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Texas Petrochemicals Reports Fiscal 2007 Second Quarter Result
HOUSTON, Feb. 12 /PRNewswire-FirstCall/ -- TPC Group, Inc., (OTC: TXPI.PK - News; "TPI") today reported revenues of $369.2 million for the second quarter of fiscal year 2007 compared to $301.1 million reported in the comparable prior year quarter. The 23 percent increase primarily reflects the positive impact of the Port Neches operations acquired in June 2006 being partially offset by slightly lower base core business revenues and significantly lower non-core MTBE revenues. Adjusted EBITDA for the quarter was $7.2 million compared to $12.9 million for the prior year quarter. Second quarter revenues and operating results were negatively impacted by operational issues at the Houston plant, which the Company believes have been resolved.
Charlie Shaver, President and CEO, said, "Second quarter results were not at the level we would have liked due to an unprecedented series of operational problems at our Houston plant. However, it clearly exemplified the value of Port Neches as it provided us with operational flexibility in dealing with the chain of events that significantly impeded the Houston plant's performance. Notwithstanding the operational issues, we continued our focus on achieving the synergies from the Port Neches acquisition and were able to stay on track with the integration of our two production facilities.
Fiscal Second Quarter 2007 Highlights:
-- Second quarter revenues were up 23 percent from $301.1 million in the
prior year period to $369.2 million. The overall increase reflects the
contribution from the June 2006 acquisition of the Port Neches C-4
operation, which was partially offset by the negative impact of
production outages at the Houston site and significantly lower non-core
MTBE sales.
-- Second quarter Adjusted EBITDA (earnings before interest, taxes,
depreciation and amortization) was $7.2 million compared to $12.9
million in the prior year quarter. The lower Adjusted EBITDA is the
result of the Port Neches contribution and a modest improvement in base
core business results being more than offset by a $9.8 million decline
in non-core MTBE Adjusted EBITDA. (Note: Adjusted EBITDA is a non-
GAAP measure and is reconciled to net income later in this release).
-- Second quarter net loss of $3.6 million, or $0.21 per diluted share,
compares to a net loss of $18.9 million, or $1.83 per diluted share,
for the second quarter of fiscal 2006. The current quarter net loss
was driven by operating losses from the non-core MTBE business. The
prior year net loss was driven by a $21.1 charge related to the
conversion of the Company's $60 million 7.25 percent senior secured
convertible notes to shares of the Company's common stock.
-- During the quarter, the Company worked through an unprecedented series
of production issues at the Houston site, which resulted in outages for
various lengths of time but was able to leverage the flexibility
provided by the Port Neches acquisition to significantly mitigate the
negative impact of these events.
-- During the second quarter, the Company continued to commit significant
effort and resources to the integration of the Port Neches and Houston
operations and remains on track to achieve the identified synergies as
originally planned.
-- During the quarter, the Company generated $19.8 million in cash from
operating activities and incurred capital expenditures of $15.3 million
as it continued to invest in the capacity, efficiency and safety of its
production facilities.
-- In response to market conditions and seasonal demand patterns in the
second quarter, the Company continued the suspension of MTBE production
at the Port Neches site and produced MTBE at its Houston site at a
significantly reduced level.
Results of Operations
Revenues 2Q07 vs. 2Q06 - The Company generated revenues of $369.2 million for the three months ended December 31, 2006 compared to revenues of $301.1 million for the comparable prior year period, an increase of $68.1 million, or 23 percent. The overall increase in revenue reflects a full quarter contribution made by the Port Neches operation acquired on June 27, 2006. Revenues from the core operations were up $110.1 million; however, revenues from the non-core MTBE business declined $42.0 million, or 62 percent. The increase in core operations reflects incremental volume contributed by the Port Neches acquisition, partially offset by lower volume for the base core business due substantially to production outages at the Houston plant during the quarter. The significant decline in non-core MTBE sales reflects extremely soft market conditions in the current year quarter. The Company continues to view MTBE as non-core business.
