KRATON PERFORMANCE POLYMERS, INC.
BARCLAY’S HIGH YIELD BOND AND SYNDICATED LOAN CONFERENCE
MAY 21, 2013
Forward-Looking Statement Disclaimer
This presentation includes forward-looking statements that reflect our plans, beliefs, expectations and current views
with respect to, among other things, future events and financial performance. Forward-looking statements are often
characterized by the use of words such as “outlook,” “believes,” “estimates,” “expects,” “projects,” “may,”
“intends,” “plans” or “anticipates,” or by discussions of strategy, plans or intentions, including statements regarding
anticipated stability in feedstock prices and related market demand and other effects; the anticipated costs, capital
structure of, and prospects for our joint venture with FPCC, and statements regarding selected 2013 P&L estimates.
All forward-looking statements in this presentation are made based on management's current expectations and
estimates, which involve known and unknown risks, uncertainties and other important factors that could cause actual
results to differ materially from those expressed in forward-looking statements. These risks and uncertainties are
more fully described in in our latest Annual Report on Form 10-K, including but not limited to “Part I, Item 1A. Risk
Factors” and “Part I, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”
therein, and in our other filings with the Securities and Exchange Commission, and include, but are not limited to,
risks related to: conditions in the global economy and capital markets; declines in raw material costs; limitations in
the availability of raw materials we need to produce our products in the amounts or at the prices necessary for us to
effectively and profitably operate our business; competition in our end-use markets, from other producers of SBCs and
from producers of products that can be substituted for our products; our investment in the joint venture with FPCC;
and other risks, factors and uncertainties described in this press release and our other reports and documents; and
other factors of which we are currently unaware or deem immaterial. Readers are cautioned not to place undue
reliance on forward-looking statements. Forward-looking statements speak only as of the date they are made, and we
assume no obligation to update such information in light of new information or future events.
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GAAP Disclaimer
This presentation includes the use of both GAAP and non-GAAP financial measures. The non-GAAP financial measures are EBITDA, Adjusted
EBITDA, Adjusted EBITDA at ECRC, Gross Profit at ECRC and Adjusted Net Income (or earnings per share). A table included in this
presentation reconciles each of these non-GAAP financial measures with the most directly comparable GAAP financial measure.
We consider these non-GAAP financial measures important supplemental measures of our performance and believe they are frequently used
by investors, securities analysts and other interested parties in the evaluation of our performance and/or that of other companies in our
industry, including period-to-period comparisons. Further, management uses these measures to evaluate operating performance, and our
executive compensation plan bases incentive compensation payments on our Adjusted EBITDA and Adjusted EBITDA at ECRC performance,
along with other factors.
These non-GAAP financial measures have limitations as analytical tools and in some cases can vary substantially from other measures of our
performance. You should not consider them in isolation, or as a substitute for analysis of our results under GAAP in the United States. For
EBIDTA, these limitations include: EBITDA does not reflect our cash expenditures, or future requirements for capital expenditures or
contractual commitments; EBITDA does not reflect changes in, or cash requirements for, our working capital needs; EBITDA does not reflect
the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; although
depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future,
and EBITDA does not reflect any cash requirements for such replacements; EBITDA calculations under the terms of our debt agreements may
vary from EBITDA presented herein, and our presentation of EBITDA herein is not for purposes of assessing compliance or non-compliance
with financial covenants under our debt agreements; and other companies in our industry may calculate EBITDA differently from how we do,
limiting its usefulness as a comparative measure. As an analytical tool, Adjusted EBITDA is subject to all the limitations applicable to EBITDA.
In addition, we prepare Adjusted EBITDA by adjusting EBITDA to eliminate the impact of a number of items we do not consider indicative of
our on-going performance, but you should be aware that in the future we may incur expenses similar to the adjustments in this presentation.
Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items. As an analytical tool, Adjusted EBITDA at ECRC is subject to all the limitations applicable to EBITDA, as well as the following
limitations: due to volatility in raw material prices, Adjusted EBITDA at ECRC may, and often does, vary substantially from EBITDA and other
performance measures, including net income calculated in accordance with GAAP; and Adjusted EBITDA at ECRC may, and often will, vary
significantly from EBITDA calculations under the terms of our debt agreements and should not be used for assessing compliance or noncompliance with financial covenants under our credit agreement. Because of these and other limitations, EBITDA, Adjusted EBITDA and ECRC
Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. As a
measure of our performance, Gross Profit at ECRC is limited because it often varies substantially from gross profit calculated in accordance
with GAAP due to volatility in raw material prices. Finally, we prepare Adjusted Net Income by adjusting net income to eliminate the impact
of a number of items we do not consider indicative of our on-going performance, but you should be aware that in the future we may incur
expenses similar to the adjustments in this presentation. Our presentation of Adjusted Net Income should not be construed as an inference
that our future results will be unaffected by unusual or non-recurring items.
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Overview


