Polymer Group, Inc. (PGI) reported results of operations for the fourth quarter and fiscal year ended January 2, 2010.
Sales from continuing operations were $882.7 million in fiscal 2009 compared to $1.07 billion in fiscal 2008 reflecting lower selling prices from significantly lower raw material costs in fiscal 2009 and lower volumes in the industrial segments, offset by improvement in Asia and Latin America.
Gross profit increased 4.5% to $183.7 million in fiscal 2009 compared to the prior year. Gross profit margin increased over 400 basis points in fiscal 2009 to 20.8% compared with 16.4% for fiscal 2008.
Operating income increased to $49.6 million in fiscal 2009 compared to operating income of $32.5 million in fiscal 2008.
For fiscal 2009, cash flow from operations increased 70% to $100.8 million.
Net income attributable to PGI for fiscal 2009 more than tripled to $18.2 million compared to net income attributable to PGI of $5.4 million in fiscal 2008.
Strong operating cash flows, the sale of FabPro Oriented Polymers and reduction in operating working capital allowed the company to reduce net debt (defined as total debt less cash balances) by $85 million at the end of the fiscal year to $283.1 million and improved the ratio of net debt to Adjusted EBITDA to 2.3 times from 3.3 times a year ago.
The company’s investments in growth initiatives and improvement in financial flexibility continued to yield strong returns during fiscal 2009. Global leadership of the nonwovens’ medical and hygiene markets was achieved, commercialization of a new state-of-the-art facility in Mexico was accomplished ahead of schedule, acquisition of the minority portion of its joint venture in Argentina was completed and an expanded presence in Europe was gained with the acquisition of state-of-the-art spunmelt technology in Spain.
PGI’s chief executive officer, Veronica (Ronee) M. Hagen, stated, “This was a year of significant achievement and solid execution of our strategic plan. Our goals were to become more valuable to our customers, operate more efficiently, pursue leadership positions in the core businesses, develop new growth opportunities in developing regions and enhance our financial flexibility. Although a very tall order in a period of economic uncertainty, we exceeded each of these objectives by stabilizing the businesses and aggressively managing our capital. As a result, we achieved sizable growth in net income and Adjusted EBITDA, improved gross margins by over 400 basis points, reduced our debt and invested in profitable growth in developing regions and existing markets.”
Net sales were $882.7 million for the 52-week fiscal 2009, a decrease of $190.6 million from net sales of $1.07 billion in the 53-week fiscal 2008. The net volume decline of $72.0 million in the Nonwovens segments was in all regions except Asia, but predominantly in the U.S. and Europe due to the U.S. plant closure in the third quarter of fiscal 2008 and recessionary impacts that are negatively affecting the industrial and wiping businesses located in the U.S. and European regions and carded technologies in the U.S. Oriented
Polymers’ sales volumes continued to be negatively impacted by reduced housing starts affecting their industrial business, imported commodity products affecting lumber wrap volumes and significant reduction in market demand for protective apparel fabrics. Most currencies were weaker against the U.S. dollar during 2009 compared to 2008. As a result, net sales decreased $29.1 million due to the unfavorable foreign currency translation, primarily in the European and Latin American regions. Sales were also negatively impacted by lower selling prices due to price decreases resulting from the pass-through of lower raw material costs. As raw material costs have decreased, the company has reduced selling prices to our customers where required by contract terms and where appropriate based on market conditions. In general, with respect to contracted business, there is usually a one-quarter lag between the change in raw material cost and the change in sales price. Offsetting these trends, the company had positive contributions from improved sales mix in several regions. In Asia, the company continued to grow its medical product sales. Latin America, specifically the operations in Argentina, increased the amount of hygiene product volumes. In the U.S., new spunmelt-based industrial products were commercialized in late 2008 and early 2009 and are well received.Additionally, top line revenues had a direct impact from the positive results of selling effectiveness initiatives to identify and provide an enhanced value proposition to customers.
Gross profit was $183.7 million compared to $175.8 million the prior year, primarily reflecting the improvement in mix and sales prices relative to declines in raw material costs and the implementation of manufacturing efficiency programs in Asia, offset by lower volumes, higher energy and labor costs, manufacturing inefficiencies and higher waste rates in certain other operations.
Operating income for fiscal 2009 was $49.6 million compared to $32.5 million the prior year.Selling, general and administrative (SG&A) costs decreased $3.4 million, from $118.3 million in 2008 to $114.9 million in 2009, due primarily to the movement of foreign currencies versus the U.S. dollar.Lower executive severance and termination costs and lower distribution costs related to sales volumes were partially offset by higher compensation costs and other investments in capabilities to better enable the company to address future market needs and execute on its strategic plan.