Published:
Texas Petrochemicals, Inc. Reports Second Quarter Fiscal 2006 Results
Texas Petrochemicals, Inc. ("TPI" or the
"Company") (OTC: TXPI) announced today its revenues of $299.3 million for
the quarter ended December 31, 2005, a 47% increase over revenues of $203.5
million in the prior year period. Adjusted EBITDA was $13.4 million for
the quarter ended December 31, 2005, including $4.9 million of operating
costs associated with a planned maintenance turnaround project. Adjusted
EBITDA was $9.4 million in the prior year period.
Highlights:
-- Revenues were $299.3 million for the three months ended December 31,
2005, as compared to revenues of $203.5 million for the prior year period,
representing an increase of $95.8 million or 47%.
-- Adjusted EBITDA was $13.4 million in the second fiscal quarter of
2006, as compared to $9.4 million in the prior year period. Adjusted
EBITDA excludes the impact of costs associated with the convertible note
transaction completed in December 2005, as well as other non-cash items.
In addition, Adjusted EBITDA for the quarter ended December 31, 2005
reflects $4.9 million of operating costs associated with a planned
maintenance turnaround project; no maintenance turnaround costs were
incurred in the prior year quarter. As further adjusted to exclude the
impact of these turnaround costs, Adjusted EBITDA increased $8.9 million
year-over-year.
-- Net loss was $18.9 million or $1.83 per diluted share in the second
fiscal quarter of 2006, reflecting a $21.1 million charge associated with
the convertible note transaction. This compares to net income of $2.7
million or $0.21 per diluted share in the prior year period.
Consent Solicitation and Special Conversion of 7.25% Senior Secured
Convertible Notes due 2009
On December 30, 2005, Texas Petrochemicals LP and TP Capital Corp.
completed the special conversion offer related to the $60 million 7.25%
Senior Secured Convertible Notes due 2009 (the "Notes"). Pursuant to this
transaction, the Company made a $14.1 million cash payment to the holders
of the Notes, and issued approximately 6.7 million shares of common stock.
As a result, the Company currently has approximately 18.3 million shares
outstanding on a fully diluted basis.
Results of Operations
The Company generated revenues of $299.3 million for the three months ended
December 31, 2005, as compared to revenues of $203.5 million for the prior
year quarter, representing an increase of $95.8 million or 47%. Revenue
for the C4 Processing and Isobutylene business increased $53.8 million, or
31%, as compared to the prior year quarter. The revenue increase was driven
by higher per unit sales prices, reflecting the year-over-year increase in
feedstock and raw material costs, as well as a 22% increase in sales volume
for the Isobutylene business. Contract crude C4 availability and butadiene
volumes were constrained by Hurricane Rita, which forced a number of the
Company's suppliers to shut down their ethylene operations.
Adjusted EBITDA from the Company's core operations was $9.9 million, as
compared to $12.4 million in the prior year quarter. The year-over-year
decline of $2.5 million was primarily driven by $4.9 million in maintenance
turnaround costs incurred in the quarter ended December 31, 2005. "We are
pleased with our performance in the second quarter, especially in light of
the effects of Hurricane Rita on the industry and a major plant turnaround
at our facility," said Charles Shaver, CEO of TPI.
Revenue also increased as a result of higher MTBE sales volumes and prices
during the quarter ended December 31, 2005 as compared to the prior year
period. Revenue and Adjusted EBITDA generated from MTBE sales was $67.8
million and $3.5 million for the three months ended December 31, 2005 and
$27.5 million and $(3.0) million for the three months ended December 31,
2004, respectively.
Liquidity and Capital Resources
At December 31, 2005, the Company had $21.2 million of cash and no
outstanding borrowings on its $50 million revolving credit facility. As
noted above, in December 2005 the Company made a $14.1 million cash payment
to holders of the Notes pursuant to the special conversion offer. This
transaction removed substantially all of the restrictive covenants
contained in the convertible note indenture and significantly improved the
Company's operational and financial flexibility.
