CHARLOTTE, N.C., April 1, 2015 /PRNewswire/ -- Polymer Group, Inc. ("PGI" or the "Company") reported preliminary results of operations for the year and fourth quarter ended December 31, 2014.
2014 Highlights:
- Acquisitions, Core Market Momentum, Growth Initiatives and Investments Resulted in Substantial Volume Growth
- Net sales increased $645.1 million to $1.86 billion in fiscal 2014 compared with $1.21 billion in fiscal 2013. The Fiberweb and Providencia acquisitions contributed $393.8 million and $194.3 million, respectively, in incremental growth.
- Excluding acquisitions, annual volumes increased 4.3% compared to the prior year period.
- Every segment generated incremental volume growth in 2014. Our Asia segment benefited from higher volumes in the healthcare and hygiene markets and supported by recent capacity expansions. The stabilization of underlying demand in the healthcare, hygiene and wipes markets drove growth in Europe. South America benefited from higher demand for wipes and specialty products while North America volumes increased as a result of increased demand in the hygiene and construction markets. After special charges and foreign currency movements, net loss attributable to PGI was $115.3 million.
- Adjusted EBITDA Increases as a Result of Global Transformation Initiatives
- Adjusted EBITDA, before giving pro forma effect to acquisition impacts, increased 60.1% to $218.8 million from $136.7 million in 2013.
- Pro forma Adjusted EBITDA, including the pro forma results of the Providencia Acquisition prior to the acquisition date of June 11, 2014 and estimated unrealized synergies for both the Providencia and Fiberweb acquisitions, was $260.0 million.
- The increase in Adjusted EBITDA was the result of an array of factors including acquisitions, growth in core markets, manufacturing efficiencies, global cost optimization, raw material cost management and focus on operational excellence.
Note: This earning release includes Adjusted EBITDA, a metric that is not calculated in accordance with Generally Accepted Accounting Principles in the U.S. ("GAAP"). See the "Non-GAAP Financial Measures" section at the end of this earnings release for the definition of Adjusted EBITDA and a reconciliation to its most directly comparable financial measure calculated in accordance with GAAP.
PGI's Chief Executive Officer, J. Joel Hackney Jr., stated, "From every perspective, 2014 was an exceptional year for PGI as the global transformational initiatives that began in late 2013 and into this year generated significant growth for our business. As the result of our strategic acquisitions, incremental volume growth in every global region, and growth investments in technology, capacity expansion and operational improvements, PGI generated record net sales and Adjusted EBITDA. In 2014, we successfully expanded our global footprint, became a more diversified business with a significantly wider range of products for use in a broader array of applications, increased the scope of our customer base and very importantly, improved our strategic value to customers across the world."
FULL YEAR 2014 RESULTS
As previously announced, the Company completed the acquisition of Providencia on June 11, 2014 (the "Providencia Acquisition Date"), whereby the Company acquired a 71.25% controlling interest in Providencia. The results of operations of Providencia have been included in the Company's operating results since the Providencia Acquisition Date. In addition, the Company completed the acquisition of Fiberweb on November 15, 2013 (the "Fiberweb Acquisition Date"), whereby Fiberweb became a wholly-owned subsidiary of the Company. The results of operations of Fiberweb have been included in the Company's operating results since the Fiberweb Acquisition Date.
In light of the recent acquisition of Providencia, the Company realigned its internal reporting structure during the third quarter of 2014 to more closely reflect our new organizational structure and business focus. Reportable segments are as follows: North America, South America, Europe and Asia. The operations previously reported in the Oriented Polymers segment are now included within the North America segment, along with the operations in Mexico. The Europe and Asia segments remain unchanged. Prior-year information has been updated to conform to the current year presentation.
For the fiscal year ended December 31, 2014, total net sales were $1.86 billion. Total sales volumes increased $640.3 million compared with the fiscal year ended December 28, 2013, primarily driven by the contributions from our acquisitions, with Fiberweb contributing an incremental $393.8 million of net sales for the period and Providencia providing $194.3 million of net sales since the date of acquisition. Excluding acquisitions, volumes increased 4.3% or $52.2 million. Incremental growth of 12.8% or $22.5 million in Asia was driven by higher volumes sold in the healthcare and hygiene markets, both of which were supported by our recent capacity expansions. In Europe, stabilization of underlying demand in the healthcare, hygiene and wipes markets 13.0% or $13.1 million of incremental volume growth. Improvements in the wipes and technical specialties markets provided 3.3% or $5.1 million of incremental volume growth in South America. Volumes increased 2.0% or $11.5 million in North America, primarily driven by the hygiene and construction markets. However, these improvements were partially offset by lower wipes volume driven by the reduction in demand of a key customer. In addition, lower filtration volume was driven by the exit of certain low margin customers during the year.
