Kraton Performance Polymers, Inc. Announces Second Quarter 2010 Results


    


    
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<p><span class="xn-location">HOUSTON</span>, <span class="xn-chron">Aug. 4</span> /CNW/ -- Kraton Performance Polymers, Inc. (NYSE:   KRA), a leading global producer of styrenic block copolymers, announces improved financial results for the quarter ended <span class="xn-chron">June 30, 2010</span>.</p>
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    (Logo:  http://photos.prnewswire.com/prnh/20100728/DA42514LOGO)
    (Logo:  http://www.newscom.com/cgi-bin/prnh/20100728/DA42514LOGO)

    2010 SECOND QUARTER HIGHLIGHTS
    --  Sales volume increased 21% year-on-year to 86 kilotons
    --  Sales revenues increased 42% year-on-year to $332 million
    --  Earnings per diluted share were $1.24 compared to a loss of $0.22 per
        diluted share in the second quarter 2009
    --  Delivered record Adjusted EBITDA(1) ( 2) of $63 million, reflecting a
        margin of 19% of revenues
    --  Continued to implement our "price right" strategy in response to
        volatility in raw material costs and other factors
    --  Isoprene Rubber and Isoprene Rubber Latex expansion projects on
        schedule and on budget


    
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<p>"In our second full quarter as a public company, Kraton delivered strong financial and operational results. The record profitability in the quarter was primarily driven by higher sales volume, and the impact of several price increases we implemented in response to changes in raw material costs, increased demand for our products and other manufacturing considerations," said Kevin M. Fogarty, President and Chief Executive Officer.  "While our sales volume in the quarter includes the impact of a seasonal increase attributable to our global Paving and Roofing business, it also reflects improvement in demand across all of our end use markets as the worldwide economy continued to recover from 2009 lows, continuing the year-on-year growth trend we have now experienced for the past three quarters," added Fogarty.  "In addition, we are equally pleased with the continued success of our innovation-led market development activities, particularly in <span class="xn-location">China</span>, which contributed as well to the 21% growth in quarterly volume.  We therefore see the need, and have begun the review process, for additional HSBC capacity in Asia, to meet the future growth needs of our global customers."</p>
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                                        Three Months Ended
                                             June 30,
    (US $ in thousands, except          ------------------
     per share amounts)                2010           2009
                                       ----           ----
    Revenues                         $332,086       $243,821
    Adjusted EBITDA(1) ( 2)           $63,025        $12,907
    Net Income (Loss)                 $38,595        $(4,185)
    Net Income (Loss) per diluted
     share                              $1.24         $(0.22)
    Net cash provided by (used
     in) operating activities         $21,799        $39,928
    
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                                      Six Months Ended June
                                               30,
    (US $ in thousands, except      ----------------------
     per share amounts)               2010          2009
                                      ----          ----
    Revenues                        $604,818      $428,779
    Adjusted EBITDA(1) ( 2)         $105,647        $3,189
    Net Income (Loss)                $58,390      $(20,646)
    Net Income (Loss) per diluted
     share                             $1.88        $(1.06)
    Net cash provided by (used
     in) operating activities       $(51,037)       $4,707
    
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    (1) A reconciliation of Adjusted EBITDA to Net Income (Loss) is
        included in the accompanying financial tables.
    (2) Adjusted EBITDA is EBITDA less restructuring and related
        charges, non-cash expenses, sponsor fees and gains on the
        extinguishment of debt.

    Operating Highlights
    
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<p>Revenues in the second quarter 2010 were <span class="xn-money">$332 million</span>, an increase of approximately 42% compared to second quarter 2009 and 22% compared to the first quarter 2010.  The increase in revenues compared to the second quarter 2009 and first quarter 2010 was primarily the result of the combined impact of increased price and sales volume.  Sales volume in the second quarter 2010 was 86 kilotons, an increase of 21% compared to second quarter 2009 and 18% compared to the first quarter 2010.</p>
<p/>
<p>Adjusted EBITDA in the second quarter 2010 was <span class="xn-money">$63 million</span>, or 19% of revenue, compared to <span class="xn-money">$13 million</span>, or 6% of revenue, in the second quarter 2009 and <span class="xn-money">$43 million</span> or 16% of revenue in the first quarter 2010.</p>
<p/>
<p>Second quarter 2010 net income was <span class="xn-money">$39 million</span> or <span class="xn-money">$1.24</span> per diluted share, compared with a second quarter 2009 net loss of <span class="xn-money">$4 million</span> or <span class="xn-money">$0.22</span> per diluted share, and net income of <span class="xn-money">$20 million</span> or <span class="xn-money">$0.64</span> per diluted share in the first quarter 2010.  During the second quarter of 2010 our effective tax rate was 12%, compared to 18% in the first quarter of 2010.  The lower effective tax rate in the second quarter of 2010 was due to the geographic mix of our pre-tax earnings in the quarter, which allowed a greater benefit from the use of net operating loss carryforwards.</p>
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    Cash Flow
    
