Polypore Internation (NYSE:PPO)
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Polypore Announces Year to Date And Third Quarter Results
CHARLOTTE, N.C., Nov. 15 /PRNewswire-FirstCall/ -- Polypore, Inc. announces
pro forma net sales for the nine months ended October 2, 2004 of $385.5
million, a 21% increase compared to the $319.0 million in the first nine months
of 2003. Net sales for the quarter ended October 2, 2004 were $117.5 million,
an increase of 8% compared to net sales of $109.0 million for the same quarter
in 2003. Pro forma net income was $21.6 million for the first nine months of
2004 compared to the $27.7 million in the first nine months of 2003. Net loss
for the third quarter of 2004 was $12.2 million compared to net income of $11.3
million in the third quarter of 2003.
"Our results for the first nine months of 2004 have been very strong across the
board. During the third quarter, our results declined from the pace set in the
first part of the year as we incurred some non-recurring charges and challenges
in two of our markets. In the third quarter, we began to see the red-hot Asian
market, particularly in China, for our lithium ion battery separators in our
Energy Storage segment cool off. Recent tightening of the economic policy in
China has contributed to the slow down of this market as we see battery and
electronic device manufacturers working to reduce inventory levels to free up
working capital. Despite the recent slowdown in the lithium battery market, we
remain positive about the long-term growth of this market. Additionally, in
the third quarter we announced the restructuring of certain of our facilities
in Germany to better align our cost structure with anticipated product demand
amid changes in our hemodialysis business including the loss of a customer. We
anticipate that this restructuring, along with other efficiency and new product
initiatives will enhance the cost structure of our businesses and benefit our
bottom line in 2005 and beyond," said Frank Nasisi, President and Chief
Executive Officer of Polypore, Inc.
Adjusted earnings before interest, taxes, depreciation and amortization
("Adjusted EBITDA"), as defined in our credit agreement, was $164.5 million for
the last four quarters. For the first nine months of 2004 and the third
quarter of 2004, adjusted EBITDA was $127.4 million and $31.1 million,
respectively.
During the third quarter of 2004, Polypore recognized a $15.4 million charge
related to the restructuring of certain production facilities in Germany and a
$10.0 million charge related to non-cash purchase accounting adjustments
originating from the May 2004 acquisition of Polypore by PP Acquisition, Inc.
Year To Date Results
The information presented in this release for the nine month period ended
October 2, 2004 is pro forma and has been derived by combining the statement of
operations for the period from January 4, 2004 through May 1, 2004 with the
period May 2, 2004 through October 2, 2004 and applying the pro forma
adjustments for the acquisition of Polypore by PP Acquisition, Inc. The pro
forma results of operations for the nine months ended October 2, 2004 include
adjustments for depreciation, amortization and interest expense associated with
the Transaction and the related income tax effect of these adjustments. The pro
forma results exclude non-recurring costs of $5.3 million for the write-off of
in process research and development costs and $18.5 million for the sale of
inventory that was written up in purchase accounting for the acquisition.
Pro forma net sales for the nine months ended October 2, 2004 of $385.5
million, a 21% increase compared to the $319.0 million in the first nine months
of 2003. This $66.5 million increase is attributable to a $50.3 million
increase in our energy storage segment and a $16.2 million increase in our
separations media segment. The $50.3 million increase in energy storage was
driven primarily by a $23.9 million increase in lithium battery separator
sales, a $12.6 million increase in lead-acid battery separator sales and $10.2
million in positive impact of the dollar/euro exchange rate. The $16.2 million
increase in separations media was driven by higher volume sales of hemodialysis
membranes, favorable customer and product mix and improved sales for industrial
and specialty products. Additionally, the positive impact of the dollar/euro
exchange rate provided $10.0 million in sales growth for the separations media
segment.
Pro forma operating income for the first nine months of 2004, excluding the
$15.4 million restructuring charge, was $90.4 million compared to $60.7 million
for the first nine months of 2003. This increase in pro forma operating
results is due to a gross profit increase of $41.5 million stemming from higher
sales volumes in both of our business segments, improved yields, and a $5.9
million decrease in depreciation expense resulting from the purchase price
allocation of the acquisition by PP Acquisition, Inc. This gross profit
improvement was offset in part by a $13.6 million increase in selling, general
and administrative expenses primarily related to an $11.0 million increase in
amortization resulting from the purchase price allocation in connection with
the Polypore acquisition in May of 2004. Pro forma operating income for the
first nine months of 2004 including the restructuring charge was $75.0 million.
