Constar International Inc. Announces Fourth Quarter and Full Year 2004 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 fourth quarter and twelve months ended December December: see month. 31, 2004. Fourth 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 rose 18 percent in the fourth quarter to $201.8 million over $171.2 million for the 2003 fourth 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 conventional products 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. Fourth quarter gross profit increased 184 percent to $10.2 million from $3.6 million reported in the fourth quarter of 2003. The growth reflects increased volumes, improved operating efficiencies and cost savings from the restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). project undertaken in the second half of 2003. The improvement was partially offset by the implementation of price reductions, softness in the European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. operations and higher freight and utility costs. 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 fourth quarter (including the $25.1 million settlement received for the Oxbar(TM) 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. ) improved to $38.2 million compared to $9.0 million in the fourth quarter of 2003. Excluding the Oxbar(TM) settlement, adjusted EBITDA in the fourth quarter grew 45 percent to $13.1 million. The growth in fourth quarter adjusted EBITDA includes offsets due to increased spending on Sarbanes Oxley Oxley refers to several things: People
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. The Company's Senior Secured Credit Agreement in effect during 2004 adjusted 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 used the adjusted EBITDA figure to determine the Company's compliance with certain financial covenants in the Senior Secured Credit Agreement. In the 2004 fourth quarter, these adjustments included add-backs of $1.9 million. This definition of adjusted EBITDA may not be comparable to adjusted EBITDA as defined by other companies. See the reconciliation of adjusted EBITDA to net income (loss) in Constar's unaudited consolidated statements of operations attached hereto here·to adv. To this document, matter, or proposition. hereto Adverb Formal or law to this place, matter, or document Adv. 1. . Michael J. Hoffman, Constar's President and Chief Executive Officer, commented, "We are pleased to report fourth quarter and full year operating results in line with our previously provided guidance for 2004. The achievements in the fourth quarter and full year were made during a challenging period of rising raw material costs, increased utility and freight costs, continued pricing pressures, European volume softness and extraordinary spending on Sarbanes Oxley compliance efforts. Our ability to overcome these challenges through growth and operational excellence demonstrates the talent and capabilities of the Constar team. Several of these challenges will continue through 2005, and we remain focused on further manufacturing efficiency improvement and utilizing our proprietary technologies to grow profitably." Excluding the $25.1 million proceeds from the Oxbar(TM) settlement, 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. in the fourth quarter (defined as selling and administrative expenses, research and technology expense, foreign exchange adjustments and other expense (income), net) were $9.8 million compared to a $7.9 million for the same period in 2003. The increase in operating expenses primarily reflects costs associated with the Company's Sarbanes Oxley compliance efforts. Interest expense in the fourth quarter was $9.8 million compared to $8.5 million in the prior year period. The increase is the result of an increase in the Company's effective interest rate resulting from the December 2003 refinancing Refinancing An extension and/or increase in amount of existing debt. . The Company reported net income in the fourth quarter of $11.5 million, or $0.92 income 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 $12.1 million, or $1.01 loss per diluted share, in the 2003 fourth quarter. Excluding the $25.1 million Oxbar(TM) settlement, there was a net loss of $13.6 million, or $1.14 loss per basic and diluted share. Full Year Results Fiscal 2004 net sales rose to $844.2 million, a 14 percent increase over the $742.3 million in 2003. The growth reflects increased shipments of conventional products, the pass-through of increased resin prices and favorable foreign currency translation. These increases were partially offset by implementation of price reductions to extend key contracts and meet competitive pricing. Gross profit grew 61 percent to $46.4 million for the twelve-month period over the $28.9 million for 2003. The growth reflects increased volume, improved operating efficiencies, reduced spending on warehousing and material handling and cost savings from the restructuring project undertaken in the second half of 2003. The improvement was partially offset by the implementation of price reductions and higher freight and utility costs. Adjusted EBITDA for 2004 increased to $90.8 million compared to $58.3 million in 2003. Excluding the $25.1 million Oxbar(TM) settlement, adjusted EBITDA for 2004 grew 13 percent to $65.7 million. As noted above, the Company's Senior Secured Credit Agreement in effect during 2004 adjusted EBITDA for certain non-cash accruals and used the adjusted EBITDA figure to determine the Company's compliance with certain financial covenants in that Senior Secured Credit Agreement. For 2004, these adjustments included add-backs of $3.4 million. This definition of adjusted EBITDA may not be comparable to adjusted EBITDA as defined by other companies. Excluding the $25.1 million Oxbar(TM) settlement, operating expenses (selling and administrative expenses, research and technology expense, foreign