PGI Reports Full Year and Fourth Quarter 2011 Results

CHARLOTTE, N.C., March 30, 2012 /PRNewswire via COMTEX/ — Polymer Group, Inc. (PGI) (the “Company”) reported results of operations for the year and fourth quarter ended December 31, 2011.

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 December 31, 2011 periods have been combined and are referred to as “Combined”. The combined presentation does not comply with U.S. 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 U.S. GAAP presentation to the combined presentation.

Full Year 2011 Highlights (Combined):

Top Line Results Up on Improved Sales/Mix and Volume Growth

Net sales were $1.188 billion compared with $1.106 billion in 2010, reflecting higher selling prices from the pass-through of higher raw material costs and the favorable benefit of foreign currency translation. Excluding the impact from flooding at the company’s Colombia operations, volumes were up on stabilization in industrial markets and increased demand in consumer disposables in Europe and higher demand for medical and hygiene products in Asia.

Underlying Profitability Improves Against Backdrop of Colombia Flood and Higher Raw Material Costs

Gross profit, including the impact of purchase accounting, was $186.5 million compared with $209.9 million in the prior year.

Although moderating in the fourth quarter of 2011, raw material costs impacted profitability throughout 2011 and have risen to date in 2012. The positive impact of the company’s U.S. plant consolidation activities and operational improvements throughout its global base during the year were offset somewhat by the disruption to operations from the flood in Cali, Colombia.

Adjusted EBITDA was $140.9 million in 2011 compared with $143.3 million in 2010. Adjusted EBITDA, a non-GAAP financial measure, is defined and reconciled to net income below.

Completed Growth Investments in Asia and the U.S. Together with New Product Launches Signal Optimism Amid Competitive Environment

New investments in Suzhou, China and Waynesboro, Virginia came online in 2011 and bring proprietary spunmelt equipment to nearly 80% of total nonwovens capacity.

Introduction of Arium(TM) technology opens new opportunities in healthcare, industrial, filtration and new emerging market applications.

Strong Cash Generation and Disciplined Working Capital Management Continues

Ended the year with $72.7 million in cash and cash equivalents.

Operating working capital remains well under 5% of net sales.

Well positioned with one of the world’s stronger financial partners in Blackstone.

PGI’s chief executive officer, Veronica (Ronee) M. Hagen, stated, “We finished a year of significant achievement and investment in future growth on a strong note with new state-of-the-art capacity fully commercialized in the U.S. and China and our Cali, Colombia operations back in full stride. I’m pleased with the sequential improvement in sales and profitability we were able to demonstrate throughout the year. While the fluctuations in raw material costs were evident, we benefitted from a moderating trend for most of the second half of the year, as expected, as well as improvements from our previous manufacturing consolidation and realignment initiatives.

“The competitive environment across many of our businesses is intensifying, and we are enhancing our strategic positioning with a greater concentration of proprietary capacity, opening new market opportunities with our Arium technology and repositioning resources to capitalize on new dynamics in our existing markets. “

FULL YEAR FINANCIAL RESULTS (COMBINED)

Net sales for the year ended December 31, 2011, were $1.188 billion compared with $1.106 billion for the year ended January 1, 2011. The increase was due primarily to a higher price/sales mix in all Nonwovens Segments and the Oriented Polymers segment primarily associated with the pass-through of higher raw material costs as well as the favorable impact from changes in foreign currency as the U.S. dollar generally weakened, resulting in higher translation of sales generated in foreign jurisdictions (particularly in the Europe Nonwovens segment). These favorable impacts were partially offset by a decrease in volumes in the Nonwoven Segments, which was primarily attributable to the disruption in operations at the company’s Cali, Colombia facility from flooding, and a decrease in volumes in Oriented Polymers associated with lower demand in the building products and industrial packaging markets. Excluding the effects of the flood in Colombia, sales volumes would have been higher than a year ago on increases in Europe and Asia, offset by lower volumes in the U.S. and Latin America.

Gross profit for the year ended December 31, 2011, was $186.5 million compared with $209.9 million for the year ended January 1, 2011. The decline was primarily the result of the recognition of $16.3 million of purchase accounting adjustments in the year primarily associated with stepped-up inventory values. Additionally, lower volumes due to the disruption in Colombia negatively impacted gross profit by approximately $8.5 million. The net effect of $100.9 million in higher raw material costs and an increase in sales/price mix of $96.7 million contributed to a decrease of $4.2 million. The positive impact of the U.S. plant consolidation activities, along with the company’s incremental improvements in operational efficiencies in the rest of its business, coupled with the exclusion of the Spain lease payment of approximately $5.0 million due to its cancellation as a result of the Merger, contributed to an increase of $10.0 million.

