- Separations Media and Transportation and Industrial segments
continue to deliver solid performance
- New vehicle model introductions show promise for additional
growth in Electronics and Electric Drive Vehicles ("EDVs") segment
later in 2014 and into 2015
- Company announces 5-year lithium-ion separator supply agreement
with Panasonic for large-format batteries
- Debt reduction and refinancing reduce interest costs and
provide additional flexibility
- Board of Directors authorizes new share repurchase program
Polypore International, Inc. (NYSE:PPO), a global high technology
filtration company specializing in microporous membranes, today
reported its financial results for the first quarter ended March
29, 2014.
For the first quarter:
- Sales were $161.0 million compared with $145.9 million in the
prior-year period. Excluding the effect of foreign currency
translation, sales increased $14.3 million, or 10%.
- Segment Operating Income was $29.4 million compared with $23.9
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 $13.6 million and
$0.30 per diluted share, respectively, compared with $10.0 million
and $0.21 per diluted share in the prior-year period. Income from
Continuing Operations was $8.4 million, or $0.18 per diluted share,
compared with $5.6 million, or $0.12 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.
"The solid performance of our Separations Media and
Transportation and Industrial segments continued in the first
quarter, and we are making capacity investments in these businesses
to participate in market growth. In Electronics and EDVs, we're
very pleased to announce a long-term supply agreement with
Panasonic for large-format lithium-ion batteries. We're still in
the early stages of penetration into the automotive industry, and
we expect new vehicle model introductions and other positive trends
to drive increased vehicle sales," said Robert B. Toth, President
and Chief Executive Officer. "Our recent debt reduction and
refinancing provide substantial interest savings to our Company,
which—combined with the ongoing cash being generated by our
businesses—gives us the flexibility to pursue growth and
opportunities to create value for our shareholders."
Adjusted EBITDA
Adjusted earnings before interest, taxes, depreciation and
amortization ("Adjusted EBITDA") was $42.5 million in the first
quarter of 2014 compared with $37.2 million in the first quarter of
2013. Adjusted EBITDA for the 12 months ended March 29, 2014 was
$171.2 million. Adjusted EBITDA, as defined in Polypore's new
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 $79.1 million
compared with $76.1 million in the prior-year period. Excluding the
effect of foreign currency translation, sales increased $3.6
million, or 5%, driven by volume growth in Europe and Asia.
- Segment Operating Income was $17.0 million compared with $16.2
million in the prior-year period, and 22% of sales, which was
comparable to the prior-year period.
Electronics and EDVs Segment
- Sales of lithium battery separators were $30.1 million, up 23%
compared with $24.4 million in the prior-year period, with higher
volumes in EDVs partially offset by a decline in consumer
electronics.
- Segment Operating Income was $3.1 million and 10% of sales
compared with a loss of $2.0 million for the prior-year period,
reflecting higher sales.
Separations Media Segment
Sales were $51.8 million compared with $45.4 million in the
prior-year period. Excluding the effect of foreign currency
translation, sales increased $5.0 million, or 11%.
- Sales of healthcare products were $32.1 million, up 9% compared
with $29.5 million in the prior-year period, primarily associated
with higher volumes.
- Sales of filtration and specialty products were $19.7 million,
up 24% compared with $15.9 million in the prior-year period,
primarily associated with growth in microelectronics and other
degasification applications.
- Segment Operating Income was $17.7 million compared with $15.5
million in the prior-year period, and 34% of sales, which was
comparable to the prior-year period.
New Long-term Customer Supply Agreement
Today the Company announced that its Celgard subsidiary and
Panasonic Automotive and Industrial Systems Division ("Panasonic")
have entered into a long-term supply agreement under which
Panasonic will purchase Celgard® brand separators to be used in its
large-format electric drive vehicle lithium-ion batteries. This
long-term agreement includes guaranteed purchase and supply volume
requirements and a five-year term.
