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Texas Petrochemicals Reports Fiscal 2009 Third Quarter Results

^{Published on 2009-05-14 04:09:51, Last Modified on 2009-11-02 12:00:44 - Market Wire}
 

Texas Petrochemicals Reports Fiscal 2009 Third Quarter Results

Third quarter results reflect sequential improvement from second quarter despite continuing weak market conditions

HOUSTON, May 14 /PRNewswire-FirstCall/ -- Texas Petrochemicals, Inc., (OTC:[ TXPI.PK ] - [ News ]; "TPI") today reported revenues of $162.6 million for the third quarter of fiscal 2009, a decrease of approximately $300.0 million, or 65%, compared to $462.0 million reported in last year's third quarter. The overall decrease in revenues reflects a combined impact of significantly lower sales volumes and average selling prices driven by the economic recession that has led to substantial deterioration of commodity prices and customer demand.

Charlie Shaver, President and CEO, commented, "Our fiscal third quarter results reflect the continuation of significantly depressed market conditions. Although overall customer demand continued to be weak, we experienced incremental improvement in volumes during the quarter as the effects of prior destocking efforts by customers waned. We also gained stability in pricing during the quarter, allowing for much improved variable margins compared to the prior quarter. Our crude C4 supply increased significantly during the quarter as our suppliers restarted facilities and North America ethylene operating rates moved back above 70%.

"Our team will continue to take the timely and decisive actions necessary to ensure adequate liquidity and operational flexibility as we navigate through these challenging markets. We are committed to maintain the highest standards of operations and safety and continue to fund necessary capital and expense in that arena. We have deferred discretionary investments until appropriate and remain focused on our working capital levels. As our customers and suppliers have limited visibility into their markets at this point, we are staying in close communication and adjusting to their changing requirements."

Fiscal Third Quarter Highlights:

• On April 30 we issued a press release announcing plans to enhance our profitability and cash flow by $25 million annually by implementing a combination of cost reductions and profit improvement initiatives during the remainder of calendar year 2009 in order to offset lower contract feedstock and sales volume in the current economic environment. These actions include the idling of certain crude C4 processing capability in both Houston and Port Neches.
• In February and March we saw incremental improvement in demand and stability in the selling prices of our products. As a result, all production facilities temporarily idled in second quarter have been restarted and operated for most of the third quarter.
• Operating cash flow was a positive $33.4 million, reflecting our strong focus on working capital. This reduced our borrowings under our revolver by over $27 million.
• Crude C4 supply increased significantly during the quarter with contract crude moving back up to 85% of normal by the end of the quarter.
• We completed a major scheduled five-year turnaround on our butadiene extraction unit in Houston.
• Capital Spending was $3.8 million, reflecting the completion of our major initiatives and a return to our baseline capital requirements.
• In response to more pressing priorities, we have temporarily deferred our SEC registration process to later in calendar 2009.
• We continue to pursue our claim under our business interruption insurance coverage to recover a portion of the substantial loss we incurred from the aftermath of Hurricane Ike.

Results of Operations

The financial statements and segment information provided at the end of this press release should be referred to when reading the discussion of our third quarter and year-to-date operating results provided below.

Third Quarter of Fiscal 2009 versus Third Quarter of Fiscal 2008

Revenues

Fiscal 2009 third quarter revenues were $162.6 million compared to comparable prior year quarter revenues of $462.0 million. The 65% decline in revenues reflects the negative impacts of 29% lower total sales volume as well as significantly lower average selling prices. On a segment basis, the overall decrease in revenues reflects lower revenues for the C4 Processing and Performance Products segments of $218.7 million and $82.3 million, respectively, slightly offset by higher revenues for the Other segment of $1.6 million.

Adjusted EBITDA

Fiscal 2009 third quarter Adjusted EBITDA of $5.4 million compares to Adjusted EBITDA of $19.5 million for the comparable prior year quarter. The primary components of the overall decrease of $14.1 million are lower gross profit of $24.7 million, partially offset by lower operating, general and administrative expenses of $5.9 million and a $4.7 million recovery of prior years unauthorized freight payments. On a segment basis, the overall decrease reflects declines in the C4 Processing, Performance Products and Other segments of $4.6 million, $9.0 million and $0.1 million, respectively. Corporate and other expenses were higher by $0.4 million.

