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.