Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Kraton Performance Polymers Inc  (KRA)
Q4 2018 Earnings Conference Call
Feb. 28, 2019, 9:00 a.m. ET

Contents:

Prepared Remarks:

Operator

Good morning, and welcome to the Kraton Corporation Fourth Quarter 2018 Earnings Conference Call. My name is Jovi, and I will be your conference facilitator. At this time, all participants are in a listen-only mode. Following the company's prepared remarks, there will be a question-and-answer period. (Operator Instructions) 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 Shiels, Director of Investor Relations.

Gene Shiels -- Director of Investor Relations

Thank you, Jovi. Good morning, and welcome to the Kraton Corporation fourth quarter 2018 earnings call. With me on the call this morning are Kevin Fogarty, Kraton's President and Chief Executive Officer; and Chris Russell, Kraton's Vice President, Chief Accounting Officer and Interim Chief Financial Officer.

A copy of our fourth quarter news release and the related presentation material we'll review this morning is available in the Investor Relations section on our website.

Before we review the fourth quarter and full-year 2018 results, I'll draw your attention to the disclaimers on forward-looking information and the use of non-GAAP measures included in our presentation and in yesterday's 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 Kraton's actual performance to be significantly different from the expectations stated or implied by any forward-looking statements we may make today. Our forward-looking statements speak only as of the date they are 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.

With regard to the use of non-GAAP financial measures, a reconciliation of each used non-GAAP financial measure to its most comparable GAAP financial measure was provided in yesterday's earnings release and is included in the presentation we will review this morning.

Following our prepared remarks, we'll open the line for your questions.

I'll now turn the call over to Kevin Fogarty.

Kevin Fogarty -- President and Chief Executive Officer

Thanks, Gene; and good morning, everyone. Before we review our fourth quarter results, I want to first acknowledge the two important initiatives we announced last week that underscore our commitment to unlock value for the benefit of our shareholders. Specifically, we are evaluating strategic alternatives for our Cariflex business, including a possible sale. As it means to realize an appropriate valuation for what we believe to be a truly unique and Specialty business. And, secondly, our Board has approved a $50 million share repurchase authorization. The rationale for these two undertakings are standing on our belief at the intrinsic value of our Specialty businesses is not fairly reflected in today's current market valuation. I'll come back to these two initiatives later on our call and I want to ensure that they are appreciated within the context of the broader longer-term value creation strategies under way here at Kraton.

Now turning to the fourth quarter and full-year results, our fourth quarter was largely in line with our expectations. Our Chemical segment delivered favorable results in the fourth quarter, despite disruption at our Panama City, Florida site resulting from the impact of Hurricane Michael. Sales volume growth and improved margins contributed to adjusted EBITDA growth of nearly 18% compared to the year ago quarter. We believe this minimal theory into 2019 with good trends in both our Performance Chemicals business and our Tires business and overall stability in our Adhesive business.

Regarding Hurricane Michael and the impact on Panama City, Chris will walk you through financial details, but I'm pleased to say that at Panama City our CST capacity will be fully restored by the end of this week, at which time our Panama City site will be back to 100% operational capacity, an achievement that can only be attributed to the hard work and dedication of our employees and this is especially true considering the level of damage we experienced at Panama City just a little over four months ago.

Looking at our Polymer segment in the fourth quarter of 2018, we saw a strong rebound in our Cariflex business with sales volume up 18% compared to the fourth quarter of 2017 when Cariflex sales were impacted, while we've resolved certain processing issues our customers were experiencing with materials from our newly deployed Direct Connect capacity at Paulinia.

Overall margins for the Polymer segment were consistent with our long-term expectation as evidenced by adjusted gross profit for the segment of over $1,000 per ton, both for the quarter and for the full-year of 2018. However, as anticipated, our fourth quarter results were affected by the production disruption at our Wesseling Germany plant caused by low water levels on the Rhine River, which impacted product availability in our Performance Products business.

We also experienced continued weaker sales of SIS into global adhesive markets, softer HSBC demand, particularly in China and North America automotive applications, and higher costs predominantly associated with transportation logistics. As a result, fourth quarter 2018 adjusted EBITDA for the Polymer segment was down 13% compared to the fourth quarter of 2017.

Given that the improvement in our Chemical segment adjusted EBITDA was largely offset by weaker Polymer segment results, consolidated adjusted EBITDA for the fourth quarter of 2018 of $85.1 million was essentially flat relative to the fourth quarter of 2017.

On a full-year basis, we've reported 2018 consolidated adjusted EBITDA of $378 million. Chemical segment adjusted EBITDA for the full-year of 2018 of $163 million was up 8% compared to 2017, driven by modestly higher sales volume, despite the negative effect of Hurricane Michael in the fourth quarter and the year-long trend of improving pricing for TOFA and TOFA derivatives as well as other high-value product streams, including sales into our Tire markets.

Polymer segment adjusted EBITDA for 2018 was $215 million, down 4%, principally due to the impact of production challenges in the second half of 2018, lower sales volume into non-core paving markets, China, North American Automobile or Automotive Applications and higher costs including, again, transportation logistics.

Cash generation was favorable in 2018 and during the year, we've reduced consolidated net debt by $76 million, net of foreign currency benefit, exceeding our most recent guidance for the full-year consolidated net debt reduction of $50 million to $60 million, and bringing consolidated leverage down to 3.9 times. Had we not incurred $53 million of transaction costs and call premium associated with the opportunistic refinancing of our 10.5% notes, the reduction in net debt would have been closer to a $125 million, again net of foreign currency benefit.

In 2019, debt reduction will remain a priority and we expect to reduce consolidated net debt by another $170 million to $190 million, excluding the effect of foreign currency and the impact of purchases under our share repurchase authorization, thereby making significant progress toward our targeted consolidated net debt leverage ratio of 3.0 times.

At this time, I'm going to halt, turn the call over to our Interim Chief Financial Officer, Chris Russell, for a more in-depth review of the financial results. Over to you, Chris.

