- Solid performance in the Separations Media and Transportation
and Industrial segments
- Fourth quarter 2012 reflects weak end-market demand in the
Electronics and Electric Drive Vehicles ("EDVs") segment
- Electronics and EDVs segment is expected to experience improved
demand in 2013
- Company transitioning from a period of significant capital
investment to a period of substantial cash generation
- The Board of Directors has authorized the Company to repurchase
up to 4 million shares of common stock in 2013
Polypore International, Inc. (NYSE:PPO) today reported its
financial results for the fourth quarter and year ended December
29, 2012.
For the fourth quarter:
- Sales were $180.2 million compared with $191.0 million in the
prior-year period. Excluding the effect of foreign currency
translation, sales decreased $7.2 million, or 4%.
- Segment Operating Income was $39.3 million compared with $48.5
million in the prior-year period. A table showing the
reconciliation of Segment Operating Income to U.S. GAAP amounts is
included in this release.
- Adjusted Net Income and Adjusted EPS were $20.5 million and
$0.43 per diluted share, compared with $27.6 million and $0.58 per
diluted share in the prior-year period. Net income was $17.5
million, or $0.37 per diluted share, compared with $26.4 million,
or $0.56 per diluted share, in the prior-year period. A table
showing the reconciliation of Adjusted Net Income and Adjusted EPS
to U.S. GAAP amounts is included in this release.
Commenting about the fourth quarter, Robert B. Toth, President
and Chief Executive Officer, said, "Solid performance of our
Separations Media and Transportation and Industrial segments was
offset by our Electronics and EDVs segment, where anticipated
improvements did not materialize. Specifically, in the Electronics
and EDVs segment, consumer electronics-related sales declined due
to a further weakening of end-market demand, despite the addition
of new accounts. In EDVs, the level of production of certain
high-separator content EDVs was lower than expected.
"While the drivers of the improvement anticipated in Electronics
and EDVs did not develop in the quarter, specific factors in those
markets—combined with the strengths of our other
businesses—position us for growth occurring over the course of
2013. Additionally, with our capacity investments now substantially
complete, we are moving to a period of significant cash generation
and earnings growth potential. With that, Polypore's Board of
Directors has authorized the repurchase of up to 4 million shares
of common stock by December 31, 2013," added Mr. Toth.
For the year ended December 29, 2012:
- Sales were $717.4 million compared with $763.1 million in 2011.
Excluding the effect of foreign currency translation, sales
decreased $21.3 million, or 3%.
- Segment Operating Income was $158.1 million compared with
$199.4 million in the prior year. A table showing the
reconciliation of Segment Operating Income to U.S. GAAP amounts is
included in this release.
- Adjusted Net Income and Adjusted EPS were $84.1 million and
$1.78 per diluted share, compared with $110.3 million and $2.34 per
diluted share in the prior year. Net income was $71.0 million, or
$1.50 per diluted share, compared with $105.2 million, or $2.23 per
diluted share, in the prior year. A table showing the
reconciliation of Adjusted Net Income and Adjusted EPS to U.S. GAAP
amounts is included in this release.
Adjusted EBITDA
Adjusted EBITDA was $53.4 million in the fourth quarter of 2012
compared with $62.1 million in the fourth quarter of 2011. For the
year, Adjusted EBITDA was $214.1 million. Adjusted earnings before
interest, taxes, depreciation and amortization ("Adjusted EBITDA"),
as defined in Polypore's senior secured credit agreement, is
reconciled to U.S. GAAP amounts in the attached table.
Energy Storage Business
Transportation and Industrial Segment
- Sales of lead-acid battery separators in the quarter were $96.5
million, up 7% compared with $90.5 million in the prior-year
period. Excluding the effect of foreign currency translation, sales
increased $8.0 million, or 9%. This increase reflects strong growth
in Asia and a more typical winter season in Europe. For the year,
sales were $367.7 million compared with $371.9 million. Excluding
the effect of foreign currency translation, sales increased $8.8
million, or 2%.
- Segment Operating Income was $22.5 million and 23% of sales
compared with $22.5 million and 25% of sales for the prior-year
period. For the year, Segment Operating Income was $83.2 million
and 23% of sales compared with $96.1 million and 26% of sales for
the prior year. The decrease in segment operating income margin was
due to the costs of exporting goods from U.S. and European
manufacturing facilities to Asia and the costs associated with
growth investments necessary to meet growing demand in Asia.
Electronics and Electric Drive Vehicles ("EDVs") Segment
- Sales of lithium battery separators in the quarter were $34.1
million compared with $52.0 million in the prior-year period. For
the year, sales were $167.4 million compared with $201.0 million in
the prior year. These results were primarily due to weakened
end-market demand in consumer electronics applications and
lower-than-expected production of high-separator content EDVs.
