CHARLOTTE, N.C., May 15, 2012 /PRNewswire/ -- Polymer Group, Inc. (PGI) (the "Company") reported results of operations for the first quarter ended March 31, 2012.
As previously announced, Polymer Group, Inc. finalized the merger with the Blackstone Group, along with co-investors, and certain members of the Company's management (the "Merger") on January 28, 2011 and became a privately held company.
In this press release, the January 2 to January 28, 2011, and January 29 to April 2, 2011, periods have been combined. The combined presentation does not comply with United States generally accepted accounting principles, or GAAP, but is presented because we believe it provides the most meaningful comparison of our financial results. Included in the release is a reconciliation of the GAAP presentation to the combined presentation.
First Quarter 2012 Highlights:
PGI's chief executive officer, Veronica (Ronee) M. Hagen, stated, "While the underlying fundamentals of our business remain strong throughout the world, we face an increasingly competitive environment due to excess industry capacity and continued volatility in raw material costs. The growth investments we ramped up in the past year and the manufacturing efficiencies we have implemented are yielding sequential improvement in sales and profitability. To carry this momentum even further and realize the full potential of our unique, diverse business model and global scale we possess, we are boldly moving the company to new levels of competency, readiness and capabilities with a new internal operating framework."
FIRST QUARTER 2012 RESULTSNet sales for the first quarter of 2012 were $295.2 million compared with $283.6 million for the first quarter ended April 2, 2011 and $291.9 million in the fourth quarter of 2011. The year-over-year increase was due primarily to additional volume in the company's Nonwovens segments, with increases in Latin America, the U.S. and Asia offset somewhat from lower volumes in Europe, and lower volumes in the Oriented Polymers segment. A higher price/mix in the Oriented Polymers segment was more than offset by a lower price/mix in all Nonwovens segments, with the exception of Asia, primarily due to the pass-through of lower raw material costs. Foreign currency translation rates negatively impacted sales by approximately $4.8 million compared with the first quarter of 2011.
Gross profit was $53.2 million for the first quarter of 2012 compared with $40.8 million for the first quarter of 2011 and $48.1 million for the fourth quarter of 2011. The year-over-year increase was predominately due to the absence of $10.5 million of purchase accounting adjustments in 2011 primarily associated with the stepped up inventory values, higher volume related to the disruption in operations during 2011 at our Cali Colombia facility, partially offset by an increase in lease expense associated with the new line installed in the U.S. Raw material costs were $4.7 million lower in the first quarter of 2012 compared with the prior-year period, offset by unfavorable sales price/mix of $4.1 million related to the pass-through of lower raw material costs. Raw material prices began to increase during the first quarter and into the second quarter of 2012. In the Americas, the company has experienced a moderation in polypropylene prices that has not been experienced to the same degree in other regions. The combination of the above is expected to result in profit headwinds for the second quarter of 2012. Manufacturing costs were higher by $2.2 million in the first quarter of 2012 compared to the first quarter of 2011, primarily due to the impact of the additional lease expense for the new line in the U.S. region.
Operating income for the first quarter of 2012 was $17.0 million compared with an operating loss of $42.7 million in the first quarter of 2011 and an operating income of $0.3 million in the fourth quarter of 2011. Of the $59.7 million improvement in the year-over-year operating income, $53.9 million was due to lower special charges of $43.4 million, primarily associated with costs resulting from the Merger, and $10.5 million of purchase accounting adjustments primarily associated with stepped-up inventory values. The remaining $5.8 million year-over-year improvement in operating income was due to favorable volumes of $5.6 million, principally associated with increases in volumes due to the disruption in operations in 2011 at our Cali, Colombia facility. Selling, general and administrative (SG&A) expenses for the first quarter of 2012 were lower than the prior-year period by $3.9 million and lower than the fourth quarter of 2011 by $2.0 million. The $3.9 million year-over-year decrease in SG&A was due primarily to $2.1 million of lower volume-related expenses; $1.1 million of lower stock compensation expense; $1.0 million of lower incentive compensation expenses; $0.4 million higher amortization expense; and $0.1 million of lower spending in other categories.
