Constar International Inc. Announces 2006 Third Quarter and First Nine 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 third quarter and nine months ended September September: see month. 30, 2006. Third Quarter Results: Highlights when compared to the third 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. grew 19.6 percent. Gross margin improved to 8.3 percent from 5.4 percent. 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. rose to $11.8 million compared to a loss of $17.1 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 increased 13.6 percent to $20.0 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 improved to $1.9 million compared to a loss of $23.6 million. "We are pleased with our continued improved performance in the quarter. Impressive execution of our strategy to grow custom sales, improve pricing, reduce costs, and improve working capital management yielded solid cash performance for 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, 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 of Constar. Consolidated 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 were $251.3 million in the third quarter of 2006 compared to $251.5 million in the third quarter of 2005. The slight decrease in consolidated net sales was driven by a decrease in unit volume, which was offset by 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 higher 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, favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. foreign currency translations, and the positive impact of the Company's strategic value initiative plan. In the U.S., net sales of $198.2 million in the third quarter of 2006 remained consistent with net sales in the third quarter of 2005. Total U.S. unit volume decreased 4.2 percent over the third quarter of 2005. Custom unit volume growth was 19.6 percent, while conventional unit volume declined 8.7 percent compared to the third quarter of 2005. The impact of the net unit volume decrease on net sales was offset by the pass-through to customers of higher resin costs and the effect of the Company's strategic value initiative plan. In Europe, net sales were $53.1 million in the third quarter of 2006 compared to $53.3 million in the third quarter of 2005. The slight decrease in European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. net sales in the third quarter of 2006 was primarily due to a decline in conventional unit volume of 10.0 percent compared to the third quarter of 2005, offset by favorable foreign currency translations and the pass-through of higher resin costs to customers. U.S. net sales accounted for 78.9 percent of net sales in the third quarter of 2006 compared to 78.8 percent of net sales in the third quarter of 2005. Gross profit increased $7.2 million to $20.8 million in the third quarter of 2006 from $13.6 million in the third quarter of 2005. Gross profit as a percentage of net sales increased to 8.3 percent from 5.4 percent in the 2005 third quarter. The increase reflects improved product and customer mix, lower costs, benefits from the Company's strategic value initiative plan, reduced depreciation expense, lower property and other non-income related taxes, a reduction in customer rebates and improved operating efficiencies in 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. . Selling and administrative expenses increased by $0.1 million to $6.9 million in the third quarter of 2006 from $6.8 million in the third quarter of 2005. This modest increase primarily relates to increased compensation expense of $1.0 million, offset by an adjustment of $0.6 million related to incentive compensation and decreased legal and bad debt expense. In the third quarter of 2005, 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 to write down to fair value 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 assets used in its European operations. Operating income rose to $11.8 million in the 2006 third quarter compared to a loss of $17.1 million in the third quarter of 2005. The improvement primarily reflects the increase in gross profit and the absence of impairment charges in 2006 compared to an impairment charge of $22.2 million in 2005. Interest expense increased $0.6 million to $10.4 million in the third quarter of 2006 from $9.8 million in the third quarter of 2005 as a result of a higher effective interest rate partially offset by lower average borrowings. Other income increased to $0.6 million in the third quarter of 2006 compared to the third 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 $1.4 million in the third quarter of 2006, or $0.11 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 $23.5 million, or $1.93 loss per basic and diluted share, in the third quarter of 2005. Credit Agreement EBITDA in the third quarter of 2006 increased by $2.4 million, or 13.6 percent, to $20.0 million from $17.6 million in the third quarter of 2005. This increase was primarily due to a 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. , excluding asset impairment charges. 