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Polypore International Inc. Reports Operating Results (10-Q)

November 04, 2010 | About:
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10qk

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Polypore International Inc. (PPO) filed Quarterly Report for the period ended 2010-10-02.

Polypore International Inc. has a market cap of $1.61 billion; its shares were traded at around $36.4 with a P/E ratio of 30.9 and P/S ratio of 3.2. PPO is in the portfolios of Pioneer Investments, Bruce Kovner of Caxton Associates.

Highlight of Business Operations:

Lithium batteries are the power source in a wide variety of electronics applications ranging from notebook computers and mobile phones to cordless power tools. In addition to consumer electronics applications, growth in lithium batteries is being driven by application proliferation and growing demand in EDVs. The development and investment in lithium batteries for use in EDV applications is accelerating and we are making sales into this market. In order to meet the growing demand, we have made and are continuing to make significant investments in lithium battery separator capacity. In 2008, we completed a lithium battery separator capacity expansion at our Charlotte, NC facility and acquired a lithium battery separator company in South Korea. In late 2009, we initiated a $102.0 million expansion aimed at enhancing our position as a market leader in supplying lithium separators for EDV applications. The expansion is being partially funded by a $49.3 million grant from the U.S. Department of Energy (DOE). The first phase of this expansion will increase capacity at our existing Charlotte, NC facility, with production beginning to ramp up toward the end of 2010. The second phase is the construction of a new lithium battery separator facility in Concord, NC. Construction of the Concord, NC facility started in the third quarter of 2010 with production expected to start in early 2012. In early 2010, we initiated a $30.0 million capacity expansion at our Korean facility to serve growth in consumer electronics applications in Asia, with start-up expected in the second half of 2011. In November 2010, we announced an additional $32.0 million lithium battery separator expansion targeted at the EDV market at our Charlotte, NC facility that is expected to begin production toward the end of 2011.

Certain assumptions are used in the calculation of the actuarial valuation of our defined benefit pension plans and other postretirement benefits. Two critical assumptions, discount rate and expected return on assets, are important elements of plan expense and/or liability measurement and differences between actual results and these two actuarial assumptions can materially affect our projected benefit obligation or the valuation of our plan assets. Other assumptions involve demographic factors such as retirement, expected increases in compensation, mortality and turnover. The discount rate enables us to state expected future cash flows at a present value on the measurement date. The discount rate assumptions are based on the market rate for high quality fixed income investments, and are thus subject to change each year. At January 2, 2010, a 1% decrease in the discount rate would increase our projected benefit obligations and the unfunded status of our pension plans by $13.0 million. The expected rates of return on our pension plans assets are based on the asset allocation of each plan and the long-term projected return of those assets. For 2009, if the expected rate of return on pension plan assets were reduced by 1%, the result would have increased our net periodic benefit expense for fiscal 2009 by $0.2 million. At January 2, 2010, if the actual plan assets were reduced by 1%, the unfunded status of our pension plans would increase by $0.2 million.

Net sales. Net sales for the three months ended October 2, 2010 were $151.7 million, an increase of $14.0 million, or 10.2%, from the same period in the prior year. Energy storage sales for the three months ended October 2, 2010 were $113.3 million, an increase of $13.1 million, or 13.1%. Lithium battery separator sales increased by $10.8 million due to strong demand in consumer electronics, application proliferation and new product launches, including EDVs. Lead-acid battery separator sales increased by $2.3 million due primarily to continued growth in Asia, somewhat offset by the effect of foreign currency translation of $1.6 million. In addition, the prior-year period included advance purchases of $3.7 million by a North American customer.

Separations media sales for the three months ended October 2, 2010 were $38.4 million, an increase of $0.9 million, or 2.4%, from the same period in the prior year, including the negative effect of foreign currency translation of $3.0 million. Healthcare sales decreased by $1.9 million, or 7.6%, as solid demand in hemodialysis and blood oxygenation applications was more than offset by the effect of foreign currency translation. Filtration and specialty product sales increased by $2.8 million, or 22.2%, due to strong demand in all key applications, somewhat offset by the effect of foreign currency translation.

Net sales. Net sales for the nine months ended October 2, 2010 were $447.1 million, an increase of $82.3 million, or 22.6%, from the same period in the prior year. Energy storage sales for the nine months ended October 2, 2010 were $322.2 million, an increase of $66.0 million, or 25.8%. Lithium battery separator sales increased by $35.9 million due to strong demand in consumer electronics, application proliferation and new product launches, including EDVs. Lead-acid battery separator sales increased by $30.1 million due to global economic improvement and continued growth in Asia. The impact of foreign currency translation was not significant for the nine months ended October 2, 2010.

Separations media sales for the nine months ended October 2, 2010 were $124.9 million, an increase of $16.3 million, or 15.0% from the same period in the prior year, including the negative effect of foreign currency translation of $3.2 million. Healthcare sales increased by $2.7 million, or 3.6%, as solid demand in hemodialysis and blood oxygenation applications was somewhat offset by the effect of foreign currency translation. Filtration and specialty product sales increased by $13.6 million, or 40.1%, due to strong demand in all key applications, somewhat offset by the effect of foreign currency translation.

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