Special charges for the first quarter of 2012 consisted primarily of $0.7 million of professional fees associated with our recently announced internal redesign and restructuring of global operations; $1.0 of employee termination and severance expenses; $0.4 million of professional fees associated with the Blackstone Acquisition; and $0.3 million of restructuring and other restructuring costs.
After recognizing $4.5 million of income tax expense, the company reported a net loss attributable to PGI for the first quarter of 2012 of $0.3 million, compared with a net loss attributable to PGI of $54.4 million in the first quarter of 2011 and a net loss attributable to PGI of $21.4 million in the fourth quarter of 2011.
FINANCIAL METRICSNet debt (defined as total debt less cash balances) as of March 31, 2012 was $519.3 million compared with $527.7 million as of December 31, 2011. Capital expenditures for the first quarter were $13.3 million. Operating working capital, defined as accounts receivable plus inventories less trade accounts payable and accrued liabilities, was $56.9 million and represented 4.8% of annual sales compared with $59.9 million and 5.3% of annual sales for the first quarter of 2011.
ADJUSTED EBITDAAdjusted EBITDA for the first quarter of 2012 was $36.8 million compared with $37.3 million in the first quarter of 2011 and $33.7 million in the fourth quarter of 2011 due primarily to higher volumes in the U.S. and Latin America, offset by lower volumes in Europe; and offset by the absence of a proforma addback in the prior year period reflecting the annualized incremental contribution from the company's Colombia operations prior to the flood, and the impact from the higher lease expense associated with the company's new line in Waynesboro, Virginia.
NON-GAAP FINANCIAL MEASURESAs more fully described in the company's Annual Report on Form 10-K, the Merger is being accounted for in accordance with GAAP for business combinations. Accordingly, our accounting for the Merger requires that the purchase accounting treatment of the Merger be "pushed down", resulting in the adjustment of all of our net assets to their respective fair values as of the Merger date of January 28, 2011. Although we continued as the same legal entity after the Merger, the application of push down accounting represents the termination of the old reporting entity and the creation of a new reporting entity. Accordingly, the two entities are not presented on a consistent basis of accounting. As a result, our consolidated financial statements for 2011 are presented for the period from January 29, 2011 through April 2, 2011 for the new reporting entity succeeding the Merger (the "Successor"), and for the period from January 2, 2011 through January 28, 2011 for the old reporting entity preceding the Merger (the "Predecessor"). The combined presentation in this press release is a "non-GAAP financial measure" and does not comply with GAAP, but is presented because we believe it provides the most meaningful comparison of our results. The results of the Successor are not comparable to the results of the Predecessor due to the difference in basis of presentation of purchase accounting as compared to historical cost.
Adjusted EBITDA (as defined below) is used in this release as a "non-GAAP financial measure," which is a measure of the company's financial performance that is different from measures calculated and presented in accordance with GAAP within the meaning of applicable Securities and Exchange Commission rules. A non-GAAP financial measure, such as EBITDA or Adjusted EBITDA, should not be viewed as an alternative to GAAP measures of performance such as (1) net income determined in accordance with GAAP or (2) operating cash flows determined in accordance with GAAP. The calculation of Adjusted EBITDA may not be comparable to the calculation of similarly titled measures reported by other companies.
As defined in the company's credit agreement, Adjusted EBITDA equals net income (loss) before interest expense, net, income and franchise taxes and depreciation and amortization, further adjusted to exclude certain unusual, non-cash, non-recurring and other items permitted in calculating covenant compliance under the indenture governing the Senior Secured Notes and the credit agreement governing our ABL facility. It is also generally consistent with the metric used by management as a performance measurement for certain performance-based incentive compensation plans. In addition, the company considers Adjusted EBITDA an important supplemental measure of its performance and believes it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in its industry.
Included in this release are reconciliations of the GAAP presentation to the combined presentation for first quarter 2011 and a reconciliation of net loss to Adjusted EBITDA, which illustrates the differences in these measures of operating performance.
Polymer Group, Inc. is a global, technology-driven developer, producer and marketer of engineered materials, and one of the world's leading producers of nonwovens. With the broadest range of process technologies in the nonwovens industry, PGI is a global supplier to leading consumer and industrial product manufacturers. The company operates 13 manufacturing and converting facilities in 9 countries throughout the world.