Kraton is the global leader in the styrenic block copolymer (SBC) industry

Original inventor of SBC chemistry 50 years ago, with leading market share positions in the
end use markets we serve

Designer and manufacturer of custom SBC and compound solutions with the broadest
portfolio offering in the industry

Only SBC producer with true worldwide manufacturing footprint (U.S., Europe, South
America, Asia Pacific)

Unmatched commitment to customer service and R&D, with over 1,450 patents granted or
applied for
Kraton is transforming its portfolio through its focus on recently commercialized products
and on its pipeline of technologies under commercialization
2012 Revenue by End-Use
CariflexTM
Advanced
Materials
7%
36%
27%
Adhesives,
Sealants and
Coatings
2012 Revenue by Geography
Europe, Middle
East & Africa
Americas
39%
40%
21%
30%
Paving and
Roofing
Asia Pacific
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What Are SBC’s ?
Primary Raw
Materials
Styrene
Products
Business
Consumer
Product/Enduse
Un-Hydrogenated
Paving & Roofing
Polymer-modified
asphalt
SBC’s
SBS, SIS
Hydrogenated
Butadiene
SBC’s
SEBS, SEPS
Isoprene Rubber
(IR)
& IR Latex
Isoprene
Compounds
SBC’s, PP + Additives
Adhesives,
Sealants,
and Coatings
Tapes, labels, nonwoven adhesives and
industrial adhesives
Advanced
Materials
Soft Skin, Personal
care, IV bags,
Medical tubing
CariflexTM
Medical stoppers,
Cold seal adhesives,
Surgical gloves,
Condoms
Kraton is the only provider of these value components across all
products touching a wide array of applications
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Leading Market Share Positions
Advanced Materials
CariflexTM
Adhesives, Sealants,
and Coatings
Paving and Roofing
2012 Revenue(1)
27%
7%
36%
30%
2017 Revenue(2)
34%
13%
32%
21%
Growth(3)
8%
28%
6%
6%
Market Position
2011(2)
#1
#1
#1
#1
Kraton Market
Share Relative to
#2 Competitor (4)
2.2x
N/A
2.2x
1.4x
Source: Management estimates.
(1) Based on 2012 sales of $1,423 million.
(2) Management estimate (based on revenue).
(3) Industry volume growth from 2001 to 2011, Cariflex growth rate refers to Kraton’s Isoprene Rubber (“IR”) and Isoprene Rubber Latex (“IRL”) growth from
2005-2011.
(4) Management’s estimates based upon 2011 sales.
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Kraton’s Strategic Focus – Portfolio Shift



HSBC and USBC portfolio
 Expand sales of recently introduced innovation
grades
 Accelerate commercialization of new
technologies
 Build upon pipeline of products nearing
commercialization
CariflexTM
 Grow revenue through expansion of customer
base and focus on new applications
Geographic expansion
 Emerging markets
 Asia Pacific
6/30/2012 TTM
2017 Revenue Goal (2)
25%
43%
Standard
13%
Differentiated
Innovation
49%
38%
Contribution Margin(1) Goal Relative to TTM Period
1.0x
Standard
32%
Differentiated
Innovation
6/30/12 TTM
1.5x
2017
(1) Contribution margin is Sales Revenue less raw materials (Estimated Current Replacement Cost basis) and
other variable costs, before excluding plant fixed and other fixed costs.
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(2) Includes NEXAR and Oilfield applications
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Kraton Growth Strategies
Existing
Strategy
Paving & Roofing
Upgrade the product portfolio through commercialization of
specially-designed molecules such as HiMA
Bill Davis
VP, Paving & Roofing
Adhesives, Sealants &
Coatings
Deepen strategic partnerships with multi-national customers through
new, innovative product offerings and continuous portfolio
enrichment with HSBC grades
Mark Siebert
VP, Adhesives,
Sealants & Coatings
Advanced Materials
Continue differentiation by expanding the HSBC portfolio, to
capitalize on key market trends such as flexible PVC replacement
Michael Oberkirch
VP, Advanced
Materials
CariflexTM
Grow revenue through continued conversion from natural rubber to
Cariflex IR latex and further diversification of Cariflex solid IR sales
into new markets
Richard Brennan
VP, IR Products
New
Opportunity
NEXARTM
Leverage the NEXAR platform to expand addressable markets beyond
textiles into water processing and HVAC applications
Jim Dieter
VP, Market
Development
Oilfield
Commercialize a pioneering synthetic cement solution with
significant market potential
Jim Dieter
VP, Market
Development
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Drivers of Growth - CariflexTM Isoprene Rubber and
Isoprene Rubber Latex
Features & Benefits