- Segment Operating Income in the quarter was $5.3 million and
16% of sales compared with $22.4 million and 43% of sales for the
prior-year period. For the year, Segment Operating Income was $47.2
million and 28% of sales compared with $91.1 million and 45% of
sales in the prior year. Segment Operating Income margin was
impacted by the lack of operating leverage from lower sales and the
costs associated with recent manufacturing capacity
expansions.
- Polypore expects overall demand for EDVs to be higher in 2013
based on customer forecasts, the recent startup of new battery and
EDV production facilities and continued momentum in planned vehicle
launches. Additionally, the inventory level correction – which
occurred downstream in the supply chain during 2012 to reflect
actual vehicle production compared with the higher levels of
production initially projected – is not expected to repeat in
2013.
Separations Media Segment
Sales for the quarter were $49.6 million, up 2% compared with
$48.5 million in the prior-year period. Excluding the effect of
foreign currency translation, sales increased $2.7 million, or 6%.
For the year, sales were $182.3 million compared with $190.2
million in the prior year. Excluding the effect of foreign currency
translation, sales increased $3.5 million, or 2%, reflecting
increases in both healthcare and filtration and specialty product
sales.
- Fourth quarter sales of healthcare products were $32.7 million
compared with $32.0 million in the prior-year period. For the year,
sales were $114.8 million compared with $120.4 million.
- Fourth quarter sales of filtration and specialty products were
$16.9 million compared with $16.5 million in the prior-year period.
For the year, sales were $67.5 million compared with $69.8 million
in the prior year.
- Segment Operating Income in the quarter was $16.0 million and
32% of sales compared with $13.6 million and 28% of sales in the
prior-year period, driven by product mix and production timing. For
the year, Segment Operating Income was $52.5 million and 29% of
sales compared with $54.7 million and 29% of sales in the prior
year.
Outlook
"While the first quarter will be challenging, the long-term
demand drivers for our products remain unchanged and we expect to
experience growth as 2013 progresses," said Mr. Toth. "In three of
our businesses, the opportunities are more established and less
variable over the short term: In the lead-acid separator business,
we are focused on continued growth in Asia; and, in the healthcare
and filtration businesses, we will grow our core applications while
supporting the development of new applications beyond 2013.
"Within our lithium separator business, which can experience
sizable short-term demand fluctuations, we will continue to monitor
and adjust our manufacturing capacity and cost structure to meet
near-term levels of demand," added Mr. Toth. "In consumer
electronics, where we have long held a strong market position, we
are well prepared to serve the market as sales recover. In EDV and
emerging Energy Storage System applications, where we have the
preferred products and technology, we have a step-change growth
opportunity as these markets develop."
Stock Repurchase Authorization
The Board of Directors has authorized the Company to repurchase
up to 4 million shares of common stock by December 31, 2013. The
timing, price and volume of repurchases will be based on market
conditions, relevant securities laws and other factors. The stock
repurchases may be made from time-to-time on the open market or in
privately negotiated transactions. The stock repurchase program
does not require the Company to repurchase any specific number of
shares, and the Company may terminate the repurchase program at any
time. The cash proceeds received from any potential divestiture
associated with the previously announced formal evaluation of
alternatives for the Company's lead-acid battery separator
facilities in Piney Flats, Tennessee, and Feistriz, Austria may be
a factor in the amount of shares repurchased.
Conference Call
Polypore International, Inc. will hold a conference call to
discuss the Company's fourth quarter 2012 financial results and
business outlook today, Wednesday, February 20, 2013, at 4:45 p.m.
Eastern time. The number to call for this interactive
teleconference is (913) 312-0833. Enter code 7784606. A replay of
the conference call will be available through February 27, 2013,
via telephone at (719) 457-0820. Enter code 7784606. The call will
also be webcast live and archived for 30 days in the Investor
Relations section of the Company's website at
http://investor.polypore.net/.
In addition, the Company filed a Current Report on Form 8-K with
the Securities and Exchange Commission with Supplemental Financial
Information that is located on the Company's website.
Non-GAAP Supplemental Information
Adjusted EBITDA, Adjusted Net Income and Adjusted EPS (earnings
per share) are non-GAAP financial measures presented in this press
release as supplemental disclosures to net income and reported
results. Adjusted EBITDA is defined in our credit agreement and
represents earnings before interest, taxes, depreciation and
amortization and certain non-operating items, stock-based
compensation and other non-cash or non-recurring charges.
