 Lenders’ Presentation – January 2011 Exhibit 99.1 |
 2 Forward-Looking Statement Disclaimer This presentation may include “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 “believes,” “estimates,” “expects,” “projects,” “may,” “intends,” “plans” or “anticipates,” or by discussions of strategy, plans or intentions. All forward-looking statements in this presentation are made based on management's current expectations and estimates, which involve risks, uncertainties and other factors that could cause actual results to differ materially from those expressed in forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements. These risks and uncertainties are more fully described in “Part I. Item 1A. Risk Factors” contained in our Annual Report on 10-K, as filed with the Securities and Exchange Commission and as subsequently updated in our Quarterly Reports on Form 10-Q, and include risks related to: conditions in the global economy and capital markets; our reliance on LyondellBasell Industries for the provision of significant operating and other services; the failure of our raw materials suppliers to perform their obligations under long-term supply agreements, or our inability to replace or renew these agreements when they expire; 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, by other producers of SBCs and by producers of products that can be substituted for our products; our ability to produce and commercialize technological innovations; our ability to protect our intellectual property, on which our business is substantially dependent; infringement of our products on the intellectual property rights of others; seasonality in our Paving and Roofing business; financial and operating constraints related to our substantial level of indebtedness; product liability claims and other lawsuits arising from environmental damage or personal injuries associated with chemical manufacturing; political and economic risks in the various countries in which we operate; the inherently hazardous nature of chemical manufacturing; health, safety and environmental laws, including laws that govern our employees’ exposure to chemicals deemed harmful to humans; regulation of our customers, which could affect the demand for our products or result in increased compliance costs; international trade, export control, antitrust, zoning and occupancy and labor and employment laws that could require us to modify our current business practices and incur increased costs; our relationship with our employees; loss of key personnel or our inability to attract and retain new qualified personnel; fluctuations in currency exchange rates ; the fact that we do not enter into long-term contracts with our customers; a decrease in the fair value of our pension assets, which could require us to materially increase future funding of the pension plan; and concentration of ownership among our principal stockholder, which may prevent new investors from influencing significant corporate decisions. We assume no obligation to update such information. Further information concerning issues that could materially affect financial performance related to forward looking statements can be found in our periodic filings with the Securities and Exchange Commission. |
 3 GAAP Disclaimer This presentation includes the use of both GAAP (generally accepted accounting principles) and non-GAAP financial measures. The non-GAAP financial measures are EBITDA and Adjusted EBITDA. The most directly comparable GAAP financial measure is net income/loss. A reconciliation of the non-GAAP financial measures used in this presentation to the most directly comparable GAAP measure is included herein. We consider EBITDA and Adjusted EBITDA important supplemental measures of our performance and believe they are frequently used by investors and other interested parties in the evaluation of companies in our industry. EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our results under GAAP in the United States. |
