Polypore Announces Fourth Quarter and Fiscal Year 2004 Results
CHARLOTTE, N.C., March 2 /PRNewswire-FirstCall/ -- Polypore, Inc.
announces pro forma net sales for the twelve months ended January
1, 2005 of $490.4 million, an 11% increase compared to actual net
sales of $441.1 million in the fiscal year 2003. Net sales for the
quarter ended January 1, 2005 were $104.9 million, a decrease of
14% compared to net sales of $122.1 million for the same quarter in
2003. Pro forma net income for fiscal 2004 was $17.0 million
compared to fiscal 2003 actual net income of $45.3 million. Net
loss for the fourth quarter of 2004 was $5.3 million compared to
net income of $17.6 million in the fourth quarter of 2003.
Additionally, Polypore announces that on February 28th it made an
optional prepayment of approximately $25.0 million (22.2 million
U.S. dollars and 2.16 million euros) in principal on the term loans
under its bank credit facility, reducing the outstanding balance on
its term loans to approximately 346.0 million U.S. dollars and 33.7
million euros as of February 28, 2005. "2004 has been another
strong year for Polypore," commented Frank Nasisi, President and
Chief Executive Officer of Polypore, Inc. "During 2004, a year in
which we achieved 11% sales growth, our results were front end
weighted due to two main factors. The first factor was in our
lithium ion battery separator business where we saw a red hot Asian
market, particularly in China, carry over from late 2003 into the
first half of 2004. The market cooled off in the second half of the
year as tightening in economic policies caused many of these
manufacturers to reduce inventory levels and production. The second
factor contributing to these quarterly fluctuations was a
restructuring charge taken in our hemodialysis business primarily
in the third quarter to better align our cost structure with
anticipated product demand after the loss of a customer. We expect
that the restructuring will begin to reduce operating expenses in
the first quarter of 2005 and become fully effective by year end
2005. In 2005, we anticipate that the lithium battery market will
normalize and that the restructuring in our hemodialysis business
along with other efficiency and new product initiatives will
benefit our bottom line in 2005 and beyond." Adjusted earnings
before interest, taxes, depreciation and amortization ("Adjusted
EBITDA"), which is a key measurement in our credit agreement, was
$158.8 million for full year 2004, an increase of 17% compared to
adjusted EBITDA of $135.6 million in full year 2003. Adjusted
EBITDA for the fourth quarter of 2004 was $31.5 million compared
with $37.2 million in the fourth quarter of 2003. EBITDA and
adjusted EBITDA are defined and reconciled to generally accepted
accounting principles below. Year To Date Results On May 13, 2004,
Polypore and its stockholders consummated a stock purchase
agreement with PP Acquisition Corporation, a subsidiary of Polypore
International, Inc., pursuant to which PP Acquisition Corporation
purchased all of the outstanding shares of the Company's capital
stock (the "Transaction"). At the time of the closing of the
acquisition, PP Acquisition Corporation merged with and into
Polypore, with Polypore as the surviving corporation. The
information presented in this release for the twelve-month period
ended January 1, 2005 ("fiscal 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 (pre-transaction) with the
period May 2, 2004 through January 1, 2005 (post-transaction) and
applying the pro forma adjustments for the acquisition of Polypore
by PP Acquisition Corporation. The pro forma results of operations
for the twelve months ended January 1, 2005 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
$19.0 million for the sale of inventory that was written up in
purchase accounting for the acquisition. Pro forma net sales for
fiscal year 2004 was $490.4 million, an 11% increase compared to
actual sales of $441.1 million in fiscal year 2003. This $49.3
million increase is attributable to a $37.6 million increase in our
energy storage segment and a $11.7 million increase in our
separations media segment. The $37.6 million increase in energy
storage was driven primarily by $14.6 million of growth in lithium
battery separator sales, $10.6 million in lead-acid battery
separator and other sales, and $12.4 million in positive impact
from the dollar/euro exchange rate. The $11.7 million increase in
separations media was driven primarily by $14.4 million in positive
impact from the dollar/euro exchange rate plus growth in specialty
and industrial products, offset by a $6.9 million decline in sales
of healthcare products. The decline in healthcare products is
primarily due to the loss of a hemodialysis customer that made the
decision to outsource the manufacturing of its dialyzers to another
company that does not currently source membranes from us. Pro forma
operating income for fiscal year 2004, excluding the $15.7 million
restructuring charge ($1.8 million of which is an inventory
write-off included in cost of goods sold) was $102.1 million
compared to $85.8 million for fiscal year 2003. This increase in
pro forma operating income is due to a pro forma gross profit
increase of $23.2 million stemming primarily from higher sales in
both of our business segments. This pro forma gross profit
improvement was offset in part by an increase in pro forma selling,
general and administrative expenses as cost decreases were offset
by higher average foreign currency exchange rates and an increase
in amortization resulting from the purchase price allocation in
connection with the Transaction. Pro forma operating income for
fiscal year 2004, including the restructuring charge, was $86.4
million. Fourth Quarter Results Net sales for the quarter ended
January 1, 2005 were $104.9 million, a decrease of 14% compared to
net sales of $122.1 million for the same quarter in 2003. This
$17.2 million decrease is attributable to a $12.6 million decrease
in our energy storage segment and a $4.6 million decrease in our
separations media segment. The $12.6 million decrease in our energy
storage segment was driven by a $9.4 million decrease in lithium
battery separators and a $6.4 million decline in lead-acid battery
separators and other product sales related to a change in product
mix, offset by a $3.2 million positive impact from the dollar/euro
exchange rate. The $4.6 million decrease in the separations media
segment was driven by lower healthcare product sales, primarily
from the loss of a hemodialysis customer earlier in 2004, offset by
a $3.1 million positive impact from the dollar/euro exchange rate.