We define Adjusted Net Income as income from continuing
operations excluding certain items. We define Adjusted EPS as
Adjusted Net Income divided by the number of diluted shares of
common stock outstanding. The adjustments used in calculating
Adjusted Net Income and Adjusted EPS are consistent with the
adjustments used in calculating Adjusted EBITDA, as defined in our
credit agreement.
For more information regarding the computation of Adjusted
EBITDA, Adjusted Net Income and Adjusted EPS, the reconciliation of
Adjusted EBITDA to net income, Adjusted Net Income to net income
and Adjusted EPS to earnings per share, please see the attached
financial tables.
We present these non-GAAP financial measures because we believe
that they are useful indicators of our operating performance and
facilitate the comparison of results between periods. Adjusted
EBITDA is a measure used in calculating covenant compliance under
the terms of our credit agreement. We also use Adjusted EBITDA to
review and assess our operating performance in connection with
employee incentive programs and the preparation of our annual
budget and financial projections. Adjusted Net Income and Adjusted
EPS exclude amounts we do not consider part of our ongoing
operating results when assessing performance and are calculated
consistent with the calculation of Adjusted EBITDA.
Adjusted EBITDA, Adjusted Net Income and Adjusted EPS are not
measurements of financial performance under GAAP and such financial
measures should not be considered as an alternative to net income,
cash flows from operating activities or other measures of
performance determined in accordance with GAAP. In addition, our
calculation of these non-GAAP financial measures may not be
comparable to the calculation of similarly titled measures reported
by other companies.
Forward-Looking Statements
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 to develop innovative products; 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; our substantial indebtedness; interest rate risk related
to our variable rate indebtedness; our inability to generate cash;
restrictions related to the senior secured credit agreement;
employee slowdowns, strikes or similar actions; product liability
claims exposure; risks in connection with our operations outside
the United States, including compliance with applicable
anti-corruption laws; 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 loss of senior management; the incurrence of
additional debt, contingent liabilities and expenses in connection
with future acquisitions; the failure to effectively integrate
newly acquired operations; lithium market demand does not
materialize as anticipated; the absence of expected returns from
the intangible assets we have recorded; the adverse impact from
legal proceedings on our financial condition; and natural
disasters, epidemics, terrorist acts and other events beyond our
control. Additional information concerning these and other
important factors can be found in Item 1A. "Risk Factors" of our
most recent Annual Report on Form 10-K and subsequent reports filed
with the Securities and Exchange Commission. Such forward-looking
statements speak only as of the date of this press release.
Polypore expressly disclaims any obligation to release publicly any
updates or revisions to any forward-looking statements contained
herein to reflect any change in Polypore's expectations with regard
thereto or change in events, conditions or circumstances on which
any statement is based.
|
|
|
|
|
Polypore International,
Inc. |
|
|
|
|
Condensed consolidated statements of
income |
|
|
|
|
(in millions, except per share data) |
|
|
|
|
|
Three Months
Ended |
Year
Ended |
|
December 29,
2012 |
December 31,
2011 |
December 29,
2012 |
December 31, 2011
(a) |
Net sales |
$ 180.2 |
$ 191.0 |