Debt Reduction, Senior Notes Redemption and
Refinancing
On April 8, 2014, the Company announced that it had entered into
a new senior secured credit agreement, consisting of a $500 million
term loan facility and $150 million revolving credit facility. Cash
on hand and borrowings under the new senior credit agreement were
used to repay all outstanding obligations under the Company's prior
senior secured credit agreement and to redeem its 7.5% senior
notes. The redemption of the 7.5% senior notes, which was completed
on May 8, 2014, and a reduced level of total debt are expected to
reduce annualized interest expense by approximately $20 million to
$25 million compared with 2013 interest expense of $39.5 million,
depending on variables such as market interest rates, hedging
strategies and average revolver borrowings.
Share Repurchase Authorization
The Board of Directors has authorized the Company to repurchase
up to 4.5 million shares of common stock, or approximately 10% of
shares currently outstanding. 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.
Conference Call
Polypore International, Inc. will hold a conference call to
discuss the Company's first quarter 2014 financial results and
business outlook today, Thursday, May 8, 2014, at 4:45 p.m. Eastern
time. The dial-in number for the conference call is (631)
291-4526. Enter code 19636584. A replay of the conference
call will be available through Thursday, May 15, 2014 via telephone
at (404) 537-3406. Enter code 19636584. 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 EPS (earnings per
share) and Segment Operating Income 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 new
senior secured 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. We define Segment Operating Income as
operating income before stock-based compensation and certain
non-recurring and other costs. 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
new credit agreement.
For more information regarding the computation of Adjusted
EBITDA, Adjusted Net Income, Adjusted EPS and Segment Operating
Income, the reconciliation of Adjusted EBITDA to income from
continuing operations, the reconciliation of Adjusted Net Income to
income from continuing operations, the reconciliation of Adjusted
EPS to earnings per share from continuing operations and the
reconciliation of Segment Operating Income to income from
continuing operations before income taxes, 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 new 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. We use Segment Operating Income
to evaluate business segment performance and allocate resources.
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, as defined in our new credit agreement.
Adjusted EBITDA, Adjusted Net Income, Adjusted EPS and Segment
Operating Income 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 processes;
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 contained in our 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 the "Risk Factors" section 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 |
|
March 29, 2014 |
March 30, 2013 |
Net sales |
$ 161.0 |
$ 145.9 |
Cost of goods sold |
102.5 |
96.7 |
Gross profit |
58.5 |
49.2 |
Selling, general and administrative
expenses |
36.1 |
30.7 |
Operating income |
22.4 |
18.5 |
Other (income) expense: |
|
|
Interest expense, net |
9.6 |
9.8 |
Foreign currency and other |
0.7 |
0.7 |
|
10.3 |
10.5 |
Income from continuing operations before
income taxes |
12.1 |
8.0 |
Income taxes |
3.4 |
2.2 |
Income from continuing operations |
8.7 |
5.8 |
Income from discontinued operations, net of
income taxes |
-- |
3.4 |
Net income |
8.7 |
9.2 |
