Constar International Inc. Announces 2005 Third Quarter and Nine Month 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 third quarter and nine months ended September September: see month. 30, 2005. Third Quarter Results 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 in the third quarter grew to $259.0 million, a 15.4% increase over the $224.5 million reported for the 2004 third quarter. The growth reflects the pass through 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 and 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. . The increased net sales were partially offset by previously agreed to 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. Third quarter gross profit increased to $13.8 million compared to $13.0 million in last year's third quarter. The improvement reflects a positive mix shift to custom products and increased operating efficiencies in U.S. plants that resulted from higher production of domestic units. The increased gross profit was partially offset by previously agreed to price concessions implemented to extend key contracts and meet competitive pricing and increased transportation and utility costs. 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, "We continue to be pleased with the manufacturing performance of our domestic operations and are seeing the benefits of our increased sales of custom products. With custom volume growth in excess of 25% in the third quarter, we have continued our expansion in custom PET where pricing and contract terms support new business growth. In the domestic conventional industry, persistent margin compression has stalled stall 1 n. 1. A compartment for one domestic animal in a barn or shed. 2. a. A booth, cubicle, or stand used by a vendor, as at a market. b. capacity growth, resulting in supply shortages. As we approach contract renewals, our objective is to implement a structure of sustainable prices and terms under which we would be willing to commit our capacity." Mr. Hoffman continued, "As for our European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. business, we are disappointed with profit performance, which has been impacted by soft consumer demand and productivity issues in our U.K. facility. However, we remain focused on improving the financial results of this business through improved pricing, cost reductions and better overall operating performance." 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 $8.4 million compared to $8.6 million for the same period last year. The reduced operating expenses primarily reflect lower Sarbanes Oxley Oxley refers to several things: People
Interest expense in the third quarter was $9.8 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 recorded a non-cash asset impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge of $22.2 million ($19.9 million, net of tax, or $1.63 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) in the third quarter related to the write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. of certain long-lived European assets as a result of reduced operating profits Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. in the United Kingdom and Holland. The Company reported a third quarter net loss of $23.5 million, or $1.93 per diluted share, compared to a net loss of $5.5 million, or $0.45 per diluted share, in the 2004 third quarter. Excluding the non-cash asset impairment charge, the third quarter net loss would have been $3.6 million, or $0.30 per diluted share. 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 third quarter was $17.6 million compared to $18.3 million reported for the third quarter of last year. This decrease in adjusted EBITDA primarily reflects the reduced profitability in Europe. 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 a financial covenant in the revolving loan facility. For the 2005 third quarter, these adjustments included add-backs of $23.2 million which consists primarily of the European asset impairment charge. 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. Nine Month Results For the first nine months of 2005, net sales rose 16.1% to $745.7 million over the $642.4 million reported for the same period last year. The growth resulted from the pass-through of increased resin prices, increased shipments of both conventional and custom products in the United States and favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. foreign currency translation. The increase was reduced in part by previously agreed to price reductions implemented to extend key long-term contracts and meet competitive pricing as well as reduced volumes in certain European markets. Gross profit for the first nine months of 2005 was $30.7 million compared to $36.2 million for the first nine months of last year. The reduced gross profit resulted from previously agreed to price concessions implemented to extend key contracts and meet competitive pricing, lower volumes in Europe and increased costs related to transportation and utilities. These items were partially offset by increased operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: in U.S. plants that resulted from higher domestic 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. and a positive mix shift toward higher margin custom products. Operating expenses for the nine month period were $23.9 million compared to $24.3 million for the same period last year. This decrease resulted