Kraton Corporation

Good morning and welcome to the Creaton Corporation third quarter 2020 earnings conference call. My name is Kirby. I'll be your conference facilitator for today. At this time, all participants are in listen-only mode. Following the company's prepared remarks, there will be a question and answer period. If you would like to ask a question, please press star 1 on your touchstone phone. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I will now turn the call over to Mr. Gene Shields, Director of Investor Relations.

Thank you, Kirby. Good morning and welcome to the Craton Corporation third quarter 2020 earnings call. With me on the call this morning are Kevin Fogarty, Craton's president and chief executive officer, and Atanas Atanasoff, Craton's executive vice president and chief financial officer. A copy of the third quarter news release and the related presentation material we will review this morning is available in the investor relations section of our website. And before we review the results for the third quarter of 2020, I'd like to draw your attention to the disclaimers on forward-looking information and the use of non-GAAP measures included in our presentation this morning and in yesterday's earnings press release. During the call, we may make certain comments that are not statements of historical fact and thus constitute forward-looking statements. Investors are cautioned that there are risks, uncertainties, and other factors that may cause Craton's actual performance to be significantly different from the expectations stated or implied by any forward-looking statements we make today. Our forward-looking statements speak only as of the date they're made, and we have no obligation to update such statements in the future. Our business outlook is subject to a number of risk factors, as the format of this morning's presentation does not permit a full discussion of these risk factors. Please refer to our Forms 10-K, 10-Q, and other regulatory filings available in the investor relations section of our website. Regarding the use of non-GAAP financial measures, a reconciliation of each non-GAAP financial measure we use to its most comparable GAAP financial measure was provided in yesterday's earnings press release and in the appendix of the presentation we reviewed this morning. Following our prepared remarks, we'll open a line for questions. I'll now turn the call over to Kevin Fogarty. Kevin. Thanks, Gene. Good morning, everyone.

For the third quarter overall, we continue to effectively manage our business despite COVID-19, having an ongoing effect on global demand fundamentals. During the quarter, we benefited once again from our diverse and market exposure and specifically from improved demand fundamentals in delivering solid operational and financial results. With COVID-19 continuing to have an impact across the globe, the health and safety of our employees, customers and the communities in which we operate remained our top priority. During the quarter, many of our employees continue to work remotely, while our manufacturing facilities operated safely and efficiently, including undergoing planned maintenance and turnaround activities we referenced in our second quarter earnings call. In addition, we did not experience any significant disruption in logistics or in our supply chain within the quarter. From a high level, improved demand in the third quarter in conjunction with the benefit of our diverse end market exposure contributed to solid volume growth in both our polymer and chemical segments. Geographically, demand in China and broader Asia continued to improve in the third quarter, And we saw sequential improvement in North America for consumer durables medical and automotive applications in our specialty polymers business. And our performance products business, we saw solid demand and paving and roofing applications. While in our chemical segment we experienced a notable sequential rebound in demand across all major product lines, with the exception of oil field where weaker demand conditions continued. In the third quarter, as experienced over the course of the year, we have seen continued stability in unit margins in both our polymer and chemical segments. However, as mentioned in the third quarter, we did incur costs associated with the timing of maintenance and turnaround activities, and our financial results also reflect the fixed cost absorption impact associated with the inventory drawdown, both of which we anticipated in our second quarter earnings calls. Cash generation was favorable in the third quarter, providing for a $75.5 million reduction in consolidated debt and a $25.8 million reduction in consolidated net debt, excluding the effect of foreign currency. Moreover, we have maintained ample liquidity with $205 million of availability on our ABL facility and approximately $63 million of cash at quarter end. In terms of execution on key priorities, while we continue to reduce outstanding debt during the third quarter, debt reduction itself remains a primary objective. We expect further cash generation in the fourth quarter that should provide for additional debt reduction this year as we continue to target a consolidated net debt ratio of approximately three turns. During the quarter, we also maintain our focus on operational efficiency, including the implementation of various cost reduction initiatives that we believe will result in approximately $20 million of run rate cost savings by year's end. And perhaps most importantly, with an eye to the future, we continue to position Craton to benefit from organic growth opportunities, particularly as we work to leverage our sustainable innovation portfolio, including our recently introduced Revolution family of rosin ester formulations, our circular polymer grades, and most recently, our biaxium sulfonated polymers. I'll provide an update on these platforms later in the call. For now, at this point, I'm going to turn the call over to our Chief Financial Officer, Athanas Atanasoff, who will provide more specifics on our financial results for the third quarter. Athanas.