TPC Group Reports Third Quarter 2012 Financial Results
Nov 1, 2012 (Menafn - GlobeNewswire via COMTEX) --
--Third quarter net income was 7 million, or 0.46 per diluted share,
compared to 9 million, or 0.58 per diluted share, last year
--Third quarter Adjusted EBITDA was 33 million versus 34 million last
year
--Excluding impact of butadiene price changes in both periods, Adjusted
EBITDA was 39 million versus 28 million last year
--Third quarter free cash flow was 30 million versus 24 million last
year
HOUSTON, Nov. 1, 2012 (GLOBE NEWSWIRE) -- TPC Group Inc. TPCG, a leading fee-based processor and service provider of value-added products derived from niche petrochemical raw materials, today announced its 2012 third quarter results.
The Company's third quarter 2012 revenue was 511 million compared to 835 million in the third quarter of 2011. The 39% decline in revenue reflected a 28% decrease in the overall average selling price and 15% lower sales volume. The lower average selling price was driven primarily by a 49% decline in the benchmark contract price for butadiene, while the lower sales volume reflected softer demand due to continuing weakness in global economic conditions.
Gross profit contribution (GPC) (defined herein as revenue less cost of sales as reported in our consolidated statements of operations) for the quarter was 78.5 million compared to 77.2 million in the third quarter of 2011. The improvement of 1.3 million reflected higher Performance Products segment GPC of 6.2 million, partially offset by lower C4 Processing segment GPC of 4.9 million. The higher Performance Products GPC resulted from strong volume and margin performance in the quarter for certain product lines. The lower C4 Processing GPC reflected lower sales volume and a year-over-year negative impact of 11 million from changes in the price of butadiene during the two quarters, partially offset by our ability to capitalize on strong fundamentals in the markets for our fuels products.
Net income for the quarter was 7.3 million, or 0.46 per diluted share, compared to net income of 9.4 million, or 0.58 per diluted share, in the prior year quarter. The lower net income for the quarter reflected the improved GPC, which was more than offset by higher operating and general and administrative expenses. Net income for the first nine months of 2012 was 28.6 million, or 1.81 per diluted share, versus 55.1 million, or 3.41 per diluted share, in the first nine months of 2011. The substantial decline in net income for the nine month period was driven by the impact of butadiene price changes, which had a 40 million positive impact in the prior year period compared to a 1 million negative impact in the current year period.
Adjusted EBITDA for the third quarter of 2012 was 33.5 million compared to 34.4 million for the prior year quarter. The decrease of 0.9 million reflected lower C4 Processing segment Adjusted EBITDA of 7.1 million, due primarily to the year-over-year negative impact of the timing of changes in butadiene prices, partially offset by higher Performance Products segment Adjusted EBITDA of 5.6 million. (Adjusted EBITDA is a non-GAAP financial measure, and a reconciliation of Adjusted EBITDA to Net Income, the most closely related GAAP measure, is provided in the attached financial tables).
Butadiene pricing is sensitive to short-term supply and demand imbalances and can create significant volatility in our earnings as a result of any changes in the monthly posted market price for butadiene between the period of purchase of butadiene in the crude C4 and the period of sale of finished butadiene. During the third quarter of 2012, the price of butadiene declined 22%, which had a 5 million negative impact on our earnings. In the prior year third quarter, the price of butadiene increased 12% and had a 15 million positive impact on earnings, which was offset by a lower-of-cost-or-market charge of 9 million to write down the value of butadiene inventory as a result of a substantial decline in butadiene price in October 2011. Excluding the impact of butadiene price changes from our reported results, our underlying results for the current year quarter would have been Adjusted EBITDA of 39 million compared to Adjusted EBITDA of 28 million for the prior year quarter.
