Polypore Announces Fourth Quarter and Full Year 2006 Results
CHARLOTTE, NC — March 7, 2007 — Polypore, Inc. today announced net sales of $124.9 million
for the three months ended December 30, 2006, representing a 23% increase over fourth quarter 2005.
Fourth quarter 2006 operating income was $19.2 million, compared to $17.6 million in the prior
year. Net income in the fourth quarter 2006 was $0.8 million, compared to net income of $3.5 million in
the fourth quarter of 2005.
During 2006, Polypore recorded restructuring charges of $34.5 million related to the Company’s exit
of cellulosic hemodialysis membrane production at its Wuppertal, Germany facility, of which $17.5
million was non-cash impairment of fixed assets associated with cellulosics production. With the
inclusion of these restructuring charges, for the twelve months ended December 30, 2006, compared
to the twelve months ended December 31, 2005:
Net sales were $479.7 million, up from $432.5 million;
Operating income was $40.3 million, a decrease from $67.4 million; and
Net loss was $12.7 million, down from net income of $14.0 million.
Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), which
is a key measurement in Polypore’s Credit Agreement, was $38.2 million for the fourth quarter of
2006 compared to $32.5 million reported in the fourth quarter of 2005. Adjusted EBITDA for the
twelve months ended December 30, 2006 was $139.8 million. Cash charges related to the cellulosics
restructuring recorded in the period were $17.0 million, which will be substantially paid out
through the second quarter of 2008. Non-cash charges were $17.5 million. Adjusted EBITDA, as
defined in our Credit Agreement, provides for add-backs of non-cash charges and up to $15.0 million
in cash charges for the cellulosics restructuring. Thus, the add-back for business restructuring in
Adjusted EBITDA is $2.0 million less than the actual restructuring charges recorded for the twelve
months ended December 30, 2006. Adjusted EBITDA is defined and reconciled to GAAP as noted below.
“We’re pleased with our performance and execution on priorities in 2006,” said Robert Toth,
President and Chief Executive Officer of Polypore, Inc. “Performance was consistent with our
expectations and we remain focused on growing our business in high value applications based on our
core capabilities in microporous membranes.”
Net sales for the energy storage segment in fourth quarter 2006 were $88.9 million, an increase of
$13.4 million from the same period in the prior year. For fiscal 2006, energy storage net sales
were $343.0 million, up $33.6 million from fiscal 2005. In the lead acid battery separator
business, the quarterly and fiscal year gains were primarily attributed to increased volume,
particularly in Asia. In the lithium separator business, the quarterly and fiscal year gains were
driven primarily by continued demand for consumer electronic products and expanding applications
for lithium batteries.
Fourth quarter gross profit in energy storage was $36.0 million, an increase of $4.5 million from
the same period in 2005. Gross profit for fiscal 2006 was $132.5 million, up $17.2 million over
the prior year. The fourth quarter and full year change in gross profit was driven by higher sales
and production efficiencies, partially offset by higher raw material and energy costs.
Fourth quarter net sales in separations media were $36.0 million, up $9.8 million from the fourth
quarter of 2005. The increase was due to the timing of cellulosic hemodialysis membrane sales, as
well as growth in high performance filtration applications and synthetic hemodialysis membranes.
Net sales for fiscal 2006 were $136.7 million, up $13.6 million from fiscal 2005. The fiscal year
gain was primarily due to growth in high performance filtration applications and synthetic
Fourth quarter gross profit in separations media was $5.9 million. This represents a decrease of
$2.0 million from the same period in the prior year, largely due to production costs associated
with the exit of cellulosic hemodialysis membrane production. For fiscal 2006, gross profit was
$32.4 million, a decrease of $2.5 million from fiscal 2005. The decrease is largely due to the exit
of cellulosic hemodialysis membranes and higher energy costs.