 4 Presenters Kevin Fogarty President and Chief Executive Officer Steve Tremblay Chief Financial Officer |
 5 Agenda Business and Industry Overview Financial Overview Proposed Transaction Overview |
 Business and Industry Overview |
 7 Experienced Leadership Team Name Title Previous Experience Years Industry Experience Dan Smith Chairman of the Board Lyondell 40 Kevin Fogarty President & CEO Koch (Invista) 19 Steve Tremblay Chief Financial Officer Vertis 15 Lothar Freund Research & Technical Services Hoechst AG (Invista) 21 Gene Shiels Director – Investor Relations Baker Hughes 7 Scott Lee Vice President – Operations Shell Chemical Co. 26 |
 8 37% 21% 42% 4% 7% 31% 26% 32% Kraton Overview We invented and commercialized Styrenic Block Copolymer (SBC) technology nearly 50 years ago We believe that we hold #1 market share positions in each of our end-use markets providing industrial, consumer and geographical diversification that is second to none We design and manufacture customized SBC polymer and compound solutions to meet our leading customers’ specific innovation needs We produce the following: • Unhydrogenated Styrenic Block Copolymers (USBC’s) • Hydrogenated Styrenic Block Copolymers (HSBC’s) • Isoprene Rubber and Isoprene Rubber Latex We currently offer approximately 800 products to more than 700 customers, in over 60 countries We employ approximately 830 people in 9 locations in all major regions of the world TTM revenue ended September 30, 2010 of $1,191 million and Adjusted EBITDA (1) of $196 million; 16.4% margin (1) Adjusted EBITDA is GAAP EBITDA excluding sponsor fees, restructuring and related charges, non-cash expenses, and the gain on extinguishment of debt. (2) Management Estimates. 2009 Revenue by End-Use (2) 2009 Revenue by Geography (2) North and South America Europe, Middle East & Africa Asia Pacific Paving and Roofing Adhesives, Sealants and Coatings Other Emerging Businesses Advanced Materials Clear SBC Market Leader Globally |
 9 Soft touch overmolding has become a value-added market trend that has revolutionized a broad spectrum of end-use products from automotive to sporting goods. In the late 1960s SBCs began use in hot melts for packaging tape, labels, and diaper spray adhesives. Kraton G polymers, SBCs with hydrogenated midblocks, were also introduced for use in production of soft, strong compounds for handles and grips, elastic components in diapers, etc. Shell Chemicals scientists develop first styrenic block co-polymers in 1961, making amazingly strong elastomers which required no vulcanization, but could be molded into different shapes with heat (thermoplastic). Kraton’s History is the History of the SBC Industry Kraton spun out of Shell Chemicals and acquired by Ripplewood Holdings in 2001 Developed hypoallergenic synthetic latex for surgical gloves and condoms. In 1964, Kraton produced the first Kraton D polymers and SBS compounds for footwear applications. The first dedicated block copolymer plant was built by Shell in Belpre, Ohio in 1971. Use of SBS in roofs didn’t take off until the 70’s in Europe and the early 1980’s in the US. Stronger and more flexible roofing felt made from SBS modified asphalts took hold in the market. Kraton acquired by TPG Capital and J.P. Morgan Partners in 2003 Road technologies shifted in the early 1990s leading to dramatic increases in the use of SBS modified asphalts, especially for climates with large temperature swings. Developed NEXAR high ion-flux polymers as coating on top-end fabric & membranes. Applications include military uniforms, athletic apparel, chemical protective suits, water filtration, etc. 1960 1970 1980 1990 2000 2010 Initial Public Offering on the New York Stock Exchange |
