- Separations Media and Transportation and Industrial segments
delivered solid performance
- Electronics and Electric Drive Vehicles ("EDVs") segment
performance improved
-- EDV sales growth offset continued consumer electronics
weakness -- Licensing agreement validates separator coating
intellectual property position
Polypore International, Inc. (NYSE:PPO), a global high technology
filtration company specializing in microporous membranes, today
reported its financial results for the fourth quarter and full year
ended December 28, 2013. The results discussed below are from
continuing operations and exclude the results of the Microporous
business divested in December.
For the fourth quarter:
- Sales were $169.4 million, up 5% compared with $162.1 million
in the prior-year period. Excluding the effect of foreign currency
translation, sales increased $4.9 million, or 3%.
- Segment Operating Income was $33.8 million, consistent with 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 $14.2 million,
or $0.31 per diluted share, compared with $17.1 million, or $0.36
per diluted share, in the prior-year period, with the primary
difference associated with a higher effective tax rate in the
quarter. Income from Continuing Operations was $10.8 million, or
$0.24 per diluted share, compared with $14.2 million, or $0.30 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: "We
are pleased with the continued solid performance in the
Transportation and Industrial and Separations Media segments, and
with two meaningful accomplishments in the Electronics and EDVs
segment: our technology agreement with Sumitomo Chemical Co., Ltd.
("Sumitomo") and our more recent long-term supply agreement with
Samsung SDI Co., Ltd. ("Samsung"), a global leader in EDV and
Energy Storage Systems ("ESS") batteries. Our technology agreement
with Sumitomo confirms the value of our intellectual property
position regarding ceramic coatings, and the supply agreement with
Samsung underscores the value of our capacity investments and
proven industry-leading products and technology.
"We value long-term customer relationships and, after years of
supporting LG Chem, Ltd. with substantial investments and product
development, we are disappointed that their recent approach and
unacceptable demands left us with no choice but to take legal
action to protect Polypore's intellectual property, which we
announced on January 30," added Toth. "In contrast, the recent
agreements with Sumitomo and Samsung confirm the value of our
strong technology position, the proven performance of our products,
and our ability to provide certainty of supply to meet customer
needs for high-growth applications like EDVs and energy storage
systems. We have—and will continue to pursue—customer relationships
that reflect the value of our products in applications such as EDVs
where exceptional safety and performance characteristics are
critical."
For the year ended December 28, 2013:
- Sales were $636.3 million compared with $648.7 million in 2012.
Excluding the effect of foreign currency translation, sales
decreased $17.3 million, or 3%.
- Segment Operating Income was $110.7 million compared with
$141.7 million in the prior year.
- Adjusted Income from Continuing Operations was $47.7 million,
or $1.03 per diluted share, compared with $73.0 million, or $1.55
per diluted share, in the prior year. Income from Continuing
Operations was $33.5 million, or $0.72 per diluted share, compared
with $60.1 million, or $1.27 per diluted share, in the prior
year.
Adjusted EBITDA
Adjusted EBITDA was $47.2 million in the fourth quarter of 2013
compared with $47.6 million in the fourth quarter of 2012. For the
year, Adjusted EBITDA was $163.7 million. 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 $79.0 million,
consistent with the prior-year period. For the year, sales were
$311.9 million, up 4% compared with $299.0 million in the prior
year, with an increase in sales volumes across all geographic
regions.
- Segment Operating Income was $20.7 million and 26% of sales
compared with $17.3 million and 22% of sales for the prior-year
period. Operating income margin was strong in the fourth quarter
due to favorable sales mix and production efficiencies. For the
year, Segment Operating Income was $70.0 million compared with
$66.1 million in the prior year, with the operating income margin
of 22% being similar in both periods.
Electronics and Electric Drive Vehicles ("EDVs") Segment
- Sales of lithium battery separators were $35.9 million, up 5%
compared with $34.1 million in the prior-year period, reflecting
higher volumes in EDVs and a technology licensing fee, partially
offset by lower volumes in consumer electronics. For the year,
sales were $130.3 million compared with $167.4 million in the prior
year, reflecting lower volumes in consumer electronics, partially
offset by higher volumes in EDVs.
- Segment Operating Income was $6.8 million and 19% of sales
compared with $5.3 million and 16% of sales for the prior-year
period, primarily reflecting the technology licensing fee somewhat
offset by legal expenses related to intellectual property
protection. For the year, Segment Operating Income was $17.3
million and 13% of sales compared with $47.2 million and 28% of
sales in the prior year. Operating income margin was impacted by
the lack of operating leverage from lower sales volumes.