Christopher Russell -- Vice President, Chief Accounting Officer and Interim Chief Financial Officer

Thank you, Kevin; and good morning, everyone. I will begin my remarks on Slide 5 with a review of the Polymer segment financial results. Adjusted EBITDA for the Polymer segment in the fourth quarter was $44 million or 16% of revenue as compared to $51 million or 18% of revenue in the fourth quarter of 2017. The decline in our 2018 fourth quarter adjusted EBITDA resulted from slowing global demand, particularly in China and to a lesser extent lower sales in the non-core paving markets as well as the supply disruptions at our Wesseling site. We also experienced higher operating costs, including freight and logistics, all of which we mentioned during the third quarter earnings call.

Volumes in the fourth quarter of 2018 declined by 8%, predominantly in our Performance Products business, due to lower paving sales in non-core markets and the supply disruptions at our Wesseling site. Our HSBC volumes were down 11% when compared to the fourth quarter of 2017, driven by weakness in consumer demand in Asia as a result of the ongoing trade dispute between the US and China and lower sales in the North American automotive applications.

On a positive note, with the Direct Connect technology issues behind us, we are pleased to see meaningful growth returned to our Cariflex product group. Our Cariflex business reported 18% volume growth in the fourth quarter of 2018, driven by strong market demand for our latex applications, a trend we expect to continue into 2019.

Overall, unit margins in the fourth quarter of 2018 were relatively flat when compared to the fourth quarter of 2017, despite modest inflation in monomer pricing. Our unit margins remain in line with our long-term expectation as evidenced by an adjusted gross profit per ton in excess of $1,000.

Similar to the third quarter, we continued to experience higher freight and logistics cost coming from a shortage of US truck drivers and a consolidation of ocean freight carriers, a trend which is negatively impacting most industries.

Full-year 2018 Polymer segment adjusted EBITDA was $215 million or 18% of revenue versus $223 million or 19% of revenue for the full-year 2017. The decline was primarily from the issues we discussed with you during our third quarter earnings call, namely volume decline in paving applications in non-core markets, the unplanned outages and higher operating cost, especially freight and logistics, which I mentioned earlier. Furthermore, the supply disruption at our Wessling site impacted volumes in our USBC business and we did see softening demand in Asia. Offsetting these challenges was full-year volume growth in our Cariflex product group of 8%.

Despite the volume declines in our USBC and HSBC product groups, execution of our Price Right strategy contributed to higher full-year unit margins across all product groups. The higher unit margins are evidenced by the achievement of a full-year adjusted gross profit per ton in excess of $1,000.

With respect to the cost reset initiatives, we are pleased to report that all necessary actions required to achieve the $70 million of benefit have been substantially completed. As a result, we expect to be in an annualized run rate of $70 million by the end of the first quarter of 2019. This is a significant milestone achieved through the dedication and focus of our teams.

Moving to the Chemical segment on Slide 6. As a reminder, when we provided our revised guidance on October 25 of $380 million of adjusted EBITDA, we were unable, at that time, to estimate the operational and financial impacts of Hurricane Michael. As we noted in our press release on December 21st, the CTO portion of our Panama City facility was fully restored in November and the CST refining capacity was restored to approximately 60% in December. With the restoration of full CST capacity by the end of this week, our Panama City site will be fully operational for both CTO and CST.

From a financial standpoint, during the fourth quarter of 2018, we incurred $12.3 million of direct cost, which were included in our cost of goods sold, but which have not been reimbursed under our insurance policy. Given this, these costs have been added back for purposes of adjusted EBITDA.

With respect to lost sales in the quarter, we estimate the associated margin to be $8.9 million and in the quarter we recognized $8.9 million of reimbursement under our business interruption policy, which is included in operating income and therefore reflected in adjusted EBITDA. We currently estimate the replacement cost associated with damaged equipment to be in a range of $5 million to $7 million and we have not yet been reimbursed under our property and casualty policy for these replacement costs above our deductible.

In addition, during the fourth quarter, we've recognized an impairment loss related to the damaged equipment with a net book value of $1.3 million. We currently anticipate filing our initial claim with our insurance carrier during the first half of 2019, and we expect reimbursement for the direct cost incurred following the submission of this claim. While the reimbursement of these direct costs will be reflected as a gain in our GAAP financial statements in the period received, this gain will be excluded from our adjusted EBITDA in that same period.

Given our CST refining capacity was only recently fully restored, our first quarter 2019 results will be negatively impacted by the applicable margin associated with lost revenue. As opposed to the fourth quarter in which we've received offsetting reimbursement for large margin, we expect to be reimbursed for these first quarter loss margins later in the year. We estimate this margin impact to be approximately $5 million to $7 million.

Adjusted EBITDA for the Chemical segment in the fourth quarter was $41 million or 23% of revenue, 21% when including an estimated amount of lost revenue as a result of Hurricane Michael. This is compared to $35 million or 19% of revenue in the fourth quarter of 2017. This $6 million increase in adjusted EBITDA was driven by improved unit margins as a result of the successful implementation of our Price Right strategy, which contributed to higher prices for our TOFA, TOFA derivatives and Specialty Tires applications.

Despite the continuation of excess supply coming from the Asia C5 hydrocarbon based resin market, we continue to see stable adhesives demand, a trend we expect to continue into 2019.

Our fourth quarter 2018 adjusted EBITDA also benefited from lower planned maintenance, partially offset by higher operating cost and the same logistics and transportation inflation, I mentioned, impacting our Polymer segment.

Full-year 2018 Chemical segment adjusted EBITDA was $163 million or 21% of revenue, 20% when including an estimated amount of lost revenue as a result of Hurricane Michael. This is compared to $151 million or 20% of revenue for the full-year of 2017. These results were driven by the continued execution of our Price Right strategy and to a lesser extent to volume growth. The higher prices drove margin expansion for TOFA, TOFA derivatives and Specialty Tire applications, albeit partially offset by higher operating costs including planned maintenance and turnarounds at a number of our refining sites as well as the aforementioned freight and logistics.

Looking now at our consolidated results for the fourth quarter and full-year of 2018 on Slide 7. Adjusted EBITDA in the fourth quarter of 2018 amounted to $85 million or 19% of revenue, 18% when including an estimated amount of lost revenue as a result of Hurricane Michael. This was essentially flat when compared to the like period in 2017. As I mentioned in the segment reviews, we continue to execute on our Price Right strategy, thus the quarter-over-quarter results reflect healthy unit margins in both of our segments, albeit offset by supply disruptions at our Wesseling site and slowing consumer demand in Asia, both of which impacted our Polymer segment.

