Constar International Inc. Announces 2005 Second Quarter and First Six Months Financial Results.PHILADELPHIA Philadelphia, ancient cities Philadelphia, name of several ancient cities. One was in Lydia, W Asia Minor (now W Turkey). At the foot of Mt. Tmolus and near the location of modern Alaşehir, it was founded in the 2d cent. B.C. -- Constar International Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :CNST CNST Clinical Negligence Scheme for Trusts (UK) CNST Certified Network Systems Technician ) today announced its financial results for the second quarter and six months ended June June: see month. 30, 2005. Second Quarter Results Second quarter net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight grew to $265.4 million, a 17.4% increase over the $226.1 million reported for the 2004 second quarter. The growth reflects the pass-through pass-through n. 1. An opening between two rooms, especially a shelved space between a kitchen and dining room that is used for passing food. 2. A route through which something is permitted to pass. 3. of increased resin resin, any of a class of amorphous solids or semisolids. Resins are found in nature and are chiefly of vegetable origin. They are typically light yellow to dark brown in color; tasteless; odorless or faintly aromatic; translucent or transparent; brittle, fracturing prices, increased shipments of both conventional and custom products in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. foreign currency translation. The increased net sales were partially offset by price reductions implemented to extend key long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. contracts and meet competitive pricing as well as reduced volumes in certain European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. markets. Gross profit in the second quarter was $10.4 million compared to $13.9 million in last year's second quarter. This decrease was primarily due to price concessions implemented to extend key contracts and meet competitive pricing, reduced volumes in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). and increased
transportation and utility costs. These items were partially offset by
increased operating efficiencies in U.S. plants that resulted from
improved manufacturing performance and higher production of domestic
units driven by increased sales.Michael Michael, archangel Michael (mī`kəl) [Heb.,=who is like God?], archangel prominent in Christian, Jewish, and Muslim traditions. In the Bible and early Jewish literature, Michael is one of the angels of God's presence. J. Hoffman, Constar's President and Chief Executive Officer, commented, "During the quarter, our domestic business experienced solid growth in unit sales unit sales Sales measured in terms of physical units rather than dollars. Unit sales data are often used by financial analysts when evaluating the health of a company. in both conventional and custom containers. However, our custom growth was below our expectation due to delayed ramp-ups on certain projects. Offsetting the domestic improvements were contractual price concessions, increased freight and utility costs, and weaker than expected performance in two of our European operations. Our UK plant was challenged in the quarter with soft demand and operational difficulties which further hampered sales. We are actively addressing this shortfall Shortfall The amount by which the capital required to fulfill a financial obligation exceeds available capital. Notes: Shortfall risk is often combated with an efficient hedging strategy created by a fund, group, institution, or individual. through a combination of manufacturing performance improvements, reduction of costs and price increases in certain product categories." Second quarter operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. (defined as selling and administrative expenses, research and technology expense, foreign exchange adjustments and other expense, net) were $8.3 million compared to $7.2 million for the same period last year. The increase reflects higher research and development expenses, foreign exchange adjustments and other expenses. These increases were partially offset by a reduction in litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. expenses. Interest expense in the second quarter was $9.4 million compared to $10.0 million in the prior year period. The decrease reflects a lower effective interest rate resulting from the February 2005 refinancing Refinancing An extension and/or increase in amount of existing debt. . The Company reported a second quarter net loss of $7.7 million, or $0.63 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared to a net loss of $3.9 million, or $0.32 per diluted share, in the 2004 second quarter. Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become in the second quarter was $15.2 million compared to $20.2 million reported for the second quarter of last year. This decrease in adjusted EBITDA primarily reflects the reduced gross profit as noted above. EBITDA is defined by the Company as net income (loss) before interest expense, provision for income taxes, depreciation and amortization and the cumulative effect of a change in accounting for goodwill. Adjusted EBITDA is presented in this earnings release because management believes that it is of interest to the Company's investors and lenders in relation to the Company's revolving loan facility. The Company's revolving loan facility adjusts EBITDA for certain non-cash accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. and uses the adjusted EBITDA figure to determine the Company's compliance with certain financial covenants in the revolving loan facility. For the 2005 second