EARNINGS CONFERENCE CALL
PGI will conduct an investor conference call, including presentation slides, starting at 2:30 p.m. ET on Wednesday, May 16, 2012. A live webcast of the conference call and presentation material can be accessed by visiting PGI's investor relations website at www.polymergroupinc.com. The number to call for the live interactive teleconference is (866) 362-4820 or (617) 597-5345 and entering the passcode, 50928096. A replay of the conference call will be available until May 23, 2012, by dialing (888) 286-8010 or (617) 801-6888 and entering the passcode, 44389961. Shortly after the conclusion of the conference call, a webcast replay will be made available at www.polymergroupinc.com.
Safe Harbor Statement
Except for historical information contained herein, the matters set forth in this press release are forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that involve certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These forward‑looking statements speak only as of the date of this release. Important factors that could cause actual results to differ materially from those discussed in such forward‑looking statements include: general economic factors including, but not limited to, changes in interest rates, foreign currency translation rates, consumer confidence, trends in disposable income, changes in consumer demand for goods produced, and cyclical or other downturns; cost and availability of raw materials, labor and natural and other resources and the inability to pass raw material cost increases along to customers; changes to selling prices to customers which are based, by contract, on an underlying raw material index; substantial debt levels and potential inability to maintain sufficient liquidity to finance our operations and make necessary capital expenditures; the inability to meet existing debt covenants or obtain necessary waivers; achievement of objectives for strategic acquisitions and dispositions; the inability to achieve successful or timely start-up of new or modified production lines; reliance on major customers and suppliers; domestic and foreign competition; information and technological advances; risks related to operations in foreign jurisdictions; and changes in environmental laws and regulations, including climate change-related legislation and regulation. Investors and other readers are directed to consider the risks and uncertainties discussed in documents filed by Polymer Group, Inc. with the Securities and Exchange Commission, including the company's Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q.
POLYMER GROUP, INC. Consolidated Statements of Operations (Unaudited) Three Months Ended March 31, 2012, Three Months Ended December 31, 2011, Two Months Ended April 2, 2011 and One Month Ended January 28, 2011 (In Thousands)SuccessorPredecessorThree Months
March 31, 2012Three Months Ended December 31, 2011Two Months
2011One Month Ended
84,606Cost of goods sold
53,18748,09724,70816,075Selling, general and administrative expenses
34,13136,14526,48711,564Special charges, net
2,41911,87824,94820,824Other operating (income) loss, net
(361)(258)230(564)Operating income (loss)
16,998332(26,957)(15,749)Other expense (income):
Interest expense, net
Foreign currency and other (gain) loss, net
(62)14,38734982Income (loss) before income tax expense and discontinued operations
4,212(26,951)(35,534)(17,753)Income tax expense (benefit)
4,477(4,886)79549Loss from continuing operations
(265)(22,065)(35,613)(18,302)Income (loss) from discontinued operations, net of tax
(265)(21,421)(36,104)(18,120)Net income attributable to noncontrolling interests
--(59)(83)Net loss attributable to Polymer Group, Inc.
(18,203) POLYMER GROUP, INC. Consolidated Statements of Operations (Unaudited) Combined* (In Thousands)PredecessorSuccessorCombined*January 2, 2011 to
2011January 29, 2011 to
2011January 1, 2011 to
2011Net sales $
84,606$ 199,037$ 283,643Cost of goods sold 68,531174,329242,860Gross profit 16,07524,70840,783Selling, general and administrative expenses 11,56426,48738,051Special charges, net 20,82424,94845,772Other operating (income) loss, net (564)230(334)Operating loss(15,749)(26,957)(42,706)Other expense (income):
Interest expense, net 1,9228,22810,150
Foreign currency and other loss, net 82349431Loss before income tax expense and discontinued operations (17,753)(35,534)(53,287)Income tax expense 54979628Loss from continuing operations (18,302)(35,613)(53,915)Income (loss) from discontinued operations, net of tax182(491)(309)Net loss(18,120)(36,104)(54,224)Net income attributable to noncontrolling interests (83)(59)(142)Net loss attributable to Polymer Group, Inc.