Operating income for the fourth quarter of 2004, excluding $0.3
million in restructuring charges and $0.5 million in purchase
accounting adjustments, was $12.9 million compared to $25.1 million
for the fourth quarter of 2003. This decrease in operating results
is due primarily to reduced sales and production volumes in our
lithium battery separator and hemodialysis businesses and $6.9
million in increased depreciation and amortization expense related
to purchase accounting, offset by $7.9 million in cost savings.
Operating income for the fourth quarter of 2004, including the
restructuring charge and purchase accounting adjustment, was $12.1
million. Polypore, Inc. will hold a conference call to discuss the
results of the fourth quarter and fiscal year 2004 on Thursday,
March 3, 2005 at 9:00 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 11:59 PM on Sunday, March 6, 2005 at
800-642-1687 (in the U.S.) or 706-645-9291 (outside the U.S.),
access number 4165863. 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
to protect our intellectual property; the failure to replace lost
senior management; the incurrence of additional debt, contingent
liabilities and expenses in connection with 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 in the "Risk Factors" section of our
Registration Statement on Form S-4 (registration No 33-119224) 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 Three Twelve Twelve Months Months Months Months Ended
Ended Ended Ended Jan. 1, Jan. 3, Jan. 1, Jan. 3, 2005 2004 2005
2004 Net Sales $104,864 $122,062 $490,362 $441,076 Cost of goods
sold 75,935 74,906 313,539 285,631 Gross profit 28,929 47,157
176,823 155,445 SG&A / Other 16,509 22,054 76,566 69,684
Restructuring 318 - 13,899 - Operating income (loss) 12,102 25,103
86,358 85,761 Other (income) expense: Interest expense, net 15,857
6,307 56,651 21,521 Foreign currency and other 875 1,886 2,232
2,433 Other (income) expense - (1,017) - (2,287) Income (loss)
before income taxes (4,630) 17,927 27,475 64,094 Income taxes 678
314 10,440 18,781 Net income $(5,308) $17,613 $17,035 $45,313 * The
pro forma results of operations for the twelve months ended January
1, 2005 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 $19.0 million for the
sale of inventory that was written up in purchase accounting for
the acquisition. Polypore, Inc. Condensed Consolidated Balance
Sheets (Unaudited, in thousands) January 1, January 3, 2005 2004
Assets: Cash and equivalents $ 31,684 $ 20,063 Other current assets
189,565 161,875 Property, plant and equipment, net 441,350 480,602
Intangibles, net 244,256 17,735 Goodwill 535,541 32,200 Other
21,267 18,167 Total assets $1,463,663 $730,642 Liabilities and
shareholders' equity: Current liabilities (including the $25
million optional prepayment) $99,577 $100,988 Debt, less current
portion 825,292 250,519 Other 232,000 173,157 Redeemable preferred
stock and cumulative dividends payable - 16,221 Shareholders'
equity 306,794 189,757 Total liabilities and shareholders' equity
$1,463,663 $730,642 EBITDA EBITDA represents net income before
interest, taxes, depreciation and amortization. EBITDA is not a
recognized term under generally accepted accounting principles
("GAAP") and does not purport to be an alternative to net income as
a measure of operating performance or to cash flows from operating
activities as a measure of liquidity. Additionally, EBITDA is not
intended to be a measure of free cash flow for management's
discretionary use, as it does not consider certain cash
requirements such as interest payments, tax payments, debt service
requirements and capital expenditures. Management believes that
such non-GAAP information is useful to investors because it
provides meaningful information to assess the Company's core
operations and perform financial analysis on comparative periods
and peer group data. This non-GAAP information also is used by
management to assess the Company's core operations, allocate
resources and make strategic decisions. Our calculation of EBITDA
may not be comparable to the calculation of similarly titled
measures reported by other companies. The following is a
reconciliation of EBITDA to net income for the periods indicated.
Reconciliation of EBITDA ($ in thousands) ** Three Three Twelve
Twelve Months Months Months Months Ended Ended Ended Ended Jan. 1,
05 Jan. 3, 04 Jan. 1, 05 Jan. 3, 04 Net income $(5,308) $17,613
$11,963 $45,313 + Interest expense 15,857 6,307 43,879 21,521 +
Income taxes 678 314 6,971 18,781 + Depreciation and amortization
expense 15,773 8,829 48,954 38,693 EBITDA $27,000 $33,063 $111,767
$124,308 Reconciliation of Adjusted EBITDA ($ in thousands) **
Three Three Twelve Twelve Months Months Months Months Ended Ended
Ended Ended Jan. 1, Jan. 3, Jan. 1, Jan. 3, 2005 2004 2005 2004
EBITDA $27,000 $33,063 $111,767 $124,308 + Restructuring Charge 318
- 15,687 - + Non-cash purchase acct. adjustments 472 - 24,257 - +
Other (currency, transaction costs, other) 3,675 4,113 7,118 11,323
* Adjusted EBITDA - defined in credit agreement $31,465 $37,176
$158,829 $135,631 * 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 have refinanced. ** Statement of operations data
presented for the twelve months ended January 1, 2005 represents
the combination of historical results for the periods from January
4, 2004 through May 1, 2004 and May 2, 2004 through January 1,
2005. Contacts Lynn Amos 704.587.8409 Mark Hadley 704.587.8886
DATASOURCE: Polypore, Inc. CONTACT: Lynn Amos, +1-704-587-8409, or
Mark Hadley, +1-704-587-8886, both of Polypore, Inc. Web site:
http://www.polypore.net/
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