The company reported an operating loss for the year ended December 31, 2011 of $23.8 million compared with operating income of $49.5 million for the year ended January 1, 2011. Selling, general and administrative (SG&A) expenses for the year were $146.1 million compared with $141.5 million in the prior-year period. The year-over-year increase was principally due to incremental SG&A expenses from: $6.6 million of cost increases related to the Blackstone acquisition/merger (the “Merger”) and purchase accounting; $5.2 million of lower stock compensation expense; the lack of comparable charges that were incurred in 2010 of $4.2 million for equity-based and sales-related taxes in certain foreign jurisdictions; $1.8 million of higher costs attributable to unfavorable changes in foreign currency rates; $5.9 million associated with higher spending in other categories; and a $0.3 million positive impact of the Cali insurance claim. Also included in operating income for the year were higher special charges of $44.2 million, consisting of: $27.7 million associated with professional fees and other transaction costs associated with the Merger; accelerated vesting of share-based awards of $12.7 million due to a change in control associated with the Merger; $7.6 million associated with the impairment of goodwill; $0.8 million of higher asset impairment charges associated with facilities and unused manufacturing equipment; lower restructuring and plant realignment costs of $7.4 million; $1.1 million of higher costs incurred to restore our Cali, Colombia site; and other costs of $1.7 million. The company recognized $1.3 million of acquisition and integration costs in the year ended January 1, 2011 related to the purchase of the business in Spain in December 2009.

As a result, the company reported a net loss attributable to PGI for the year ended December 31, 2011, of $94.4 million compared with net income attributable to PGI of $10.4 million in the year ended January 1, 2011.

FOURTH QUARTER RESULTS

Net sales for the fourth quarter of 2011 were $291.9 million compared with $268.9 million for the fourth quarter ended January 1, 2011 and $315.5 million in the third 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, Asia and Europe offset somewhat from lower volumes in the U.S., and lower volumes in the Oriented Polymers segment. Net sales also benefitted from a higher price/mix in all Nonwovens segments and Oriented Polymers, primarily due to price increases resulting from the higher raw material costs. Foreign currency translation rates negatively impacted sales by approximately $2.9 million compared with the fourth quarter of 2010.

Gross profit was $48.1 million for the fourth quarter of 2011 compared with $50.8 million for the fourth quarter of 2010 and $48.9 million for the third quarter of 2011. Higher depreciation costs in 2011 associated with increased asset values resulting from the Merger was the primary contributor to lower year-over-year gross profit, along with an increase in lease expense associated with the new line installed in the U.S. Raw material costs were $18.9 million higher in the fourth quarter of 2011 compared with 2010, offset by increases in sales price/mix of $19.3 million related to the pass-through of higher raw material costs. Although the company experienced a decline in raw material prices during the fourth quarter of 2011, costs have begun to increase to date in 2012, which is expected to result in profit headwinds for the first quarter of 2012. Manufacturing costs were lower by $0.2 million in the fourth quarter of 2011 compared with the prior year due to the positive impact of U.S. plant consolidation activities along with the company’s incremental improvements in operational efficiencies in the rest of its business.

Operating income for the fourth quarter of 2011 was $0.3 million compared with $4.3 million in the fourth quarter of 2011 and $11.4 million in the third quarter of 2011. Selling, general and administrative (SG&A) expenses for the fourth quarter of 2011 were lower than the prior-year period by $3.0 million. The year-over-year decrease was due primarily to the lack of comparable charges that were incurred in 2010 of $3.6 million for equity-based and sales-related taxes in certain foreign jurisdictions; $2.0 million of lower stock compensation expense; $0.4 million of lower profit sharing and other compensation expense; and $0.4 million of lower costs attributable to favorable changes in foreign currency rates; offset by $1.3 million of cost increases related to the Merger; and $1.2 million of higher compensation and benefits. The company also incurred special charges of $11.9 million in the fourth quarter of 2011 compared with $6.1 million in the fourth quarter of 2010 and $1.4 million in the third quarter of 2011. Special charges were $5.8 million higher in fourth quarter of 2011 as compared to 2010 primarily due to: $7.6 million associated with the impairment of goodwill; $1.6 million of higher asset impairment charges associated with facilities and unused manufacturing equipment; $2.3 million of lower professional fees and other transaction costs associated with the Merger; $1.2 million of lower costs incurred to restore our Cali, Colombia site; and other higher costs of $0.1 million.

As a result of the above, the company reported a net loss attributable to PGI for the fourth quarter of $21.4 million, compared with a net loss attributable to PGI of $5.3 million in the fourth quarter of 2010 and a net loss attributable to PGI of $9.2 million in the third quarter of 2011.

