Polypore International Inc. (PPO) filed Quarterly Report for the period ended 2009-10-03.
PolyporeInc.a subsidiary of Polypore InternationalInc.is a worldwide developermanufacturer and marketer of highly specialized polymer-based membranes used in separation and filtration processes. Polypore International Inc. has a market cap of $506.06 million; its shares were traded at around $11.4 with a P/E ratio of 19 and P/S ratio of 0.83.
Highlight of Business Operations:
In the North American region, the lead-acid battery separator market is characterized by below average growth, excess capacity and a highly consolidated customer base. On October 30, 2009 our Board of Directors approved a restructuring plan to better align lead-acid battery separator production capacity with demand in North America. The restructuring plan will include idling capacity and reducing headcount at our manufacturing facility in Owensboro, Kentucky. The current estimated cost of the plan is expected be in the range of $24.0 million to $31.0 million, including estimated cash charges of $5.0 million to $8.0 million for severance and other costs and an estimated non-cash impairment charge of $19.0 million to $23.0 million for buildings and equipment. We expect to implement the plan and record an estimated restructuring charge of $19.0 million to $24.0 million in the fourth quarter of 2009, with the remainder of the restructuring charge to be recognized as costs are incurred. The timing, scope and costs of these planned restructuring actions are subject to change as we implement the plan and continue to evaluate our business needs and costs.
A supply contract between our lead-acid battery separator business and Johnson Controls, Inc. (“JCI”) expired on December 31, 2008 and was not renewed. In response, we implemented a restructuring plan in our energy storage segment to align lead-acid battery separator production capacity with demand, reduce costs and position ourselves to meet future growth opportunities. The plan included closing our facility in Potenza, Italy, streamlining production at our facility in Owensboro, Kentucky and reducing selling, general and administrative resources associated with the lead-acid battery separator business. The total estimated cost of the plan is expected to be approximately $62.0 million, including cash charges of $33.1 million for severance, environmental and other exit costs and a $28.9 million non-cash impairment charge. We implemented the restructuring plan and a restructuring charge of $59.9 million was recorded during the fourth quarter of 2008.
Net sales. Net sales for the three months ended October 3, 2009 were $137.7 million, a decrease of $17.2 million, or 11.1%, from the same period in the prior year. Energy storage sales for the three months ended October 3, 2009 were $100.2 million, a decrease of $15.3 million, or 13.2%. Lithium battery separator sales decreased by 18.5% due to the impact of current macro-economic conditions. Lead-acid battery separator sales decreased by 11.5%, including the negative impact of dollar/euro exchange rate fluctuations of $1.4 million. The most significant factor impacting lead-acid separator sales in the third quarter of 2009 as compared to the same period in the prior year was the loss of a customer at the end of fiscal 2008. Sales to this customer in the third quarter of 2008 were $13.9 million. In addition, demand for the Company’s lead-acid battery separators has continued to be negatively impacted by the current economic environment particularly in North America and Europe. The economic impact in North America and Europe was partially offset in the third quarter of 2009 by advance orders from Exide. In the third and fourth quarters of 2009, Exide placed advance orders of approximately $9.0 million for 2010 usage and demand. We shipped approximately $3.7 million of these orders during the third quarter of 2009 and expect to ship the remaining orders in the fourth quarter of 2009. We believe that these advance orders will reduce Exide’s purchases of battery separators in 2010 and therefore, could impact our lead-acid battery separator sales in 2010. Demand in Asia, which is the fastest growing market for lead-acid separators, continues to be strong as sales in this region increased 44.6% in the third quarter of 2009.
Selling, general and administrative expenses. Selling, general and administrative expenses decreased by $2.1 million for the three months ended October 3, 2009. Excluding the impact of dollar/euro exchange rate fluctuations, the decrease was $1.9 million, consisting primarily of reduced discretionary spending and cost savings from the 2008 restructuring plan, partially offset by $0.9 million of increased costs associated with the FTC litigation.
Net sales. Net sales for the nine months ended October 3, 2009 were $364.8 million, a decrease of $100.1 million, or 21.5%, from the same period in the prior year. Energy storage sales for the nine months ended October 3, 2009 were $256.2 million, a decrease of $85.2 million, or 25.0%. Lithium battery separator sales decreased by 20.3% due to the impact of current macro-economic conditions. Lead-acid battery separator sales decreased by 26.3%, including the negative impact of dollar/euro exchange rate fluctuations of $9.9 million. Lead-acid battery separator sales were impacted by the loss of a customer at the end of fiscal 2008. Sales to this customer in the nine months ended September 27, 2008 were $42.0 million. In addition, demand for the Company’s lead-acid battery separators has been negatively impacted by the current economic environment, particularly in North America and Europe. Another factor impacting 2009 sales has been the significant decline in sales to Exide. In 2008, Exide represented approximately $86.0 million of the Company’s sales and based on current forecasts, the Company expects sales to Exide in 2009 will be approximately $60.0 million. In the third and fourth quarters of 2009, Exide placed advance orders of approximately $9.0 million for 2010 usage and demand. We shipped approximately $3.7 million of these orders during the third quarter of 2009 and expect to ship the remaining orders in the fourth quarter of 2009. We believe that these advance orders will reduce Exide’s purchases of battery separators in 2010 and therefore, could impact our lead-acid battery separator sales in 2010. Demand in Asia, which is the fastest growing market for lead-acid separators, continues to be strong as sales in this region increased 22.2% compared to the same period in the prior year.
Separations media sales for the nine months ended October 3, 2009 were $108.6 million, a decrease of $14.9 million, or 12.1% from the same period in the prior year, including the negative impact of dollar/euro exchange rate fluctuations of $10.2 million. Healthcare sales decreased 5.6% as the impact of higher sales volumes of synthetic hemodialysis membranes was more than
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