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<p>In the first quarter of each year our operations typically consume cash as we build inventories in advance of the second and third quarters, which are the peak season for our Paving and Roofing end use market.  During the second quarter, net cash provided by operating activities was <span class="xn-money">$22 million</span>, compared to net cash used in operating activities of <span class="xn-money">$73 million</span> in the first quarter.  Net capital expenditures in the second quarter 2010 were <span class="xn-money">$12 million</span> versus <span class="xn-money">$16 million</span> in the second quarter 2009.</p>
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    END USE MARKET INFORMATION
    
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<p>Revenue in our Adhesives, Sealants and Coatings end use market increased <span class="xn-money">$32 million</span> or approximately 44% to <span class="xn-money">$104 million</span> in the second quarter 2010 compared to the second quarter 2009.</p>
<p/>
<p>"In <span class="xn-location">North America</span>, revenue growth in our Adhesives, Sealants and Coatings end use market was the result of higher sales in personal care, and specialty tape applications, as well as increased demand for clear sealant applications, driven by increased do-it-yourself home improvement activity," said Fogarty.  "In <span class="xn-location">Europe</span>, increased sales reflected a recovery in non-woven adhesives used in personal care products such as diapers, and an increased demand for automotive sealants."</p>
<p/>
<p>Revenue in our Advanced Materials end use market increased <span class="xn-money">$30 million</span> or approximately 44% to <span class="xn-money">$98 million</span> in the second quarter 2010 compared to the second quarter 2009.</p>
<p/>
<p>"Volume growth for Advanced Materials was broad-based, with increases across all regions," added Fogarty.  "Revenue increases were driven by our core business in automotive, consumer electronics, personal care, and medical applications, all of which benefitted from an improving economic climate.  We continue to see positive innovation momentum, especially in applications for personal care products and PVC alternatives for wire and cable and medical applications."</p>
<p/>
<p>Revenue in our Paving and Roofing end use market increased <span class="xn-money">$37 million</span> or approximately 53% to <span class="xn-money">$107 million</span> in the second quarter 2010 compared to the second quarter 2009.</p>
<p/>
<p>"As expected, revenue from our Paving and Roofing end use market showed the largest increase both year-on-year and sequentially as we entered into the peak season for paving and roofing projects," said Fogarty.  "The growth reflects stronger sales in roofing applications, primarily in <span class="xn-location">Europe</span>.  In <span class="xn-location">North America</span>, a combination of poor weather conditions and constrained state and local infrastructure spending resulted in essentially flat demand compared to the second quarter of 2009."</p>
<p/>
<p>Revenue in our Emerging Businesses end use market increased <span class="xn-money">$5 million</span> or approximately 34% to <span class="xn-money">$19 million</span> in the second quarter 2010 compared to the second quarter 2009.</p>
<p/>
<p>"The revenue increase in our Emerging Business end use market reflects the continued volume growth of our isoprene rubber latex products in applications such as surgical gloves and condoms," said Fogarty.  "During the quarter, the expansion projects we announced for increased isoprene rubber capacity at our Belpre, Ohio, facility and for debottlenecking of isoprene rubber latex capacity at our Paulinia, <span class="xn-location">Brazil</span>, site continued to progress on plan, and on budget.  The incremental capacity will help us meet growing demand which is being driven by our innovation projects."</p>
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    SECOND QUARTER 2010 DEVELOPMENTS
    --  During the second quarter, we initiated a project assessment work plan
        which includes site selection activities for additional HSBC capacity
        in the Asia Pacific region.   As a result of growth in Kraton's
        differentiated grades of HSBC's globally, we see the need for
        additional manufacturing capacity. We are continuing to expand and
        strengthen our presence in Asia, and thus we believe Kraton's
regional,
        and global, business would benefit from such increased capacity.  The
        anticipated 30 kiloton HSBC manufacturing facility would employ
        Kraton's latest state-of-the-art technology for producing HSBC's, and
        we believe would set a new global standard for manufacturing cost and
        product quality, demonstrating further our commitment to our business
        and the region. Our site-selection team is expected to make its
        recommendation to management by December 2010 at which time we will be
        in a better position to render a final project decision.  While it is
        too early to estimate the expected cost of the new facility, we
        anticipate that construction could commence in the first half of 2012
        with start-up occurring as early as the second half of 2013.
    --  We have relocated our Shanghai, China, office to a facility that is
        double the size of the previous location to better accommodate our
        on-going increase in staff and in-house capabilities. Our Shanghai
        staff has nearly doubled since 2006.  The new facility also offers a
        multi-functional customer service center and also includes a dedicated
        training facility.
    --  During the quarter, we announced a number of price increases in
        response to rising raw material costs and other factors.