Separations Media Segment
Sales were $54.5 million, up 10% compared with $49.6 million in
the prior-year period. Excluding the effect of foreign currency
translation, sales increased $2.9 million, or 6%. For the year,
sales were $194.1 million, up 7% compared with $182.3 million in
the prior year. Excluding the effect of foreign currency
translation, sales increased $7.1 million, or 4%, reflecting
increases in both healthcare and filtration and specialty product
sales.
- Sales of healthcare products were $35.5 million, up 9% compared
with $32.7 million in the prior-year period due to higher volumes
and a favorable currency effect. For the year, sales were $124.2
million, up 8% compared with $114.8 million in the prior year.
- Sales of filtration and specialty products were $19.0 million,
up 12% compared with $16.9 million in the prior-year period, driven
by higher volumes and a favorable currency effect. For the year,
sales were $69.9 million, up 4% compared with $67.5 million in the
prior year.
- Segment Operating Income was $15.1 million and 28% of sales
compared with $16.0 million and 32% of sales in the prior-year
period. For the year, Segment Operating Income was $54.1 million
compared with $52.5 million in the prior year, with the operating
income margin of 28% being similar in both periods.
Microporous Sale
On December 19, 2013, Polypore completed the sale of its
Microporous business to Seven Mile Capital Partners for $120.0
million. In discontinued operations, the Company recognized a gain
of $35.8 million on the sale, net of income taxes and subject to a
typical working capital adjustment.
Conference Call
Polypore International, Inc. will hold a conference call to
discuss the Company's fourth quarter and full year 2013 financial
results today, Monday, February 24, 2014, at 4:45 p.m. Eastern
time. The dial-in number for the conference call is (631) 291-4526.
Enter code 31358725. A replay of the conference call will be
available through Monday, March 3, 2014 via telephone at (404)
537-3406. Enter code 31358725. 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, N.C., Polypore
International, Inc. is a market leader with manufacturing
facilities or sales offices in nine countries serving six
continents. See www.polypore.net.
Non-GAAP Supplemental Information
Adjusted EBITDA, 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.
For more information regarding the computation of Adjusted
EBITDA, Adjusted Net Income, Adjusted Income from Continuing
Operations, Adjusted EPS and Adjusted EPS from Continuing
Operations, the reconciliation of Adjusted EBITDA 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 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; 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 28,
2013 |
December 29,
2012 |
December 28,
2013 |
December 29, 2012
(a) |
Net sales |
$ 169.4 |
$ 162.1 |
$ 636.3 |
$ 648.7 |
Cost of goods sold |
105.9 |
104.2 |
415.6 |
403.5 |
Gross profit |
63.5 |
57.9 |
220.7 |
245.2 |
Selling, general and administrative
expenses |
36.4 |
27.9 |
132.8 |
121.4 |
Operating income |
27.1 |
30.0 |
87.9 |
123.8 |
Other (income) expense: |
|
|
|
|
Interest expense, net |
9.8 |
9.6 |
39.5 |
36.0 |
Foreign currency and other |
(0.8) |
0.6 |
0.7 |
(0.1) |
Write-off of loan acquisition
costs associated with refinancing of senior credit agreement |
-- |
-- |
-- |
2.5 |
|
9.0 |
10.2 |
40.2 |
38.4 |
Income from continuing operations before
income taxes |
18.1 |
19.8 |
47.7 |
85.4 |
Income taxes |
7.3 |
5.6 |
14.2 |
25.3 |
Income from continuing operations |
10.8 |
14.2 |
33.5 |
60.1 |
Income from discontinued operations, net of
income taxes |
3.5 |
3.3 |
12.3 |
10.9 |