Third Quarter of Fiscal 2009 versus Second Quarter of Fiscal 2009

Revenues

Total revenues for the third quarter of fiscal 2009 of $162.6 million were down 60% from fiscal second quarter revenues of $410.0 million, reflecting 23% lower total sales volumes and substantially lower average selling prices across the board. The overall decrease, on a segment basis, reflects lower revenues for the C4 Processing, Performance Products and Other operating segments of $194.6 million, $44.2 million and $8.6 million, respectively. The previous quarter revenues were also negatively impacted by the global economic crisis as well as the aftermath of the September hurricanes.

Adjusted EBITDA

Total Adjusted EBITDA for the third quarter of fiscal 2009 was positive $5.4 million versus negative $17.1 million for the second quarter. The overall improvement of $22.5 million consists primarily of higher gross profit of $1.3 million, lower operating expenses of $3.4 million, lower general and administrative and other expenses of $1.5 million, a $4.7 million recovery of prior years unauthorized freight payments and the absence of a lower-of-cost-or-market adjustment, which was $11.6 million in the previous quarter. On a segment basis, the overall increase consists of improvements of $21.5 million and $4.2 million for the C4 Processing and Other segments, respectively, partially offset by lower Adjusted EBITDA for the Performance Products segment of $4.6 million. Corporate and other expenses were lower by $1.4 million.

Adjusted EBITDA for the previous quarter reflects substantial variable margin erosion resulting from the rapid and significant decline in selling prices of our products over the course of the quarter, especially in the C4 Processing segment. In addition to the margin erosion realized on product sales, previous quarter results include a lower-of-cost-or-market adjustment of $11.6 million to reflect the devaluation of our inventory at the end of the quarter. Although demand and pricing for our products in the fiscal third quarter remained severely depressed, which negatively impacted our sales volumes and revenues, selling prices of our products and costs of our raw materials were more stable, resulting in substantial improvement in per unit variable margins compared to the immediately preceding quarter.

Liquidity and Capital Resources

Operating cash flows for the fiscal third quarter were positive $33.4 million, reflecting negative net income that was more than offset by depreciation and other net non-cash expenses, substantial reduction in working capital and a federal tax refund of $3.7 million. Capital expenditures were $3.8 million for the quarter, reflecting the completion of our major capital investment program and tight control over fiscal 2009 spending to conserve cash.

As of March 31, 2009, our revolver borrowings were $19.0 million, down from $46.5 million on December 31, 2008. We are confident that available borrowings, together with cash flow from operations, will provide us with sufficient liquidity to meet our anticipated working capital and operational requirements.

Conference Call

The Company has scheduled a conference call for 3:00 p.m. Eastern Time (2:00 p.m. Central) on Thursday, May 14, 2009. To listen to the call, dial (480) 629-9722 at least 10 minutes prior to the start time and ask for the Texas Petrochemicals call, or access it live over the Internet by logging on to the Company's website at [ http://www.txpetrochem.com ]. For those unable to listen to the live call, a replay will be available through Thursday, May 28, 2009 by calling (303) 590-3030 using pass code 4062410#. Also, an archive of the webcast will be available shortly after the call on the Company's website for approximately 90 days.

To supplement the comments we make during the conference call, we have posted some slides on our website on the Presentations & Webcasts page of the Investor Center section.

Headquartered in Houston, Texas, Texas Petrochemicals Inc. sells products into a wide range of performance, specialty and intermediate markets, including synthetic rubber, fuel additives, plastics and detergents. The Company has manufacturing facilities in the industrial corridor adjacent to the Houston Ship Channel, Port Neches and Baytown, Texas and operates a product terminal in 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 strategic alternatives or 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: 713-627-7474 - tables to follow - 

