- Separations Media and Transportation and Industrial segments
generated solid performance
- Electronics and Electric Drive Vehicle development progress
continues while volumes declined sequentially due to ongoing
customer supply discussions
- Consolidated Adjusted EPS was $0.24 (including $0.06 from
discontinued operations)
- Strong cash flow generation continued in the quarter
Polypore International, Inc. (NYSE:PPO), a global high technology
filtration company specializing in microporous membranes, today
reported its financial results for the third quarter and nine
months ended September 28, 2013. The results discussed below are
from continuing operations, and therefore exclude the results of
the Company's Microporous business, which is being divested.
For the third quarter:
- Sales were $152.0 million compared with $161.4 million in the
prior-year period. Excluding the effect of foreign currency
translation, sales decreased $11.7 million, or 7%.
- Segment Operating Income was $19.7 million compared with $30.8
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 Income from Continuing Operations was $8.0 million, or
$0.18 per diluted share, compared with $15.5 million, or $0.33 per
diluted share, in the prior-year period. Income from Continuing
Operations was $4.5 million, or $0.10 per diluted share, compared
with $12.4 million, or $0.26 per diluted share, in the prior-year
period. A table showing the reconciliation of Adjusted Income from
Continuing Operations and Adjusted EPS from Continuing Operations
to U.S. GAAP amounts is included in this release.
Robert B. Toth, President and Chief Executive Officer, said,
"During the third quarter our Transportation and Industrial and
Separations Media segments, which represent the majority of our
Company, delivered solid performance, and the Company continued to
generate substantial free cash flow. In the Electronics and EDVs
segment, consumer electronics orders remained weak and EDV volumes
declined sequentially as we are active in supply discussions. These
ongoing discussions can impact order flow and quarterly
results given the size and scale of certain customers.
"In the EDV market, where development momentum continues and
where there are positive growth signals, we are working to
formalize partnerships with several customers, highlighting the
field performance of our products, our patent-protected coating
technology, and the capacity investments we have completed to meet
future supply needs," continued Toth. "As the leading qualified
supplier to the largest number of vehicle models in the market, we
are working with many current and next generation battery makers,
and we are focused on making disciplined decisions in the interests
of our shareholders, rather than reacting to short-term
dynamics."
For the nine months ended September 28, 2013:
- Sales were $466.9 million compared with $486.6 million in the
first nine months of 2012. Excluding the effect of foreign currency
translation, sales decreased $22.2 million, or 5%.
- Segment Operating Income was $76.9 million compared with $107.3
million in the prior-year period.
- Adjusted Income from Continuing Operations was $33.4 million,
or $0.72 per diluted share, compared with $55.9 million, or $1.19
per diluted share, in the prior-year period. Income from Continuing
Operations was $22.7 million, or $0.49 per diluted share, compared
with $45.9 million, or $0.97 per diluted share, in the prior-year
period.
Adjusted EBITDA
Adjusted EBITDA was $38.1 million ($32.8 million from continuing
operations) in the third quarter of 2013 compared with $47.6
million ($43.9 million from continuing operations) in the third
quarter of 2012. Adjusted EBITDA for the twelve months ended
September 28, 2013 was $186.7 million ($164.0 million from
continuing operations). Adjusted earnings before interest, taxes,
depreciation and amortization ("Adjusted EBITDA"), as defined in
Polypore's senior secured credit agreement, is reconciled to Income
from Continuing Operations in the attached table.
Energy Storage Business
Transportation and Industrial Segment
- Sales of lead-acid battery separators were $76.4 million and
Segment Operating Income was $16.2 million and 21% of sales,
consistent with the prior-year period.
Electronics and Electric Drive Vehicles ("EDVs") Segment
- Sales of lithium battery separators were $27.8 million compared
with $43.5 million in the prior-year period. The decrease from the
prior-year period was due to lower volumes in consumer
electronics-related sales.
- Segment Operating Income was $2.3 million and 8% of sales
compared with $10.5 million and 24% of sales for the prior-year
period. The decline was due to lower sales volumes.