Full-year 2018 adjusted EBITDA is $378 million with an adjusted EBITDA margin of 19%, unaffected when including an estimated amount of lost revenue as a result of Hurricane Michael. This is compared to $374 million of adjusted EBITDA or 19% of revenue for the full-year 2017. Adjusted earnings per share was $0.67 per share in the fourth quarter of 2018, unchanged from the fourth quarter of 2017, while full-year adjusted EPS improved $0.31 to $3.16 per share, largely due to a $39 million reduction in interest expense, driven by the actions we've taken to improve the capital structure.

Now moving to Slide 8. I'm pleased to report another solid year of cash flow generation and net debt reduction. Our consolidated net debt amounted to $1.48 billion at December 31, 2018, representing a reduction of $113 million as compared to December 31, 2017. Excluding a $38 million favorable foreign currency effect, our consolidated net debt was reduced by $76 million, which is $16 million better than the high-end of our previous guidance of $50 million to $60 million.

As a reminder, the $76 million reduction in the year, net of FX, also includes $53 million of cost associated with the successful refinancing of our 10.5% senior notes. I'll note that now as we have a substantial indebtedness denominated in the euro, it may be the case that we have periodic fluctuations in our consolidated net debt due to currency effects. For purposes of full-year guidance around debt reduction, we exclude the impact of FX.

Since closing the Arizona Chemical acquisition, our focus on net debt reduction has resulted in a 1.5 turn improvement in our net debt leverage ratio and at December 31, 2018, our net debt leverage ratio was a sub-4 turns. We continue to have confidence in the cash flow profile of Kraton and are committed to further debt reductions, while prudently investing for future growth.

You will note in our 10-K, which will be filed later today, that on December 6, 2018, we commenced a repurchase program for up to $20 million of our 7% senior notes, which at the time we are trading at a significant discount to par. As of today, we have repurchased 5.3 million of these shares at an average discount of par of 93.3%.

Before I turn the call back to Kevin, I want to spend some time on Slide 9, speaking to our current outlook for 2019. We currently anticipate 2019 adjusted EBITDA will be in a range of $370 million to $390 million. We expect 2019 to be a dynamic year with adjusted EBITDA influenced by a number of both Kraton specific and broader macroeconomic factors.

For example, in our Chemical segment, we expect continued margin improvement, particularly in our TOFA and TOFA derivatives, driven by the recent pricing improvements in the vegetable oil markets. Similarly, in our Polymer segment, we expect a continuation of margin expansion in our Cariflex business and significant volume growth in our USBC business, particularly in paving applications in emerging markets.

While there are a number of tailwinds, which should benefit 2019, the headwinds noted on Slide 9 create both known and unknown financial uncertainty. The largest being associated with a major lubricant additive customer that has notified us of their intent to implement an inventory management program with an estimated impact of $17 million. We also expect ongoing pressure in transportation and logistics cost with a full year 2019 impact being higher than 2018, particularly given our expectations for volume growth.

We are working on a number of mitigation efforts through a combination of logistics optimization and pricing initiatives. However, these factors coupled with the continuing uncertainty coming from slowing growth in Asia, particularly in China, and the fact that 2019 is a significant turnaround year for Kraton with planned maintenance costs expected to increase $7 million relative to 2018. These headwinds put significant pressure on our 2019 adjusted EBITDA.

I'll close with a reminder that 2019 guidance for specific line items such as non-cash compensation, interest expense, tax rate and the like are included in the appendix to the earnings material reviewed this morning.

I'll now turn the call back over to Kevin.

Kevin Fogarty -- President and Chief Executive Officer

Okay. Thank you, Chris. Now while we did not achieve our financial objectives that we established for Kraton early in 2018, we entered 2019 well positioned to benefit from our clear strategic focus to pursue growth and improve operational and financial results. We have good momentum in our Chemical segment and despite pockets of demand softness in our Polymer business, primarily in China and Greater Asia, our broader outlook for demand in North America and Europe remains positive.

Regarding our outlook, for our Polymer segment, on Slide 10, in 2019, we intend to focus on organic growth, driven by innovation, building upon the foundational work to reposition our Polymer business that is now complete. As a reminder, in 2015, we outlined a strategy for our legacy Polymer business designed to deliver a step change increase in profitability and to position the business for the future.

Elements of the strategy included specific initiatives designed to reset the cost structure of our manufacturing footprint. In addition, we outline objectives related to our innovation programs that we believe will contribute to our portfolio shift toward higher value products.

As of year-end 2018, I'm pleased to say that we have successfully completed all projects contributing to the $70 million of run rate cost reductions and, importantly, at an all-in cost of $48 million, which is well below our initial estimated cost to achieve of $93 million. We completed our state-of-the-art 30 kiloton HSBC plant in Mailiao, Taiwan, as you know, and during 2018 product qualifications and grade transitions continued. And we entered 2018 with a significant increase in production from that new plant. That production ramp is expected to continue into 2019.

We also completed the 18 kiloton USBC expansion in Berre, France, allowing us to further leverage very attractive local costs for raw materials.

And, lastly, but certainly not least, we completed the Direct Connect Cariflex process in Brazil, demonstrating the effectiveness of the new manufacturing process. Regarding our focus on innovation, in 2015, we set a goal to increase the revenue contribution from differentiated product grades from 57% of the portfolio in 2015 to 61% by the end of 2018. Our efforts have been successful. As of year-end 2018, a 63% of Polymer revenue was derived from differentiated product rates, a testament to our innovation progress.

Through market growth, the benefits of cost reductions and our innovation efforts, we've grown adjusted EBITDA for the Polymer segment from $167 million in 2015 to $215 million in 2018. And this is despite the impact of operational headwinds we discussed in our third quarter call amounting to approximately $10 million. More impressively, we've improved adjusted gross profit from $842 per ton in 2014 to over $1,000 per ton in 2018, and we expanded our adjusted EBITDA margin from 16% in 2015 to nearly 18% in 2018.

In 2019, we intend to build upon the improved cost structure and profitability, continuing our focus on organic growth through innovation. In addition, our capital budget in 2019 include certain investments to specifically improve our overall operational performance to prevent or mitigate the impacts experienced in 2018.

