Constar International Inc. Announces 2006 Second Quarter and First Six Months 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, 2006. Second Quarter Results: Highlights when compared to the second quarter of 2005 include: --Custom 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. increased 34.7 percent. --Gross profit percentage improved to 8.2 percent from 4.0 percent. --Operating income improved to $10.2 million from $2.6 million. --Credit Agreement 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 of $22.7 million, up 49.3 percent from $15.2 million. --Income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the of $0.7 million compared to $7.8 million loss. "Impressive execution of our strategy to grow high margin custom sales, improved pricing, pass through of energy surcharges, and reduced costs yielded improved results in the quarter," said 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. Hoffman, Constar's CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. and President. He added, "Credit Agreement EBITDA increased by 49.3 percent or $7.5 million despite higher administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. incurred during the quarter and we generated positive cash flow of $3.4 million after investing activities. We are pleased with our positive performance in the quarter." Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: 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 increased $0.6 million, or 0.2 percent, to $258.5 million in the 2006 second quarter compared to $257.9 million in the second quarter of 2005. This increase in consolidated net sales was primarily driven by increased shipments of custom products, partially offset by unfavorable foreign currency translations, and a slight decline in conventional unit volumes. In the U.S., net sales increased $5.0 million, or 2.5 percent, to $205.6 million in the second quarter of 2006 from $200.6 million in the second quarter of 2005. This increase in U.S. net sales in 2006 was due to increased sales of custom units, improved product mix and the impact of the Company's strategic value initiative, partially offset by lower unit sales of conventional products. Total U.S. unit volume increased 1.6 percent over the second quarter of 2005. In the 2006 second quarter, custom unit volume growth was 34.7 percent while conventional unit volume declined 4.3 percent compared to the 2005 second quarter. 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). , net sales decreased $4.4 million, or 7.7 percent, to
$52.9 million in the second quarter of 2006 from $57.3 million in the
second quarter of 2005. The decrease in European Europeanemanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. net sales in the second quarter of 2006 was principally due to the weakening weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. of the British
Pound and Euro against the U.S. Dollar.U.S. net sales accounted for 79.6 percent of net sales in the second quarter of 2006 compared to 77.8 percent of net sales in 2005. Gross profit increased $10.8 million to $21.2 million or 8.2 percent of consolidated net sales in the second quarter of 2006 from $10.4 million in the second quarter of 2005 or 4.0 percent of consolidated net sales. The increase reflects greater custom sales units, favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. product mix, benefits from the Company's strategic value initiative, improved pricing related to the settlement of a pricing dispute which contributed to approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 20 percent of the improvement, improved operating efficiencies in our U.S. manufacturing operations Manufacturing operations concern the operation of a facility, as opposed to maintenance, supply and distribution, health, and safety, emergency response, human resources, security, information technology and other infrastructural support organizations. and reduced depreciation expense. The second quarter gross profit gains were partially offset by a non-cash depreciation adjustment of $1.8 million resulting from a review of property, plant and equipment. Selling and administrative expenses increased $2.1 million, or 34.4 percent, to $8.2 million in the second quarter of 2006 from $6.1 million in the second quarter of 2005. This increase in 2006 was primarily related to the absence of incentive 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. in 2005 along with higher legal, audit and Sarbanes-Oxley related expenses. In the second quarter of 2006, 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 $0.9 million to write down the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of an asset to fair value. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. was $10.2 million in the second quarter of 2006 compared to $2.6 million in the second quarter of 2005. This increase in the operating income in 2006 compared to 2005 was primarily related to the improved operating performance described above, partially offset by the increase in selling and administrative expenses. Interest expense increased $1.1 million to $10.5 million in the second quarter of 2006 from $9.4 million in the second quarter of 2005 as a result of a higher effective interest rate and higher average borrowings. Other income was $0.9 million in the second quarter of 2006 compared to other expense of $0.7 million in the second quarter of 2005. The income in 2006 primarily resulted from the positive impact of changes in foreign currency translation rates on intra-company balances and from royalty income. Net income was $0.2 million in the second quarter of 2006, or $0.01 income per basic and 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 $7.7 million, or $0.63 loss per basic and diluted share, in