 10 SBCs are Engineered to Meet Customer Needs Primary Raw Materials Products Customer Value End-Use Applications Styrene Unhydrogenated SBCs SBS SIS SIBS Butadiene Isoprene Hydrogenated SBCs SEBS SEPS Isoprene Rubber and Latex Compounds Paving Roofing Personal Care Tapes Formulators Labels & Printing Compounds Packaging Auto Lubricants Medical Stretch Soft-Touch Adhesion Strength Durability Thickening Compatibility Clarity Recyclability Kraton is the only provider of these value components across all products touching a wide array of applications |
 11 Investment Highlights Leadership Clear leader in the fast growing, attractive SBC market More than 1.6x the size of our largest competitor in each of our end-use markets The only producer with a global footprint and service capabilities Innovation- Driven Top- Line Growth Most-productive innovator of new SBC polymers Successfully leveraging product knowledge and technical expertise to commercialize next generation of innovative solutions Earnings Growth Driven by compelling organic growth platforms, expanding presence in Asia, sustained volume growth and new product introductions Margin enhancement through continued “Smart Pricing” strategy and innovation Created meaningful operating leverage through significant improvement in cost structure Investing capital in high-return projects – driving profitable growth in key products and geographies Experience innovation and margin improvement High Barriers to Entry Patented technology, custom designed product, process excellence, global reach and customer relationships create strong competitive position that cannot be matched by existing or potential competitors Competitive position allows for price leadership Best-in-class service levels: 100% of products delivered on-demand on-time |
 12 SBCs Enhance Performance Attributes Durability Elasticity Impact Soft Touch Clarity Adhesion We are a Highly Engineered, Performance Materials Business Recyclable |
    13 Before Kraton After Kraton Kraton Makes Products Perform Better Stretch in legs only (Spandex) Not a fitted garment High leakage rate Overall improvement in stretch (where it’s needed) Better fit Low leakage rate Kraton market share: 50% 2001 – 2009 CAGR: 11.5% Kraton material as % of Diaper cost: <2% Phthalate plasticizers are used to make PVC soft but they can leach from finished products and create health concerns Limited recyclability PVCs are unsafe when burned or incinerated improperly Environmentally friendly – 100% recyclable Kraton imparts softness, toughness and clarity Plasticizer & chlorine free Kraton material as % of finished product cost: <5% |
 14 SBCs are a Growth Industry SBC Industry Volume (kT) (1) SBCs Grow Faster Than GDP Adoption and penetration of SBCs into new applications and end-markets lead to industry growth of ~2x GDP Growing demand from emerging economies Innovation and new SBC product introductions End-use application growth (e.g., PVC alternatives for wire & cable and medical applications such as IV bags, etc.) Growing demand for environmentally friendly and greener alternatives in electronics, medical and baby care markets Low cost relative to value added / performance with limited substitution risk 675 1,112 1,599 2001 2009 2014 (1) Management estimates. Excludes footwear end-use in which Kraton does not actively compete. |
 16 Global SBC Industry Kraton believes it is better positioned than the industry in HSBCs, which have higher performance characteristics, are significantly more complex to produce and generate higher margins SBC Industry Market Size: 1,400kT (~$3.3 billion) USBC Production (Unhydrogenated Styrenic Block Copolymers) HSBC Production (Hydrogenated Styrenic Block Copolymers) SBS (Styrene-Butadiene- Styrene) SIS (Styrene-Isoprene- Styrene) SEBS (Styrene-Ethylene- Butylene-Styrene) SEPS (Styrene-Ethylene- Propylene-Styrene) Paving and Roofing Footwear Adhesives, Sealants and Coatings Advanced Materials Advanced Materials Adhesives, Sealants and Coatings Lubricant Additives Adhesives, Sealants and Coatings Advanced Materials % Industry % Kraton 2009 Revenue 66% 34% Kraton Industry 79% 21% Source: Kraton Management and SRI Consulting. Note: Blue percentages correspond to industry split and red percentages represent estimated Kraton split. |