Anionic polymerization
No proteins
Low residual metals
Low gel content (~0 %)
No odor
Excellent transparency due to high purity
Natural
Rubber
Ziegler-Natta IR
CariflexTM IR
Cariflex IR applications




Medical stoppers
Septum for IV bags
Needle shields
Medical shields
Cariflex IR Latex applications





Surgical gloves
Condoms
Catheter balloons
Cold seal adhesives
Self-sticking medical bandages
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Drivers of Growth - PVC Alternatives
Cost effective PVC Alternatives for medical, wire
& cable, soft touch and coated fabric
applications.
Features & Benefits








Halogen free
Phthalate plasticizer free
Soft, flexible
Easy processability
Recyclability
Compatible with polypropylene
Clean, colorless, odorless
Strong USP VI & FDA Position
Markets & Application




Medical
 IV bags, medical tubing
Wire & Cable
 Consumer electronics power cord components
(UL, VDE, PSE)
Auto dashboards and interior panels
Coated fabrics (seating applications)
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Drivers of Growth - NexarTM Polymers
Features & Benefits
High water flux and transport rates
 Mechanical strength & ion selectivity
 Chlorine resistance and low electrical
resistance
 Mechanical strength both wet and dry; good
dimensional stability in wet and dry conditions
 Stable under ambient conditions- no special
packaging required
 Can be applied using current commercial
coating and laminating lines

Applications



Sports and outdoor apparel and gear, military
and industrial uniforms and medical and
geotextile applications
Energy recovery ventilation (ERV) systems
Water filtration
 Water management systems
 Electro dialysis and electro dialysis reversal
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Drivers of Growth - KratonTM Polymers in Oilfield
Applications
Viscosity Modification of Drilling Fluids



Shear thinning behavior (low shear
rheology)
High temperature stability
Inherent compatibility with base oils
High Temperature/Pressure Fluid Loss
Additive


High temperature stability
Low API fluid loss
Modification of Cement


Flexibility, reduction of modulus
Swelling in the presence of hydrocarbon
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Drivers of Growth - Highly-Modified Asphalt (HiMA)
Definition




~7.5% modification vs. 3% typical
Superior rutting and cracking resistance
20 – 40% reduction in pavement thickness
Low viscosity polymer modified binder
Applications





Base and binder courses
Thin lift wearing course
Micro surfacing
Chip seals
Bridge decking
Recent Successes



I-40 Project in Oklahoma
Parana, Brazil (Highway PR 092)
Bloomington, Michigan
Geographic Opportunities



Russia
South America
Canada
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Asia HSBC Project
 50/50 joint venture with Formosa
Petrochemical Corporation (FPCC)
 Joint venture agreements with FPCC
signed February 27th
 Joint venture now consolidated into
Kraton financials for reporting
purposes
Plant location
 Initial capital contributions made by
Kraton and FPCC during Q1’13
 Working on detailed engineering and
financing structure
 Expect mechanical completion by mid2015, plant operation second half of
2015
 Kraton will maintain marketing rights for
plant offtake
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Cash Flow
Twelve Months ended
March 31, 2013
KRA
Standalone Consolidated
EBITDA(1)
Cash interest
Cash taxes
Working capital & other items
Operating cash flow
Investing activities
Beginning cash
Free cash flow
JV funding from financing
Other financing activities
Currency
Ending cash
(1)
81,509
(35,902)
(18,020)
42,054
69,641
(76,902)
233,476
(7,261)
(15,174)
(104,138)
(1,736)
105,167
81,357
(35,902)
(18,020)
42,048
69,483
(76,902)
233,476
(7,419)
15,174
(104,138)
(975)
136,118
Year Ended
December 31, 2012
KRA
Standalone Consolidated
96,972
(29,303)
(19,306)
97,970
146,333
(69,944)
88,579
76,389
53,401
4,797
223,166
96,972
(29,303)
(19,306)
97,970
146,333
(69,944)
88,579
76,389
53,401
4,797
223,166
See reconciliation of net income (loss) to EBITDA in the attached appendix
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Capital Structure
$
Revolver
Term Loan
Unsecured notes
Total debt
Net debt
105,167
30,951
136,118
$
40,000
351,104
391,104
$
254,986
223,166
223,166
96,875
351,142
448,017
$
$400
224,851
$350
$300
49.7%
47.0%
40.7%
50%
42.2%
39.1% 37.2%
37.9%
37.0%
45%
37.2%
32.7%
31.6%
32.1%
31.4%
$250
$200
$150
$100
(1)
40%
35%
30%
25%
20%
15%
10%
Net Debt to Cap
Kraton cash
J.V. cash
Total cash
(1)
Net Debt and Net Debt to Net
Capitalization(1)
December 31, 2012
Net Debt
March 31, 2013
5%
0%
At March 31, 2013, includes $31.0 million of cash in the Kraton
Formosa Polymers Corporation joint venture that is not available
to the company.