 TEXAS PETROCHEMICALS, INC. CONSOLIDATED BALANCE SHEETS (in millions) March 31, December 31, June 30, 2009 2008 2008 ---- ---- ---- Unaudited Unaudited ASSETS Current assets Cash and cash equivalents $0.4 $0.6 $0.6 Accounts receivable - trade 77.3 72.9 200.5 Inventories 40.2 44.6 102.5 Other current assets 23.5 26.2 28.5 ---- ---- ---- Total current assets 141.4 144.3 332.1 Property, plant and equipment, net 528.3 536.2 546.0 Investment in limited partnership 2.8 3.0 2.4 Intangible assets, net 6.0 6.0 4.4 Other assets, net 23.5 21.9 20.4 ---- ---- ---- Total assets $702.0 $711.4 $905.3 ====== ====== ====== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable - trade $67.4 $36.0 $218.6 Accrued liabilities 19.3 28.3 28.5 Current portion of long-term debt 3.8 5.5 2.7 --- --- --- Total current liabilities 90.5 69.8 249.8 Long-term debt 289.5 317.7 294.4 Deferred income taxes 51.4 49.5 61.6 ---- ---- ---- Total liabilities 431.4 437.0 605.8 Stockholders' equity 270.6 274.4 299.5 ----- ----- ----- Total liabilities and stockholders' equity $702.0 $711.4 $905.3 ====== ====== ====== TEXAS PETROCHEMICALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in millions, except per share amounts) Three Months Ended Nine Months Ended March 31, December 31, March 31, ------------ ------------ ----------- 2009 2008 2008 2009 2008 ---- ---- ---- ---- ---- Revenues $162.6 $462.0 $410.0 $1,116.0 $1,458.0 Cost of sales 127.0 401.7 375.7 974.5 1,271.0 ----- ----- ----- ----- ------- Gross profit 35.6 60.3 34.3 141.5 187.0 Operating expenses 29.4 35.6 32.8 99.1 97.6 General and administrative expenses 7.3 7.0 9.0 25.3 27.7 Depreciation and amortization 10.7 9.4 10.6 31.4 25.9 Loss on sale of assets - - - - 1.1 Lower-of-cost-or- market adjustment - - 11.6 21.0 - Unauthorized freight payments (4.7) - - (4.7) 0.5 ---- --- --- ---- --- Income (loss) from operations (7.1) 8.3 (29.7) (30.6) 34.2 Other (income) expense Interest expense 3.9 4.0 5.2 13.2 14.7 Interest income - - - - (0.2) Unrealized (gain) loss on derivatives (1.3) (0.9) 5.0 4.0 0.2 Other, net (0.2) (0.2) (0.5) (1.1) (1.0) ---- ---- ---- ---- ---- Income (loss) before income taxes (9.5) 5.4 (39.4) (46.7) 20.5 Income tax (benefit) expense (4.2) 1.9 (12.7) (16.1) 7.7 ---- --- ----- ----- --- Net income (loss) $(5.3) $3.5 $(26.7) $(30.6) $12.8 ===== ==== ====== ====== ===== Earnings per share: Basic $(0.30) $0.20 $(1.51) $(1.73) $0.73 Diluted $(0.30) $0.19 $(1.51) $(1.73) $0.71 Weighted average shares outstanding: Basic 17.7 17.6 17.7 17.7 17.6 Diluted 17.7 18.0 17.7 17.7 18.1 TEXAS PETROCHEMICALS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in millions) Three Months Ended Nine Months Ended March 31, December 31, March 31, ------------ ------------ ----------- 2009 2008 2008 2009 2008 ---- ---- ---- ---- ---- Cash flows from (used for) operating activities $33.4 $(22.3) $(16.8) $21.6 $19.1 ----- ------ ------ ----- ----- Cash flows from (used for) investing activities Capital expenditures (3.8) (29.8) (3.4) (15.1) (69.8) Purchase of business assets - - - - (70.0) --- --- --- --- ----- (3.8) (29.8) (3.4) (15.1) (139.8) Cash flows from (used for) financing activities Proceeds from term loan borrowings - - - - 70.0 Repayments on term loans (0.7) (0.7) (0.7) (2.1) (1.9) Net proceeds from (payments on) revolving credit facility borrowings (27.5) 43.4 22.2 (2.8) 43.4 Other financing activities cash flows (1.6) (2.1) (1.4) (1.8) 0.8 ---- ---- ---- ---- --- (29.8) 40.6 20.1 (6.7) 112.3 Increase (decrease) in cash and cash equivalents (0.2) (11.5) (0.1) (0.2) (8.4) Cash and cash equivalents at beginning of period 0.6 12.6 0.7 0.6 9.5 --- ---- --- --- --- Cash and cash equivalents at end of period $0.4 $1.1 $0.6 $0.4 $1.1 ==== ==== ==== ==== ==== TEXAS PETROCHEMICALS, INC. BUSINESS SEGMENT INFORMATION (Unaudited) (in millions) Three Months Ended Nine Months Ended March 31, December 31, March 31, ------------ ------------ ----------- 2009 2008 2008 2009 2008 ---- ---- ---- ---- ---- Sales volumes (lbs) C4 Processing 456.9 645.6 548.8 1,505.6 2,191.4 Performance Products 115.0 202.6 184.0 464.3 566.2 MTBE (1) - - - - 172.6 Other (2) 33.8 9.0 51.0 96.4 9.0 ---- --- ---- ---- --- 605.7 857.2 783.8 2,066.3 2,939.2 ===== ===== ===== ======= ======= Revenues C4 Processing $109.2 $327.9 $303.8 $818.3 $1,052.4 Performance Products 43.5 125.8 87.7 259.6 323.1 MTBE (1) - - - - 66.1 Other (2) 9.9 8.3 18.5 38.1 16.4 --- --- ---- ---- ---- $162.6 $462.0 $410.0 $1,116.0 $1,458.0 ====== ====== ====== ======== ======== Cost of sales (3) C4 Processing $84.8 $291.5 $286.3 $729.0 $934.2 Performance Products 33.2 102.9 70.0 207.5 263.4 MTBE (1) - - - - 59.2 Other (2) 9.0 7.3 19.4 38.0 14.2 --- --- ---- ---- ---- $127.0 $401.7 $375.7 $974.5 $1,271.0 ====== ====== ====== ====== ======== Adjusted EBITDA C4 Processing $8.1 $12.7 $(13.4) $10.7 $50.5 Performance Products 3.4 12.4 8.0 26.1 32.7 MTBE (1) - - - - 6.2 Other (2) (0.5) (0.4) (4.7) (10.7) (0.5) Corporate (5.6) (5.2) (7.0) (19.5) (21.9) ---- ---- ---- ----- ----- $5.4 $19.5 $(17.1) $6.6 $67.0 ==== ===== ====== ==== ===== (1) As reported in the above table, the MTBE segment represents MTBE produced by our Houston dehydrogenation units. In conjunction with the start-up of our isobutylene processing unit in late first quarter of fiscal 2008, the dehydrogenation units were idled and all MTBE produced from those units was sold by the end of second quarter of fiscal 2008. Beginning with third quarter of fiscal 2008, MTBE production from crude C4 isobutylene is not significant and related revenues and operating results are included in the Other segment. (2) The Other segment included MTBE production and sales beginning with third quarter of fiscal 2008. Prior to the third quarter of fiscal 2008, the Other category included only production and sales of steam and excess electricity. (3) Excludes depreciation and amortization and operating expenses. 