 Clear Leader in Attractive Markets Market Position 2009 Revenue (1) Adhesives, Sealants, and Coatings Advanced Materials Paving and Roofing Emerging Businesses (4) #1 Market Position and More than 1.6x the Size of Our Closest Competitors Growth (2) Kraton Market Share Relative To #2 Competion (3) Top 4 Market Share Source: Management estimates. (1) Based on 2009 sales of $920 million (excludes by-product sales which are reported as other revenues). (2) Industry volume growth from 2001-2009, Emerging Businesses growth rate refers to Kraton’s Isoprene Rubber (“IR”) and Isoprene Rubber Latex (“IRL”) growth from 2005-2009. (3) Management’s estimates vs. next largest competitor based on 2009 sales. (4) The Emerging Businesses end-use market includes our IR and IRL business. We believe that we are the only major third-party supplier of IR and IRL, and therefore end-use market share metrics are not meaningful. 32% 5.9% #1 1.9x 74% 77% 2.0x #1 #1 1.6x 63% 100% N/A N/A 31% 7.4% 26% 6.5% 26.8% 7% 17 |
 18 Sustainable Competitive Advantages Almost 50 years of process know-how and expertise Performance-critical products and manufacturing complexity Technical Barriers Globally recognized brand – Kraton ® Industry-leading R&D infrastructure Global low-cost manufacturing footprint Significant regulatory hurdles / barriers to new manufacturing sites Stable raw material base with multiple sources of supply and contracts / relationships Collaborative customer relationships – 15+ years with majority; sole source with several customers Infrastructure Barriers Superior and Innovative Products + High Customer Switching Costs + Long-Term Customers Relationships = Leading Market Position Products designed collaboratively to meet specific customer needs / applications Preferred partner based on manufacturing consistency and process know-how Ongoing technical service offering 100% of products offered with no lead times High Value Added |
 19 Europe Asia NA Total HSBC 3 1 3 7 SBS 4 3 6 13 SIS 4 2 1 7 USBC 1 – – 1 Total 12 6 10 28 Proven Ability to Manage Input Volatility Consultant forecasts calling for relatively flat energy and monomer costs in 2011 Should monomers be more volatile, Kraton will execute its demonstrated core competence of managing volatility in monomer costs Price Increases Since IPO – December 2009 Styrene Butadiene Source: Wall Street research |
 20 Unparalleled Global Manufacturing and Service Capability Plant Capacity (kT) Products Focus Belpre, OH 189 HSBC, USBC World-scale HSBC (low cost), product breadth, N. American market Paulinia, Brazil 28 USBC, IR Latex Mercosur tariff region, USBC, IR Latex global market Berre, France 87 HSBC, USBC Product breadth, European market Wesseling, Germany 95 USBC World-scale USBC, low cost Kashima, Japan 22 USBC Asian Market Belpre, Ohio U.S. Manufacturing Facility Global Headquarters Houston, Texas U.S. Innovation Center Paulinia, Brazil Manufacturing Facility Innovation Center Mont St. Guibert, Belgium Technical Service Office Wesseling, Germany Manufacturing Facility Kashima, Japan Manufacturing Joint Venture Berre, France Manufacturing Facility Amsterdam The Netherlands European Headquarters / Innovation Center Shanghai, China Customer Service and Technical Center Tsukuba, Japan Innovation Center |
 21 Adjusted EBITDA (1) (US$ in millions) Strong Business Momentum: Q3 2010 (1) Adjusted EBITDA is GAAP EBITDA excluding sponsor fees, restructuring and related charges, non-cash expenses, and the gain on extinguishment of debt Sales volumes recovering from lows in late 2008 and first half 2009 Strong earnings momentum resulting from volume recovery, increased adoption of Kraton products and cost leverage Focus on margin expansion through “Smart Pricing” and innovation programs Profit growth through focused strategy, volume recovery, cost reduction and product innovation 12.1% Estimated “One-time” Growth Core Growth Year-on-Year Change in Sales Volume Volume (kT) 71 81 61 73 86 81 |