Third Quarter Results
Net sales for the quarter ended October 2, 2004 were $117.5 million, an
increase of 8% compared to net sales of $109.0 million for the same quarter in
2003. This $8.5 million increase is attributable to a $4.4 million increase in
our energy storage segment and a $4.1 million increase in our separations media
segment. The $4.4 million increase in our energy storage segment was driven by
higher sales volumes in our transportation and industrial separators markets
and a $2.1 million positive impact from dollar/euro exchange rate partially
offset by a decline in lithium battery separator sales. The $4.1 million
increase in separations media segment was driven by an increase in sales
volumes to the microelectronic and beverage markets and a $2.3 million positive
impact from dollar/euro exchange rate.
Operating income for the third quarter of 2004, excluding the restructuring
charge and purchase accounting adjustment, was $18.6 million compared to $22.4
million for the third quarter of 2003. This decrease in operating results is
due to $6.2 million in manufacturing variances caused by lower production
volumes in our separations media segment and an unfavorable change in product
mix in our energy storage segment somewhat offset by a $3.5 million decrease in
depreciation expense. Additionally the selling general and administrative
expenses for the third quarter increased by $4.1 million driven primarily by a
$3.8 million increase in amortization resulting from the purchase price
allocation in connection with the Polypore acquisition by PP Acquisition, Inc.
Operating loss for the third quarter of 2004, including the restructuring
charge and purchase accounting adjustment, was $6.8 million.
Polypore, Inc. will hold a conference call to discuss the results of the third
quarter on Monday, November 15, 2004 at 10:30 AM. You are invited to listen to
the conference call that will be broadcast live over the internet at
http://www.polypore.net/. If you are unable to listen to the live webcast, the
call will be archived on the website http://www.polypore.net/. Additionally, a
replay of the call will be available until 11:00 PM on Friday, November 19,
2004 at 800-642-1687 (in the U.S.) or 706-645-9291 (outside the U.S.), access
number 2051797.
Polypore Inc., a wholly owned subsidiary of Polypore International, Inc., is a
growing worldwide developer, manufacturer and marketer of highly specialized
polymer-based membranes used in separation and filtration processes.
Polypore's products and technologies target specialized applications and
markets that require the removal or separation of various materials from
liquids, with concentration in the ultrafiltration and microfiltration markets.
Truly a global provider, Polypore has manufacturing facilities or sales
offices in ten countries serving five continents. Polypore's corporate offices
are located in Charlotte, NC.
This release contains statements that are forward-looking in nature. Statements
that are predictive in nature, that depend upon or refer to future events or
conditions or that include words such as "expects," "anticipates," "intends,"
"plans," "believes," "estimates," and similar expressions are forward-looking
statements. These statements involve known and unknown risks, uncertainties
and other factors that may cause our actual results and performance to be
materially different from any future results or performance expressed or
implied by these forward-looking statements. These factors include the
following: the highly competitive nature of the markets in which we sell our
products; the failure to continue developing innovative products; the increased
use of synthetic hemodialysis filtration membranes by our customers; the loss
of our customers; the vertical integration by our customers of the production
of our products into their own manufacturing process; increases in prices for
raw materials or the loss of key supplier contracts; employee slowdowns,
strikes or similar actions; product liability claims exposure; risks in
connection with our operations outside the United States; the incurrence of
substantial costs to comply with, or as a result of violations of, or
liabilities under environmental laws; the failure in protecting our
intellectual property; the failure to replace lost senior management; the
incurrence of additional debt, contingent liabilities and expenses in
connection of future acquisitions; the failure to effectively integrate newly
acquired operations; and absence of expected returns from the amount of
intangible assets we have recorded. Additional information concerning these
and other important factors can be found within the Polypore International's
filings with the Securities and Exchange Commission. Statements in this release
should be evaluated in light of these important factors. Although we believe
that these statements are based upon reasonable assumptions, we cannot
guarantee future results. Given these uncertainties, the forward-looking
statements discussed in this press release might not occur.
Polypore, Inc.