For the fiscal year ended December 31, 2014, net selling prices increased $4.7 million compared with the fiscal year ended December 28, 2013. The pricing increase was primarily driven by higher net selling prices of $4.6 million in North America, which reflects the positive impact of certain pricing initiatives implemented during the year and the pass-through of higher raw material costs to our customers. In addition, we experienced pricing improvements of $2.7 million in South America. The pricing increase, which primarily resulted from our passing through higher raw material costs associated with index-based selling agreements and market-based pricing trends, more than offset lower selling prices of $1.6 million in Europe. Lower net selling prices in Asia impacted net sales by $1.0 million. The decrease, a result of a larger proportion of current year sales in the hygiene market compared with more prior year sales in the healthcare market (which have higher average selling prices), was also impacted by a competitive pricing environment.
Gross profit for the fiscal year ended December 31, 2014 was $333.5 million, a $137.4 million increase compared with the fiscal year ended December 28, 2013. The primary driver of the increase related to the contributions from Fiberweb, which represented an incremental $95.8 million for the period, including contributions associated with integration synergies. In addition, contributions from Providencia were $33.9 million, including $4.5 million related to the non-recurring amortization expense of the inventory step-up established as a result of the acquisition as well as the negative impact of start-up inefficiencies in Brazil as certain lines were returning to normal operations during the second half of the year after being temporarily shut down in the second quarter due to required alterations to meet safety regulations.
Volume and price increases further provided incremental gross profit. In addition, the $2.1 million reduction of our labor component of cost of goods sold reflects the positive benefits of our cost reduction initiatives. However, these amounts were partially offset by lower net spreads (the difference between the change in raw material costs and selling prices) of $14.0 million as raw material costs increased, impacting each of the North America, South America and Asia segments. Other costs that impacted gross profit include an $8.3 million increase to our overhead component of cost of goods sold. The increase, primarily related to the increase in volume-related costs, was partially offset by manufacturing efficiencies in North America and South America. As a result, gross profit as a percentage of net sales for fiscal year ended December 31, 2014 increased to 17.9% from 16.1% for the fiscal year ended December 28, 2013.
Selling, general and administrative expenses for the fiscal year ended December 31, 2014 were $254.3 million, a $101.1 million increase compared with the fiscal year ended December 28, 2013. The increase was primarily related to the inclusion of Fiberweb, which added an incremental $61.3 million of costs for the period. In addition, expenses related to our recent acquisition of Providencia added $32.1 million to selling, general and administrative expenses. Other selling general and administrative expenses increased $7.7 million compared to the prior year. Factors that contributed to the increase include higher incentive compensation and Blackstone-related management fees as well as increased selling, marketing and freight expenses associated with higher volumes. In addition, we incurred higher employee-related expenses and costs related to third-party fees and expenses. These amounts were partially offset by lower non-cash stock compensation, depreciation and amortization expense. As a result, selling, general and administrative expenses as a percentage of net sales increased to 13.7% for the fiscal year ended December 31, 2014 from 12.6% for the fiscal year ended December 28, 2013. The fiscal year ended December 28, 2013 included costs related to the announced retirement of our previous Chief Executive Officer and appointment of our new Chief Executive Officer. Amounts recorded totaled $6.5 million, which included $2.0 million of non-cash stock compensation expense.
Special charges were $59.2 million for the fiscal year ended December 31, 2014. We recognized $24.4 million related to professional fees and other transaction costs associated with our acquisition of Providencia as well as $14.6 million of costs associated with the integration of Fiberweb. Restructuring and plant realignment costs, primarily associated with Fiberweb integration activity, totaled $9.7 million. Special charges were $33.2 million for the fiscal year ended December 28, 2013 and included $18.3 million related to professional fees and other transaction costs associated with the acquisition of Fiberweb. In addition, we incurred $8.6 million related to restructuring and plant realignment costs as well as $2.3 million related to a non-cash fixed asset impairment change in our South America segment.
Operating income for the fiscal year ended December 31, 2014 was $18.2 million compared with operating income of $7.2 million in the fiscal year ended December 28, 2013. The overall increase was primarily driven by the contributions from our acquisitions of Fiberweb and Providencia, offset by higher special charges.