In our third quarter call, we also discussed our plan to arrange alternative truck and rail logistics at our Wesseling site in Germany as a means to mitigate the operational impact of low water levels on the Rhine River. Those alternatives are now evaluated and should be available if we see potential for future disruption at Wesseling. We are considering similar alternatives to provide raw material flexibility in Berre, France.

Likewise, in Belpre, Ohio, we have historically been reliant upon barges for the supply of key raw materials, such as butadiene. From time to time, high water levels on the Ohio River have disrupted barge access and raw material supply. The project is now under way at the Belpre site to expand rail access for raw materials, lessening the potential for operational disruption in the future and lowering shipping costs for critical raw materials.

Turning now to our Chemical segment on Slide 11. As you know, we acquired this business at the beginning of 2016. While 2018, marks the first full year of adjusted EBITDA growth during our ownership, we believe the business has substantial value to be realized through three main drivers. We expect global adhesive markets will return to historical levels of profitability, we project continued growth in existing markets resulting in increased utilization of our European refinery system, and, three, we expect to diversify our sales mix through realization of innovation-led growth initiatives deployed these past three years.

With regard to our Performance Chemicals business specifically, as we have discussed before, a significant amount of which is TOFA-based, contraction in oilfield drilling activity in 2016 contributed to excess market availability of TOFA. Although Kraton did not have a significant sales of TOFA based products into the oilfield markets at that time, overall supply surplus caused market pricing to collapse. With the rebound in drilling activity, TOFA pricing begin to improve in early 2017 and through 2018 we have seen improved pricing and margins for TOFA and TOFA derivatives.

We believe the outlook for TOFA is favorable and that pricing should also benefit from more recent increases in pricing for vegetable oils. In fact, TOFA margins, as expressed in terms of fundamental raw material margin, are back to pre-acquisition levels. Most recently, we announced the global price increase for tall oil fatty acids, effective March 1st, which further reflects our view of underlying positive momentum in these markets.

With respect to our adhesive business, in late 2016, pricing for rosin esters came under pressure due to excess hydrocarbon tackifier capacity that was added in Asia. As a reminder, our prices for rosin esters typically mirror trends of hydrocarbon-based tackifiers. While we were mindful of the significant capacity additions in the tackifier industry, we have projected, at the very least, that integrated producers of base hydrocarbons and derivative tackifiers would pass along underlying crude oil-based cost increases. In other words, we did not fully anticipate the willingness of Asian producers to price commodity tackifiers at levels that suggest, in many cases, negative cash margins as crude oil prices almost doubled, since dipping below $40 in late 2015.

Beginning in 2018, we saw stability in our adhesive business with modest improvements in rosin ester pricing being largely offset by higher feedstock cost. While we still believe a recovery margins in the broader tackifier markets and thus our rosin ester markets will occur, in the interim our strategies are clear. First, we intend to preserve our share by being market responsive with hydrocarbon-based tackifiers substitute pricing. Our customers consistently maintain, all else being equal, with respect to quality, performance and price. We will use Kraton's renewable rosin ester offerings.

Which leads to the second key component of our strategy, improving both quality and performance of our offerings. For example, we are developing a process to reduce sulfur contained in CTO and its precursor black liquor soap. If successfully commercialized, we believe this game changing advancement and product quality will offer our adhesive customers a cost competitive renewable solution to utilize Kraton's offerings in a much larger cross-section of the adhesive marketplace.

We also intend to continue to leverage the attractive growth prospects and specialty margin profile of our CST chain, both in primary fractions sales as well as derivatives. For example, we've recently completed an expansion of our tread enhancement agent plant in Niort, France. Our Tier 1 tire OEM customers utilize Kraton's offerings in their highly differentiated tread enhancement technologies used primarily in wet grip and reduced rolling resistance tire applications.

Our Chemical business remains a highly profitable enterprise with 20% EBITDA margins and impressive cash flow profile and we believe real growth prospects that should unlock further value for our shareholders, customers and the dedicated global teams charged with delivering this future.

Turning now to Slide 12, I believe all our key stakeholders appreciate that we fundamentally believe innovation plays a role and a vital one at Kraton in creating organic growth and realizing margin enhancement in both our Polymer and Chemical segments. Two years ago, we made a significant change in our innovation approach and, today, we are seeing the benefits, such as the portfolio shift we have achieved in our Polymer segment.

I've commented before that I believe our current innovation pipeline is the best I've seen in years. Our innovation focus is now more market-driven and we have reprioritized the platforms we are investing in working with fewer projects but placing more resources on projects that we feel the higher probability for near-term commercialization and thus meaningful market penetration potential.

Moreover, we are driving efficiency in our innovation processes and working to accelerate product development. A radical departure from the past, we have embraced an open innovation model in which we are leveraging expertise and capabilities of external research organizations, many of those based in India. This is helping us not only to significantly accelerate our innovation programs, but also explore novel chemistries and process technologies more cost effectively.

Let me share few thoughts on our overall R&D spend for 2018, which totaled $41 million split approximately 70% to our Polymer segment and 30% to our Chemical segment, and encompassing three main activities; product development, customer technical support and operational process improvements, which includes quality enhancement initiatives. We have found that housing these three essential competencies under a broader technical community leads to efficient knowledge sharing, career development and adoption of best practices.

Moreover, our approach allows our leadership flexibility to balance current timeline priorities such as seeking customer approvals of existing product grades being produced on new assets as in the case of Mailiao, Taiwan, with longer-term initiatives, specifically new product developments. Being a committed provider of specialty products and solutions and seeking to sharing the value we ultimately help create downstream requires industry leading technical service and support, which again we provide through our R&D organization.

Fundamentally, we believe our multi-dimensional approach to providing both internal and external customers' technical support, while maintaining our core growth commitment to develop new products and improving overall sales derived from innovation and differentiation is a true source of competitive advantage for Kraton.

As we look to the future, we must be also mindful of calibrating our growth plans and expectations with capacity availability. In other words, we can't expect to grow without having capacity underground to fuel it.

Beginning with our Cariflex business, which in 2018 saw return to more normal growth as the past two years were impacted by the significant pull forward of growth we benefited from -- in 2016 associated with the FDA ban on powdered latex natural rubber surgical gloves. We typically manage our supply capability as a global system, optimizing between our wholly owned facility in Paulinia, Brazil, which -- where we now employ the Direct Connect process and in Japan with our long-standing strategic tolling relationship. We strive to maximize Paulinia's output to fully capitalize on the economies of scale of the new Direct Connect process. While we presently have sufficient capacity to serve near-term growth, we must plan ahead to ensure we are never the constraint on our customers' ability to grow.