 22 Conservative Capital Structure Superior profitability and industry leading margins Growth through re-investment in existing business Support market-driven research and development High-return capital spending projects Strategic M&A opportunities that build technology and market portfolio Acquisition criteria: Consistent with existing capabilities / core competencies Accretive to earnings within first year No near-term plans to initiate dividend or share repurchases until current capital plan completed Kraton is focused on maintaining a conservative capital structure Financial Objectives and Future Uses of Cash |
 23 Majority of top customers have 15+ year relationship Blue chip customer base in the consumer products, packaging, medical supplies, construction and textile industries Several key customer relationships are sole source Well diversified customer base Long-Standing and Collaborative Customer Relationships High Quality Customer Base 74% 26% 2009 Revenues by Customer ~700 Customers Top 10 |
 24 20% 13% 12% 14% 13% 11% 6% 2005 2006 2007 2008 2009 Q3 2010 TTM Target Profit Growth Through Innovation Approximately 1,000 patents granted and 381 pending Innovation continuously repositions sales mix, improves margins and drives growth Step-change advancement of Big 6 Innovation Priorities Wire and cable solutions Elastic nonwovens NEXAR™ membrane technology Oilfield service applications Protective films Automotive soft skin solutions Innovation Share of Total Revenue (%) (1) (1) Innovation revenue defined as revenues of new products (e.g., new polymer, new application of an existing polymer or new step out production technology) introduced within the last 5 years. Vision 20/20: 20% of revenue at 20% margin premium Increased in Period of Strong Volume Growth in Base Business |
 25 Compelling Organic Growth Platforms Advanced Materials Adhesives, Sealants & Coatings Paving and Roofing Emerging markets growth Expansion into new and differentiated markets, such as protective films, oilfield service applications, spray and extrusion coatings, hot melt adhesives, elastic adhesives, labels and sealant applications Superior performing SBS modified emulsions for asphalt modification Low VOC roof coating formulations for superior water resistance, improved adhesion and reduced installation cost “Green” PVC alternatives to the wire and cable industry Enabling technology for high performance fabric solutions “Soft Touch” covers and solutions to the automotive industry NEXAR ® – high-end membrane technology markets for performance clothing, HVAC applications and fuel cells Co-extrusion technology for surface protection Applications Isoprene Rubber Latex Medical applications – surgical gloves Material substitution – condoms HiMA Protective Films Soft Skins IRL Gloves |
 26 Innovation-led Top Line Growth Tremendous growth Rapidly capture share from $2.2 billion natural rubber latex industry Margins well in excess of rest of business Leading producer in the market Challenging process technology to replicate for competitors and new entrants Commenced capacity expansion of Paulinia, Brazil facility Total planned IRL capacity expansion of 33% Case Study: IR Latex and IR Revenue Growth Key Attributes $15 $22 $23 $35 $76 $61 2005 2006 2007 2008 2009 Q3 2010 TTM (US$ in millions) |