Provided in the table below, for each period presented, are the percentage increase (decrease) in the contract price of butadiene and the corresponding impact on our GPC and Adjusted EBITDA (dollars in millions):
Three Months EndedNine Months
-----------------------Ended
September 30,JuneSeptember 30,
---------------30,---------------
20122011201220122011
--------------------------------
% increase (decrease) in butadiene contract price(22)%12%(26)%(14)%98%
Positive (negative) impact on GPC / Adj. EBITDA (5) 6 (13) (1) 40
Commenting on the Company's results, Mike McDonnell, President and CEO, stated, "excluding the butadiene price change impact, we achieved underlying Adjusted EBITDA results of 39 million in the current year quarter compared to 28 million in the prior year quarter, driven significantly by margin expansion in fuel products and certain performance products businesses. Our strong third quarter underlying results were achieved in spite of persistent weakness in demand that affected many of our product lines. We also generated free cash flow of 30 million during the quarter. These results, which reflect the underlying performance of the Company, continue to confirm the value of the fee-based aggregation, processing and logistics services we provide, as well as our strategies of service fee and margin expansion, operational excellence and targeted volume growth."
Business Segments
Results of Operations, C4 Processing Segment
(in millions, unaudited)
Three Months Ended
September 30,
-------------------
20122011Inc (Dec)
---------------------------
Revenue 406.5 713.5 (307.0)
GPC53.858.7(4.9)
Adjusted EBITDA26.433.5(7.1)
-- The decrease in revenue reflected a 30% decrease in average unit selling price,
driven by a 49% decline in the benchmark contract price for butadiene, and 19%
lower sales volume that reflected weaker demand in the current period.
-- The decreases in both GPC and Adjusted EBITDA reflected the year-over-year
negative impact of butadiene price changes of 11 million and the lower sales
volume, partially offset by strong margins in our products sold into fuels
markets.
Results of Operations, Performance Products Segment
(in millions, unaudited)
Three Months Ended
September 30,
-------------------
20122011Inc (Dec)
--------------------------
Revenue 104.1 121.8 (17.7)
GPC24.718.56.2
Adjusted EBITDA13.78.15.6
-- The decrease in revenue was driven primarily by lower selling prices, resulting from
lower pricing for butane and propylene which are major pricing components for a large
portion of our products in this segment.
-- The higher GPC and Adjusted EBITDA reflected strong volume and margin performance in
the quarter for certain product lines.
Liquidity and Capital Resources
The Company ended the quarter with 165.4 million in cash and no borrowings under the Revolving Credit Facility. Net cash flow from operating activities for the quarter was 45.1 million and capital expenditures were 15.1 million, resulting in free cash flow for the quarter of 30.0 million. Net cash provided by operating activities was positively impacted by a reduced investment in trade working capital (trade receivables, inventory and trade payables) of 17.6 million, which reflected the decline in both selling prices and raw material costs over the course of the quarter. Overall days outstanding for receivables and payables and inventory days at September 30, 2012 were all consistent with historical trends. (Free Cash Flow is a non-GAAP financial measure, and a reconciliation of Free Cash Flow to Cash Flows from Operating Activities, the most closely related GAAP measure, is provided in the attached financial tables).
Outlook for 2012
Commenting on the Company's outlook for the fourth quarter and full year, Mr. McDonnell stated, "we continue to see a business environment characterized by general economic weakness, continued destocking in the synthetic rubber chain and a relative balance between supply and demand at the present time. We are also beginning to experience the normal seasonal decline in margins in our fuels-related products.
"We continue to make progress on our strategic growth projects. Our Board of Directors recently approved our strategic project to produce on-purpose isobutylene from natural gas liquids with a total capital expenditure estimated at 265 million. The project includes refurbishment and restart of certain of our dehydrogenation assets and will provide isobutylene feedstock for our performance products and fuels products businesses. We anticipate startup of the refurbished unit in the second half of 2014. Preliminary engineering for our second strategic project, to produce on-purpose butadiene from natural gas liquids, also continues to move forward. We expect these two projects to drive our longer term growth and profit performance by capitalizing on attractive markets, projected long term shortages in butadiene, idled existing production assets and future supply of cost-advantaged butane from the shale plays. We also remain focused on our strategies to expand service fees and contractual margins in our C4 Processing segment, achieve targeted volume growth in our Performance Products segment and drive efficiencies across our operations."