the second quarter of 2005. The Company's Turkish joint venture ceased operations in May 2006 and has been classified as discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. for all periods in the attached financial statements. Credit Agreement EBITDA in the second quarter increased 49.3 percent to $22.7 million from $15.2 million in the second quarter of 2005. This increase was primarily due to higher gross profit excluding depreciation expense partially offset by increased 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. . EBITDA is defined by the Company as net income (loss) before interest expense, provision for income taxes, depreciation and amortization. The Company's Credit Agreement adjusts EBITDA for certain items. In the second quarter of 2006, these adjustments amounted to $1.3 million. In the second quarter of 2005, these adjustments were $1.9 million. Credit Agreement EBITDA is not a GAAP-defined measure and may not be comparable to adjusted EBITDA as defined by other companies. Management believes that investors, analysts and other interested parties view our ability to generate Credit Agreement EBITDA as an important indicator of our operating performance. Management also believes that Credit Agreement EBITDA is a useful measure in understanding trends because it eliminates various non-operational and non-recurring items. In addition, Credit Agreement EBITDA facilitates comparisons to operating performance in prior periods, and is used by the Company in setting incentive plan targets. Investors are urged to take into account GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). measures in evaluating the Company, and to review the reconciliation of Credit Agreement EBITDA to net income (loss) in the attached unaudited consolidated statements of operations. First Six Months Results: Consolidated net sales increased $9.5 million, or 2.0 percent, to $484.2 million in the six months ended June 30, 2006 from $474.7 million in the six months ended June 30, 2005. The increase in consolidated net sales was primarily driven by the increase in custom sales units, improved product mix, and the benefits from the Company's strategic value initiative, partially offset by unfavorable foreign currency translations. In the U.S., net sales increased $17.0 million, or 4.6 percent, to $388.1 million in the six months ended June 30, 2006 from $371.1 million in the six months ended June 30, 2005. This increase in U.S. net sales reflects the increase in custom sales units, improved product mix and the benefits of the Company's strategic value initiative. Total U.S. unit volume increased 3.3 percent over the first six months of 2005. This increase reflects custom unit volume growth of 37.4 percent, which was offset by a 2.9 percent decrease in conventional unit volume. In Europe, net sales decreased $7.5 million, or 7.3 percent, to $96.1 million in the six months ended June 30, 2006 from $103.6 million in the six months ended June 30, 2005. This decrease in European net sales in the six months of 2006 was due to the weakening of the British Pound and Euro against the U.S. Dollar along with the pass through of lower 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 costs to customers. U.S. net sales accounted for 80.2 percent of net sales in the first six months of 2006 compared to 78.2 percent of net sales in the first six months of 2005. Gross profit increased $17.0 million to $33.7 million, or 7.0 percent of consolidated net sales in the six months ended June 30, 2006, from $16.7 million, or 3.5 percent of consolidated net sales in the six months ended June 30, 2005. The increases primarily reflect the growth in custom sales units, improved product mix, the benefits of the Company's strategic value initiative, improved operating efficiencies in our U.S. manufacturing operations and $3.7 million less in depreciation expense. Selling and administrative expenses increased $3.6 million, or 28.7 percent, to $15.8 million in the six months ended June 30, 2006 from $12.2 million in the six months ended June 30, 2005. This increase in 2006 primarily related to the absence of incentive accruals in 2005 along with higher legal, audit and Sarbanes-Oxley related expenses. In connection with its February February: see month. 2005 refinancing Refinancing An extension and/or increase in amount of existing debt. , the Company repaid amounts outstanding under its former revolving loan facility and two term loans. As a result of these repayments, last year the Company wrote off approximately $6.5 million of the remainder of the deferred financing costs related to those three facilities and incurred prepayment penalties Prepayment penalty A fee a borrower pays a lender when the borrower repays a loan before its scheduled time of maturity. of approximately $3.5 million. As noted above, during the 2006 second quarter, the Company recorded a non-cash asset impairment charge of $0.9 million to write down the carrying value of an asset to fair value. Operating income was $13.8 million in the six months ended June 30, 2006 compared to an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $8.7 million in the six months ended June 30, 2005. This increase in operating income in the first six months of 2006 compared to the first six months of 2005 was primarily related to the improved operating performance described above, and the absence in 2006 of the $10.0 million write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of deferred financing costs and prepayment penalties associated with the 2005 refinancing. Interest expense increased $1.6 million to $20.6 million in the six months ended June 30, 2006 from $19.0 million in the six months ended June 30, 2005 as a result of a higher effective interest rate