$ 717.4 |
$ 763.1 |
Cost of goods sold |
116.8 |
112.8 |
453.5 |
441.0 |
Gross profit |
63.4 |
78.2 |
263.9 |
322.1 |
Selling, general and administrative
expenses |
28.4 |
34.5 |
123.9 |
132.6 |
Operating income |
35.0 |
43.7 |
140.0 |
189.5 |
Other (income) expense: |
|
|
|
|
Interest expense, net |
9.6 |
8.5 |
36.0 |
34.4 |
Foreign currency and other |
0.8 |
(2.4) |
-- |
(2.0) |
Write-off of loan acquisition costs
associated with refinancing of senior credit agreement |
-- |
-- |
2.5 |
-- |
|
10.4 |
6.1 |
38.5 |
32.4 |
Income before income taxes |
24.6 |
37.6 |
101.5 |
157.1 |
Income taxes |
7.1 |
11.2 |
30.5 |
51.9 |
Net income |
$ 17.5 |
$ 26.4 |
$ 71.0 |
$ 105.2 |
|
|
|
|
|
Net income per share - basic |
$ 0.37 |
$ 0.57 |
$ 1.52 |
$ 2.28 |
|
|
|
|
|
Net income per share - diluted |
$ 0.37 |
$ 0.56 |
$ 1.50 |
$ 2.23 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding -
basic |
46,579,665 |
46,490,064 |
46,540,385 |
46,182,204 |
Weighted average shares outstanding -
diluted |
47,260,142 |
47,245,819 |
47,229,595 |
47,119,997 |
|
|
|
|
|
(a) Derived from audited consolidated
financial statements. |
|
|
|
|
|
|
|
|
|
|
|
|
Polypore International,
Inc. |
|
|
Condensed consolidated balance
sheets |
|
|
(in millions) |
|
|
|
|
|
|
December 29,
2012 |
December 31, 2011
(a) |
Assets: |
|
|
Cash and cash equivalents |
$ 44.9 |
$ 92.6 |
Accounts receivable, net |
137.3 |
134.0 |
Inventories |
119.9 |
90.4 |
Other |
45.2 |
24.8 |
Current assets |
347.3 |
341.8 |
|
|
|
Property, plant and equipment, net |
638.8 |
527.8 |
Goodwill |
469.3 |
469.3 |
Intangibles and loan acquisition costs,
net |
121.7 |
133.6 |
Other |
9.0 |
9.4 |
Total assets |
$ 1,586.1 |
$ 1,481.9 |
|
|
|
Liabilities and shareholders'
equity: |
|
|
Accounts payable and accrued liabilities |
$ 78.2 |
$ 96.2 |
Income taxes payable |
1.6 |
5.9 |
Current portion of debt |
50.0 |
3.7 |
Current liabilities |
129.8 |
105.8 |
|
|
|
Debt, less current portion |
646.3 |
705.8 |
Other |
227.2 |
170.9 |
Shareholders' equity |
582.8 |
499.4 |
Total liabilities and shareholders'
equity |
$ 1,586.1 |
$ 1,481.9 |
|
|
|
(a) Derived from audited consolidated
financial statements. |
|
|
|
|
|
|
|
|
Polypore International,
Inc. |
|
|
Condensed consolidated statements of
cash flows |
|
|
(in millions) |
|
|
|
|
|
|
Year
Ended |
|
December 29,
2012 |
December 31, 2011
(a) |
Operating activities: |
|
|
Net income |
$ 71.0 |
$ 105.2 |
Adjustments to reconcile net income to
net cash provided by operating activities: |
|
|
Depreciation and
amortization expense |
55.7 |
51.3 |
Stock-based
compensation |
16.3 |
9.3 |
Deferred income taxes |
9.8 |
28.6 |
Excess tax benefit from
stock-based compensation |
(0.3) |
(14.1) |
Write-off of loan
acquisition costs associated with refinancing of senior credit
agreement |
2.5 |
-- |
Other |
4.1 |
0.8 |
Changes in operating assets
and liabilities |
(54.3) |
(36.3) |
Net cash provided by operating
activities |
104.8 |
144.8 |
Investing activities: |
|
|
Purchases of property, plant and equipment,
net |
(137.1) |
(156.3) |
Net cash used in investing activities |
(137.1) |
(156.3) |
Financing activities: |
|
|
Proceeds from new senior credit
agreement |
350.0 |
-- |
Principal payments in connection with
refinancing of senior credit agreement |
(342.3) |
-- |
Principal payments on debt |
(4.7) |
(4.5) |
Payments on revolving credit facility |
(15.0) |
-- |
Loan acquisition costs |
(6.2) |
(0.6) |
Proceeds from stock option exercises |
1.3 |
6.7 |
Excess tax benefit from stock-based
compensation |
0.3 |
14.1 |
Other |
(0.2) |
1.9 |
Net cash provided by (used in) financing
activities |
(16.8) |
17.6 |
Effect of exchange rate changes on cash and
cash equivalents |
1.4 |
(3.5) |
Net increase (decrease) in cash and
cash equivalents |
(47.7) |
2.6 |
Cash and cash equivalents at beginning of
year |
92.6 |