In the first quarter 2013, Kraton entered into an aggregate $250 million of revolving credit facilities
 $150 million U.S. facility, $100 million Dutch facility, subject to borrowing base
 Secured by receivables and inventory
 Minimal covenants
Paid off former term loan through cash on hand and draw under new revolver
Lower funded cost than former senior bank facility
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Current Capital Structure
US $ in millions
As of March 31, 2013
Cash (1)
Amount
$
Maturity
Rate
Cumulative Debt/
TTM Adj. EBITDA (2)
Debt Ratings:
S&P / Moody’s
105.2
Debt:
BB- / Ba3
Corporate Family Rating
Senior Unsecured Notes
$
351.1
Mar 2019
6.75%
3.55x
ABL Revolver ($250 million)
$
40.0
Mar 2018
L + 150-200
0.40x
Total Debt
$
391.1
3.95x
Net Debt
$
285.9
2.89x
Total Shareholder’s Equity
$
498.0
Total Capitalization @ 12/31/2012
$
783.9
B+ / B1
(1) Excludes $31.0 million of cash attributable to the Kraton Formosa Polymers Corporation joint venture.
(2) TTM Adjusted EBITDA is Trailing Twelve Month GAAP EBITDA adjusted for non-recurring and unusual items. See reconciliation of GAAP EBITDA
to Adjusted EBITDA, please refer to our Forms 10-Q and 10-K.
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KRATON PERFORMANCE POLYMERS, INC.
BARCLAY’S HIGH YIELD BOND AND SYNDICATED LOAN CONFERENCE
MAY 21, 2013
Reconciliation of Net Income (Loss) to EBITDA
$ in Thousands
Net income (loss)
Add:
Kraton Standalone
Twelve months ended:
March 31, 2013
Consolidated
Twelve months ended:
March 31, 2013
Twelve months ended:
December 31, 2012
$
$
$
Interest expense, net
Income tax expense
Depreciation and amortization expenses
EBITDA
(36,216)
35,902
18,020
63,803
$
81,509
(36,368)
35,902
18,020
63,803
$
81,357
(16,191)
29,303
19,306
64,554
$
96,972
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Reconciliation of Net Debt and Net Debt to
Net Capitalization
($ Millions)
Q1'10
Q2'10
Q3'10
Q4'10
Q1'11
Q2'11
Q3'11
Q4'11
Q1'12
Q2'12
Q3’12
Q4’12
Q1’13
Total Debt
$384
$384
$383
$383
$400
$396
$394
$393
$492
$490
$448
$448
$391
Less:
Cash(1)
$12
$39
$72
$93
$36
$67
$46
$89
$233
$228
$202
$223
$105
Net Debt
$372
$344
$311
$290
$364
$329
$349
$304
$258
$262
$246
$225
$286
Equity
(1)
$377
$388
$454
$452
$499
$556
$571
$518
$546
$539
$532
$492
$483
Add: Net Debt
$372
$344
$311
$290
$364
$329
$349
$304
$258
$262
$246
$225
$286
$750
$732
$765
$742
$863
$885
$920
$822
$805
$801
$778
$717
$769
49.7%
47.0%
40.7%
39.1%
42.2%
37.2%
37.9%
37.0%
32.1%
32.7%
31.6%
31.4%
37.2%
Net Capitalization
Net Debt to Net
Capitalization
(1) Excludes JV cash and noncontrolling interest beginning in Q1 2013