The Company increased its capital spending during the quarter to $10.4
million from $1.2 million in the prior year quarter. The increase was
primarily related to capital investments being made for operational
efficiencies in the plant and on environmental initiatives.
The Company is continually considering potential transactions, including,
but not limited to, enhancement of existing processing facilities, the
purchase of existing processing facilities or businesses from third
parties, construction of new processing facilities, joint ventures
involving Company facilities and the acquisition of other companies engaged
in petrochemicals processing. Some of the potential transactions considered
by the Company could, if completed, result in the expenditure of a material
amount of funds or the issuance of a material amount of debt or equity
securities.
The Company is general partner of Texas Petrochemicals LP. Headquartered in
Houston, TX, Texas Petrochemicals LP, is a premier chemical company with
over $1 billion in annual sales. The Company provides quality C4 chemical
products and services to both local and global industry companies. The
Company has manufacturing facilities in the industrial corridor adjacent to
the Houston Ship Channel and operates product terminals in Baytown, Texas
and Lake Charles, Louisiana. For more information, visit the Company's Web
site at www.txpetrochem.com.
Cautionary Information Regarding Forward-Looking Statements
Certain oral and written information that the Company may make publicly
available from time to time may constitute forward-looking statements. Such
statements may relate to future operating results, existing and expected
competition, financing and refinancing sources and availability, and plans
related to acquisitions or other future expansion activities and capital
expenditures. Forward-looking statements involve a number of risks and
uncertainties that may significantly affect the Company's liquidity and
results in the future and, accordingly, actual results may differ
materially from those expressed in any forward-looking statements. Such
risks and uncertainties include, but are not limited to, those related to
effects of competition, leverage and debt service, financing and
refinancing efforts, litigation and governmental investigations,
environmental laws and regulations, general economic conditions and changes
in laws or regulations.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
2005 2004 2005 2004
-------- -------- -------- --------
Revenues $ 299.3 $ 203.5 $ 645.8 $ 419.6
Cost of goods sold 260.7 177.1 529.5 361.5
-------- -------- -------- --------
Gross profit 38.6 26.4 116.3 58.1
Operating costs 21.0 14.0 36.1 29.2
SG&A expense 5.0 3.1 8.6 5.5
Depreciation and amortization 3.4 3.4 6.9 6.6
-------- -------- -------- --------
Operating costs 29.4 20.5 51.6 41.3
Operating income 9.2 5.9 64.7 16.8
Other income (expense)
Non-cash change in fair value of
derivatives * (4.8) - - -
Non-cash stock compensation
expense (0.6) - (1.1) -
Debt conversion fee ** (21.1) - (21.1) -
Other income 0.8 0.1 1.4 0.3
-------- -------- -------- --------
Other income (expense) (25.7) 0.1 (20.8) 0.3
Interest expense 1.3 1.4 2.7 2.9
-------- -------- -------- --------
Income before reorganization
items and income tax provision
(benefit) (17.8) 4.6 41.2 14.2
Reorganization costs - 0.4 - 1.1
-------- -------- -------- --------
Income before income tax provision
(benefit) (17.8) 4.2 41.2 13.1
Income tax provision (benefit) 1.1 1.5 21.8 4.6
-------- -------- -------- --------
Net income (loss) $ (18.9) $ 2.7 $ 19.4 $ 8.5
======== ======== ======== ========
Earnings per share, basic $ (1.83) $ 0.27 $ 1.90 $ 0.85
Earnings per share, fully
diluted*** $ (1.83) $ 0.21 $ 1.08 $ 0.60
Weighted average shares, basic
(in millions) 10.3 10.0 10.2 10.0
Weighted average shares, fully
diluted (in millions)*** 10.3 16.4 18.0 16.4
* Reflects change in the mark-to-market value of the Company's derivative
contracts.
** Conversion fee associated with the conversion of $60 million 71/4%
Senior Secured Convertible Notes to shares of the Company's common
stock. $7.0 million of this debt conversion fee was a non-cash
transaction.