quarter, these adjustments included add-backs of $1.7 million which consists primarily of the foreign currency loss on intra-company balances. This definition of adjusted EBITDA may not be comparable to adjusted EBITDA as defined by other companies. A reconciliation of adjusted EBITDA to net loss is included in the attached unaudited consolidated statements of operations. Six Month Results For the first six months of 2005 net sales rose to $486.6 million, a 16.5% increase over the $417.8 million reported for the same period last year. This growth resulted from the pass-through of increased resin prices, increased shipments of both conventional and custom products in the United States and favorable foreign currency translation. The increase was partially impacted by price reductions implemented to extend key long-term contracts and meet competitive pricing as well as reduced volumes in certain European markets. Gross profit in the first half of 2005 was $16.8 million compared to $23.3 million for the first six months of last year. Price concessions implemented to extend key contracts and meet competitive pricing, reduced volumes in Europe and increased costs related to transportation and utilities were the primary drivers to the reduced gross profit. These items were partially offset by increased operating efficiencies in U.S. plants that resulted from higher domestic unit sales. Operating expenses for the six month period were $15.5 million compared to $15.7 million for the same period last year. This slight decrease resulted from the combination of several factors including a significant reduction in legal expenses. This reduction was offset by increased research and development expenses in the first six months of 2005 and an increased loss generated in the 2005 period related to changes in the foreign currency translation rates of intra-company balances. Also, the Company incurred a charge in the first quarter of 2004 for an insurance deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). related to a warehouse fire in the United Kingdom. Interest expense in the first half of 2005 decreased $1.0 million to $19.0 million as compared to the first six months of 2004. The decrease reflects a lower effective interest rate resulting from the February 2005 refinancing. The Company reported a net loss of $27.7 million, or $2.29 per diluted share, compared to a net loss of $12.8 million, or $1.07 per diluted share, in the first six months of last year. The current year's net loss includes the $10.0 million loss associated with the Company's February refinancing. Adjusted EBITDA for the first six months of 2005 was $26.5 million compared to $34.4 million in the first six months of 2004. This decrease in adjusted EBITDA primarily reflects the reduced gross profit. For the six months ending June 30, 2005, adjustments to EBITDA for certain non-cash accruals included add-backs of $12.6 million, primarily related to the $10.0 million loss associated with the Company's February refinancing. Conference Call, Web Cast Information The Company will hold a conference call on Tuesday, August 9, 2005, at 9:00 a.m. ET to discuss this news release and the Company's business outlook. Forward-looking and other material information will be discussed on this conference call. The dial-in numbers for the conference call are: (800) 289-0493 (domestic callers) or (913) 981-5510 (international callers). The conference call will also be broadcast live over the internet and can be accessed via the Company's website: www.constar.net. Please log on approximately 15 minutes prior to the call to register and download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. any necessary audio software. A replay of the broadcast will be available from 1:00 p.m. ET August 9, 2005, through midnight on August 16, 2005 and can be accessed via telephone by dialing (888) 203-1112 (domestic callers) or (719) 457-0820 (international callers) and entering passcode, 9594671 or via the web at www.constar.net where it will be archived. Cautionary Note Regarding Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Except for historical information, all information in this press release consists of forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve a number of risks, uncertainties and other factors, which may cause the actual results to be materially different from those expressed or implied in the forward-looking statements. These forward-looking statements and forecasts are subject to risks, uncertainties and assumptions, including, among other things, the Company's debt level and its ability to service existing debt or, if necessary, to refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. that debt; the impact of the Company's debt on liquidity; the Company's expectation that it will be cash flow negative at least into the second half of 2006 and the Company's ability to fund operations using a credit facility that is subject to conditions and borrowing base limitations; indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. under the Company's $220 million of notes issued in February 2005, and borrowings under the Company's credit facility, are subject to floating interest rates that may cause interest expense to increase; the Company's ability to comply with covenants in the instruments governing gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. the Company's indebtedness; the Company's ability to compete successfully against competitors; the impact of price competition on gross margins and profitability; the level of demand for conventional PET packaging and custom PET packaging requiring the Company's proprietary technologies and know-how; conventional