FINANCIAL METRICS

The company successfully reduced its net debt (defined as total debt less cash balances) during 2011 following the Merger. Net debt as of December 31, 2011 was $527.7 million compared with $537.6 million as of October 1, 2011, and $542.4 million as of July 2, 2011. Capital expenditures for the fourth quarter were $14.0 million and $76.8 million for the year. Capital expenditures during 2011 included $11.2 million associated with the restoration of the operations in Cali, Colombia. Operating working capital, defined as accounts receivable plus inventories less trade accounts payable and accrued liabilities, was $54.6 million and represented 4.7% of annual sales compared with $53.1 million and 4.9% of annual sales for the fourth quarter of 2010.

In January 2012, the company completed its previously announced offer to exchange all of its outstanding 7.75% Senior Secured Notes due 2019, representing a total of $560 million, for an equal principal amount of its 7.75% Senior Secured Notes, which have been registered under the Securities Act of 1933, as amended.

ADJUSTED EBITDA

Adjusted EBITDA for the full year was $140.9 million compared with $143.3 million for the prior year period due primarily to lower manufacturing costs; higher price/sales mix offset by higher raw materials costs incurred in the first three quarters of the year; and lower volumes in the U.S. and Latin America. Adjusted EBITDA for the fourth quarter of 2011 was $33.7 million compared with $34.7 million in the fourth quarter of 2010 due primarily to higher volumes in Asia and Latin America; higher price/sales mix partially offset by higher raw materials costs; and higher manufacturing costs. Unfavorably impacting fourth quarter manufacturing costs was the $2.1 million in rent expense attributed to the Company’s new Waynesboro, Virginia spunmelt manufacturing line.

NON-GAAP FINANCIAL MEASURES

As more fully described in the company’s Annual Report on Form 10-K, the acquisition is being accounted for in accordance with U.S. 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 December 31, 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 does not comply with U.S. 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 generally accepted accounting principles, or 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 income and franchise tax expense (benefit), interest expense, net, depreciation and amortization, minority interests net of cash distributions, write-off of loan acquisition costs, non-cash compensation, foreign currency gain and losses, net, and special charges, net of unusual or non-recurring gains. The company presents Adjusted EBITDA, as defined in its credit agreement, as the measurement used as a basis for determining compliance with several covenants thereunder. 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 is a reconciliation of net (loss) income 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 10:00 a.m. EDT on Monday, April 2, 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 (800) 638-5439 or (617) 614-3945 and entering the passcode, 94870359. A replay of the conference call will be available until April 9, 2012, by dialing (888) 286-8010 or (617) 801-6888 and entering the passcode, 23242993. 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 forwardlooking 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 forwardlooking 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.