Conference Call
In conjunction with this release, the Company has scheduled a conference call for Friday, November 2, 2012 at 10:00 a.m. Eastern Time (9:00 a.m. Central Time). Interested parties may listen to the live conference call over the Internet by logging on to http://investors.tpcgrp.com/ or via phone by dialing (877) 415-4081 or internationally at (708) 290-1135. A telephone replay of the call will be available until November 16, 2012, and may be accessed via phone by dialing (855) 859-2056, and conference ID number, 57997357. Also, an archive of the webcast will be available shortly after the call on the Company's website at www.tpcgrp.com.
About TPC Group
TPC Group Inc. is a leading producer of value-added products derived from niche petrochemical raw materials, such as C4 hydrocarbons, and provider of critical infrastructure and logistics services along the Gulf Coast region. The Company sells its products into a wide range of performance, specialty and intermediate markets, including synthetic rubber, fuels, lubricant additives, plastics and surfactants. Headquartered in Houston, Texas, and with an operating history of over 68 years, the Company has manufacturing facilities in the industrial corridor adjacent to the Houston Ship Channel, Port Neches and Baytown, Texas and operates a product terminal in Lake Charles, Louisiana. For more information, visit the Company's website at http://www.tpcgrp.com.
The TPC Group logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=9551
Cautionary Information Regarding Forward-Looking Statements
Certain statements in this news release, including our guidance estimates, are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include assumptions, expectations, predictions, intentions or beliefs about future events, particularly statements that may relate to future operating results, future market and industry conditions, future commodity pricing and supply trends, stability of future margins, cash flows and profits, existing and expected competition, financing sources and availability, potential returns of capital to stockholders, the effects of seasonality and plans related to strategic alternatives or future expansion activities and capital expenditures. Although TPC Group believes that such statements are based on reasonable assumptions, no assurance can be given that such statements will prove to have been correct. A number of factors could cause actual results to vary materially from those expressed or implied in any forward-looking statements, including risks and uncertainties such as volatility in the petrochemicals industry, commodity pricing, seasonality, limitations on the Company's access to capital, the effects of competition, leverage and debt service, general economic conditions, litigation and governmental investigations, and extensive environmental, health and safety laws and regulations. More information about the risks and uncertainties relating to TPC Group and the forward-looking statements are found in the Company's SEC filings, including the Annual Report on Form 10-K, which are available free of charge on the SEC's website at http://www.sec.gov. TPC Group expressly disclaims any obligation to update any forward-looking statements, including our guidance estimates, contained in this news release to reflect events or circumstances that may arise after the date of this release, except as otherwise required by applicable law. There can be no assurance that any guidance estimates included in this news release can or will be achieved.
- tables to follow --
TPC GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
SeptemberJune 30,December
30, 2012201231, 2011
---------------------------
(unaudited)
ASSETS
Current assets
Cash and cash
equivalents 165.4 135.4 107.6
Trade accounts
receivable156.0191.4210.8
Inventories94.491.779.3
Other current assets23.323.732.1
---------------------------
Total current assets439.1442.2429.8
Property, plant and
equipment, net503.2498.2495.8
Investment in limited
partnership2.82.72.6
Intangible assets, net5.95.95.9
Other assets, net34.935.735.6
---------------------------
Total assets 985.9 984.7 969.7
===========================
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Current liabilities
Accounts payable 154.6 169.7 170.1
Accrued liabilities33.725.633.8
---------------------------
Total current
liabilities188.3195.3203.9
Long-term debt348.2348.2348.0
Deferred income taxes129.4129.4129.4
---------------------------
Total liabilities665.9672.9681.3
Stockholders' equity320.0311.8288.4
---------------------------
Total liabilities and
stockholders' equity 985.9 984.7 969.7
===========================
