Polypore International Inc. Reports Operating Results (10-Q)
Polypore International Inc. has a market cap of $749.1 million; its shares were traded at around $16.86 with a P/E ratio of 22.8 and P/S ratio of 1.4.
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, development and investment in lithium batteries for use in EDV applications is accelerating and we are making early sales into this market. In late 2008, we completed a lithium battery separator capacity expansion at our Charlotte, NC facility. 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 will be partially funded by a $49.3 million grant from the U.S. Department of Energy (DOE) and includes the existing Charlotte, NC facility and construction of a new manufacturing facility in Concord, NC, which is expected to begin in the second half of 2010. In 2008, we acquired a lithium battery separator company in South Korea which was subsequently renamed Celgard Korea, Inc. In early 2010, we initiated a $30.0 million capacity expansion at this facility to serve growth in consumer electronics applications in Asia.
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 April 3, 2010 were $145.3 million, an increase of $36.4 million, or 33.4%, from the same period in the prior year. Energy storage sales for the three months ended April 3, 2010 were $101.4 million, an increase of $27.7 million, or 37.6%. Lithium battery separator sales increased by $13.1 million due to economic improvement in consumer electronics, continued application proliferation and new product launches, including initial sales into electric drive vehicle applications. Lead-acid battery separator sales increased by $14.6 million due to global economic improvement, continued growth in Asia and the positive impact of dollar/euro exchange rate fluctuations of $3.0 million.
Separations media sales for the three months ended April 3, 2010 were $43.9 million, an increase of $8.7 million, or 24.7%, from the same period in the prior year. The positive impact of dollar/euro exchange rate fluctuations on sales was $2.1 million. Healthcare sales increased by $3.9 million, or 15.6%, due to strong demand in hemodialysis and blood oxygenation applications and the positive impact of dollar/euro exchange rate fluctuations. Filtration and specialty product sales increased by $4.8 million, or 47.1%, due to economic improvement, strong demand in Asia and the positive impact of dollar/euro exchange rate fluctuations.
Selling, general and administrative expenses. Selling, general and administrative expenses increased by $2.0 million for the three months ended April 3, 2010, primarily due to growth investments and the $0.7 million negative impact of dollar/euro exchange rate fluctuations.
The restructuring plan included idling capacity and reducing headcount at our manufacturing facility in Owensboro, Kentucky. The total estimated cost of the plan is expected to be approximately $23.2 million, of which $20.3 million has been recognized. The total cost includes estimated cash charges of $3.3 million for severance and other costs and a non-cash impairment charge of $19.9 million for buildings and equipment. The timing, scope and cash costs associated with the plan are subject to change as we implement the plan and continue to evaluate our business needs and costs. Cash payments for other exit costs are expected to be paid over the next three years.
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