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/
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