TPC GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) (In millions, except per share amounts)
Three Months EndedNine Months Ended
---------------------------------------------------
September 30,September 30,
-------------------June 30,----------------------
20122011201220122011
---------------------------------------------
Revenue 510.6 835.3 690.1 1,806.8 2,183.8
Cost of sales432.1758.1621.71,570.81,911.3
Operating expenses38.435.637.0111.2109.9
General and
administrative expenses11.47.67.327.123.0
Depreciation and
amortization10.110.010.130.430.3
---------------------------------------------
Income from operations18.624.014.067.3109.3
Other (income) expense
Interest expense, net8.58.68.625.325.7
Other, net(0.3)(0.4)(0.2)(0.8)(1.3)
---------------------------------------------
Income before income
taxes10.415.85.642.884.9
Income tax expense3.16.42.214.229.8
---------------------------------------------
Net income 7.3 9.4 3.4 28.6 55.1
=============================================
Earnings per share:
Basic 0.47 0.59 0.21 1.83 3.43
Diluted 0.46 0.58 0.21 1.81 3.41
Weighted average shares
outstanding:
Basic15.716.015.715.716.0
Diluted15.816.015.815.816.2
TPC GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (In millions)
Three Months EndedNine Months Ended
------------------------------------------------
September 30,September 30,
------------------June 30,--------------------
20122011201220122011
------------------------------------------
Cash flows from operating activities 45.1 36.2 38.6 95.2 44.5
------------------------------------------
Cash flows from investing activities
Capital expenditures(15.1)(11.8)(12.9)(37.9)(32.6)
------------------------------------------
(15.1)(11.8)(12.9)(37.9)(32.6)
Cash flows from financing activities
Exercise of stock options--0.20.40.51.0
Repurchase of common stock--(8.3)----(16.1)
------------------------------------------
--(8.1)0.40.5(15.1)
Increase (decrease) in cash and cash
equivalents30.016.326.157.8(3.2)
Cash and cash equivalents at
beginning of period135.466.1109.3107.685.6
------------------------------------------
Cash and cash equivalents at end of
period 165.4 82.4 135.4 165.4 82.4
==========================================
Changes in trade working capital
Accounts receivable 35.4 22.1 56.4 54.8 (92.8)
Inventory(2.7)1.741.8(15.1)(75.4)
Accounts payable(15.1)(12.5)(69.4)(15.5)102.8
------------------------------------------
17.6 11.3 28.8 24.2 (65.4)
==========================================
TPC GROUP INC.
BUSINESS SEGMENT INFORMATION
(unaudited) (In millions)
Three Months Ended
-----------------------------Nine Months Ended
September 30,September 30,
-------------------June 30,----------------------
20122011201220122011
---------------------------------------------
Sales volumes (lbs) (1)
C4 Processing544.7669.1602.11,651.21,941.5
Performance Products148.2149.0141.7419.2487.1
---------------------------------------------
692.9818.1743.82,070.42,428.6
=============================================
Revenue
C4 Processing 406.5 713.5 575.8 1,483.2 1,806.9
Performance Products104.1121.8114.3323.6376.9
---------------------------------------------
510.6 835.3 690.1 1,806.8 2,183.8
=============================================
Cost of sales (2)(3):
C4 Processing 352.7 654.8 528.4 1,312.5 1,597.4
Performance Products79.4103.393.3258.3313.9
---------------------------------------------
432.1 758.1 621.7 1,570.8 1,911.3
=============================================
Adjusted EBITDA (4):
C4 Processing 26.4 33.5 20.8 91.1 130.9
Performance Products13.78.110.533.731.7
Corporate (5)(6.6)(7.2)(6.4)(20.8)(21.7)
---------------------------------------------
33.5 34.4 24.9 104.0 140.9
=============================================
1)Sales volumes represent product sales volumes only and do not include
volumes of products delivered under tolling or similar arrangements, in which
we do not purchase the raw materials, but process raw materials for another
party for a specified fee.
2)Cost of sales does not include operating expenses or depreciation and
amortization expense.
3)Cost of sales for the three months ended June 30, 2012 includes
lower-of-cost-or-market adjustments for C4 Processing and Performance Products
segments of 2.2 million and 0.6 million, respectively. Cost of sales for the
three and nine months ended September 30, 2011 includes lower-of-cost-or-market
adjustments for C4 Processing and Performance Products segments of 9.7 million
and 0.1 million, respectively.
4)See below for a discussion of Adjusted EBITDA and a reconciliation of
Adjusted EBITDA to Net Income for all periods presented. Net Income is the most
directly comparable GAAP measure reported in the Condensed Consolidated
Statements of Operations.