    OUTLOOK
    
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<p>"The rate of increase in raw material prices slowed in the second quarter and has recently started to level off.  We expect prices for our manufacturing inputs to remain relatively stable for the balance of the year," said Fogarty.  "Based upon the solid volume growth we experienced in the second quarter, we remain positive on the near-term outlook for our business.  At this time we expect third quarter sales volumes to be generally in line with the second quarter.  That said, we will continue to monitor the pace and strength of the economic recovery for any material change that could potentially impact demand in our end use markets."</p>
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    USE OF NON-GAAP FINANCIAL MEASURES
    
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<p>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 and Adjusted 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.</p>
<p/>
<p>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 <span class="xn-location">United States</span>.  EBITDA and Adjusted EBITDA presented in this earnings release may differ from EBITDA amounts calculated by us under our debt instruments.</p>
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    CONFERENCE CALL AND WEBCAST INFORMATION
    
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<p>Kraton has scheduled a conference call on <span class="xn-chron">Thursday August 5, 2010</span> at <span class="xn-chron">9:00 a.m. (Eastern Time</span>) to discuss second quarter 2010 financial results. Kraton invites you to listen to the conference call, which will be broadcast live over the internet at <a href="http://www.kraton.com">www.kraton.com</a>, 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.</p>
<p/>
<p>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.</p>
<p/>
<p>For those unable to listen to the live call, a replay will be available beginning at approximately <span class="xn-chron">11:00 a.m. (Eastern Time</span>) on <span class="xn-chron">August 5, 2010</span> through <span class="xn-chron">5:00 p.m. Eastern Time</span> on <span class="xn-chron">August 19, 2010</span>. To hear a replay of the call over the Internet, access Kraton's Website at <a href="http://www.kraton.com">www.kraton.com</a> 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 866-415-8391 and International callers dial 203-369-0700.</p>
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    ABOUT KRATON
    
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<p>Kraton Performance Polymers, Inc., through its operating subsidiary Kraton Polymers LLC and its subsidiaries (collectively, "Kraton"), 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 Kraton almost 50 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, and 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 most diversified SBC plant in the world, as well as plants in <span class="xn-location">Germany</span>, <span class="xn-location">France</span>, <span class="xn-location">Brazil</span> and <span class="xn-location">Japan</span>. The plant in <span class="xn-location">Japan</span> is operated by an unconsolidated manufacturing joint venture. For more information on the company, please visit <a href="http://www.kraton.com">www.kraton.com</a>.</p>
<p/>
<p>Kraton, the Kraton logo and design, and the "Giving Innovators their Edge" tagline are all trademarks of Kraton Polymers LLC.</p>
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    Forward Looking Statements
    
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<p>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.</p>
<p/>
<p>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. These risks and uncertainties are more fully described in "Part I. Item 1A. Risk Factors" contained in our Annual Report on 10-K, as filed with the Securities and Exchange Commission and as subsequently updated in our Quarterly Reports on Form 10-Q, and include the following risk factors: conditions in the global economy and capital markets; our reliance on LyondellBasell Industries for the provision of significant operating and other services ; the failure of our raw materials suppliers to perform their obligations under long-term supply agreements, or our inability to replace or renew these agreements when they expire; limitations in the availability of raw materials we need to produce our products in the amounts or at the prices necessary for us to effectively and profitably operate our business; competition in our end-use markets, from other producers of SBCs and from producers of products that can be substituted for our products; our ability to produce and commercialize technological innovations; our ability to protect our intellectual property, on which our business is substantially dependent; infringement of our products on the intellectual property rights of others; seasonality in our Paving and Roofing business; financial and operating constraints related to our substantial level of indebtedness; product liability claims and other lawsuits arising from environmental damage or personal injuries associated with chemical manufacturing; political and economic risks in the various countries in which we operate; the inherently hazardous nature of chemical manufacturing; health, safety and environmental laws, including laws that govern our employees' exposure to chemicals deemed harmful to humans; regulation of our customers, which could affect the demand for our products or result in increased compliance costs; international trade, export control, antitrust, zoning and occupancy and labor and employment laws that could require us to modify our current business practices and incur increased costs; our relationship with our employees; loss of key personnel or our inability to attract and retain new qualified personnel; fluctuations in currency exchange rates ; the fact that we typically do not enter into long-term contracts with our customers; a decrease in the fair value of our pension assets, which could require us to materially increase future funding of the pension plan; and concentration of ownership among our principal stockholders, which may prevent new investors from influencing significant corporate decisions 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.</p>
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                       KRATON PERFORMANCE POLYMERS, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)
                     (In thousands, except per share data)
    