 27 27 62 149 2001 2009 2014 Investing for Growth In Asia Asia Pacific SBC market – 53% of global SBC consumption by volume in 2009 (1) YTD September 2010, Asia Pacific accounted for 20% of our total revenue, with 46% derived from higher margin HSBC products In 2010 relocated Shanghai, China office to a new facility (double the size of the previous location) Expanded warehouse capacity in Shanghai Waigaoqiao Free Trade Zone Proposed HSBC expansion in Asia Forecast strong worldwide growth in HSBC driven by innovation Initiated project assessment for a new 30 kT per year HSBC plant in Asia Site selection by early 2011 with start-up planned for second half of 2013 Asia is an important component of Kraton’s growth strategy Asian HSBC Industry Demand Trends (kT) (1) Management estimates. Includes SBC consumption for footwear, a market in which Kraton does not actively compete. |
 Financial Overview |
 29 Update on 2010 Business Priorities – Q3 2010 Innovation-led Top-line Growth Capital Investment Realizing benefits from ERP implementation IR and IRL projects continue on plan; operational mid- 2011 Belpre DCS project progressing well Actively engaged in evaluation of alternatives for additional HSBC capacity Earnings Growth Net Income was $28 million, up $6 million from Q3 2009 Pace of raw material price increases moderated from second quarter 2010 Adjusted EBITDA of $55 million TTM Adjusted EBITDA margin on sales revenue of 16% 29 TTM vitality index 13% Good momentum in PVC alternatives for wire & cable and medical applications Pipeline includes Soft Skins in automotive applications, Cariflex TM IR products and advances in protective films |
 30 Historical Financial Summary Volume (kT) Revenue (1) Gross Profit (2) Adjusted EBITDA (3) (US$ in millions) (1) Includes by-product revenue. (2) Adjusted for restructuring charges (3) Adjusted EBITDA is GAAP EBITDA excluding sponsor fees, restructuring and related charges, non-cash expenses, and the gain on extinguishment of debt. $210 $255 $302 $153 $182 2006 2007 2008 2009 Q3 10 TTM $122 $68 $152 $91 $196 2006 2007 2008 2009 Q3 10 TTM 352 358 313 301 260 2006 2007 2008 2009 Q3 10 TTM Margin: 20.0% 14.1% 20.8% 18.8% 25.4% Margin: 11.6% 6.3% 12.4% 9.4% 16.4% $1,048 $1,226 $1,191 $1,090 $968 2006 2007 2008 2009 Q3 10 TTM |
 31 Attractive Free Cash Flow Dynamics $196 million of TTM September 30, 2010 Adjusted EBITDA (1) Meaningful operating leverage – $55 million of annualized net cost reduction since 2007 Favorable demand drivers will drive strong volume growth Attractive Earnings Power Drivers of Free Cash Flow $15 million historical average annual maintenance capex Low Level of Maintenance Capex $78 million of cash at September 30, 2010 Net Debt-to-Cap ratio of 40% at September 30, 2010, with Net Debt to September 30, 2010 TTM Adjusted EBITDA of 1.56x Capital Structure Near-term cash tax rate of 10% - 13% $331 million NOL balance as of December 31, 2009 Low Cash Tax Rate Reduced quantity of finished goods inventory by nearly 20% excluding isoprene rubber build, since year end 2006 Minimal impact on service levels Target working capital (excl. cash) as % of revenue of ~25% Moderate Working Capital Needs (1) Adjusted EBITDA is GAAP EBITDA excluding sponsor fees, restructuring and related charges, non-cash expenses, and the gain on extinguishment of debt. |
 TTM Adjusted EBITDA (2) $120 $95 $85 $91 $144 $194 $196 3/09 6/09 9/09 12/09 3/10 6/10 9/10 32 Gross Debt (1) $497 $486 $486 $385 $388 $386 $385 3/09 6/09 9/09 12/09 3/10 6/10 9/10 Net Debt (1) $484 $469 $463 $316 $376 $347 $306 3/09 6/09 9/09 12/09 3/10 6/10 9/10 Leverage Ratio (3) 4.1x 5.1x 5.7x 4.2x 2.7x 2.0x 2.0x 3/09 6/09 9/09 12/09 3/10 6/10 9/10 Earnings Growth and Deleveraging (US$ in millions) Proceeds from IPO (1) Gross Debt and Net Debt include insurance note payable. (2) Adjusted EBITDA is GAAP EBITDA excluding management fees, restructuring and related charges, non-cash expenses, and the gain on extinguishment of debt. (3) Leverage ratio is calculated by dividing total Gross Debt by TTM Adjusted EBITDA. |