Fortunately, the reduced capital intensity of the Direct Connect process provides for compelling expansion economics. In 2019, we intend to commence planning for the next addition of capacity for Paulinia.

In our Performance Products business, we expect to see continued growth in global paving demand led by infrastructure spending and overall emerging markets, such as India. Therefore, as with Cariflex, we expect we will need additional capacity to serve this growth. Given the lead times required, planning is currently under way and we are fortunate that we have multiple options for consideration when critical factors such as capital cost, timing, feedstock availability, trade flows to name a few. You should expect to hear more about these plans in the coming quarters.

Now, turning to Slide 13. Fundamentally we believe Kraton remains well positioned for growth and continued margin expansion, which we expect to deliver through our focus on innovation. We've seen growth and significant margin improvement on our Polymer segment over the past three years and we expect this trend to continue. Again, this is precisely why we are now planning for capacity expansion. Similarly, the outlook for our Chemical segment is positive and we believe there is significant opportunity for margin expansion in growth, particularly with expected recovery in adhesive markets and a return to rosin ester profitability in line with historical norms.

We entered 2018 below 4 turns of leverage and we further expect to reduce consolidated net debt this year by $170 million to $190 million, again, net of the impact of foreign exchange and any activity under our share repurchase authorization. Debt reduction remains our primary focus and we expect to achieve our targeted consolidated net debt leverage ratio, irrespective any decision we ultimately take regarding the Cariflex business.

To conclude, we believe the intrinsic value of Kraton has not appropriately reflected in our market valuation and this brings us back to the two announcements we made last week. First, given our valuation, we believe in modest share repurchase program is in the best interest of our shareholders, particularly as we do not expect to detract from our primary goal of deleveraging.

Turning to our Cariflex business, by any definition, it is truly a specialty business. Having built the business over the past 10 years, we still relish the margin profile in the long-term growth opportunity it represents. As you've heard this morning, after one year respite following the 19% volume growth in 2016, our Cariflex volume was up 8% in 2018. Profitability for Cariflex has been enhanced even further by the success of our Direct Connect conversion. And so, for the Cariflex business, the valuation disconnect is particularly punitive. For this reason, we are evaluating strategic alternatives for the Cariflex business, including a possible sale as a means to secure a proper valuation for our shareholders. We look forward to updating you on our progress on all these fronts as we move through 2019.

With that, I'd be happy to open the call up for questions. Back to you, operator.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions) Our first question will come from the line of Jim Sheehan of SunTrust. Your line is now open.

James Sheehan -- SunTrust Robinson Humphrey, Inc. -- Analyst

Good morning. Thanks for taking my question. So could you give us your outlook for CTO cost in 2019, please?

Kevin Fogarty -- President and Chief Executive Officer

Hey, Jim. So I think that from a CTO cost perspective, I think you fundamentally appreciate that the costs are driven by really a combination of two factors, one is just underlying energy values, crude oil, natural gas and the like, and secondly, obviously, we have to recognize that there's a supply/demand fundamentals that we nest -- always be mindful of and I'd say that today as we look at the CTO markets, we'd say that the markets are pretty tight in terms of availability. Some of that availability, of course, is driven by just the uplift in the overall TOFA markets, that I spoke of, and to a lesser extent, I suppose, but still relevant, we have one major facility in the US, namely our neighbor in the Panama City that is still down or parts of the plant is still down as a result of Hurricane Michael.

James Sheehan -- SunTrust Robinson Humphrey, Inc. -- Analyst

Thank you. And on the Cariflex business, what do you see as the normalized growth rate for that? And what are the key drivers of that growth?

Kevin Fogarty -- President and Chief Executive Officer

You're talking about Cariflex?

James Sheehan -- SunTrust Robinson Humphrey, Inc. -- Analyst

Cariflex.

Kevin Fogarty -- President and Chief Executive Officer

Yes. So look, I mean, Cariflex, it's a fairly simple business proposition where we're replacing natural rubber in surgical glove and condom applications, primarily. The history of the business has been such that the replacement is a direct result of risk mitigation strategy, if you will, if not in any customer preference for some material, that's a synthetic does not carry the natural rubber containing proteins that can cause allergenic reactions but mimics the performance in terms of form fit and feel, tensile strength, and whatnot, that mimics natural rubber and we see that trend continue. In particular, as we look from 2019 and beyond, certainly the European market presents an opportune target market for our customers to continue to grow in, and the exact same value proposition exists that allow the business to penetrate into the US as rapidly as it did.

James Sheehan -- SunTrust Robinson Humphrey, Inc. -- Analyst

Okay. And on your modeling slide, you've got CapEx $110 million for 2019, do you see that moving higher in 2020 and beyond in line with these capacity expansion plans that you referenced?

Kevin Fogarty -- President and Chief Executive Officer

Well, I think that -- the one thing I wanted to make clear, one, we see obviously good growth prospects that would drive our capacity requirements. You have two things happening at the same time. some of the initiatives that we have been embarking on to bring our plants up to the reliability and performance that we expect that we've been embarking on since -- particularly in our Chemical business, we closed the deal in 2016. Those things will start to phase down, while at the same time we'll be introducing some of these capacity initiatives and without knowing exactly which initiatives particularly in our Performance Products business, we're going to pursue, it's possible that -- the CapEx could ramp-up a little bit over this base level that we're experiencing in 2019, but I think it's too early for us to say definitively.

James Sheehan -- SunTrust Robinson Humphrey, Inc. -- Analyst

Thank you.

Operator

Thank you. Our next question is from the line of Mike Sison of KeyBanc. Your lines now open.

Michael Sison -- KeyBanc Capital Markets, Inc. -- Analyst

Hi, guys. Hey, Kevin, when you think about the Chemical business, I mean margins there have clearly been very good for the last couple of years -- I mean are very good, but they've been steadily around 20% solid, definitely indicative of good specialty business, but what do you think needs to happen for EBITDA to grow and where do you think that EBITDA number should be over the next several years?