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                                                          Three months ended
                                                               June 30,
                                                               --------
                                                           2010        2009
                                                           ----        ----
    Operating Revenues
        Sales                                            $332,086    $233,741
        Other                                                   -      10,080
                                                              ---      ------
            Total operating revenues                      332,086     243,821
    Cost of Goods Sold                                    242,973     208,060
                                                          -------     -------
    Gross Profit                                           89,113      35,761
                                                           ------      ------
    Operating Expenses
        Research and development                            5,572       5,071
        Selling, general and administrative                21,772      18,052
        Depreciation and amortization of identifiable
         intangibles                                       11,969      12,542
                                                           ------      ------
            Total operating expenses                       39,313      35,665
                                                           ------      ------
    Gain on Extinguishment of Debt                              -       4,340
    Equity in Earnings of Unconsolidated Joint
     Venture                                                  162         102
    Interest Expense, net                                   6,272       7,832
                                                            -----       -----
    Income (Loss) Before Income Taxes                      43,690      (3,294)
    Income Tax Expense                                      5,095         891
                                                            -----         ---
    Net Income (Loss)                                     $38,595     $(4,185)
                                                          =======     =======
    
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    Earnings (Loss) per common share
        Basic                                               $1.25      $(0.22)
        Diluted                                             $1.24      $(0.22)
    
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    Weighted average common shares outstanding
        Basic                                              30,806      19,410
        Diluted                                            31,244      19,410

    
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                       KRATON PERFORMANCE POLYMERS, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)
                     (In thousands, except per share data)
    
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                                                           Six months ended
                                                               June 30,
                                                               --------
                                                           2010        2009
                                                           ----        ----
    Operating Revenues
        Sales                                            $604,818    $411,607
        Other                                                   -      17,172
                                                              ---      ------
            Total operating revenues                      604,818     428,779
    Cost of Goods Sold                                    446,578     384,085
                                                          -------     -------
    Gross Profit                                          158,240      44,694
                                                          -------      ------
    Operating Expenses
        Research and development                           11,556      10,040
        Selling, general and administrative                43,834      36,303
        Depreciation and amortization of identifiable
         intangibles                                       23,015      25,106
                                                           ------      ------
            Total operating expenses                       78,405      71,449
                                                           ------      ------
    Gain on Extinguishment of Debt                              -      23,831
    Equity in Earnings of Unconsolidated Joint
     Venture                                                  236         176
    Interest Expense, net                                  12,336      16,738
                                                           ------      ------
    Income (Loss) Before Income Taxes                      67,735     (19,486)
    Income Tax Expense                                      9,345       1,160
                                                            -----       -----
    Net Income (Loss)                                     $58,390    $(20,646)
                                                          =======    ========
    
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    Earnings (Loss) per common share
        Basic                                               $1.90      $(1.06)
        Diluted                                             $1.88      $(1.06)
    
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    Weighted average common shares outstanding
        Basic                                              30,751      19,409
        Diluted                                            31,023      19,409

    
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                  KRATON PERFORMANCE POLYMERS, INC.
                CONDENSED CONSOLIDATED BALANCE SHEETS
                             (Unaudited)
                  (In thousands, except par value)
    
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                                                   June 30,      December 31,
                                                     2010           2009
                                                     ----           ----
    ASSETS
    