        
        For further information, please contact:
        Dennis Norman                            Cliff Bridges
        Chief Financial Officer                  Sr. Director, Corporate Communications
        (704) 697-5186                           (704) 697-5168
        normand@pginw.com                        bridgesc@pginw.com
        POLYMER GROUP, INC.
        Consolidated Statements of Operations (Unaudited)
        Combined*
        (In Thousands)
                                                                             Predecessor           Successor           Combined*
                                                                             --------------------  ------------------  --------------------
                                                                             January 1,            January 29,         January 1,
                                                                             2011 to               2011 to             2011 to
                                                                             January 28,           December 31,        December 31,
                                                                             2011                  2011                2011
                                                                             --------------------  ------------------  --------------------
        Net sales                                                            $             84,606  $     1,102,929     $        1,187,535
        Cost of goods sold                                                   68,531                932,523             1,001,054
                                                                             --------------------  ------------------  --------------------
        Gross profit                                                         16,075                170,406             186,481
        Selling, general and administrative expenses                         11,564                134,483             146,047
        Special charges, net                                                 20,824                41,345              62,169
        Other operating loss (income), net                                   (564)                 2,634               2,070
                                                                             --------------------  ------------------  --------------------
        Operating (loss) income                                              (15,749)              (8,056)             (23,805)
        Other expense (income):
        Interest expense, net                                                1,922                 46,409              48,331
        Foreign currency and other loss, net                                 82                    18,636              18,718
                                                                             --------------------  ------------------  --------------------
        (Loss) income before income tax expense and discontinued operations  (17,753)              (73,101)            (90,854)
        Income tax (benefit) expense                                         549                   (3,272)             (2,723)
                                                                             --------------------  ------------------  --------------------
        (Loss) income from continuing operations                             (18,302)              (69,829)            (88,131)
        Discontinued operations:
        (Loss) income from operations of discontinued business               182                   (5,548)             (5,366)
        Loss on sale of discontinued operations                              -                     (735)               (735)
                                                                             --------------------  ------------------  --------------------
        (Loss) income from discontinued operations, net of tax               182                   (6,283)             (6,101)
        Net (loss) income                                                    (18,120)              (76,112)            (94,232)
        Net income attributable to noncontrolling interests                  (83)                  (59)                (142)
                                                                             --------------------  ------------------  --------------------
        Net (loss) income attributable to Polymer Group, Inc.                $           (18,203)  $         (76,171)  $           (94,374)
        POLYMER GROUP, INC.
        Consolidated Statements of Operations (Unaudited)
        Three Months Ended December 31, 2011,
        Three Months Ended October 1, 2011 and
        Three Months Ended January 1, 2011
        (In Thousands)
                                                                     Successor                                Predecessor
                                                                     --------------------------------------   --------------------
                                                                     Three Months         Three Month         Three Months
                                                                     Ended                Ended               Ended
                                                                     December 31,         October 1,          January 1,
                                                                     2011                 2011                2011
                                                                     -------------------  -----------------   --------------------
        Net sales                                                    $         291,937    $       315,498     $         268,919
        Cost of goods sold                                           243,840              266,509             218,072
                                                                     -------------------  -----------------   --------------------
        Gross profit                                                 48,097               48,989              50,847
        Selling, general and administrative expenses                 36,145               34,516              39,163
        Special charges, net                                         11,878               1,399               6,125
        Acquisition and integration expenses                         -                    -                   13
        Other operating (income) loss, net                           (258)                1,691               1,215
                                                                     -------------------  -----------------   --------------------
        Operating income                                             332                  11,383              4,331
        Other expense (income):
        Interest expense, net                                        12,896               12,866              7,174
        Foreign currency and other loss, net                         14,387               2,886               315
                                                                     -------------------  -----------------   --------------------
        (Loss) before income tax expense and discontinued operations (26,951)             (4,369)             (3,158)
        Income tax (benefit) expense                                 (4,886)              936                 1,556
                                                                     -------------------  -----------------   --------------------
        (Loss) income from continuing operations                     (22,065)             (5,305)             (4,714)
        Discontinued operations:
        Income (loss) from operations of discontinued business       644                  (3,363)             (364)
        Loss on sale of discontinued operations                      -                    (520)               -
                                                                     -------------------  -----------------   --------------------
        Income (loss) from discontinued operations, net of tax       644                  (3,883)             (364)
        Net loss                                                     (21,421)             (9,188)             (5,078)
        Net income attributable to noncontrolling interests          -                    -                   (176)
                                                                     -------------------  -----------------   --------------------
        Net loss attributable to Polymer Group, Inc.                 $          (21,421)  $         (9,188)   $            (5,254)
        POLYMER GROUP, INC.
        Consolidated Statements of Operations (Unaudited)
        Eleven Months Ended December 31, 2011,
        One Month Ended January 28, 2011 and
        Twelve Months Ended January 1, 2011
        (In Thousands)
                                                                            Successor              Predecessor
                                                                            --------------------   ----------------------------
                                                                            Eleven Months          One Month       Fiscal Year
                                                                            Ended                  Ended           Ended
                                                                            December 31,           January 28,     January 1,
                                                                            2011                   2011            2011
                                                                            --------------------   --------------  ------------
        Net sales                                                           $       1,102,929      $       84,606  $1,106,211
        Cost of goods sold                                                  932,523                68,531          896,319
                                                                            --------------------   --------------  ------------
        Gross profit                                                        170,406                16,075          209,892
        Selling, general and administrative expenses                        134,483                11,564          141,461
        Special charges, net                                                41,345                 20,824          17,993
        Acquisition and integration expenses                                -                      -               1,742
        Other operating loss (income), net                                  2,634                  (564)           (815)
                                                                            --------------------   --------------  ------------
        Operating (loss) income                                             (8,056)                (15,749)        49,511
        Other expense (income):