Kevin Fogarty -- President and Chief Executive Officer

Well, we've never veered from our view that the value-added offering we have should be reflective in the overall EBITDA margin in the business. But there's no question that, just like I said, there's really two elements to that that are kind of more in the immediate term, one is clearly a return to more normal margin profile for the adhesive business and again in order for it to improve you got to start with stability and that stability occurred in 2018. It's hard for us to predict exactly, because this is more behavioral than it is supply/demand on the part of the hydrocarbon space, but nevertheless, like all good markets, people can't continue to absorb these cost increases forever. So that's why our first element of our strategy must be to preserve our share against those hydrocarbon alternatives.

The second element clearly is the fact that we've got surplus capacity in our refining system in Europe and we expect it grow into that across all our product families in our Chemical business.

And then, lastly, perhaps a little bit more longer-term, but we're not just sitting back and waiting for those adhesive markets to return. We know that one key element of the overall offering we provide our customers has a significant relevant performance criteria that our customers would like to see us improve and that's reducing the amount of sulfur contained in our material and the effects it has on color and smell and that's exactly what we're working on.

Michael Sison -- KeyBanc Capital Markets, Inc. -- Analyst

Okay. And then in terms of a follow-up for Cariflex, it's been your best growth business I would imagine, one of your higher margin businesses, can you maybe walk us through how are you going to -- how you're going to think about monetizing that business? What type of value -- any -- what I kind of specifics do you think that business should provide?

Kevin Fogarty -- President and Chief Executive Officer

Well, as I said in my comments, Mike, and we certainly feel that we think that if you just think about Kraton's valuation today that nowhere near represents the underlying value of this Cariflex business and that's why I made the comment that that's particularly punitive for our shareholders. So, yes, our Board has a view that this value, this business has a real attractive value in the marketplace. And, clearly, we expect to realize that if we choose down to go down that path.

Michael Sison -- KeyBanc Capital Markets, Inc. -- Analyst

Okay. And then maybe a quick one on some of the headwinds. Can you maybe -- a lot of companies have struggled a little bit first quarter here, first half of the year is going to be a little bit tougher. Can you maybe talk about some of the headwinds you're seeing? And is it more first quarter, second quarter loaded? And then the second half looks a little bit better in terms of growth for the businesses?

Kevin Fogarty -- President and Chief Executive Officer

Well, look, we called out kind of four headwinds as we think about the guidance we provided for 2019. Clearly, there's not a whole lot I can do about inventory reduction plan on the part of a major, as Chris commented, lubricant additives customer. That's their choice. They take that risk. We obviously, at the end of the day, therefore, continue to work on alternatives to fill that volume gap. But we called out that as a very finite headwind facing our business for 2019.

The logistical issue, I don't consider that to be first half, second half, it's going to take some time, quite frankly, for a combination of the supply side, in this case, to increase capacity, like every business does when their margins improve, they are going to invest in capacity and that's going to take a little bit of time. But, however, our goal in Kraton is not just to sit back and take it. Our goal in the Kraton is obviously do two things; do anything we possibly can internally with respect to the optimization around logistics to minimize this impact. And then, secondly, our realization has to occur downstream with our customers that this is a very real cost inflation facing every business and we're no different.

So through our pricing policies, we'll be pushing through as much as we can. But the net effect of that is what we called out in terms of headwind for the balance of the year and then that last one, which is a turnaround issue, again, that's unique to us. We're on a five-year cycle at our major plant in Germany. I think, in this case, it's the second half of the year in which we'll have that turnaround. So the only one of the four, therefore, that you can really talk about in terms of, is it first half, is it second half, how long is it going to last, is really this China issue, and I'm not going to sit here and speculate. If you've got an opinion, I'd love to hear it.

Obviously, but at the end of the day, we know there's two factors here. We know there's the tariff factor in and itself, which is direct. And the second factor is just what cause that's had on underlying market or, if you will, end-user sentiment in China specifically. And while we think those two things are related, it's very hard to kind of get your arms around whether that's true or not. So we take that as kind of a sign that, in our guidance, we presume that it's going to carry on quite some time in 2019. We hope that's not the case like most people. But I think these things don't reverse course and really have a one quarter effect, we think it probably carries for the balance -- at least the balance of the first part of the year.

Michael Sison -- KeyBanc Capital Markets, Inc. -- Analyst

Great. Thank you.

Operator

Thank you. Our next question is from of Chris Kapsch from Loop Capital Markets. Your line is now open.

Christopher Kapsch -- Loop Capital Markets -- Analyst

Yeah, good morning. I had a couple of questions. One is regarding the 2019 guidance range in the Polymer segment, specifically. You mentioned you expect, I guess, volume growth -- just -- is there any order of magnitude? And then along those lines, what is your expectation in terms of a gross profit per ton expectation for this segment that's baked into the guidance. And just some color on -- and are you seeing continued mix uplift and where the drivers around that dynamic?

Kevin Fogarty -- President and Chief Executive Officer

So -- hey, Chris. Look, when we think about the Polymer business, we have three sub businesses there. We have our Performance Products business, which is primarily our paving and infrastructure business. We have our Specialty Materials business, especially Polymers business, which is our hydrogenated portfolio, which is particularly dealing with these China issues that we just discussed and then have, of course, our Cariflex business. I think Cariflex business is clear, where we see the growth coming from. I just talked about that.

In the case of our Performance Products business, we see growth coming from two factors. One is just generally the underlying markets in our Performance Products business are still solid, infrastructure spending is there, our customers' expectation in terms of the ability for us to supply their growth this year is clear. And we have every intention to satisfy their expectation. And, of course, there is also an element of -- some of the markets that kind of disappeared on us in 2018, particularly in South America and Australia, every indication tells us they're coming back and of course this is the high season for those markets. So I think we have a pretty good feel for that.

Christopher Kapsch -- Loop Capital Markets -- Analyst

And is there -- in terms of the expectation for gross profit per ton, do you have a magnitude that's baked into your guidance?

Kevin Fogarty -- President and Chief Executive Officer

Well, we haven't raised our expectations that things should be considerably better than $1,000 ton. So for the time being, we have always maintained this business ought to be able to at least average $1,000 a ton. And then, of course, take that and extrapolate it over increased volume and you've got truly incremental economics to benefit the EBITDA line.

Christopher Kapsch -- Loop Capital Markets -- Analyst

And do you see -- based on your outlook, do you see better mix or actually adverse mix, but higher profitability despite adverse mix?