90.0 |
Cash and cash equivalents at end of
year |
$ 44.9 |
$ 92.6 |
|
|
|
(a) Derived from audited consolidated
financial statements. |
|
|
|
|
|
|
|
|
|
|
Polypore International,
Inc. |
|
|
|
|
Supplemental
Information |
|
|
|
|
Reconciliation of Adjusted
EBITDA |
|
|
|
|
(unaudited, in millions) |
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
Year
Ended |
|
December 29,
2012 |
December 31,
2011 |
December 29,
2012 |
December 31,
2011 |
Net income |
$ 17.5 |
$ 26.4 |
$ 71.0 |
$ 105.2 |
Add: |
|
|
|
|
Depreciation and amortization
expense |
14.3 |
13.6 |
55.7 |
51.3 |
Interest expense, net |
9.6 |
8.5 |
36.0 |
34.4 |
Income taxes |
7.1 |
11.2 |
30.5 |
51.9 |
EBITDA |
48.5 |
59.7 |
193.2 |
242.8 |
Adjustments: |
|
|
|
|
Stock-based compensation |
3.9 |
4.8 |
16.3 |
9.3 |
Foreign currency (gain) loss |
0.8 |
(2.4) |
0.6 |
(1.9) |
Loss on disposal of property, plant and
equipment |
-- |
0.2 |
1.0 |
0.3 |
Costs related to the FTC litigation |
-- |
(0.2) |
0.3 |
0.5 |
Write-off of loan acquisition costs
associated with refinancing of senior credit agreement |
-- |
-- |
2.5 |
-- |
Other non-cash or non-recurring
items |
0.2 |
-- |
0.2 |
(0.2) |
Adjusted EBITDA |
$ 53.4 |
$ 62.1 |
$ 214.1 |
$ 250.8 |
|
|
|
|
|
|
|
|
|
|
Polypore International,
Inc. |
|
|
|
|
Supplemental
Information |
|
|
|
|
Reconciliation of Adjusted Net Income
and Adjusted EPS |
|
|
|
|
(unaudited) |
|
|
|
|
(in millions, except per share data) |
|
|
|
|
|
Three Months
Ended |
Year
Ended |
|
December 29,
2012 |
December 31,
2011 |
December 29,
2012 |
December 31,
2011 |
Net income |
$ 17.5 |
$ 26.4 |
$ 71.0 |
$ 105.2 |
Adjustments: |
|
|
|
|
Stock-based compensation |
3.9 |
4.8 |
16.3 |
9.3 |
Foreign currency (gain) loss |
0.8 |
(2.4) |
0.6 |
(1.9) |
Loss on disposal of property, plant and
equipment |
-- |
0.2 |
1.0 |
0.3 |
Costs related to the FTC litigation |
-- |
(0.2) |
0.3 |
0.5 |
Write-off of loan acquisition costs
associated with refinancing of senior credit agreement |
-- |
-- |
2.5 |
-- |
Other non-cash or non-recurring
items |
0.4 |
-- |
0.5 |
(0.2) |
Impact of adjustments on income
taxes |
(2.1) |
(1.2) |
(8.1) |
(2.9) |
Adjusted net income |
$ 20.5 |
$ 27.6 |
$ 84.1 |
$ 110.3 |
|
|
|
|
|
Net income per share - diluted |
$ 0.37 |
$ 0.56 |
$ 1.50 |
$ 2.23 |
Impact of adjustments on net income per
share |
0.06 |
0.02 |
0.28 |
0.11 |
Adjusted earnings per share - diluted |
$ 0.43 |
$ 0.58 |
$ 1.78 |
$ 2.34 |
|
|
|
|
|
Weighted average shares outstanding -
diluted |
47,260,142 |
47,245,819 |
47,229,595 |
47,119,997 |
|
|
|
|
|
|
|
|
|
|
Polypore International,
Inc. |
|
|
|
|
Supplemental
Information |
|
|
|
|
Reconciliation of Segment Operating
Income to Income Before Income Taxes |
|
|
|
|
(unaudited, in millions) |
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
Year
Ended |
|
December 29,
2012 |
December 31,
2011 |
December 29,
2012 |
December 31,
2011 |
Operating income: |
|
|
|
|
Electronics and EDVs |
$ 5.3 |
$ 22.4 |
$ 47.2 |
$ 91.1 |
Transportation and industrial |
22.5 |
22.5 |
83.2 |
96.1 |
Energy storage |
27.8 |
44.9 |
130.4 |
187.2 |
Separations media |
16.0 |
13.6 |
52.5 |
54.7 |
Corporate and other |
(4.5) |
(10.0) |
(24.8) |
(42.5) |
Segment operating income |
39.3 |
48.5 |
158.1 |
199.4 |
Stock-based compensation |
3.9 |
4.8 |
16.3 |
9.3 |
Non-recurring and other costs |
0.4 |
-- |
1.8 |
0.6 |
Total operating income |
35.0 |
43.7 |
140.0 |
189.5 |
Reconciling items: |
|
|
|
|
Interest expense, net |
9.6 |
8.5 |
36.0 |
34.4 |
Foreign currency and other |
0.8 |
(2.4) |
-- |
(2.0) |
Write-off of loan acquisition costs
associated with refinancing of senior credit agreement |
-- |
-- |
2.5 |
-- |
Income before income taxes |
$ 24.6 |
$ 37.6 |
$ 101.5 |
$ 157.1 |
|
|
|
|
|
CONTACT: Polypore International, Inc.
Investor Relations
(704) 587-8886
investorrelations@polypore.net