5)Corporate expenses exclude transaction expenses of 4.5 million and 0.6
million for the three month periods ended September 30, 2012 and June 30, 2012,
respectively, and 5.5 million for the nine months ended September 30, 2012.
TPC GROUP INC.
RECONCILIATION OF EBITDA TO NET INCOME
(unaudited) (In millions)
Provided in the table below is a reconciliation of Adjusted EBITDA, a non-GAAP financial measure defined below, to Net Income, the most closely related GAAP measure.
Adjusted EBITDA is not a measure computed in accordance with generally accepted accounting principles in the United States (GAAP). A non-GAAP financial measure is a numerical measure of historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statements of operations, balance sheets, or statements of cash flows (or equivalent statements); or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measures so calculated and presented.
Adjusted EBITDA is presented and discussed in this news release because management believes it enhances understanding by investors and lenders of the Company's financial performance. As a complement to financial measures provided in accordance with GAAP, management believes that Adjusted EBITDA assists investors and lenders who follow the practice of some investment analysts who adjust GAAP financial measures to exclude items that may obscure underlying performance outlook and trends and distort comparability. In addition, management believes a presentation of Adjusted EBITDA on a segment and consolidated basis enhances overall understanding of our performance by providing a higher degree of transparency for such items and providing a level of disclosure that helps investors understand how management plans, measures and evaluates our operating performance and allocates capital. Since Adjusted EBITDA is not a measure computed in accordance with GAAP, it is not intended to be presented herein as a substitute to operating income or net income as indicators of the Company's operating performance. Adjusted EBITDA is the primary performance measurement used by our senior management and our Board of Directors to evaluate operating results and to allocate capital resources between our business segments.
We calculate Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization (EBITDA), which is then adjusted in certain periods to remove or add back items that, in the opinion of management, distort comparability between periods. As shown below in the reconciliation of Adjusted EBITDA to Net Income, the GAAP measure most directly comparable to Adjusted EBITDA, there was one adjustment to EBITDA for the three and nine months ended September 30, 2012
Also provided in the table below is a reconciliation of free cash flow, a non-GAAP measure, to cash flows from operating activities. We believe free cash flow is a useful metric because it represents a measure of how much cash a company has available for discretionary and non-discretionary items after the deduction of capital expenditures. Since free cash flow is not a measure computed in accordance with GAAP, it is not intended to be presented herein as a substitute to cash flows from operating activities as an indicator of our liquidity. Our calculation of free cash flow may be different from the calculation used by other companies; therefore, it may not be comparable to other companies.
Reconciliation of Adjusted EBITDA to Net
Income:
Three Months Ended
-------------------------Nine Months Ended
September 30,JuneSeptember 30,
-----------------30,------------------
20122011201220122011
-------------------------------------
Net income 7.3 9.4 3.4 28.6 55.1
Income tax expense3.16.42.214.229.8
Interest expense, net8.58.68.625.325.7
Depreciation and
amortization10.110.010.130.430.3
-------------------------------------
EBITDA29.034.424.398.5140.9
Transaction costs4.5--0.65.5--
-------------------------------------
Adjusted EBITDA 33.5 34.4 24.9 104.0 140.9
=====================================
Reconciliation of Free Cash Flow to Cash
Flows from Operating Activities:
Three Months Ended
-------------------------Nine Months Ended
September 30,JuneSeptember 30,
-----------------30,------------------
20122011201220122011
-------------------------------------
Cash flows from operating
activities 45.1 36.2 38.6 95.2 44.5
Capital expenditures(15.1)(11.8)(12.9)(37.9)(32.6)
-------------------------------------
Free cash flow 30.0 24.4 25.7 57.3 11.9
=====================================
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SOURCE: TPC Group
(Logo:http://media.primezone.com/cache/15270/int/10370.jpg)
CONTACT:Investor Relations
Contact: Miguel Desdin
Email: miguel.desdin@tpcgrp.com
Phone: 713-627-7474
Media Relations
Contact: Sara Cronin
Email: sara.cronin@tpcgrp.com
Phone: 713-627-7474
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