Separations Media Segment
Sales were $47.8 million compared with $41.2 million in the
prior-year period. Excluding the effect of foreign currency
translation, sales increased $4.7 million, or 11%.
- Sales of healthcare products were $29.1 million, up 12%
compared with $26.0 million in the prior-year period due to higher
volumes and a favorable currency effect.
- Sales of filtration and specialty products were $18.7 million,
up 23% compared with $15.2 million in the prior-year period, driven
by higher volumes and a favorable currency effect.
- Segment Operating Income was $9.6 million and 20% of sales
compared with $9.7 million and 24% of sales in the prior-year
period. The decrease in operating income margin was primarily due
to previously disclosed planned preventative maintenance shutdowns
that were longer than in the prior-year period. Full year 2013
operating income margin is still expected to be similar to prior
years' levels.
Microporous Divestiture
As previously disclosed, Polypore entered into a Stock Purchase
Agreement to sell its Microporous business to Seven Mile Capital
Partners for a purchase price of $120 million. The sale is subject
to Federal Trade Commission approval and is expected to close in
the fourth quarter of 2013.
Share Repurchase Update
As of September 28, 2013, the Company had repurchased 2 million
shares of common stock for a total cost of approximately $80.3
million year-to-date, leaving 2 million shares remaining under its
current repurchase authorization of 4 million shares.
Conference Call
Polypore International, Inc. will hold a conference call to
discuss the Company's third quarter 2013 financial results and
business outlook today, Monday, November 4, 2013, at 4:45 p.m.
Eastern time. The dial-in number for the conference call is (631)
291-4526. Enter code 72588259. A replay of the conference call will
be available through Monday, November 11, 2013 via telephone at
(404) 537-3406. Enter code 72588259. 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.
About Polypore International, Inc.
Polypore International, Inc. is a global high technology
filtration company specializing in microporous membranes.
Polypore's flat sheet and hollow fiber membranes are used in
specialized applications that require the removal or separation of
various materials from liquids, primarily in the ultrafiltration
and microfiltration markets. Based in Charlotte, NC, Polypore
International, Inc. is a market leader with manufacturing
facilities or sales offices in ten countries serving six
continents. See www.polypore.net.
Non-GAAP Supplemental Information
Adjusted EBITDA, Adjusted EBITDA from Continuing Operations,
Adjusted Net Income, Adjusted Income from Continuing Operations,
Adjusted EPS (earnings per share) and Adjusted EPS from Continuing
Operations 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 net income excluding certain
items. We define Adjusted Income from Continuing Operations 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. We define Adjusted EPS
from Continuing Operations as Adjusted Income from Continuing
Operations divided by the number of diluted shares of common stock
outstanding. The adjustments used in calculating Adjusted Net
Income, Adjusted Income from Continuing Operations, Adjusted EPS
and Adjusted EPS from Continuing Operations are consistent with the
adjustments used in calculating Adjusted EBITDA, as defined in our
credit agreement, and Adjusted EBITDA from Continuing
Operations.
For more information regarding the computation of Adjusted
EBITDA, Adjusted EBITDA from Continuing Operations, Adjusted Net
Income, Adjusted Income from Continuing Operations, Adjusted EPS
and Adjusted EPS from Continuing Operations, the reconciliation of
Adjusted EBITDA and Adjusted EBITDA from Continuing Operations to
income from continuing operations, the reconciliation of Adjusted
Net Income and Adjusted Income from Continuing Operations to income
from continuing operations and the reconciliation of Adjusted EPS
and Adjusted EPS from Continuing Operations to earnings per share
from continuing operations, 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, Adjusted
Income from Continuing Operations, Adjusted EPS and Adjusted EPS
from Continuing Operations 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, as
defined in our credit agreement.