Condensed Consolidated Statements of Income
(Unaudited, in thousands)
Pro Forma
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
Oct. 2, Sep. 27, Oct. 2, Sep. 27,
2004* 2003 2004* 2003
Net Sales $117,496 $108,996 $385,498 $319,014
Cost of goods
sold 91,833 71,841 235,682 210,726
Gross profit 25,663 37,155 149,816 108,288
SG&A / Other 32,452 14,776 74,859 47,630
Operating income
(loss) (6,789) 22,379 74,957 60,658
Other (income)
expense:
Interest expense,
net 13,602 4,596 40,261 15,214
Foreign currency
and other 506 36 (75) 549
Unrealized (gain)
loss on derivative
interest -- (1,109) -- (1,272)
Income (loss)
before income
taxes (20,897) 18,856 34,771 46,167
Income taxes (8,694) 7,543 13,213 18,467
Net income $(12,203) $11,313 $21,558 $27,700
* The income statement for the three and nine months ended October 2,
2004 includes the effect of the application of purchase accounting
for the acquisition by and merger with PP Acquisition, Inc. The
purchase price allocation is based on preliminary estimates and may
be adjusted based on the finalization of independent appraisals and
certain accruals to be recorded in connection with the transaction.
For accounting purposes, the Transaction was accounted for as if it
occurred on the last day of the Company's fiscal month ended May 2,
2004, which is the closest month end to the Transaction date of
May 13, 2004.
Polypore, Inc.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
October 2, January 3,
2004 2004
Assets
Cash and equivalents $ 37,299 $ 20,063
Other current assets 172,284 161,875
Property, plant and equipment, net 485,654 480,602
Intangibles, net 763,083 49,935
Other assets 19,357 18,167
Total assets $1,477,677 $730,642
Liabilities and shareholders' equity
Current liabilities $ 86,224 $100,988
Debt, less current portion 821,232 250,519
Deferred income taxes & other 250,723 173,157
Redeemable preferred stock and cumulative
dividends payable -- 16,221
Shareholders' equity 319,498 189,757
Total liabilities and shareholders' equity $1,477,677 $730,642
EBITDA
EBITDA represents net income before interest, taxes, depreciation and
amortization. EBITDA is not a recognized term under GAAP and does not purport
to be an alternative to net income as a measure of operating performance or to
cash flows from operating activities as a measure of liquidity. Additionally,
EBITDA is not intended to be a measure of free cash flow for management's
discretionary use, as it does not consider certain cash requirements such as
interest payments, tax payments, debt service requirements and capital
expenditures. Our calculation of EBITDA may not be comparable to the
calculation of similarly titled measures reported by other companies. The
following is a reconciliation of EBITDA to net income for the periods
indicated.
Reconciliation of EBITDA ($ in thousands)
Three Three Nine Nine Twelve
Months Months Months Months Months
Ended Ended Ended Ended Ended
Oct. 2, Sep. 27, Oct. 2, Sep. 27 Oct. 2
04 03 04 03 04
Net income $(12,203) $11,313 $17,271 $27,700 $34,885
+ Interest expense 13,602 4,596 28,022 15,214 34,328
+ Income taxes (8,694) 7,543 6,293 18,467 6,604
+Depreciation and
amortization
expense 10,832 10,227 33,181 29,864 42,009
EBITDA 3,537 33,679 84,767 91,245 117,826
Reconciliation of Adjusted EBITDA ($ in thousands)
Three Months Nine Months Twelve Months
Ended Ended Ended
Oct. 2, 2004 Oct. 2, 2004 Oct. 2, 2004
EBITDA $3,537 $84,767 $117,826
+ Restructuring Charge 15,369 15,369 15,369
+ Non-cash purchase acct.
adjustments 10,015 23,786 23,786
+ Other (currency,
transaction costs,
other) 2,138 3,442 7,559
* Adjusted EBITDA -
defined in credit
agreement 31,059 127,365 164,540
* Under our senior credit facility, compliance with the minimum interest
coverage ratio and maximum leverage ratio tests is determined based on
a calculation of adjusted EBITDA in which certain items are added back
to EBITDA. These items include non-cash charges, impairments and
expenses other than depreciation and amortization, cash charges
resulting from the acquisition of Polypore, Inc. that arise within six
months of the closing of the transaction, restructuring and acquisition
integration costs and certain salary and bonus payments made to former
officers of Polypore, Inc. prior to the closing of the transaction, who
are no longer affiliated with us as a result of the transaction, and
payments under two operating lease agreements that the company intends
to refinance.
DATASOURCE: Polypore, Inc.
CONTACT: Lynn Amos, +1-704-587-8409, or Mark Hadley, +1-704-587-8886,
both for Polypore, Inc.
Web site: http://www.polypore.net/