PET containers, which comprise the bulk of the Company's business, generally carry low profit margins, and the market for conventional soft drink containers is not expected to grow appreciably ap·pre·cia·ble adj. Possible to estimate, measure, or perceive: appreciable changes in temperature. See Synonyms at perceptible. in the near term; continued conversion from metal, glass and other materials for packaging to plastic packaging; the Company's relationship with its largest customers; the success of the Company's customers in selling their products in their markets; the Company's ability to manage inventory levels based on its customers' projected sales; risks associated with the Company's international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. ; the terms upon which the Company acquires resin and its ability to reflect price increases in its sales; the Company's ability to obtain resin from suppliers on a timely basis; the impact of consolidation of the Company's customers on sales and profitability; the Company's ability to fund capital expenditures in the future; general economic and political conditions; increases in the price of petrochemical petrochemical, any one of a large group of chemicals derived from a component of petroleum or natural gas. The cracking processes for manufacturing gasoline produce vast quantities of gaseous hydrocarbons. products such as PET resin and the effect of such increases on the demand for PET products; the Company's ability to protect its existing technologies and to develop new technologies; the Company's ability to market timely products incorporating MonOxbar(TM) technology and the realization of the expected benefits of the MonOxbar(TM) technology; the Company's ability to control costs; the Company's ability to maintain an effective system of internal control; legal and regulatory proceedings and developments; seasonal fluctuations in demand and the impact of weather on sales; the Company's ability to identify trends in the markets and to offer new solutions that address the changing needs of these markets; the Company's ability to execute successfully its business model and enhance its product mix; the Company's ability to prosecute To follow through; to commence and continue an action or judicial proceeding to its ultimate conclusion. To proceed against a defendant by charging that person with a crime and bringing him or her to trial. successfully or defend successfully the legal proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. to which it is a party; and the other factors disclosed from time to time by the Company in its filings with the Securities and Exchange Commission. The Company does not intend to review or revise any particular forward-looking statement in light of future events. About Constar Philadelphia-based Constar is a leading global producer of PET (polyethylene polyethylene (pŏl'ēĕth`əlēn), widely used plastic. It is a polymer of ethylene, CH2=CH2, having the formula (-CH2-CH2-)n terephthalate Ter`eph´tha`late n. 1. (Chem.) A salt of terephthalic acid. ) plastic containers for food, soft drinks and water. The Company provides full-service packaging solutions, from product design and engineering, to ongoing customer support. Its customers include many of the world's leading branded consumer products companies.
Tables to Follow
CONSTAR INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS COMPARISON
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -------------------
2005 2004 2005 2004
---------- --------- --------- ---------
Net customer sales $ 264,179 $224,774 $484,424 $415,519
Net sales to affiliates 1,179 1,310 2,213 2,303
---------- --------- --------- ---------
Net sales 265,358 226,084 486,637 417,822
Cost of products sold,
excluding depreciation 243,478 199,010 447,085 368,450
Depreciation 11,431 13,179 22,732 26,077
---------- --------- --------- ---------
Gross profit 10,449 13,895 16,820 23,295
Selling and administrative
expense 5,452 5,980 11,139 12,257
Research and technology
expense 1,572 1,143 3,046 2,517
Write off deferred financing
costs and other fees - - 10,025 -
Interest expense 9,392 9,988 19,037 19,970
Foreign exchange adjustments 865 361 1,076 407
Provision for restructuring
and asset impairments 51 - 110 -
Other expense/(income), net 411 (241) 242 513
---------- --------- --------- ---------
Loss before taxes and
minority interest (7,294) (3,336) (27,855) (12,369)
(Provision) benefit for
income taxes (397) (564) 125 (448)
Minority interest (10) 14 (19) 19
---------- --------- --------- ---------
Net loss $ (7,701) $ (3,886) $(27,749) $(12,798)
========== ========= ========= =========
Per common share data:
Basic
Net loss $ (0.63) $ (0.32) $ (2.29) $ (1.07)
Diluted
Net loss $ (0.63) $ (0.32) $ (2.29) $ (1.07)
Weighted average common
shares outstanding:
Basic shares 12,129 12,000 12,124 12,000
Diluted shares 12,129 12,000 12,124 12,000
Reconciliation of net loss to
adjusted EBITDA:
Net loss $ (7,701) $ (3,886) $(27,749) $(12,798)
Add back:
Interest expense 9,392 9,988 19,037 19,970
Taxes 397 564 (125) 448
Depreciation 11,431 13,179 22,732 26,077
---------- --------- --------- ---------
EBITDA 13,519 19,845 13,895 33,697
Other adjustments under
Credit Agreement 1,684 308 12,582 707
---------- --------- --------- ---------
Adjusted EBITDA $ 15,203 $ 20,153 $ 26,477 $ 34,404
========== ========= ========= =========
---------------------------
SELECTED BALANCE SHEET DATA
---------------------------
6/30/2005
----------
Cash and cash equivalents $ 8,352
Debt:
Senior Revolving Credit 20,000
Senior Secured Floating
Rate Notes 220,000
Senior Subordinated Debt 175,000
Other 1,510
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