Less: Net income attributable to
noncontrolling interest |
0.3 |
0.2 |
Net income attributable to Polypore
International, Inc. |
$ 8.4 |
$ 9.0 |
|
|
|
Net income attributable to Polypore
International, Inc.: |
|
|
Income from continuing
operations |
$ 8.4 |
$ 5.6 |
Income from discontinued
operations |
-- |
3.4 |
Net income attributable to
Polypore International, Inc. |
$ 8.4 |
$ 9.0 |
|
|
|
Net income attributable to Polypore
International, Inc. per share - basic: |
|
|
Continuing operations |
$ 0.19 |
$ 0.12 |
Discontinued operations |
-- |
0.07 |
Net income attributable to
Polypore International, Inc. per share |
$ 0.19 |
$ 0.19 |
|
|
|
Net income attributable to Polypore
International, Inc. per share - diluted: |
|
|
Continuing operations |
$ 0.18 |
$ 0.12 |
Discontinued operations |
-- |
0.07 |
Net income attributable to
Polypore International, Inc. per share |
$ 0.18 |
$ 0.19 |
|
|
|
|
|
|
Weighted average shares outstanding -
basic |
44,884,728 |
46,613,321 |
Weighted average shares outstanding -
diluted |
45,423,573 |
47,295,430 |
|
|
Polypore International,
Inc. |
Condensed consolidated
balance sheets |
(in millions) |
|
|
March 29, 2014 |
December 28, 2013
(a) |
Assets: |
|
|
Cash and cash equivalents |
$ 177.4 |
$ 163.4 |
Accounts receivable, net |
113.3 |
113.5 |
Inventories |
113.6 |
113.9 |
Other |
16.4 |
18.1 |
Current assets |
420.7 |
408.9 |
|
|
|
Property, plant and equipment, net |
587.6 |
595.4 |
Goodwill |
444.5 |
444.5 |
Intangibles and loan acquisition costs,
net |
90.4 |
93.8 |
Other |
7.6 |
7.6 |
Total assets |
$ 1,550.8 |
$ 1,550.2 |
|
|
|
Liabilities and shareholders'
equity: |
|
|
Accounts payable and accrued liabilities |
$ 72.5 |
$ 81.0 |
Income taxes payable |
5.1 |
4.1 |
Current portion of debt |
192.5 |
16.9 |
Current liabilities |
270.1 |
102.0 |
|
|
|
Debt, less current portion |
446.3 |
629.4 |
Other |
199.5 |
199.2 |
Shareholders' equity |
634.9 |
619.6 |
Total liabilities and shareholders'
equity |
$ 1,550.8 |
$ 1,550.2 |
|
(a) Derived from audited
consolidated financial statements. |
|
Polypore International,
Inc. |
Condensed consolidated
statements of cash flows |
(unaudited, in millions) |
|
|
Three Months
Ended |
|
March 29, 2014 |
March 30, 2013 |
Operating activities: |
|
|
Net income |
$ 8.7 |
$ 9.2 |
Adjustments to reconcile net income to net
cash provided by operating activities: |
|
|
Depreciation and amortization
expense |
13.7 |
14.3 |
Stock-based compensation |
5.4 |
4.5 |
Deferred income taxes |
(1.7) |
(2.8) |
Changes in operating assets and
liabilities |
(3.3) |
10.0 |
Other |
1.5 |
1.2 |
Net cash provided by operating
activities |
24.3 |
36.4 |
Investing activities: |
|
|
Purchases of property, plant and equipment,
net |
(3.7) |
(6.2) |
Net cash used in investing activities |
(3.7) |
(6.2) |
Financing activities: |
|
|
Principal payments on debt |
(7.5) |
(7.5) |
Payments on revolving credit facility |
-- |
(25.0) |
Other |
0.3 |
0.4 |
Net cash used in financing activities |
(7.2) |
(32.1) |
Effect of exchange rate changes on cash and
cash equivalents |
0.6 |
0.2 |
Net increase (decrease) in cash and
cash equivalents |
14.0 |
(1.7) |
Cash and cash equivalents at beginning of
period |
163.4 |
44.9 |
Cash and cash equivalents at end of
period |
$ 177.4 |
$ 43.2 |
|
|
Polypore International,
Inc. |
Supplemental
Information |
Reconciliation of
Adjusted EBITDA |
(unaudited, in millions) |
|
|
|
Three Months
Ended |
Twelve Months
Ended |
|
March 29, 2014 |
March 30, 2013 |
March 29, 2014 |
March 30, 2013 |
Income from continuing operations
attributable to Polypore International, Inc. |
$ 8.4 |
$ 5.6 |
$ 36.2 |
$ 49.9 |
Add: |
|
|
|
|
Depreciation and amortization
expense |
13.7 |
13.5 |