Adjusted EBITDA, Adjusted EBITDA from Continuing Operations,
Adjusted Net Income, Adjusted Income from Continuing Operations,
Adjusted EPS and Adjusted EPS from Continuing Operations are not
measurements of financial performance under GAAP and such financial
measures should not be considered as an alternative to net income,
income from continuing operations, 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 not materializing
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 |
(unaudited) |
(in millions, except per share
data) |
|
|
|
|
|
|
Three Months
Ended |
Nine Months
Ended |
|
September 28,
2013 |
September 29,
2012 |
September 28,
2013 |
September 29,
2012 |
Net sales |
$ 152.0 |
$ 161.4 |
$ 466.9 |
$ 486.6 |
Cost of goods sold |
104.4 |
105.6 |
309.6 |
299.3 |
Gross profit |
47.6 |
55.8 |
157.3 |
187.3 |
Selling, general and administrative
expenses |
33.2 |
29.0 |
96.4 |
93.6 |
Operating income |
14.4 |
26.8 |
60.9 |
93.7 |
Other (income) expense: |
|
|
|
|
Interest expense, net |
9.9 |
9.5 |
29.6 |
26.4 |
Foreign currency and other |
0.9 |
0.4 |
1.6 |
(0.8) |
Write-off of loan acquisition
costs associated with refinancing of senior credit agreement |
-- |
-- |
-- |
2.5 |
|
10.8 |
9.9 |
31.2 |
28.1 |
Income from continuing operations before
income taxes |
3.6 |
16.9 |
29.7 |
65.6 |
Income taxes |
(0.9) |
4.5 |
7.0 |
19.7 |
Income from continuing operations |
4.5 |
12.4 |
22.7 |
45.9 |
Income from discontinued operations, net of
income taxes |
2.5 |
1.8 |
8.8 |
7.6 |
Net income |
$ 7.0 |
$ 14.2 |
$ 31.5 |
$ 53.5 |
|
|
|
|
|
Net income per share - basic: |
|
|
|
|
Continuing operations |
$ 0.10 |
$ 0.27 |
$ 0.50 |
$ 0.99 |
Discontinued operations |
0.06 |
0.04 |
0.19 |
0.16 |
Net income per share |
$ 0.16 |
$ 0.31 |
$ 0.69 |
$ 1.15 |
|
|
|
|
|
Net income per share - diluted: |
|
|
|
|
Continuing operations |
$ 0.10 |
$ 0.26 |
$ 0.49 |
$ 0.97 |
Discontinued operations |
0.05 |
0.04 |
0.19 |
0.16 |
Net income per share |
$ 0.15 |
$ 0.30 |
$ 0.68 |
$ 1.13 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding -
basic |
44,748,071 |
46,550,852 |
45,877,092 |
46,527,292 |
Weighted average shares outstanding -
diluted |
45,386,263 |
47,211,245 |
46,526,755 |
47,211,168 |
|
|
|
|
|
|
|
|
|
|
Note: The condensed consolidated
statements of income for all periods presented reflect the
presentation of discontinued operations. |
|
Polypore International,
Inc. |
Condensed consolidated
balance sheets |
(in millions) |
|
|
|
|
September 28,
2013 |
December 29, 2012
(a) |
Assets: |
|
|
Cash and cash equivalents |
$ 26.9 |
$ 44.9 |
Accounts receivable, net |
103.7 |
122.1 |
Inventories |
113.3 |
115.5 |
Other |
34.0 |
44.4 |
Assets held for sale |
91.2 |
92.2 |
Current assets |
369.1 |
419.1 |
|
|
|
Property, plant and equipment, net |
596.6 |
607.5 |
Goodwill |
444.5 |
444.5 |
Intangibles and loan acquisition costs,
net |
97.0 |
107.0 |
Other |
7.6 |
8.0 |
Total assets |
$ 1,514.8 |
$ 1,586.1 |
|
|
|
Liabilities and shareholders'
equity: |
|
|
Accounts payable and accrued liabilities |
$ 78.3 |
$ 74.1 |
Income taxes payable |
1.0 |
1.6 |
Current portion of debt |