Adjusted EBITDA 2Q07 vs. 2Q06 - Adjusted EBITDA for the second quarter was $7.2 million compared to $12.9 million for the prior year quarter. Adjusted EBITDA from the Company's core operations was $13.6 million versus $9.5 million in the prior year quarter. The core business improvement primarily reflects incremental volumes from the Port Neches acquisition. Operating expense, excluding the impact of Port Neches, was comparable to the prior year as expenses related to the Houston plant outages offset the turnaround expense in the prior year quarter. Second quarter Adjusted EBITDA from the non-core MTBE business was a negative $6.4 million compared to a positive $3.4 million in the prior year quarter. The combination of weak pricing for MTBE and very high raw material methanol costs precluded positive margins on MTBE; consequently, the Company is currently limiting the production of MTBE for merchant sales.
Adjusted EBITDA 2Q07 vs. 1Q07 - Second quarter Adjusted EBITDA of $7.2 million was down substantially from fiscal first quarter of $29.1 million. The overall $21.9 million decline consists of lower core business Adjusted EBITDA of $13.2 million and a decline for the non-core MTBE business of $8.7 million. The lower core business results primarily reflect the impact of the production outages at the Houston plant. The deterioration in the MTBE results was due to weak market conditions in the second quarter.
Liquidity and Capital Resources
At December 31, 2006 the Company had $37.3 million of cash compared to $34.4 million at September 30, 2006 and $20.3 million at June 30, 2006. The Company had no borrowings against its $115 million revolving credit facility during the first half of fiscal 2007. The improved liquidity during the first half of the year reflects positive net cash flows provided by operating activities of $45.6 million, net cash used in investing activities of $28.7 million and net cash provided by financing activities of $0.1 million. The Company did not make any quarterly federal income tax payments during the first half of the year and does not anticipate paying federal income taxes related to fiscal 2007, primarily as a result of tax deductible depreciation on the Port Neches assets.
The Company's investment in net working capital at December 31, 2006 was slightly favorable versus June 30, 2006. Current liabilities at both December 31 and June 30 include the $70 million contingent obligation to Huntsman Chemical associated with the purchase of the Port Neches operation and the crude C-4 feedstock supply agreement for the facility.
Capital spending during the fiscal second quarter and first half of the year was $15.6 million and $29.1 million, respectively, as the Company continues to invest in capacity, efficiency and safety of its production facilities. The major capital projects in fiscal 2007 include replacement of boiler equipment at the Houston plant and the new propylene derivatives facility in Baytown, Texas.
Conference Call
The Company has scheduled a conference call for 10:00 a.m. Eastern Time (9:00 a.m. Central) on Monday, February 12, 2007. To listen to the call, dial (303) 262-2211 at least 10 minutes prior to the start time and ask for the Texas Petrochemical call, or access it live over the Internet by logging on to the Company's website at www.txpetrochem.com. For those unable to listen to the live call, a replay will be available through Monday, February 26, 2007 by calling (303) 590-3000 using pass code 11083272. Also, an archive of the webcast will be available shortly after the call on the Company's website for approximately 90 days.
Headquartered in Houston, Texas, TPC Group Inc. is a premier chemical company with more than $1.5 billion in annual sales. The Company provides quality C-4 chemical products and services to both local and global customers. The Company has manufacturing facilities in the industrial corridor adjacent to the Houston Ship Channel, Baytown and Port Neches, Texas and operates a product terminal in Lake Charles, Louisiana. For more information, visit the Company's website 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.
Investor Relations
Contact: Robert Whitlow
Email: robert.whitlow@txpetrochem.com
Phone: 713-627-7474
Contact: Ruth Dreessen
Email: ruth.dreessen@txpetrochem.com
Phone: 713-627-7474
Media Relations
Contact: Sara Cronin
Email: sara.cronin@txpetrochem.com
Phone: 713-475-7778
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
2006 2005 2006 2005
Revenues $369.2 $301.1 $874.1 $649.6
Cost of sales 327.5 262.5 767.0 533.3
Gross profit 41.7 38.6 107.1 116.3
Operating expenses 30.8 21.0 60.1 36.0
SG&A expenses 6.0 5.6 14.9 9.8
Depreciation and amortization 6.1 3.4 12.2 6.9
42.9 30.0 87.2 52.7
Operating income (1.2) 8.6 19.9 63.6
Interest expense, net 4.6 0.8 9.4 1.9
Other income (expense), net (1) (2) 0.2 (25.6) 0.5 (20.5)
Income before income taxes (5.6) (17.8) 11.0 41.2
Income tax expense (2.0) 1.1 3.8 21.8
Net income $(3.6) $(18.9) $7.2 $19.4
Earnings per share - basic $(0.21) $(1.83) $0.42 $1.90
Earnings per share - fully
diluted (3) $(0.21) $(1.83) $0.40 $1.22
Weighted average shares
- basic 17.2 10.3 17.2 10.2
Weighted average shares
- fully diluted (3) 17.2 10.3 18.2 17.0
(1) Prior year quarter and year-to-date amounts include debt conversion
fee of $21.1 related to the conversion of $60 million 7.25% Senior
Secured Convertible Notes to shares of the Company's common stock.