54.8 |
52.9 |
Interest expense, net |
9.6 |
9.8 |
39.3 |
37.0 |
Income taxes |
3.4 |
2.2 |
15.5 |
19.6 |
EBITDA |
35.1 |
31.1 |
145.8 |
159.4 |
Adjustments: |
|
|
|
|
Stock-based compensation |
5.4 |
4.5 |
21.6 |
16.5 |
Foreign currency loss |
0.9 |
0.9 |
0.4 |
0.7 |
Litigation costs associated
with patent enforcement |
1.6 |
0.5 |
3.2 |
0.7 |
Loss on disposal of property,
plant and equipment |
-- |
-- |
1.2 |
0.5 |
FTC-related costs incurred due
to the Microporous litigation and order compliance |
-- |
0.1 |
0.3 |
0.3 |
Write-off of loan acquisition
costs associated with refinancing of senior credit agreement |
-- |
-- |
-- |
2.5 |
Other non-cash or non-recurring
items |
(0.5) |
0.1 |
(1.3) |
0.2 |
Adjusted EBITDA |
$ 42.5 |
$ 37.2 |
$ 171.2 |
$ 180.8 |
|
|
|
|
|
Note: The Company entered into a
new senior secured credit agreement on April 8, 2014. Adjusted
EBITDA for all periods presented is calculated in accordance with
the definition of Adjusted EBITDA per the Company's new credit
agreement, which includes an adjustment for litigation costs
associated with patent enforcement. For the second, third and
fourth quarters of 2013, litigation costs associated with patent
enforcement were $0.3 million, $0.4 million and $0.8 million,
respectively. |
|
|
|
|
Polypore International,
Inc. |
Supplemental
Information |
Reconciliation of
Adjusted Net Income and Adjusted EPS |
(unaudited) |
(in millions, except per share
data) |
|
|
Three Months
Ended |
|
March 29, 2014 |
March 30, 2013 |
Income from continuing operations
attributable to Polypore International, Inc. |
$ 8.4 |
$ 5.6 |
Adjustments: |
|
|
Stock-based compensation |
5.4 |
4.5 |
Foreign currency loss |
0.9 |
0.9 |
Litigation costs associated
with patent enforcement |
1.6 |
0.5 |
FTC-related costs incurred due
to the Microporous litigation and order compliance |
-- |
0.1 |
Other non-cash or non-recurring
items |
-- |
0.3 |
Impact of adjustments on income
taxes |
(2.7) |
(1.9) |
Adjusted net income |
$ 13.6 |
$ 10.0 |
|
|
|
Net income per share - diluted: |
|
|
Income from continuing
operations |
$ 0.18 |
$ 0.12 |
Impact of adjustments on income
from continuing operations |
0.12 |
0.09 |
Adjusted earnings per
share |
$ 0.30 |
$ 0.21 |
|
|
|
Weighted average shares outstanding -
diluted |
45,423,573 |
47,295,430 |
|
Note: The Company entered into a
new senior secured credit agreement on April 8, 2014. The
adjustments used in calculating Adjusted Net Income and Adjusted
EPS were modified to be consistent with the adjustments used in
calculating Adjusted EBITDA, as defined in the Company's new credit
agreement. Amounts previously reported for the three months
ended March 30, 2013 have been conformed to the current year
presentation and the impact on the prior period is not
significant. |
|
|
Polypore International,
Inc. |
Supplemental
Information |
Reconciliation of Segment
Operating Income to Income from Continuing Operations Before Income
Taxes |
(unaudited, in millions) |
|
|
Three Months
Ended |
|
March 29, 2014 |
March 30, 2013 |
Operating income: |
|
|
Electronics and EDVs |
$ 3.1 |
$ (2.0) |
Transportation and
industrial |
17.0 |
16.2 |
Energy storage |
20.1 |
14.2 |
Separations media |
17.7 |
15.5 |
Corporate and other |
(8.4) |
(5.8) |
Segment operating income |
29.4 |
23.9 |
Stock-based compensation |
5.4 |
4.5 |
Non-recurring and other costs |
1.6 |
0.9 |
Total operating income |
22.4 |
18.5 |
Reconciling items: |
|
|
Interest expense, net |
9.6 |
9.8 |
Foreign currency and other |
0.7 |
0.7 |
Income from continuing operations before
income taxes |
$ 12.1 |
$ 8.0 |
CONTACT: Polypore International, Inc.
Investor Relations
(704) 587-8886
investorrelations@polypore.net