 TEXAS PETROCHEMICALS, INC. RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME (Unaudited) (in millions) 

Adjusted EBITDA, a non-GAAP financial measure, is presented and discussed in this earnings release because management believes it enhances understanding by investors and lenders of the Company's financial performance. Adjusted EBITDA is the primary performance measurement used by senior management and our Board of Directors to evaluate operating results and to allocate capital resources between our business segments.

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. Provided below is a reconciliation of Adjusted EBITDA (non-GAAP financial measure) to net income (most directly comparable GAAP financial measure).

 Three Months Nine Months Ended Ended March December March 31, 31, 31, ------- --------- ----------- 2009 2008 2008 2009 2008 ---- ---- ---- ---- ---- Adjusted EBITDA C4 processing $8.1 $12.7 $(13.4) $10.7 $50.5 Performance products 3.4 12.4 8.0 26.1 32.7 MTBE - - - - 6.2 Other (0.5) (0.4) (4.7) (10.7) (0.5) Corporate (5.6) (5.2) (7.0) (19.5) (21.9) Reconciliation Income taxes 4.2 (1.9) 12.7 16.1 (7.7) Interest expense, net (3.9) (4.0) (5.2) (13.2) (14.5) Depreciation and amortization (10.7) (9.4) (10.6) (31.3) (25.9) Loss on sale of assets - - - - (1.1) Non-cash stock-based compensation (1.6) (1.6) (1.5) (4.8) (4.8) Unrealized gain (loss) on derivatives 1.3 0.9 (5.0) (4.0) (0.2) --- --- ---- ---- ---- Net income (loss) $(5.3) $3.5 $(26.7) $(30.6) $12.8 ===== ==== ====== ====== =====