from the combination of several factors including a reduction in Sarbanes Oxley expenses. This reduction was offset by increased research and development expenses in the first nine months of 2005 and other expenses, net. In the 2004 first quarter, the Company incurred a charge 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. In the third quarter of 2004, the Company recorded a $1.2 million gain related to a licensing agreement which was recorded as other income, net. Interest expense for the nine month period decreased $1.2 million to $28.8 million as compared to the first nine months of 2004. The decrease reflects a lower effective interest rate resulting from the February 2005 refinancing. The Company reported a net loss of $51.2 million, or $4.22 per diluted share, compared to a net loss of $18.3 million, or $1.52 per diluted share, in the first nine months of last year. The 2005 net loss includes the non-cash asset impairment charge mentioned above and a $10.0 million loss associated with the Company's February refinancing. Excluding the asset impairment charge and loss on refinancing, the net loss for the first nine months of 2005 was $21.3 million, or $1.76 per dilute di·lute v. To reduce a solution or mixture in concentration, quality, strength, or purity, as by adding water. adj. Thinned or weakened by diluting. share. Adjusted EBITDA for the first nine months of 2005 was $44.1 million compared to $52.6 million in the first nine months of 2004. This decrease in adjusted EBITDA primarily reflects the contractual price reductions and reduced European profitability. For the nine months ending September 30, 2005, adjustments to EBITDA for certain non-cash accruals included add-backs of $35.7 million, primarily related to the $22.2 million asset impairment charge and 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 Wednesday, November 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) 361-0912 (domestic callers) or (913) 981-5559 (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 Wednesday, November 9, 2005 through midnight on Wednesday, November 16, 2005 and can be accessed via telephone by dialing (888) 203-1112 (domestic callers) or (719) 457-0820 (international callers) and entering passcode, 6194580 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. Important factors that could cause the statements made in this press release or the actual results of operations or financial condition of the Company to differ include the Company's ability to expand sales of custom products and to improve the operating performance of its European business. Other important factors are discussed under the caption "Cautionary Statement Regarding Forward Looking Statements" in the Company's Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. Annual Report for the year ended December 31, 2004 and in subsequent filings with the Securities and Exchange Commission made prior to or after the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" . 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.
CONSTAR INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS COMPARISON
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -------------------
2005 2004 2005 2004
---------- --------- --------- ---------
Net customer sales $257,832 $223,311 $742,256 $638,830
Net sales to affiliates 1,211 1,219 3,424 3,522
---------- --------- --------- ---------
Net sales 259,043 224,530 745,680 642,352
Cost of products sold,
excluding depreciation 233,872 198,482 680,957 566,932
Depreciation 11,325 13,095 34,057 39,172
---------- --------- --------- ---------
Gross profit 13,846 12,953 30,666 36,248
Selling and administrative
expense 6,373 7,428 17,512 19,685
Research and technology
expense 1,614 1,535 4,660 4,052
Write off deferred financing
costs and other fees - - 10,025 -
Interest expense 9,784 10,002 28,821 29,972
Asset impairment 22,200 - 22,200 -
Foreign exchange adjustments (73) 96 1,003 503
Provision for restructuring 60 - 170 -
Other expense/(income), net 508 (502) 750 11
---------- --------- --------- ---------
Loss before taxes and minority
interest (26,620) (5,606) (54,475) (17,975)
(Provision) benefit for income
taxes 3,167 132 3,292 (316)
Minority interest (14) - (33) 19
---------- --------- --------- ---------
Net loss $(23,467) $(5,474) $(51,216) $(18,272)
========== ========= ========= =========
Per common share data:
Basic
Net loss $(1.93) $(0.45) $(4.22) $(1.52)
Diluted
Net loss $(1.93) $(0.45) $(4.22) $(1.52)
Weighted average common shares
outstanding:
Basic shares 12,157 12,036 12,135 12,009
Diluted shares 12,157 12,036 12,135 12,009
Reconciliation of net loss to
adjusted EBITDA:
Net loss $(23,467) $(5,474) $(51,216) $(18,272)
Add back:
Interest expense 9,784 10,002 28,821 29,972
Taxes (3,167) (132) (3,292) 316
Depreciation 11,325 13,095 34,057 39,172
---------- --------- --------- ---------
EBITDA (5,525) 17,491 8,370 51,188
Other adjustments under Credit
Agreement 23,154 780 35,736 1,448
---------- --------- --------- ---------
Adjusted EBITDA $17,629 $18,271 $44,106 $52,636
========== ========= ========= =========
------------------------------
SELECTED BALANCE SHEET DATA
------------------------------
9/30/2005
----------
Cash and cash equivalents $8,087
Debt:
Senior Revolving Credit 3,658
Senior Secured Floating
Rate Notes 220,000
Senior Subordinated Debt 175,000
Other 1,525
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