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    Current Assets
        Cash and cash equivalents                   $39,405        $69,291
        Receivables, net of allowances of $1,232
         and $1,335                                 166,020        115,329
        Inventories of products, net                304,364        284,258
        Inventories of materials and supplies,
         net                                         10,521         10,862
        Deferred income taxes                         3,107          3,107
        Other current assets                         19,478         16,770
                                                     ------         ------
            Total current assets                    542,895        499,617
    Property, plant and equipment, less
     accumulated depreciation of $212,794 and
     $236,558                                       342,143        354,860
    Identifiable intangible assets, less
     accumulated amortization of $46,836 and
     $42,741                                         73,564         75,801
    Investment in unconsolidated joint
     venture                                         12,104         12,078
    Deferred financing costs                          6,272          7,318
    Other long-term assets                           20,201         24,825
                                                     ------         ------
        Total Assets                               $997,179       $974,499
                                                   ========       ========
    LIABILITIES AND STOCKHOLDERS' EQUITY
    
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    Current Liabilities
        Current portion of long-term debt            $2,304         $2,304
        Accounts payable-trade                       85,013         93,494
        Other payables and accruals                  56,790         68,271
        Due to related party                         16,833         19,006
        Insurance note payable                        2,566              -
                                                      -----            ---
            Total current liabilities               163,506        183,075
    Long-term debt, net of current portion          381,523        382,675
    Deferred income taxes                            15,841         13,488
    Other long-term liabilities                      48,500         46,477
                                                     ------         ------
            Total Liabilities                       609,370        625,715
                                                    -------        -------
    
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    Stockholders' equity
        Preferred stock, $0.01 par value; 100,000
         shares authorized; none issued
        Common stock, $0.01 par value; 500,000
         shares authorized; 30,851 shares issued
         and outstanding                                309            297
        Additional paid in capital                  325,145        311,665
        Retained earnings                            58,376            (14)
        Accumulated other comprehensive income        3,979         36,836
                                                      -----         ------
            Total stockholders' equity              387,809        348,784
                                                    -------        -------
    Total Liabilities and Stockholders'
     Equity                                        $997,179       $974,499
                                                   ========       ========

    
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                     KRATON PERFORMANCE POLYMERS, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Unaudited)
                              (In thousands)
    
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<p> </p>
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                                                    Six months ended
                                                        June 30,
                                                        --------
                                                    2010           2009
                                                    ----           ----
    CASH FLOWS FROM OPERATING
     ACTIVITIES
        Net income (loss)                          $58,390       $(20,646)
        Adjustments to reconcile net
         income (loss) to net cash
         provided by (used in) operating
         activities:
            Depreciation and amortization of
             identifiable intangibles               23,015         25,106
            Accretion of debt discount                   -              5
            Inventory impairment                         -            669
            Amortization of deferred financing
             costs                                   1,036          1,582
            Loss on disposal of fixed assets             3            431
            Gain on extinguishment of debt               -        (23,831)
            Change in fair value of interest
             rate swaps                               (450)          (842)
            Distributed earnings in
             unconsolidated joint venture              167            257
            Deferred income tax expense              3,853           (910)
            Non-cash compensation related to
             equity awards                           1,771          1,237
            Decrease (increase) in
                Accounts receivable                (60,335)       (29,542)
                Inventories of products, materials
                 and supplies                      (39,002)        90,670
                Other assets                       (30,167)        (6,365)
            (Decrease) in
                Accounts payable-trade, other
                 payables and accruals, and other
                 long-term liabilities              (6,444)       (18,564)
                Due to related party                (2,874)       (14,550)
                  Net cash provided by (used in)
                   operating activities            (51,037)         4,707
                                                   -------          -----
    CASH FLOWS FROM INVESTING
     ACTIVITIES
        Purchase of property, plant and
         equipment                                 (17,545)       (19,972)
        Purchase of software                        (1,857)        (6,685)
        Proceeds from sale of property,
         plant and equipment                             -          3,833
                  Net cash used in investing
                   activities                      (19,402)       (22,824)
                                                   -------        -------
    CASH FLOWS FROM FINANCING
     ACTIVITIES
        Proceeds from debt                          69,000         53,000
        Repayment of debt                          (70,152)      (115,341)
        Proceeds from issuance of common
         stock                                      11,197              -
        Costs associated with the issuance
         of common stock                              (534)             -
        Proceeds from stock based
         compensation                                1,087              -
        Proceeds from insurance note
         payable                                     3,518          4,506
        Repayment of insurance note
         payable                                      (952)        (1,487)
                  Net cash provided by (used in)
                   financing activities             13,164        (59,322)
                                                    ------        -------
        Effect of exchange rate
         differences on cash                        27,389         (6,247)
                                                    ------         ------
                    Net decrease in cash and cash
                     equivalents                   (29,886)       (83,686)
        Cash and cash equivalents,
         beginning of period                        69,291        101,396
        Cash and cash equivalents, end of
         period                                    $39,405        $17,710
                                                   =======        =======
        Supplemental Disclosures
            Cash paid during the period for
             income taxes, net of refunds
             received                               $2,026         $7,455
            Cash paid during the period for
             interest                              $12,192        $16,489