*** The computation of fully diluted net loss per share was antidilutive
for the three months ended December 31, 2005; therefore, the amount
reported for basic and fully diluted are the same.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Dollars in millions)
(Unaudited)
This earnings release contains non-GAAP financial measures. For purposes
of Regulation G, a non-GAAP financial measure is a numerical measure of a
registrant's historical or future financial performance, financial
position or cash flows that excludes amounts, or is subject to adjustments
that have the effect of excluding amounts, that are included in the most
directly comparable measure calculated and presented in accordance with
GAAP in the statement of income, balance sheet, or statement of cash flows
(or equivalent statements) of the registrant; or includes amounts, or is
subject to adjustments that have the effect of including amounts, that are
excluded from the most directly comparable measure so calculated and
presented. In this regard GAAP refers to generally accepted accounting
principles in the United States. Pursuant to the requirements of
Regulation G, TPI has provided a reconciliation of the non-GAAP financial
measure (EBITDA) to the most directly comparable GAAP financial measure
(net income/loss).
Three Months Ended Six Months Ended
December 31, December 31,
2005 2004 2005 2004
-------- -------- -------- --------
Net income (loss) $ (18.9) $ 2.7 $ 19.4 $ 8.5
Plus:
Provisions (benefit) for income
taxes 1.1 1.5 21.8 4.6
Interest expense 1.3 1.4 2.7 2.9
Depreciation and amortization 3.4 3.4 6.9 6.6
-------- -------- -------- --------
EBITDA $ (13.1) $ 9.0 $ 50.8 $ 22.6
Reorganization costs - 0.4 - 1.1
Non-cash chg in fair value of
derivatives 4.8 - - -
Non-cash stock compensation
expense 0.6 - 1.1 -
Non-cash debt conversion fee 21.1 - 21.1 -
-------- -------- -------- --------
Adjusted EBITDA $ 13.4 $ 9.4 $ 73.0 $ 23.7
======== ======== ======== ========
EBITDA is presented in the earnings release because it has particular
relevance in certain debt covenants and related compliance ratios and
because management believes it is of interest to its investors and lenders.
Condensed Consolidated Balance Sheets
(Dollars in millions)
(Unaudited)
December 31, June 30,
2005 2005
-------- --------
Current Assets:
Cash and cash equivalents $ 21.2 $ 15.9
Accounts receivable 78.0 77.5
Inventories 49.6 40.4
Other current assets 12.5 11.0
-------- --------
Total current assets 161.3 144.8
Property, Plant & Equipment, net 161.8 151.9
Other Long-Term Assets 5.6 7.1
-------- --------
Total Assets $ 328.7 $ 303.8
======== ========
Current Liabilities (excluding revolver and note
payable):
Accounts payable $ 64.4 $ 67.8
Accrued expenses 13.0 15.7
Other current liabilities 3.7 -
-------- --------
Total current liabilities 81.1 83.5
Outstanding Debt:
Revolving Line of Credit - -
7.25% Senior Secured Convertible Notes - 60.0
Note Payable - Financed Insurance Premiums 1.5 -
-------- --------
Total Debt 1.5 60.0
Deferred Income Tax Liability 41.5 43.3
Shareholders' Equity 204.6 117.0
-------- --------
Total Liabilities and Shareholders' Equity $ 328.7 $ 303.8
======== ========
Condensed Consolidated Statements of Cash Flows
(Dollars in Millions)
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31
2005 2004 2005 2004
-------- -------- -------- --------
Net Cash Provided by Operating
Activities $ 12.3 $ 9.8 $ 31.2 $ 16.6
Cash Flows Used in Investing
Activities (10.4) (1.2) (16.9) (3.0)
Net Cash Used In Financing
Activities (15.9) (8.6) (9.0) (13.8)
-------- -------- -------- --------
Net Increase (Decrease) in Cash and
Cash Equivalents $ (14.0) $ - $ 5.3 $ (0.2)
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