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 third quarter of 2006, these adjustments amounted to $0.6 million. In the third quarter of 2005, these adjustments were $16.9 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. For the three months ended September 30, 2006, net cash provided by operating activities was $37.5 million, and net cash used in investing activities was $4.4 million. First Nine Months Results: Consolidated net sales grew by $9.3 million to $735.5 million in the first nine months of 2006 from $726.2 million in the same period last year. The increase was primarily driven by the pass- through of higher resin costs to customers, an increase in custom unit volume and the impact of the Company's strategic value initiative plan, partially offset by unfavorable foreign currency translations. In the U.S., net sales increased $17.1 million to $586.3 million in the first nine months of 2006 from $569.2 million in the first nine months of 2005. The increase was primarily driven by the pass-through of higher resin costs to customers, an increase in custom unit volume and the impact of the Company's strategic value initiative plan. Total U.S. unit volume increased 0.7 percent in the first nine months of 2006 over the same period last year. This increase reflects custom unit volume growth of 30.9 percent and a 4.9 percent decrease in conventional unit volume. In Europe, net sales decreased $7.8 million to $149.2 million in the nine months ended September 30, 2006 from $157.0 million in the first nine months of 2005. The decrease was 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, and a 3.5 percent
decrease in unit volume.U.S. net sales accounted for 79.7 percent of net sales in the first nine months of 2006 compared to 78.4 percent of net sales in the same period last year. Gross profit increased $24.2 million to $54.5 million for the first nine months of 2006 from $30.3 million in the first nine months of 2005. Gross profit as a percentage of net sales in the first nine months of 2006 increased to 7.4 percent from 4.2 percent in the same period last year. The increase reflects improved customer and product mix, lower costs, the impact of the Company's strategic value initiative plan, lower depreciation expense and improved operating efficiencies in U.S. manufacturing operations, partially offset by a decrease in gross profit, excluding depreciation, in our European operations. Selling and administrative expenses were $22.8 million in the first nine months of 2006 compared to $19.0 million in the same period last year. The increase primarily reflects a $1.7 million increase in compensation expense, $1.3 million for additional audit and Sarbanes-Oxley related expenses, $1.3 million of increased other expenses and $1.0 million in higher legal fees, offset by a $1.5 million reduction in bad debt expense. In connection with its February 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 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. In the nine months ended September 30, 2006, 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. In the nine months ended September 30, 2005, the Company recorded a non-cash asset impairment charge of $22.2 million to write down the carrying value of assets used in its European operations to fair value. Operating income was $25.6 million in the nine months ended September 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 $25.8 million in the nine months ended September 30, 2005. This increase in operating income primarily relates to the improved operating performance described above, and the absence in 2006 of $22.2 million in impairment charges, a $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 $2.3 million to $31.1 million in the nine months ended September 30, 2006 from $28.8 million in the nine months ended September 30, 2005 as a result of a higher effective interest rate and higher average borrowings. In the first nine months of 2006, the Company reported other income of $1.8 million compared to other expense of $0.4 million in the first nine months of 2005. The income in 2006 was primarily from the positive impact of changes in the foreign currency translation rates of intra-company balances and royalty income. Net loss in the nine months ended September 30, 2006 was $4.8 million, or $0.39 loss per basic and diluted share, compared to a net loss of $51.2 million, or $4.22 loss per basic and diluted share, in the nine months ended September 30, 2005. Credit Agreement EBITDA in the nine months ended September 30, 2006 increased by 24.5 percent to $54.9 million from $44.1 million in the first nine months of last year. This increase was primarily due to a higher gross profit excluding depreciation expense, partially offset by increased operating expenses, excluding asset impairment charges. In the nine months ended September 30, 2006, Credit Agreement adjustments to EBITDA were $2.2 million. In the nine months ended September 30, 2005, adjustments were $29.4 million, which included the write-off of deferred financing costs of $10.0 million and the asset impairment charge. For the nine months ended September 30, 2006, net cash provided by operating activities was $37.9 million, and net cash used in investing activities was $17.1 million. Conference Call, Web Cast Information The Company will hold a conference call on Tuesday, November 14, 2006, at 9:00 a.m. ET to discuss this news release. Forward-looking 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 Tuesday, November 21, 2006 and can be accessed via telephone by dialing (888) 203-1112 (domestic callers) or (719) 457-0820 (international callers) and entering passcode 4502547, 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 include the Company's relationship with its largest customer PepsiCo, the success of the Company's strategic pricing initiative plan and the Company's ability to secure new business, expand sales of custom products and improve the operating performance of its European business. Other important factors 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 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 packaging solutions, from product design and engineering, to ongoing customer support. Its customers include many of the world's leading branded consumer products companies. [TABLE OMITTED] [TABLE OMITTED] |
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