16.9 |
50.0 |
Liabilities related to assets held for
sale |
20.6 |
19.6 |
Current liabilities |
116.8 |
145.3 |
|
|
|
Debt, less current portion |
629.4 |
646.3 |
Other |
213.8 |
211.7 |
Shareholders' equity |
554.8 |
582.8 |
Total liabilities and shareholders'
equity |
$ 1,514.8 |
$ 1,586.1 |
|
|
|
|
|
|
(a) Derived from audited
consolidated financial statements. |
|
Polypore International,
Inc. |
Condensed consolidated
statements of cash flows |
(unaudited, in millions) |
|
|
|
|
Nine Months
Ended |
|
September 28,
2013 |
September 29,
2012 |
Operating activities: |
|
|
Net income |
$ 31.5 |
$ 53.5 |
Adjustments to reconcile net income to net
cash provided by operating activities: |
|
|
Depreciation and amortization
expense |
43.2 |
41.4 |
Stock-based compensation |
14.2 |
12.3 |
Deferred income taxes |
(3.2) |
10.0 |
Write-off of loan acquisition
costs associated with refinancing of senior credit agreement |
-- |
2.5 |
Changes in operating assets and
liabilities |
37.4 |
(36.2) |
Other |
3.9 |
3.1 |
Net cash provided by operating
activities |
127.0 |
86.6 |
Investing activities: |
|
|
Purchases of property, plant and equipment,
net |
(19.8) |
(123.7) |
Net cash used in investing
activities |
(19.8) |
(123.7) |
Financing activities: |
|
|
Principal payments on debt |
(15.0) |
(4.7) |
Net payments on revolving credit
facility |
(35.0) |
-- |
Repurchases of common stock |
(80.7) |
-- |
Proceeds from new senior credit
agreement |
-- |
350.0 |
Principal payments in connection with
refinancing of senior credit agreement |
-- |
(342.3) |
Loan acquisition costs |
-- |
(6.2) |
Other |
4.0 |
0.3 |
Net cash used in financing
activities |
(126.7) |
(2.9) |
Effect of exchange rate changes on cash and
cash equivalents |
1.5 |
-- |
Net decrease in cash and cash
equivalents |
(18.0) |
(40.0) |
Cash and cash equivalents at beginning of
period |
44.9 |
92.6 |
Cash and cash equivalents at end of
period |
$ 26.9 |
$ 52.6 |
|
Polypore International,
Inc. |
Supplemental
Information |
Reconciliation of
Adjusted EBITDA |
(unaudited, in millions) |
|
|
|
|
|
|
Three Months
Ended |
Twelve Months
Ended |
|
September 28,
2013 |
September 29,
2012 |
September 28,
2013 |
September 29,
2012 |
Income from continuing operations |
$ 4.5 |
$ 12.4 |
$ 36.8 |
$ 68.9 |
Add: |
|
|
|
|
Depreciation and amortization
expense |
13.6 |
13.0 |
54.1 |
51.4 |
Interest expense, net |
9.9 |
9.5 |
39.2 |
35.0 |
Income taxes |
(0.9) |
4.5 |
12.6 |
29.7 |
EBITDA from continuing operations |
27.1 |
39.4 |
142.7 |
185.0 |
Adjustments: |
|
|
|
|
Stock-based compensation |
4.9 |
3.9 |
18.1 |
17.1 |
Foreign currency (gain)
loss |
0.6 |
0.6 |
1.7 |
(2.4) |
Loss on disposal of property,
plant and equipment |
0.1 |
-- |
1.0 |
0.9 |
FTC-related costs incurred due
to the Microporous litigation and order compliance |
0.1 |
0.1 |
0.3 |
0.2 |
Write-off of loan acquisition
costs associated with refinancing of senior credit agreement |
-- |
-- |
-- |
2.5 |
Other non-cash or non-recurring
items |
-- |
(0.1) |
0.2 |
-- |
Adjusted EBITDA from continuing
operations |
32.8 |
43.9 |
164.0 |
203.3 |