Kevin Fogarty -- President and Chief Executive Officer

Look, embedded in everything we do in innovation is improved mix, and that's just kind of our middle name, and what I mean by that is, it's not just a function of product developments driving just pure organic growth, it's also, in many cases, were replacing our very own Polymer offerings that were developed several years ago or multiple years ago with new offerings today at higher margins for our customers, because of the higher value-add we're offering. So it's a function of both. So definitely mix improvement each and every day, each and every quarter, each and every year.

Christopher Kapsch -- Loop Capital Markets -- Analyst

And, Kevin, just to follow-up to one of your answers to another question and related to the pine chemicals business and specifically the sulfur out innovation and just curious about the timing of the commercialization there. Are you at a point where you're able to sample your product to adhesives companies to try in their formulations? And also just maybe a feel for what sort of IP, if any, is around that technology that process or application technology or is there patents around it or more trade secrets? Thanks.

Kevin Fogarty -- President and Chief Executive Officer

No, we expect to definitely create the intellectual property to protect whatever development we have in mind here. With respect to where we are in the development stage, I suspect in 2019 customers will start to see samples.

Christopher Kapsch -- Loop Capital Markets -- Analyst

Thank you.

Operator

Thank you. Our next question is from James Finnerty of Citi. Your line is now open.

James Finnerty -- Citigroup, Inc. -- Analyst

Hi. Good morning. On Cariflex, could you just give us any kind of -- way of thinking about how much EBITDA on an LTM basis that business generated or if you don't want to get into specific numbers, just what kind of margin that business could or has generated on the EBITDA basis?

Kevin Fogarty -- President and Chief Executive Officer

We're not going to talk about that yet, obviously we're in the stages now preparing some of those materials for the benefit of parties that have expressed interest. I suspect probably just because those numbers will become more aware in the marketplace. We'll comment on something like that in our next call, perhaps.

James Finnerty -- Citigroup, Inc. -- Analyst

Okay. But safe to say it's much higher than the remainder of the business?

Kevin Fogarty -- President and Chief Executive Officer

On the margin, I don't think that would be -- if you're talking about the EBITDA margin itself.

James Finnerty -- Citigroup, Inc. -- Analyst

Yeah.

Kevin Fogarty -- President and Chief Executive Officer

There is no doubt, Cariflex brings our company average up. But I'm -- they're not going to share just yet is the absolute EBITDA that comprises the Cariflex business.

James Finnerty -- Citigroup, Inc. -- Analyst

Okay. And then on the destocking from the lubricant customer. It's safe to say this is sort of more of a one-time destocking and something that is -- that this customer is experiencing?

Kevin Fogarty -- President and Chief Executive Officer

Right. So they're basically -- this is nothing to do with their growth prospects, they are just going to take down their overall both raw material and finished good inventory in 2019 to generate some cash. And then once that's depleted, then they're back to the usual buying to reflect their consumption.

James Finnerty -- Citigroup, Inc. -- Analyst

And in terms of revenue, I know you've hit -- you gave it profit impact, what kind of revenue impact is that expected to have.

Kevin Fogarty -- President and Chief Executive Officer

I'm looking at Chris. Chris, do you want to answer that question?

Christopher Russell -- Vice President, Chief Accounting Officer and Interim Chief Financial Officer

Yeah. I don't -- obviously, we don't give revenue by specific category. So, I don't -- I'm not going to comment to revenue. But needless to say, this reflects a hydrogenated styrenic block copolymer customer, which basically means it's coming from our Specialty Materials and therefore that the $17 million that we called out is attractive margin, because this is a customer that buy some of our highly differentiated grades. We're not happy about the development, but there's not a whole lot we can do about it. And I have charged our Specialty Polymers team to go out and find potentially new places where we can place some of this volume that is now available in our system.

James Finnerty -- Citigroup, Inc. -- Analyst

Great. Thank you.

Operator

Thank you. And our next question is from John Roberts of Kraton (sic-UBS). Your line is now open.

John Roberts -- UBS Investment Bank -- Analyst

Thank you, Kevin. Several years ago, you had a strategic evaluation done that included looking at all options including selling the company, was this just a refresh of that five year ago study or was this narrowly limited just to the Cariflex business?

Kevin Fogarty -- President and Chief Executive Officer

I'm not sure, John, what you're referring to. I can assure you that what I have said is that this is not the first time that we've thought about Cariflex in this way. But, nevertheless, if you think about where the business was two or three years ago, it's been tricky in particular where the new technology was yet to be proven, this is a much better time to think about these types of strategic options for the business.

John Roberts -- UBS Investment Bank -- Analyst

Okay. And then, I don't want to put Chris on the spot, but is this now a permanent CFO position or do you still have an outside search going on for a CFO?

Kevin Fogarty -- President and Chief Executive Officer

I think it would be more prudent if I answered that. Chris is, as you know -- we expect to kind of make a final decision on the permanent CFO position, hopefully, in the next month or two if not a little sooner.

John Roberts -- UBS Investment Bank -- Analyst

Great. Thank you.

Operator

Thank you. We have a follow-up question from Chris Kapsch of Loop Capital Markets. Your line is now open.

Christopher Kapsch -- Loop Capital Markets -- Analyst

Yeah. I got disconnected temporarily, so if you touched on this, I apologize. But just want to reconcile the narrative around spending capital to increase the capacity on the Polymer segment versus, if you look at sort of the results in '18 and where you see '19 volumes in that segment were down in '18 and they're going to be up, you didn't provide a magnitude but up in '19, but let's just call that a wash. Just wondering if you -- the capacity expansions you're referring to support growth, what sort of timeframe are you talking about in terms of bringing on capacity and what sort of visibility do you have behind those growth drivers to rationalize the investments? Thank you.

Kevin Fogarty -- President and Chief Executive Officer

Sure, Chris. Well, first of all, back to your volume comment. Look, there were a couple of clear issues impacting our business in '18 that caused our Performance Products business volume to be down versus the prior year. We called out, of course, everything associated with the Rhine River and that impact that had on our production, not on markets. The markets demanded our material, we just didn't have it to supply.

And then secondly -- and the second issue, of course, is, those kind of one-offs down in the South American market as well as Australia, which I just commented, we see a much more positive late this year in 2019.