Polypore, Inc. will hold a conference call to discuss 2006 fourth quarter and full year results on
Thursday, March 8, 2007 at 9:00 AM Eastern time. You are invited to listen to a live broadcast via
the internet at www.polypore.net. A replay of the conference call will be available through March
16th via telephone at 800-642-1687 (in the U.S.) or 706-645-9291 (International). Enter
code 9752523. The call will also be archived on www.polypore.net.
Polypore, Inc., a wholly owned subsidiary of Polypore, International, Inc., is a 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, NC, Polypore is a global leader with manufacturing facilities or sales offices in nine
countries serving six continents.
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 failure to successfully
manage the transition in hemodialysis from cellulosic to synthetic filtration membranes; the loss
of our customers; the vertical integration by our customers of the production of our products into
their own manufacturing process; increases in prices for raw materials or the loss of key supplier
contracts; employee slowdowns, strikes or similar actions; product liability claims exposure; risks
in connection with our operations outside the United States; 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 failure to replace any senior management
losses; the incurrence of additional debt, contingent liabilities and expenses in
connection with future acquisitions; the failure to effectively integrate newly acquired
operations; the absence of expected returns from the amount of intangible assets we have recorded;
and the adverse impact on our financial condition resulting from restructuring activities.
Additional information concerning these and other important factors can be found in Item 1A. “Risk
Factors” of our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form
10-Q filed with the Securities and Exchange Commission. Statements in this release should be
evaluated in light of these important factors. Although we believe that these statements are based
upon reasonable assumptions, we cannot guarantee future results. Given these uncertainties, the
forward-looking statements discussed in this press release might not occur.
Investor Contact: Polypore Investor Relations — 704-587-8886 or firstname.lastname@example.org
Condensed Consolidated Statements of Income
Three Months Ended
Twelve Months Ended
Cost of goods sold
Selling, general and administrative expenses
Other (income) expense:
Interest expense, net
Change in accounting principle related to
Foreign currency and other
Income (loss) before income taxes
Net income (loss)
(a) Unaudited (b) Derived from audited consolidated financial statements
Debt and capital lease obligations, less current portion
Total liabilities and shareholders’ equity
(a) Unaudited (b) Derived from audited consolidated financial statements
Adjusted EBITDA Under our senior credit facility, compliance with the minimum interest coverage ratio and
maximum leverage ratio tests is determined based on a calculation of “Adjusted EBITDA”, in which
certain items are added back to EBITDA. These items include non-cash charges, impairments and
expenses other than depreciation and amortization, restructuring costs and payments under an
operating lease agreement that was bought out during the second quarter 2006.
Reconciliation of Adjusted EBITDA (in millions)
Adjusted EBITDA, as defined in the Credit Agreement, is calculated as follows:
Net income (loss)
• Depreciation and amortization
• Interest expense, net
• Provision for income taxes
• Operating lease payments (1)
• Stock compensation expense from Polypore International, Inc. (2)
• Foreign currency (gain) loss
• Loss on disposal of property, plant, and equipment
• Environmental expenses (3)
• Asset impairment (4)
• Business restructuring (5)
• Other non-cash charges (6)
Represents payments under an operating lease agreement that at the inception of the Credit Agreement we intended to refinance. During the second
quarter of 2006, we exercised our early purchase option under the lease agreement and acquired the equipment.
Represents compensation expense for stock options issued by our Parent to our employees.
Represents an increase in the existing environmental reserves at our manufacturing facility in Potenza, Italy.
Represents the non-cash asset impairment recognized in connection with the 2006 restructuring plan.
Represents business restructuring costs incurred during fiscal year 2006 for the 2004, 2005 and 2006 restructuring plans. For the 2006 restructuring
plan, the Credit Agreement limits the add-back of cash charges to
Adjusted EBITDA to $15.0 million, which is $2.0 million less than the actual cash costs expected to be incurred.
Represents the impact of adopting EITF No. 05-5, Accounting for Early Retirement or Postemployment Programs with Specific Features (Such As Terms
Specified in Altersteilzeit Early Retirement Arrangements) and other non-cash items.