Interest expense for the fiscal year December 31, 2014 was $96.2 million, of which $37.0 million relates to incremental indebtedness used to fund our recent acquisitions. Foreign currency and other, net was an expense of $27.1 million during the period. The main driver of the expense related to foreign currency losses on non-operating assets and liabilities, primarily impacting South America and Europe as the U.S. dollar strengthened considerably during second half of the year impacting the translation of U.S. dollar-denominated intercompany loans. Other items include $5.3 million attributable to the decline in the fair value of certain currency contracts in place associated with the Providencia Acquisition. These amounts were partially offset by the settlement of a foreign exchange contract associated with the Providencia purchase price. In addition, we incurred $15.7 million related to certain changes to our debt structure, which are included within Debt modification and extinguishment costs. Income tax during the year was a benefit of $1.5 million.
As a result of the above, the Company reported a net loss of $115.3 million for the fiscal year ended December 31, 2014 compared with a net loss of $24.9 million for the fiscal year ended December 28, 2013. Adjusted EBITDA, excluding pro forma impact for the acquisitions and unrealized synergies for the fiscal year ended December 31, 2014 was $218.8 million compared with $136.7 million for the fiscal year ended December 28, 2013. Adjusted EBITDA, including the pro forma impacts of above, was $260.0 million. Adjusted EBITDA, a non-GAAP financial measure, is defined and reconciled to net income below.
FOURTH QUARTER 2014 RESULTS
Net sales were $499.4 million for the fourth quarter of 2014 compared with $347.3 million for the fourth quarter of 2013. Contributions from the Fiberweb and Providencia acquisitions contributed $52.9 million and $82.5 million, respectively, to the year-over-year increase. Additionally, organic volumes increases contributed sales of $23.2 million, representing comparative growth of 7.9% over the fourth quarter of 2013. Hygiene volumes were up in all regions compared to the prior year. Additionally, healthcare volumes in Asia and wipes volumes in North America contributed to year-over-year growth during the quarter. During the fourth quarter, foreign currency impacts due to the strengthening of the U.S. dollar negatively impacted sales by $6.5 million compared to the fourth quarter of 2013.
Gross profit for the quarter ended December 31, 2014 was $92.0 million, a $40.4 million increase compared with the prior year period. The primary driver of the increase related to the contributions from Fiberweb, which represented and incremental $23.1 million for the period, including contributions associated with integration synergies. In addition, contributions from Providencia were $19.4 million.
Increases in net sales within each of our geographic regions, primarily in North America and Europe, further provided incremental gross profit. However, for the three months ended December 31, 2014, net selling prices were relatively stable compared to the three months ended December 28, 2013. During the same period, raw material costs were up $3.8 million as costs were increasing during the quarter resulting in a lower spread over raw materials due primarily to the lag between the increases in raw material costs and the time to reflect the higher costs in the selling prices. Other costs that impacted gross profit include $2.9 million increase to our overhead component of cost of goods sold, primarily related to manufacturing costs in South America. As a result, gross profit as a percentage of net sales for the three months ended December 31, 2014, increased to 18.4% from 14.9% for the three months ended December 28, 2013.
Selling, general and administrative expenses for the three months ended December 31, 2014 were $68.8 million, a $22.8 million increase compared with the three months ended December 28, 2013. The increase was primarily related to the inclusion of Fiberweb, which added an incremental $7.1 million of costs for the period. In addition, expenses related to our recent acquisition of Providencia added $13.3 million to selling, general and administrative expenses. Other selling general and administrative expenses increased $2.2 million compared with the prior year. Factors that contributed to the increase include higher incentive compensation and Blackstone-related management fees as well as increased selling and marketing expenses. As a result, selling, general and administrative expenses as a percentage of net sales increased to 13.8% for the three months ended December 31, 2014 from 13.2% for the three months ended December 28, 2013.
Special charges were $11.3 million for the fourth quarter of 2014 and included $9.7 million related to professional fees and other transaction costs associated with our acquisition of Providencia and Fiberweb integration costs. In addition, we incurred $2.1 million costs related to the relocation of our manufacturing facility in China. Special charges were $22.5 million for the fourth quarter of 2013, primarily associated with the Fiberweb Acquisition and restructuring and plant realignment activities.
Operating income for the fourth quarter of 2014 was $12.7 million compared with an operating loss of $17.5 million in the fourth quarter of 2013.
To read full press release, please click here.
Help employers find you! Check out all the jobs and post your resume.