Gain on sale of discontinued operations, net
of income taxes |
35.8 |
-- |
35.8 |
-- |
Income from discontinued operations |
39.3 |
3.3 |
48.1 |
10.9 |
Net income |
$ 50.1 |
$ 17.5 |
$ 81.6 |
$ 71.0 |
|
|
|
|
|
Net income per share - basic: |
|
|
|
|
Continuing operations |
$ 0.24 |
$ 0.30 |
$ 0.73 |
$ 1.29 |
Discontinued operations |
0.88 |
0.07 |
1.06 |
0.23 |
Net income per share |
$ 1.12 |
$ 0.37 |
$ 1.79 |
$ 1.52 |
|
|
|
|
|
Net income per share - diluted: |
|
|
|
|
Continuing operations |
$ 0.24 |
$ 0.30 |
$ 0.72 |
$ 1.27 |
Discontinued operations |
0.86 |
0.07 |
1.04 |
0.23 |
Net income per share |
$ 1.10 |
$ 0.37 |
$ 1.76 |
$ 1.50 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding -
basic |
44,809,805 |
46,579,665 |
45,610,270 |
46,540,385 |
Weighted average shares outstanding -
diluted |
45,409,058 |
47,260,142 |
46,239,796 |
47,229,595 |
|
|
|
|
|
|
|
|
|
|
(a) Derived from audited
consolidated financial statements. |
|
|
|
|
|
Note: Results for all periods
presented reflect continuing operations, unless otherwise
indicated. |
|
Polypore International,
Inc. |
Condensed consolidated
balance sheets |
(in millions) |
|
|
|
|
December 28,
2013 |
December 29, 2012
(a) |
Assets: |
|
|
Cash and cash equivalents |
$ 163.4 |
$ 44.9 |
Accounts receivable, net |
113.5 |
122.1 |
Inventories |
113.9 |
115.5 |
Other |
18.1 |
44.4 |
Assets of discontinued operations |
-- |
92.2 |
Current assets |
408.9 |
419.1 |
|
|
|
Property, plant and equipment, net |
595.4 |
607.5 |
Goodwill |
444.5 |
444.5 |
Intangibles and loan acquisition costs,
net |
93.8 |
107.0 |
Other |
7.6 |
8.0 |
Total assets |
$ 1,550.2 |
$ 1,586.1 |
|
|
|
Liabilities and shareholders'
equity: |
|
|
Accounts payable and accrued liabilities |
$ 81.0 |
$ 74.1 |
Income taxes payable |
4.1 |
1.6 |
Current portion of debt |
16.9 |
50.0 |
Liabilities of discontinued operations |
-- |
19.6 |
Current liabilities |
102.0 |
145.3 |
|
|
|
Debt, less current portion |
629.4 |
646.3 |
Other |
199.2 |
211.7 |
Shareholders' equity |
619.6 |
582.8 |
Total liabilities and shareholders'
equity |
$ 1,550.2 |
$ 1,586.1 |
|
|
|
|
|
|
(a) Derived from audited
consolidated financial statements. |
|
Polypore International,
Inc. |
Condensed consolidated
statements of cash flows |
(in millions) |
|
|
|
|
Year
Ended |
|
December 28,
2013 |
December 29, 2012
(a) |
Operating activities: |
|
|
Net income |
$ 81.6 |
$ 71.0 |
Adjustments to reconcile net income to net
cash provided by operating activities: |
|
|
Depreciation and amortization
expense |
56.3 |
55.7 |
Gain on sale of discontinued
operations, net of income taxes |
(35.8) |
-- |
Stock-based compensation |
20.7 |
16.3 |
Deferred income taxes |
(4.0) |
9.8 |
Write-off of loan acquisition
costs associated with refinancing of senior credit agreement |
-- |
2.5 |
Changes in operating assets and
liabilities |
33.3 |
(54.3) |
Other |
2.4 |
3.8 |
Net cash provided by operating
activities |
154.5 |
104.8 |
Investing activities: |
|
|
Purchases of property, plant and equipment,
net |
(28.2) |
(137.1) |
Net proceeds from the sale of discontinued
operations |
116.6 |
-- |
Net cash provided by (used in) investing
activities |
88.4 |
(137.1) |
Financing activities: |
|
|
Principal payments on debt |
(15.0) |
(4.7) |
Net payments on revolving credit
facility |
(35.0) |
(15.0) |
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 |
5.5 |
1.4 |
Net cash used in financing activities |
(125.2) |
(16.8) |
Effect of exchange rate changes on cash and
cash equivalents |
0.8 |
1.4 |
Net increase (decrease) in cash and
cash equivalents |
118.5 |
(47.7) |
Cash and cash equivalents at beginning of
year |
44.9 |
92.6 |
Cash and cash equivalents at end of