and higher average borrowings. In the first half of the year the Company reported other income of $1.2 million compared to other expense of $0.3 million in the first six months of 2005. The income in 2006 was primarily from the positive impact of the changes in the foreign currency translation rates on intra-company balances and royalty income. Net loss in the six months ended June 30, 2006 was $6.2 million, or $0.50 loss per basic and diluted share, compared to a net loss of $27.7 million, or $2.29 loss per basic and diluted share in the six months ended June 30, 2005. Credit Agreement EBITDA for the six months ended June 30, 2006 increased 31.7 percent to $34.9 million over $26.5 million in the first half of 2005. This increase was primarily due to higher gross profit excluding depreciation expense, partially offset by increased operating expenses. EBITDA is defined by the Company as net income (loss) before interest expense, provision for income taxes, depreciation and amortization. The Company's Credit Agreement adjusts EBITDA for certain items. In the six months ended June 30, 2006, these adjustments amounted to $1.5 million. In the six months ended June 30, 2005, these adjustments were $12.8 million, which included the write-off of deferred financing costs of $10.0 million. Conference Call, Web Cast Information The Company will hold a conference call on Monday Monday: see week. August 14, 2006, at 9:00 a.m. ET to discuss this news release. Forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. and other material information will be discussed on this conference call. The dial-in numbers for the conference call are (800) 810-0924 (domestic callers) or (913) 981-4900 (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 that day until midnight on Monday, August 21, 2006 and can be accessed via telephone by dialing (888) 203-1112 (domestic callers) or (719) 457-0820 (international callers) and entering passcode 5319774, 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 news 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 news release or the actual results of operations or financial condition of the Company to differ are discussed under the caption "Risk Factors" 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 December: see month. 31, 2005 and in subsequent filings with the Securities and Exchange Commission made prior to, on 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 full-ser·vice adj. Associated with or offering complete service: full-service gasoline pumps; full-service banks. 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)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
------------------- -------------------
2006 2005 2006 2005
--------- --------- --------- ---------
Net customer sales $257,198 $256,734 $481,972 $472,481
Net affiliate sales 1,256 1,179 2,212 2,213
--------- --------- --------- ---------
Net sales 258,454 257,913 484,184 474,694
Cost of products sold,
excluding depreciation 226,514 236,205 431,596 435,459
Depreciation 10,757 11,328 18,839 22,527
--------- --------- --------- ---------
Gross profit 21,183 10,380 33,749 16,708
--------- --------- --------- ---------
Selling and administrative
expenses 8,228 6,123 15,830 12,245
Research and technology
expenses 1,688 1,573 3,026 3,047
Write-off of deferred
financing costs - - - 10,025
Asset impairment charges 870 - 870 -
Provision for restructuring 182 51 225 110
--------- --------- --------- ---------
Total operating expenses 10,968 7,747 19,951 25,427
--------- --------- --------- ---------
Operating income (loss) 10,215 2,633 13,798 (8,719)
Interest expense 10,464 9,373 20,650 19,004
Other (income) expense, net (936) 735 (1,187) 348
--------- --------- --------- ---------
Income (loss) from continuing
operations before income
taxes 687 (7,475) (5,665) (28,071)
(Provision for) benefit from
income taxes - (314) - 154
--------- --------- --------- ---------
Income (loss) from continuing
operations 687 (7,789) (5,665) (27,917)
Income (loss) from
discontinued operations, net
of taxes (518) 88 (509) 168
--------- --------- --------- ---------
Net Income (loss) $169 $(7,701) $(6,174) $(27,749)
========= ========= ========= =========
Basic earnings (loss) per
common share:
Continuing operations $0.06 $(0.64) $(0.46) $(2.30)
Discontinued operations (0.05) 0.01 (0.04) 0.01
--------- --------- --------- ---------
Net income(loss) per
share $0.01 $(0.63) $(0.50) $(2.29)
========= ========= ========= =========
Diluted earnings (loss) per
common share:
Continuing operations $0.05 $(0.64) $(0.46) $(2.30)
Discontinued operations (0.04) 0.01 (0.04) 0.01
--------- --------- --------- ---------
Net income(loss) per
share $0.01 $(0.63) $(0.50) $(2.29)
========= ========= ========= =========
Weighted average common shares
outstanding:
Basic 12,208 12,129 12,203 12,124
========= ========= ========= =========
Diluted 12,540 12,129 12,203 12,124
========= ========= ========= =========
Reconciliation of net income
(loss) to Credit Agreement
EBITDA:
Net loss $169 $(7,701) $(6,174) $(27,749)
Add back:
Interest expense 10,464 9,373 20,650 19,004
Taxes - 314 - (154)
Depreciation 10,757 11,328 18,839 22,527
--------- --------- --------- ---------
EBITDA 21,390 13,314 33,315 13,628
Other adjustments under
Credit Agreement 1,330 1,889 1,539 12,849
--------- --------- --------- ---------
Credit Agreement EBITDA $22,720 $15,203 $34,854 $26,477
========= ========= ========= =========
-------------------------------
SELECTED BALANCE SHEET DATA
-------------------------------
June 30, June 30,
2006 2005
--------- ---------
Cash and cash equivalents $9,371 $8,352
Debt:
Revolver Loan $24,168 $20,000
Senior Notes $220,000 $220,000
Senior Subordinated Notes $175,000 $175,000
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