(36,163)$ (54,366)P O L Y M E R
G R O U P, I N C.Condensed Consolidated Balance Sheets (Unaudited)(In Thousands) March 31, December 31, 20122011 A S S E T S Current assets: Cash and cash equivalents
72,742 Accounts receivable, net
99,210103,911 Other current assets
41,88640,448 Total current assets
362,581358,273 Property, plant and equipment, net
490,207493,352 Goodwill and intangible assets, net
162,249164,297 Other assets
44,66344,656 Total assets
,060,578 L I A B I L I T I E S
A N D
S H A R E H O L D E R S'
E Q U I T Y
Current liabilities: Accounts payable and accrued liabilities
90,516 Current portion of long-term debt
and short-term borrowings
11,91812,592 Other current liabilities
3,3242,714 Total current liabilities
199,403205,822 Long-term debt
587,019587,853 Other noncurrent liabilities
80,69379,606 Total liabilities
867,115873,281 Total PGI shareholders' equity
Total liabilities and equity
,060,578 P O L Y M E R
G R O U P, I N C.Selected Financial Data (Unaudited)(In Thousands) Successor Predecessor Three Months Three Months Two Months One Month Ended Ended Ended Ended March 31, December 31, April 2, January 28, 2012201120112011 Selected Financial Data Depreciation and amortization expense included in operating income
3,472 Noncash compensation costs included in operating income
3,591 Amortization of loan acquisition costs
51 Capital expenditures
8,405 U.S. manufacturing line operating lease expense
- Special charges, net Blackstone Acquisition Costs
,137 Accelerated vesting of share-based awards
---12,694 Goodwill impairment
-7,647-- Colombia flood
57362971,685 Asset impairment charges
-1,620-- Restructuring and plant realignment costs
254450354114 Special charges, net
20,824 Other operating (income) loss, net including Foreign Currency (Income) Loss
United States (includes Corporate)
(155)(36)373(328) Other operating (income) loss, net including Foreign Currency (Income) Loss
(564) Adjusted EBITDA The following table reconciles Adjusted EBITDA to net loss for the periods presented: Net loss
(18,203) (Income) loss from discontinued operations
-(645)491(182) Loss from sale of discontinued operations
---- Net income attributable to noncontrolling interest
--5983 Interest expense, net
12,84812,8958,2281,922 Income and franchise tax benefit
4,494(4,878)373549 Depreciation & amortization
15,16715,6549,3863,460 Adjustments resulting from application from purchase accounting
2621,24113,625(1,005) Non-cash compensation
2041812321,057 Special charges
2,41911,87924,94720,824 Acquisition and Integration Expenses
---- Foreign currency and other non-operating loss, net
(422)14,322663(421) Severance and relocation expenses
767419169131 Unusual or non-recurring charges, net
106778108(1) Business optimization expense
42011218- Management, monitoring and advisory fees
750813563- Impact of the Spain lease
---419 Annualized incremental contribution from Mexico spunmelt line
---- Annualized incremental contribution from Cali, Colombia spunmelt lines
-2,3343,0342,701 Public company costs
--12756 Adjusted EBITDA
,390 Last Twelve Last Twelve Months Ended Months Ended March 31, December 31, Adjusted EBITDA 20122011 The following table reconciles Adjusted EBITDA to net loss for the periods presented: Net loss $
(94,374) (Income) loss from discontinued operations 5,0565,365 Loss from sale of discontinued operations 735735 Net income attributable to noncontrolling interest -141 Interest expense, net 51,02848,330 Income and franchise tax benefit 1,294(2,278) Depreciation & amortization 60,44558,124 Adjustments resulting from application from purchase accounting 3,51515,873 Non-cash compensation 7021,787 Special charges 18,81862,170 Acquisition and Integration Expenses -- Foreign currency and other non-operating loss, net 20,85021,514 Severance and relocation expenses 2,8702,403 Unusual or non-recurring charges, net 1,2871,287 Business optimization expense 924523 Management, monitoring and advisory fees 3,1873,000 Impact of the Spain lease -419 Annualized incremental contribution from Mexico spunmelt line -- Annualized incremental contribution from Cali, Colombia spunmelt lines 9,95715,692 Public company costs
-183 Adjusted EBITDA $
|SOURCE Polymer Group, Inc.|
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