year |
$ 163.4 |
$ 44.9 |
|
|
|
(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 28,
2013 |
December 29,
2012 |
December 28,
2013 |
December 29,
2012 |
Income from continuing operations |
$ 10.8 |
$ 14.2 |
$ 33.5 |
$ 60.1 |
Add: |
|
|
|
|
Depreciation and amortization
expense |
14.0 |
13.4 |
54.5 |
52.1 |
Interest expense, net |
9.8 |
9.6 |
39.5 |
36.0 |
Income taxes |
7.3 |
5.6 |
14.2 |
25.3 |
EBITDA |
41.9 |
42.8 |
141.7 |
173.5 |
Adjustments: |
|
|
|
|
Stock-based compensation |
6.5 |
3.9 |
20.7 |
16.3 |
Foreign currency (gain)
loss |
(0.8) |
0.7 |
0.4 |
0.5 |
Loss on disposal of property,
plant and equipment |
0.2 |
-- |
1.2 |
0.8 |
FTC-related costs incurred due
to the Microporous litigation and order compliance |
-- |
-- |
0.4 |
0.3 |
Write-off of loan acquisition
costs associated with refinancing of senior credit agreement |
-- |
-- |
-- |
2.5 |
Other non-cash or non-recurring
items |
(0.6) |
0.2 |
(0.7) |
0.2 |
Adjusted EBITDA |
$ 47.2 |
$ 47.6 |
$ 163.7 |
$ 194.1 |
|
|
|
|
|
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 28,
2013 |
December 29,
2012 |
December 28,
2013 |
December 29,
2012 |
Income from continuing operations |
$ 10.8 |
$ 14.2 |
$ 33.5 |
$ 60.1 |
Adjustments: |
|
|
|
|
Stock-based compensation |
6.5 |
3.9 |
20.7 |
16.3 |
Foreign currency (gain)
loss |
(0.8) |
0.7 |
0.4 |
0.5 |
Loss on disposal of property,
plant and equipment |
0.2 |
-- |
1.2 |
0.8 |
FTC-related costs incurred due
to the Microporous litigation and order compliance |
-- |
-- |
0.4 |
0.3 |
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 |
0.5 |
Impact of adjustments on income
taxes |
(2.5) |
(2.1) |
(9.0) |
(8.0) |
Adjusted income from continuing
operations |
14.2 |
17.1 |
47.7 |
73.0 |
Adjusted income from discontinued
operations |
3.6 |
3.4 |
12.5 |
11.1 |
Adjusted net income |
$ 17.8 |
$ 20.5 |
$ 60.2 |
$ 84.1 |
|
|
|
|
|
Net income per share - diluted: |
|
|
|
|
Income from continuing
operations |
$ 0.24 |
$ 0.30 |
$ 0.72 |
$ 1.27 |
Impact of adjustments on income
from continuing operations |
0.07 |
0.06 |
0.31 |
0.28 |
Adjusted earnings per share
from continuing operations |
0.31 |
0.36 |
1.03 |
1.55 |
Adjusted earnings per share
from discontinued operations |
0.08 |
0.07 |
0.27 |
0.23 |
Adjusted earnings per
share |
$ 0.39 |
$ 0.43 |
$ 1.30 |
$ 1.78 |
|
|
|
|
|
Weighted average shares outstanding -
diluted |
45,409,058 |
47,260,142 |
46,239,796 |
47,229,595 |
|
Polypore International,
Inc. |
Supplemental
Information |
Reconciliation of Segment
Operating Income to Income from Continuing Operations Before Income
Taxes |
(unaudited, in millions) |
|
|
|
|
|
|
Three Months
Ended |
Year
Ended |
|
December 28,
2013 |
December 29,
2012 |
December 28,
2013 |
December 29,
2012 |
Operating income: |
|
|
|
|
Electronics and EDVs |
$ 6.8 |
$ 5.3 |
$ 17.3 |
$ 47.2 |
Transportation and
industrial |
20.7 |
17.3 |
70.0 |
66.1 |
Energy storage |
27.5 |
22.6 |
87.3 |
113.3 |
Separations media |
15.1 |
16.0 |
54.1 |
52.5 |
Corporate and other |
(8.8) |
(4.3) |
(30.7) |
(24.1) |
Segment operating income |
33.8 |
34.3 |
110.7 |
141.7 |
Stock-based compensation |
6.5 |
3.9 |
20.7 |
16.3 |
Non-recurring and other costs |
0.2 |
0.4 |
2.1 |
1.6 |
Total operating income |
27.1 |
30.0 |
87.9 |
123.8 |
Reconciling items: |
|
|
|
|
Interest expense, net |
9.8 |
9.6 |
39.5 |
36.0 |
Foreign currency and other |
(0.8) |
0.6 |
0.7 |
(0.1) |
Write-off of loan acquisition
costs associated with refinancing of senior credit agreement |
-- |
-- |
-- |
2.5 |
Income from continuing operations before
income taxes |
$ 18.1 |
$ 19.8 |
$ 47.7 |
$ 85.4 |
CONTACT: Polypore International, Inc.
Investor Relations
(704) 587-8886
investorrelations@polypore.net