    
</pre>
<p> </p>
<p> </p>
<pre>
    
                    KRATON PERFORMANCE POLYMERS, INC.
                       EBITDA AND ADJUSTED EBITDA
                             (In thousands)
    
</pre>
<p> </p>
<p> </p>
<pre>
    
                           Three months ended           Six months ended
                                June 30,                    June 30,
                                --------                    --------
                            2010         2009          2010          2009
                            ----         ----          ----          ----
                              (in thousands)              (in thousands)
    Net income /(Net Loss)
     Plus                  $38,595      $(4,185)      $58,390      $(20,646)
        Interest
         expense, net        6,272        7,832        12,336        16,738
        Income tax
         expense             5,095          891         9,345         1,160
        Depreciation and
         amortization
         expenses           11,969       12,542        23,015        25,106
                            ------       ------        ------        ------
    EBITDA(a)              $61,931      $17,080      $103,086       $22,358
                           =======      =======      ========       =======

    
</pre>
<p> </p>
<p> </p>
<p> </p>
<pre>
    
                                  
                                                  
                           Three months ended           Six months ended
                                June 30,                    June 30,
                                --------                    --------
                            2010         2009          2010          2009
                            ----         ----          ----          ----
                              (in thousands)             (in thousands)
    
</pre>
<p> </p>
<pre>
    
    EBITDA(a)              $61,931      $17,080      $103,086       $22,358
     Add (Deduct)
        Sponsor fees and
         expenses                -          500             -         1,000
        Restructuring
         and related
         charges (b)           655          413           790         1,107
        Other non-cash
         expenses (c)          439         (746)        1,771         2,555
        Gain on
         extinguishment
         of debt (d)             -       (4,340)            -       (23,831)
                               ---       ------           ---       -------
    Adjusted
     EBITDA(a)             $63,025      $12,907      $105,647        $3,189
                           =======      =======      ========        ======


    
</pre>
<p> </p>
<p> </p>
<pre>
    
    (a) EBITDA and Adjusted EBITDA were positively impacted by
        approximately $14.7 million and $21.9 million due to the sale of
        inventory produced when raw material costs were lower than the then
        current replacement cost in the three and six months ended June 30,
        2010. Conversely EBITDA and Adjusted EBITDA were negatively impacted
        by approximately $9.3 million and $43.6 million due to the sale of
        inventory produced when raw material costs were higher than the then
        current replacement cost in the three and six months ended June 30,
        2009.
    (b) 2010 costs consist primarily of legal and consulting fees
        associated with the restructuring of our European organization and
        2009 costs consist primarily of costs associated with evaluating
        merger and acquisition transactions and potential debt refinancing.
    (c) For all periods, consists primarily of non-cash compensation.
        In 2009, also reflects the non-cash inventory impairment to lower
        inventory from first-in first-out cost to market value and losses
        on the sale of fixed assets.
    (d) In 2009, reflects the non-recurring cash gain related to the
        bond repurchase.

    
</pre>
<p> </p>
<p> </p>
<pre>
    
    Restructuring and related charges discussed above were recorded in
    the Condensed Consolidated Statements of Operations, as follows.
    
</pre>
<p> </p>
<p> </p>
<pre>
    
                                
                    Three months ended     Six months ended
                          June 30,             June 30,
                          --------             --------
                       2010      2009       2010        2009
                       ----      ----       ----        ----
                       (in thousands)        (in thousands)
    Cost of goods
     sold                $-      $122         $-        $200
    Selling,
     general and
     administrative     655       291        790         907
                        ---       ---        ---         ---
    Total
     restructuring
     and related
     charges           $655      $413       $790      $1,107
                       ====      ====       ====      ======



    

For further information: For further information: Investors, H. Gene Shiels, +1-281-504-4886, or Media, Richard A. Ott, +1-281-504-4720, both of Kraton Performance Polymers, Inc. Web Site: http://www.kraton.com

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KRATON PERFORMANCE POLYMERS, INC.

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