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Texas Petrochemicals Reports Fiscal 2006 Third Quarter Results
HOUSTON (Monday, May 15, 2006) -- TPC Group, Inc., (OTC: TXPI.PK) ("TPI" or the "Company") today reported net income of $4.5 million, or $0.25 per diluted share, for the third quarter of fiscal 2006. This compares to net income of $0.9 million, or $0.09 per diluted share, in the third quarter of fiscal 2005.
Charlie Shaver, CEO of TPI, stated, "We are very pleased with our third quarter results, especially the performance of our core operations, comprised of our C4 processing and isobutylene businesses, which performed in line with our expectations."
Fiscal Third Quarter Highlights:
- Revenues were $272.7 million compared to revenues of $216.0 million for the comparable prior year period, an increase of $56.7 million, or 26%.
- Net income was $4.5 million, or $0.25 per diluted share, compared to net income of $0.9 million, or $0.09 per diluted share, in the comparable prior year period.
- Adjusted EBITDA was $13.5 million compared to $9.7 million in the comparable prior year period. Adjusted EBITDA from the Company's core operations was $15.6 million compared to $9.3 million in the comparable prior year period, an increase of $6.3 million, or 68%. A reconciliation of EBITDA (Earnings before interest, taxes, depreciation and amortization) and adjusted EBITDA (EBITDA adjusted for non-recurring and non-cash items) to reported earnings can be found at the end of this press release.
- On April 6, 2006, the Company entered into a purchase and sale agreement with Huntsman Corporation regarding the previously announced intent to acquire Huntsman's US butadiene business.
Results of Operations
3Q06 vs. 3Q05 - The Company generated revenues of $272.7 million for the three months ended March 31, 2006, as compared to revenues of $216.0 million for the prior year quarter, an increase of $56.7 million, or 26%. Revenues for the core business increased by $63.4 million, or 38%, compared to the prior year quarter. The revenue increase is a result of higher per unit sales prices, reflecting the year-over-year increase in feedstock and raw material costs. Sales volumes for the core business increased 9% over the previous year quarter, driven by higher extraction rates.
3Q06 vs. 3Q05 - Adjusted EBITDA was $13.5 million in the third fiscal quarter of 2006 compared to $9.7 million in the prior year quarter. Adjusted EBITDA for the fiscal quarter from the Company's core operations was $15.6 million compared to $9.3 million in the prior year, an increase of $6.3 million. Net income was $4.5 million for the three months ended March 31, 2006 compared to $0.9 million for the prior year quarter, an increase of $3.6 million. Higher product margins and lower interest expense contributed to the increase, which was partially offset by $1.8 million of reorganization costs.
3Q06 vs. 3Q05 - Revenue and adjusted EBITDA generated from MTBE sales were $40.4 million and $(2.1) million, respectively, for the three months ended March 2006 and $47.1 million and $0.4 million for the three months ended March 2005. A reduction in the domestic demand for MTBE has reduced its profitability.
3Q06 vs. 2Q06 - Adjusted EBITDA was $13.5 million in the third fiscal quarter of 2006 compared to $13.4 million in the second fiscal quarter of 2006. The adjusted EBITDA in the second fiscal quarter of 2006 excludes the impact of a $21.1 million debt conversion fee associated with the conversion of $60 million 7 1/4% Senior Secured Convertible Notes to shares of the Company's common stock. 3Q06 adjusted EBITDA was aided by the capitalization of one-time expenses related to the Huntsman acquisition. As a result, SG&A was reduced by $0.8 million in 3Q06 for acquisition costs previously expensed in 1Q06 and 2Q06. In addition, 2Q06 adjusted EBITDA was reduced by $4.9 million of operating costs associated with a planned maintenance turnaround project.
Fiscal third quarter adjusted EBITDA from the core business increased by $5.6 million from the fiscal 2006 second quarter, and adjusted EBITDA from the non-core business decreased by $5.5 million from the same period.
Liquidity and Capital Resources
At March 31, 2006, the Company had $17.4 million of cash and no outstanding borrowings on its $50 million revolving credit facility. Positive cash flow generated from operations during the fiscal year has sufficiently funded the cash requirement to convert the Senior Secured Convertible Notes to shares of the Company's common stock and capital spending. The Company's capital spending increased during the quarter to $12.7 million compared to $1.6 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 TPC Group LP. Headquartered in Houston, TX, TPC Group 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 http://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.