(2) Prior year quarter amount also includes a charge of $4.8 reflecting
a change in fair value of derivatives.
(3) As a result of net losses for the current and prior year quarters,
inclusion of incremental common stock equivalents in the average
shares outstanding calculation would have had an anti-dilutive impact
on earnings per share (i.e. would result in a lower loss per share);
therefore, the basic and fully diluted average number of shares
outstanding and earnings per share for these periods are the same.
Note: Certain prior year items have been reclassified to conform with
current year presentation.
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA
(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 statements of operations, balance sheets, or statements 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, the Company has provided below a reconciliation of the Adjusted EBITDA (non-GAAP financial measure) to net income (most directly comparable GAAP financial measure.
Three Months Ended Six Months Ended
September 30, December 31, December 31,
2006 2006 2005 2006 2005
Net income $10.9 $(3.6) $(18.9) $7.2 $19.4
Plus:
Income tax provision 5.8 (2.0) 1.1 3.8 21.8
Interest expense, net 4.8 4.6 0.8 9.4 1.9
Depreciation and
amortization 6.2 6.1 3.4 12.2 6.9
EBITDA 27.7 5.1 (13.6) 32.6 50.0
Debt conversion fee - - 21.1 - 21.1
Stock-based compensation
expense 1.4 2.1 0.6 3.7 1.1
Non-cash gain on fair
value of derivatives - - 4.8 - -
Adjusted EBITDA $29.1 $7.2 $12.9 $36.3 $72.2
EBITDA information is presented in the earnings release because management
believes it enhances investors and lenders understanding of the Company's
financial performance.
CONSOLIDATED BALANCE SHEETS
(in millions)
(Unaudited)
December 31, 2006 June 30, 2006
Current assets:
Cash and cash equivalents $37.3 $20.3
Accounts receivable 128.1 176.5
Inventories 57.0 72.5
Other current assets 27.4 23.6
Total current assets 249.8 292.9
Property, plant and equipment, net 441.0 420.1
Other long-term assets 16.8 18.5
Total assets $707.6 $731.5
Current liabilities:
Accounts payable $122.5 $169.2
Accrued liabilities 86.5 80.9
Current portion of long-term debt 5.9 5.9
Total current liabilities 214.9 256.0
Long-term debt 206.9 207.9
Deferred income taxes 43.5 35.6
Shareholders' equity 242.3 232.0
Total liabilities and
shareholders' equity $707.6 $731.5
Note: Certain prior year items have been reclassified to conform with
current year presentation.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
2006 2005 2006 2005
Net cash provided by operating
activities $19.8 $11.9 $45.6 $35.7
Net cash used in investing
activities (15.3) (9.9) (28.7) (16.7)
Net cash provided by (used in)
financing activities (1.6) (15.0) 0.1 (12.7)
Net increase (decrease) in cash and
equivalents $2.9 $(13.0) $17.0 $6.3
CORE VS. NON-CORE ADJUSTED EBITDA
(in millions)
(Unaudited)
Three Months Ended Six Months Ended
September 30, December 31, December 31,
2006 2006 2005 2006 2005
Core Business $26.8 $13.6 $9.5 $40.4 $25.4
Non-Core Business 2.3 (6.4) 3.4 (4.1) 46.8
Total $29.1 $7.2 $12.9 $36.3 $72.2