 33 $63 $55 $20 ($2) ($3) ($17) ($6) Q2 2010 Volume Price COGS R&D / SG&A FX / Other Q3 2010 Q3 2010 Adjusted EBITDA Walks Adjusted EBITDA (1) – Q3 2010 vs. Q2 2010 Adjusted EBITDA (1) – Q3 2010 vs. Q3 2009 (US$ in millions) (1) Adjusted EBITDA is GAAP EBITDA excluding sponsor fees, restructuring and related charges, non-cash expenses, and the gain on extinguishment of debt. $53 $55 $76 $- ($66) ($4) ($4) Q3 2009 Volume Price COGS R&D / SG&A FX / Other Q3 2010 |
 34 Expertise in market and application development, high quality manufacturing, customer service offering, and core end-use focus Provide application-based solutions to meet customers’ needs Commercialize next generation of innovations, e.g., Nexar™ non-woven and industrial fibers, oilfield service applications, protective films, etc. Margin enhancement by improving or eliminating marginally profitable products Extract value for complexity Continue to identify opportunities to contract with key customers Proactively manage raw material price volatility Debottleneck capacity and improve assets Polyisoprene rubber (IR) expansion at Belpre, Ohio and Isoprene rubber latex (IRL) capacity expansion at Paulinia, Brazil Evaluating options for additional HSBC capacity in Asia Identify / pursue opportunities for cost reduction and productivity improvement Execute on new IR manufacturing capacity at Belpre Leverage Leadership Position Drive Growth Through Innovation Continue Smart Pricing Invest in Growth and Infrastructure Continuous Productivity Improvement Go-Forward Business Strategy Capital Structure Conservative approach to excess cash flow Maintain flexibility to complete capital plans Focus on improving ratings profile |
 Proposed Transaction Overview |
 36 Proposed Transaction Overview Kraton intends to execute a comprehensive refinancing of its capital structure in February 2011 (assuming continued favorable capital market conditions). Our objective is to raise a total of $550 million of debt financing ($400 million funded at close): • $150 million in undrawn 5-year revolver. • $200 million in a 5-year Term Loan A. • $200 million in 8-year Senior Unsecured Notes. The net proceeds of the financing will be used to redeem existing indebtedness including Senior Notes, Discount Notes and Term Debt due 2013 and 2014. The redemption of the Senior Notes due 2014 is to take place via a tender offer. Refinancing our capital structure today ensures: • Attractive low cost rate environment. • Extended maturity profile from 2013/2014 to 2016/2019. • Significant liquidity enhancement from $80 million cash flow revolver to $150 million cash flow revolver. |
 37 Proposed Sources & Uses and Pro Forma Capitalization ($ in millions) Sources of Funds $ Uses of Funds $ New Revolver ($150) $0 Refinancing of Existing Debt $383 New Term Loan A 200 Fees & Expenses 17 New Senior Unsecured Notes 200 Total Sources $400 Total Uses $400 Pro Forma % of ($ in millions) 9/30/2010 Adj. 9/30/2010 Total Debt xEBITDA Cash $78 $0 $78 Existing Revolver ($80) -- -- New Revolver ($150) -- -- -- Existing Term Loan 220 (220) -- New Term Loan A -- 200 200 1.02x Total Senior Secured Debt $220 $200 50.0% 1.02x New Sr. Uns. Notes -- 200 200 1.02x Existing Sr. Sub. Notes 163 (163) -- Total Debt $383 $400 100.0% 2.04x Net Debt 305 322 Adjusted EBITDA $196 $196 Total Interest Expense 28 26 Capital Expenditures 50 50 Adjusted EBITDA / Total Interest Expense 7.08x 7.61x (Adjusted EBITDA - Capex) / Total Interest Expense 5.28x 5.68x TTM 9/30/10 Pro Forma Financials Pro Forma Credit Statistics |
