,512 ) Net income attributable to Kraton $ 51,305 $ ( 8,743 ) $ 42,562 Earnings per common share : Basic $ 1 . 61 $ ( 0 . 27 ) $ 1 . 34 Diluted $ 1 . 60 $ ( 0 . 27 ) $ 1 . 33 Weighted average common shares outstanding : Basic 31,581 31,581 31,581 Diluted 31,881 31,881 31,881 Notes to Pro Forma Adjustments ( a ) Reflects sales , cost of goods sold , and deferred income under the LTSA and the disposition of the Cariflex business as a result of the sale transaction . Revenue Cost of Goods Sold Kraton Corporation $ 1,804,436 Kraton Corporation $ 1,390,007 LTSA contract 34,318 LTSA contract 11,967 Cariflex ( 186,266 ) Cariflex ( 130,519 ) Pro Forma $ 1,652,488 Pro Forma $ 1,271,455 ( b ) Reflects the repayments of debt on our Term Loan Facility and the resulting impact to interest expense on an annualized basis . ( c ) Reflects the income tax expense recorded at the U . S . statutory rate of 21 . 0 % related to the operations of the Business that were disposed of as a result of the sale transaction . The above proforma statement of operations does not reflect the one time gain on sale of approximately $ 266.3 million and loss on extinguishment of debt of $ 13.0 million ( related to the Term Loan Facility repayments ) , as these are one time non - recurring charges .
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