Tables to follow
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
2006 2005 2006 2005
Revenues $272.7 $216.0 $918.5 $635.5
Cost of goods sold 240.7 187.1 770.1 548.6
Gross profit 32.0 28.9 148.4 86.9
Operating costs 16.4 16.2 52.4 45.5
SG&A expense 2.6 2.6 11.3 7.9
Depreciation and amortization 3.6 3.5 10.5 10.1
Operating costs 22.6 22.3 74.2 63.5
Operating income 9.4 6.6 74.2 23.4
Other income (expense) --- (1.0) (20.9)* (0.9)
Interest expense 0.2 1.3 2.9 4.2
Income before reorganization
items and income tax
provision (benefit) 9.2 4.3 50.4 18.3
Reorganization costs 1.8 0.8 1.9 1.9
Income before income tax
provision (benefit) 7.4 3.5 48.5 16.4
Income tax provision (benefit) 2.9 2.6 24.7 7.2
Net income (loss) $4.5 $0.9 $23.8 $9.2
Earnings per share, basic $0.26 $0.09 $1.92 $0.92
Earnings per share,
fully diluted $0.25 $0.09 $1.36 $0.67
Weighted average shares,
basic (in millions) 16.8 10.0 12.4 10.0
Weighted average shares,
fully diluted (in millions) 17.8 18.2 17.5 17.0
* Included in this amount is a $21.1 million debt conversion fee associated with the conversion of $60 million 7 1/4% 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.
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 company'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 company; 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 Nine Months Ended
Dec. 31, March 31, March 31,
2005 2006 2005 2006 2005
Net income (loss) $(18.9) $4.5 $0.9 $23.8 $9.2
Plus:
Provisions (benefit)
for income taxes 1.1 2.9 2.6 24.7 7.2
Interest expense 1.3 0.2 1.3 2.9 4.2
Depreciation and
amortization 3.4 3.6 3.5 10.5 10.1
EBITDA $(13.1) $11.2 $8.3 $61.9 $30.7
Reorganization costs --- 1.8 0.8 1.9 1.9
Debt conversion fee 21.1 --- --- 21.1 ---
Non-cash change in
fair value of
derivatives 4.8 --- --- --- ---
Non-cash stock
compensation expense 0.6 0.5 0.6 1.7 0.6
Adjusted EBITDA $13.4 $13.5 $9.7 $86.6 $33.2
EBITDA information is presented in the earnings release because management believes it enhances investors and lenders understanding of the Company's financial performance.
Condensed Consolidated Balance Sheets
(Dollars in millions)
(unaudited)
March 31, 2006 June 30, 2005
Current Assets:
Cash and cash equivalents $17.4 $15.9
Accounts receivable 79.3 77.5
Inventories 48.1 40.4
Other current assets 11.8 11.0
Total current assets 156.6 144.8
Property, Plant & Equipment, net 170.9 151.9
Other Long-Term Assets 6.6 7.1
Total Assets $334.1 $303.8
Current Liabilities (excluding
note payable):
Accounts payable $75.5 $67.8
Accrued expenses 5.1 15.7
Other current liabilities 1.9 ---
Total current liabilities 82.5 83.5
Outstanding Debt:
Revolving Line of Credit --- ---
7.25% Senior Secured Convertible Notes --- 60.0
Note Payable - Financed Insurance Premiums 0.6 ---
Total Debt 0.6 60.0
Deferred Income Tax Liability 41.0 43.3
Shareholders' Equity 210.0 117.0
Total Liabilities and Shareholders'
Equity $334.1 $303.8
Condensed Consolidated Statements of Cash Flows
(Dollars in Millions)
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31
2006 2005 2006 2005
Net Cash Provided by
Operating Activities $11.0 $(6.7) $42.2 $9.9
Cash Flows Used in
Investing Activities (12.7) (1.6) (29.6) (4.6)
Net Cash Used In
Financing Activities (2.1) 8.3 (11.1) (5.5)
Net Increase (Dec) in Cash
and Cash Equivalents $(3.8) $--- $1.5 $(0.2)
Core vs. Non-Core Adjusted EBITDA
(Dollars in Millions)
(Unaudited)
Three Months Ended Nine Months Ended
Dec. 31, March 31, March 31
2005 2006 2005 2006 2005
Core Business $10.0 $15.6 $9.3 $41.8 $31.0
Non-Core Business 3.4 (2.1) 0.4 44.8 2.2
Total $13.4 $13.5 $9.7 $86.6 $33.2
Contact: Ruth Dreessen
Email: ruth.dreessen@txpetrochem.com
Phone: 713-627-7474
Contact: McCall Keyser
Email: mccall.keyser@txpetrochem.com
Phone: 713-627-7474