exchange adjustments and other expense (income), net) for 2004 were $34.0 million compared to a $31.2 million expense in 2003. Prior year expenses included $3.7 million of charges related to assets no longer in use and 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 an uncollectible account Uncollectible account An account which cannot be collected by a company because the customer is not able to pay or is unwilling to pay. receivable. Excluding these 2003 charges and adjusting for the $25.1 million Oxbar(TM) settlement, operating expenses increased by approximately $6.5 million over the prior year period primarily due to costs associated with the Company's Sarbanes Oxley compliance efforts and the impact of foreign currency exchange adjustments. Interest expense for the year was $39.8 million compared to $34.2 million in 2003, reflecting the increase in the Company's effective interest rate resulting from the December 2003 refinancing. The Company reported a net loss of $6.8 million, or $0.57 loss per diluted share, for 2004 compared to a net loss of $220.5 million, or $18.38 loss per diluted share, in 2003. The narrowing of the net loss is primarily attributable to the $183.0 million non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. for 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. of goodwill taken during 2003, the $11.6 million restructuring and asset impairment charge recorded in 2003, and the $25.1 million Oxbar(TM) settlement recorded during 2004. Excluding the $25.1 million Oxbar(TM) settlement, the Company's net loss for 2004 was $31.9 million, or $2.65 loss per diluted share. Conference Call, Web Cast Information The Company will hold a conference call on Wednesday, March 30, 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) 776-0816 (domestic callers) or (913) 981-5556 (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 on March 30, 2005, through midnight on April 6, 2005 and can be accessed via telephone by dialing (888) 203-1112 (domestic callers) or (719) 457-0820 (international callers) and entering passcode 9490142, 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; possible increases in interest rate expense because of floating interest rates under the Company's credit facility and notes issued in 2005; 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 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. ; 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; continued conversion from metal, glass and other materials for packaging to plastic packaging; the Company's expectation that the market for conventional soft drink containers will not 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; 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; recent 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 timely market products incorporating MonOxbar(TM) technology and the realization of the expected benefits of the MonOxbar(TM) technology; the Company's ability to control costs; 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 successfully execute its business model and enhance its product mix; the Company's ability to successfully 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. or defend 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.
CONSTAR INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS COMPARISON
(in thousands, except per share data)
Three Months Twelve Months
Ended Ended
December 31, December 31,
--------------------- --------------------
2004 2003 2004 2003
---------- ---------- --------- ----------
Net customer sales $200,956 $170,497 $839,786 $739,657
Net sales to affiliates 874 667 4,396 2,632
---------- ---------- --------- ----------
Net sales 201,830 171,164 844,182 742,289
Cost of products sold,
excluding depreciation 179,752 154,439 746,684 657,869
Depreciation 11,888 13,137 51,060 55,488
---------- ---------- --------- ----------
Gross profit 10,190 3,588 46,438 28,932
Selling and administrative
expense 8,422 6,935 28,107 23,040
Research and technology
expense 1,673 1,211 5,725 5,220
Write off deferred financing
costs - 751 - 751
Interest expense 9,826 8,479 39,798 34,221
Foreign exchange adjustments (441) (763) 62 (1,468)
Provision for restructuring
and asset impairments 1,095 1,418 1,095 11,557
Goodwill impairment loss - - - 183,000
Other expense/(income), net (24,959) 511 (24,948) 4,429
---------- ---------- --------- ----------
Income (loss) before taxes
and minority interest 14,574 (14,954) (3,401) (231,818)
(Provision) benefit for
income taxes (3,101) 2,781 (3,417) 11,362
Minority interest (21) 50 (2) (93)
---------- ---------- --------- ----------
Net income (loss) $11,452 $(12,123) $(6,820) $(220,549)
========== ========== ========= ==========
Per common share data:
Basic
Net income (loss) $0.95 $(1.01) $(0.57) $(18.38)
Diluted
Net income (loss) $0.92 $(1.01) $(0.57) $(18.38)
Weighted average common
shares outstanding:
Basic shares 12,017 12,000 12,028 12,000
Diluted shares 12,512 12,000 12,028 12,000
Reconciliation of net income
(loss) to adjusted EBITDA:
Net income ( loss) $11,452 $(12,123) $(6,820) $(220,549)
Add back:
Interest expense 9,826 8,479 39,798 34,221
Taxes 3,101 (2,781) 3,417 (11,362)
Depreciation 11,888 13,137 51,060 55,488
---------- ---------- --------- ----------
EBITDA 36,267 6,712 87,455 (142,202)
Other adjustments under
Senior Secured Credit
Agreements 1,916 2,315 3,364 200,544
---------- ---------- --------- ----------
Adjusted EBITDA $38,183 $9,027 $90,819 $58,342
========== ========== ========= ==========
----------------------------
SELECTED BALANCE SHEET DATA
----------------------------
12/31/2004 12/31/2003
---------- ----------
Cash and cash equivalents $9,316 $16,478
Debt:
Senior Revolving Credit 17,000 25,000
Term B Loan 121,941 123,188
Second Lien Term Loan 75,000 75,000
Senior Subordinated Debt 175,000 175,000
Other 1,540 1,547
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