We have additional capacity that we are introducing this year with -- that will be a full year benefit of the Berre expansion. So if I think about it in terms of timing, it -- what really reflects is, where we see the opportunity for growth, which we think is very clear with different options that we have internally about expanding it's one location or the other. And that's where I commented, we need to take into account the timing, the capital requirements and, of course, the all important availability of feedstock.

In the case of Performance Products, certainly more so than our Specialty Polymers business, the availability of our butadiene supply is vital to the decision about where we expand. So the good news is, we have options to consider and each one of them carries with it kind of different assumptions vis-a-vis capital and timing. But I hope you take it the same way as I do, which is -- this is a very firm confirmation that we're making about our view of future prospects in this business and it's our goal obviously to continue, not just to grow with the market but to grow with the innovation grades that we're introducing to accelerate our ability to penetrate in the highest end of the Performance Products value chain.

Christopher Kapsch -- Loop Capital Markets -- Analyst

Kevin, just to follow up on that, I guess one of the -- maybe the -- from where I sit, engaging with a lot of folks in the buy side, then maybe the one of the fundamental understanding about the company is just the nature and characteristics of this niche Polymers business. Maybe in the context of investing for future growth that you envision, maybe you could just maybe put it in the context of how do you see this niche sub-segment, if you will, in the Polymer space, the growth characteristics secularly of the industry niche? And then how you see Kraton position to presumably exceed that growth? Can you put a number on that sort of secular growth characteristic? Thank you.

Kevin Fogarty -- President and Chief Executive Officer

So, Chris, if you -- and please excuse me, but when you use the word niche, I think you're using it in the context of the broader Polymer industry overall. I assure you when it comes to styrenic block copolymers, particularly unhydrogenated styrenic block copolymers, in the markets of North America, South America and Europe, Kraton is highly relevant, more relevant than anybody else. And that we take is a very strong affirmation of how we've grown the markets to that position over time and in the context of our expansions, how we think about continuing not just to preserve our share but to do so in a way in which we enhance our overall margin profile through the innovative grades we introduce and, of course, to do that, what I'm saying to you is we will require new capacities to serve that growth and it's that simple. Our customers want to see us make these investments over time, so that they can continue to plan for their own growth and not have the risk of supply in question.

Christopher Kapsch -- Loop Capital Markets -- Analyst

Okay. Thank you.

Operator

Thank you. We also have a follow-up question from James Finnerty of Citi. Your line is now open.

James Finnerty -- Citigroup, Inc. -- Analyst

Yes. Hi. Yeah, just wanted to touch on, if Cariflex is sold or portion of it is sold and proceeds come in, what's your thoughts with regard to the use of those proceeds in terms of debt reduction, reinvesting in the business potential inorganic growth, just to know big picture thoughts there?

Gene Shiels -- Director of Investor Relations

Great. I think what I heard you say that the proceeds from any sale of the Cariflex business. And the answer there is real clear, the majority of those proceeds are certainly go to debt reduction. I mean that's our stated priority and we're going to stand behind that. To the extent we have the opportunity, obviously, to consider some other uses of some of the capital proceeds, they will be driven by our usual capital allocation programs around here where we look at what is the highest value return for our shareholders, whether that's expanding or whether that's returning that capital to you or to the shareholders, but definitely the number one use of proceeds will be to retire debt.

James Finnerty -- Citigroup, Inc. -- Analyst

Great. Thank you.

Operator

Thank you. And we have a follow-up question from Jim Sheehan's line from SunTrust. Your line is now open.

James Sheehan -- SunTrust Robinson Humphrey, Inc. -- Analyst

Thank you. You provided a really helpful bridge on Slide 8 regarding 2018 debt reduction, how do you see that bridge shaping up in 2019?

Kevin Fogarty -- President and Chief Executive Officer

Yeah. I think when we look at it, I would kind of characterize -- If you look at the midpoint of the range of $380 million of adjusted EBITDA, back off $110 million of CapEx, $75 million of estimated interest expense, about $10 million in cash tax payments and then we assume working capital would be largely a push, you're looking at debt reduction somewhere in about $180 million, $185 million. So that's kind of how we think about the -- how we think about the debt reduction for 2019.

James Sheehan -- SunTrust Robinson Humphrey, Inc. -- Analyst

Perfect. And in Chemical, how would you describe the competitive environment for rosin esters, particularly in Europe? Are you experiencing any pricing pressure?

Kevin Fogarty -- President and Chief Executive Officer

I think, as I look around our business, clearly Europe is the most competitive marketplace in our rosin esters business. And to some extent, that is a reflection of clearly what's happened in terms of the hydrocarbon chain that I explained a moment ago, but there's also intramaterial competition as well. Needless to say, if you have softer overall demand trends pursuant to what I talked about, that means all producers are experiencing the same. And what I would characterize is, we need to work with our leading customers who have come to depend upon us for reliable, ratable service and supply and as I said in my earlier comments, protect the share that we still have in that process. Because there will come a day with improvement, that improvement will come from the overall markets improving and that improvement will come from our overall material performance and quality improving, and we're going to be well situated when that happens.

James Sheehan -- SunTrust Robinson Humphrey, Inc. -- Analyst

Thank you.

Operator

Thank you. At this time, speakers, there are no further questions. You may continue.

Kevin Fogarty -- President and Chief Executive Officer

All right. Jovi, thank you. We want to thank all of our participants this morning for their interest in Kraton and some very good questions. I'll note that there's a replay of this morning's call available later today. To access that replay, dial 866-395-9164. With that, it concludes our prepared commentary.

Operator

This concludes the Kraton Corporation Fourth Quarter 2018 Earnings Conference Call. You may now disconnect.

Duration: 63 minutes

Call participants:

Gene Shiels -- Director of Investor Relations

Kevin Fogarty -- President and Chief Executive Officer

Christopher Russell -- Vice President, Chief Accounting Officer and Interim Chief Financial Officer

James Sheehan -- SunTrust Robinson Humphrey, Inc. -- Analyst

Michael Sison -- KeyBanc Capital Markets, Inc. -- Analyst

Christopher Kapsch -- Loop Capital Markets -- Analyst

James Finnerty -- Citigroup, Inc. -- Analyst

John Roberts -- UBS Investment Bank -- Analyst

More KRA analysis

Transcript powered by AlphaStreet

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.