Adjusted EBITDA from discontinued
operations |
5.3 |
3.7 |
22.7 |
19.5 |
Adjusted EBITDA |
$ 38.1 |
$ 47.6 |
$ 186.7 |
$ 222.8 |
|
Polypore International,
Inc. |
Supplemental
Information |
Reconciliation of
Adjusted Net Income and Adjusted EPS |
(unaudited) |
(in millions, except per share
data) |
|
|
|
|
|
|
Three Months
Ended |
Nine Months
Ended |
|
September 28,
2013 |
September 29,
2012 |
September 28,
2013 |
September 29,
2012 |
Income from continuing operations |
$ 4.5 |
$ 12.4 |
$ 22.7 |
$ 45.9 |
Adjustments: |
|
|
|
|
Stock-based compensation |
4.9 |
3.9 |
14.2 |
12.3 |
Foreign currency (gain)
loss |
0.6 |
0.6 |
1.1 |
(0.2) |
Loss on disposal of property,
plant and equipment |
0.1 |
-- |
0.9 |
0.8 |
FTC-related costs incurred due
to the Microporous litigation and order compliance |
0.1 |
0.1 |
0.3 |
0.4 |
Write-off of loan acquisition
costs associated with refinancing of senior credit agreement |
-- |
-- |
-- |
2.5 |
Other non-cash or non-recurring
items |
0.2 |
-- |
0.6 |
0.1 |
Impact of adjustments on income
taxes |
(2.4) |
(1.5) |
(6.4) |
(5.9) |
Adjusted income from continuing
operations |
8.0 |
15.5 |
33.4 |
55.9 |
Adjusted income from discontinued
operations |
2.7 |
1.9 |
9.0 |
7.7 |
Adjusted net income |
$ 10.7 |
$ 17.4 |
$ 42.4 |
$ 63.6 |
|
|
|
|
|
Net income per share - diluted: |
|
|
|
|
Income from continuing
operations |
$ 0.10 |
$ 0.26 |
$ 0.49 |
$ 0.97 |
Impact of adjustments on income
from continuing operations |
0.08 |
0.07 |
0.23 |
0.22 |
Adjusted earnings per share
from continuing operations |
0.18 |
0.33 |
0.72 |
1.19 |
Adjusted earnings per share
from discontinued operations |
0.06 |
0.04 |
0.19 |
0.16 |
Adjusted earnings per
share |
$ 0.24 |
$ 0.37 |
$ 0.91 |
$ 1.35 |
|
|
|
|
|
Weighted average shares outstanding -
diluted |
45,386,263 |
47,211,245 |
46,526,755 |
47,211,168 |
|
Polypore International,
Inc. |
Supplemental
Information |
Reconciliation of Segment
Operating Income to Income from Continuing Operations Before Income
Taxes |
(unaudited, in millions) |
|
|
|
|
|
|
Three Months
Ended |
Nine Months
Ended |
|
September 28,
2013 |
September 29,
2012 |
September 28,
2013 |
September 29,
2012 |
Operating income: |
|
|
|
|
Electronics and EDVs |
$ 2.3 |
$ 10.5 |
$ 10.6 |
$ 41.8 |
Transportation and
industrial |
16.2 |
16.1 |
49.3 |
48.8 |
Energy storage |
18.5 |
26.6 |
59.9 |
90.6 |
Separations media |
9.6 |
9.7 |
38.9 |
36.5 |
Corporate and other |
(8.4) |
(5.5) |
(21.9) |
(19.8) |
Segment operating income |
19.7 |
30.8 |
76.9 |
107.3 |
Stock-based compensation |
4.9 |
3.9 |
14.2 |
12.3 |
Non-recurring and other costs |
0.4 |
0.1 |
1.8 |
1.3 |
Total operating income |
14.4 |
26.8 |
60.9 |
93.7 |
Reconciling items: |
|
|
|
|
Interest expense, net |
9.9 |
9.5 |
29.6 |
26.4 |
Foreign currency and other |
0.9 |
0.4 |
1.6 |
(0.8) |
Write-off of loan acquisition
costs associated with refinancing of senior credit agreement |
-- |
-- |
-- |
2.5 |
Income from continuing operations before
income taxes |
$ 3.6 |
$ 16.9 |
$ 29.7 |
$ 65.6 |
CONTACT: Polypore International, Inc.
Investor Relations
(704) 587-8886
investorrelations@polypore.net