 38 Proposed Summary of Terms and Conditions Borrower: Kraton Polymers LLC (the “Borrower”) Facilities: $350 million Senior Secured Credit Facilities $150 million Revolving Credit Facility $200 million Term Loan A Guarantors: Kraton Performance Polymers, Inc. and all existing and future direct and indirect material domestic subsidiaries of the Borrower Security: Maturity: Revolver: 5.0 years Term Loan A: 5.0 years Pricing: Revolver: To be announced (grid based on Consolidate Net Leverage Ratio) Term Loan A: To be announced Revolver Commitment Fee: TBD (grid based) Amortization: Revolver: None Term Loan A: 5%, 5%, 7.5%, 10%, 72.5% Incremental Facilities: $125 million (subject to a maximum Consolidated Net Leverage Ratio) Optional Prepayments: Anytime at par Mandatory Prepayments : 100% asset sales 100% debt issuance (Above a Maximum Pro Forma Consolidated Net Leverage Ratio) 50% excess cash flow (with step downs to 25% and 0% based on a Consolidated Net Leverage Ratio) Financial Covenants: Consolidated Net Leverage Ratio Consolidated Net Interest Coverage Ratio Maximum Capital Expenditures First priority lien on substantially all tangible and intangible assets and capital stock of the Borrower and the Guarantors, as well as 65% of the equity interests in first-tier material foreign subsidiaries |
 Appendix |
 Adhesives, Sealants and Coatings End Use Review 32% TTM Revenue Profile Change in Sales Revenue 40 Q3 2010 vs. Q3 2009 Q3 2010 vs. Q2 2010 End Use Revenue US $ in millions ASC $83 $104 $108 0 50 100 150 Q3 09 Q2 10 Q3 10 4% 30% |
 27% Advanced Materials End Use Review 41 TTM Revenue Profile Change in Sales Revenue End Use Revenue Change in Sales Revenue US $ in millions AM Q3 2010 vs. Q3 2009 Q3 2010 vs. Q2 2010 $82 $98 $92 0 50 100 150 Q3 09 Q2 10 Q3 10 (6)% 12% |
 42 33% P&R 22% 3% $91 $107 $111 Q3 09 Q2 10 Q3 10 Paving and Roofing End-Use Review TTM Revenue Profile Change in Sales Revenue End-Use Revenue US $ in Millions Q3 2010 vs. Q3 2009 Q3 2010 vs. Q2 2010 |
 43 6% EB $35 $61 $76 2009 2008 Q3 2010 $13 $19 $19 Q3 09 Q2 10 Q3 10 Emerging Businesses End-Use Review TTM Revenue Profile TTM Sales Revenue End-Use Revenue US $ in Millions US $ in Millions |
 44 Reconciliation of Net Income / (Loss) to EBITDA and Adjusted EBITDA (US$ in millions) (1) The EBITDA measure is used by management to evaluate operating performance. Management believes that EBITDA is useful to investors because it is frequently used by investors and other interested parties in the evaluation of companies in our industry. EBITDA is not a recognized term under GAAP and does not purport to be an alternative to net income (loss) as an indicator of operating performance or to cash flows from operating activities as a measure of liquidity. Since not all companies use identical calculations, this presentation of EBITDA may not be comparable to other similarly titled measures of other companies. Additionally, EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as interest payments, tax payments and debt service requirements. (2) Adjusted EBITDA is EBITDA excluding management fees, restructuring and related charges, non-cash expenses, and the gain on extinguishment of debt. Quarterly Trailing Twelve Months Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Net income ($9) $10 $35 ($7) ($17) ($4) $22 ($2) $20 $39 $28 $21 $7 ($6) ($0) $36 $79 $85 Interest expense, net 10 9 8 9 9 8 8 9 6 6 6 35 34 34 34 31 30 28 Income tax expense (0) 3 5 1 0 1 (2) (1) 4 5 5 9 7 1 (1) 3 7 13 Depreciation and amortization 15 13 13 12 13 13 17 25 11 12 13 51 51 54 67 65 65 61 EBITDA $16 $35 $61 $16 $5 $17 $45 $32 $41 $62 $52 $117 $98 $83 $99 $135 $180 $187 Sponsor fees and expenses $1 $1 $1 $1 $1 $1 $1 $1 $0 $0 $0 $2 $2 $2 $2 $2 $1 $1 Restructuring and related charges 6 2 2 4 1 0 6 2 0 1 2 9 7 12 10 9 9 5 Other non-cash expenses 1 0 0 9 3 (1) 2 0 1 0 1 12 12 13 5 3 4 3 Gain in extinguishment of debt 0 0 0 0 (20) (4) 0 0 0 0 0 (20) (24) (24) (24) (4) 0 0 Adjusted EBITDA $23 $38 $63 $29 ($10) $13 $53 $35 $43 $63 $55 $120 $95 $85 $91 $144 $194 $196 Year Ended December 31, 2006 2007 2008 2009 Net income ($34) ($44) $28 ($0) Interest expense, net 67 43 37 34 Income tax expense 30 6 8 (1) Depreciation and amortization 44 52 53 67 EBITDA $106 $58 $127 $99 Sponsor fees and expenses $2 $2 $2 $2 Restructuring and related charges 11 6 14 10 Other non-cash expenses 3 3 10 5 Gain in extinguishment of debt 0 0 0 (24) Adjusted EBITDA $122 $68 $152 $91 (1) (1) (2) (2) |