        Interest expense, net                                               46,409                 1,922           31,728
        Foreign currency and other loss, net                                18,636                 82              1,454
                                                                            --------------------   --------------  ------------
        (Loss) income before income tax expense and discontinued operations (73,101)               (17,753)        16,329
        Income tax (benefit) expense                                        (3,272)                549             4,534
                                                                            --------------------   --------------  ------------
        (Loss) income from continuing operations                            (69,829)               (18,302)        11,795
        Discontinued operations:
        (Loss) income from operations of discontinued business              (5,548)                182             (765)
        Loss on sale of discontinued operations                             (735)                  -               -
                                                                            --------------------   --------------  ------------
        (Loss) income from discontinued operations, net of tax              (6,283)                182             (765)
        Net (loss) income                                                   (76,112)               (18,120)        11,030
        Net income attributable to noncontrolling interests                 (59)                   (83)            (623)
                                                                            --------------------   --------------  ------------
        Net (loss) income attributable to Polymer Group, Inc.               $           (76,171)   $     (18,203)  $     10,407
        P O L Y M E R   G R O U P,  I N C.
        Condensed Consolidated Balance Sheets (Unaudited)
        (In Thousands)
                                                                  Successor                 Predecessor
                                                                  -----------------------   -------------------
                                                                  December 31,              January  1,
                                                                  2011                      2011
                                                                  -----------------------   -------------------
        A S S E T S
        Current assets:
                   Cash and cash equivalents                      $             72,742      $            72,355
                   Accounts receivable, net                       141,172                   121,747
                   Inventories                                    103,911                   105,180
                   Other current assets                           40,448                    46,978
                   Assets of discontinued operations              -                         18,805
                                                                  -----------------------   -------------------
                                Total current assets              358,273                   365,065
        Property, plant and equipment, net                        493,352                   323,134
        Goodwill and intangible assets, net                       164,297                   7,533
        Other assets                                              44,656                    36,245
                                                                  -----------------------   -------------------
                   Total assets                                   $        1,060,578        $          731,977
        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       $           190,516       $          173,859
                   Current portion of long-term debt
                   and short-term borrowings                      12,592                    5,721
                   Other current liabilities                      2,714                     1,932
                   Liabilities of discontinued operations         -                         4,793
                                                                  -----------------------   -------------------
                                Total current liabilities         205,822                   186,305
        Long-term debt                                            587,853                   328,170
        Other noncurrent liabilities                              79,606                    74,250
                                                                  -----------------------   -------------------
                   Total liabilities                              873,281                   588,725
        Total PGI shareholders' equity                            187,297                   134,336
        Noncontrolling interests                                  -                         8,916
                                                                  -----------------------   -------------------
        Total equity                                              187,297                   143,252
                                                                  -----------------------   -------------------
                   Total liabilities and equity                   $        1,060,578        $          731,977
        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                Three Months
                                                                                                       Ended                      Ended                       Ended
                                                                                                       December 31,               October 1,                  January 1,
                                                                                                       2011                       2011                        2011
                                                                                                       -------------------------  --------------------------  -----------------------------
        Selected Financial Data
        Depreciation and amortization expense included in operating income                             $               15,689     $              15,799       $                 11,196
        Noncash compensation costs included in operating income                                        $                    181   $                   205     $                   1,573
        Amortization of loan acquisition costs                                                         $                    685   $                   685     $                      205
        Capital expenditures                                                                           $               14,001     $              17,130       $                 23,744
        U.S. manufacturing line operating lease expense                                                $                 2,067    $                        -  $                           -
        Special charges, net
        Blackstone Acquisition Costs                                                                   $                 1,597    $                   909     $                   3,878
        Accelerated vesting of share-based awards                                                      -                          -                           -
        Goodwill impairment                                                                            7,647                      -                           -
        Colombia flood                                                                                 362                        36                          1,585
        Asset impairment charges                                                                       1,620                      -                           -
        Restructuring and plant realignment costs                                                      202                        262                         635
        Other                                                                                          450                        192                         27
                                                                                                       -------------------------  --------------------------  -----------------------------
        Special charges, net                                                                           $               11,878     $                1,399      $                   6,125
        Other operating (income) loss, net including Foreign Currency (Gain) Loss
        United States (includes Corporate)                                                             $                   (115)  $                2,076      $                        (5)
        Canada                                                                                         -                          (19)                        104
        Europe                                                                                         (107)                      (94)                        (140)
        Asia                                                                                           -                          -                           253
        Latin America                                                                                  (36)                       (272)                       1,003
                                                                                                       -------------------------  --------------------------  -----------------------------
        Other operating (income) loss, net including Foreign Currency (Gain) Loss                      $                   (258)  $                1,691      $                   1,215
        Adjusted EBITDA
        The following table reconciles Adjusted EBITDA to net income (loss) for the periods presented:
        Net loss                                                                                       $              (21,421)    $               (9,189)     $                 (5,254)
        (Income) loss from discontinued operations                                                     (645)                      3,365                       365
        Loss from sale of discontinued operations                                                      -                          519                         -
        Net income attributable to noncontrolling interest                                             -                          -                           176
        Interest expense, net                                                                          12,895                     12,865                      7,174
        Income and franchise tax benefit                                                               (4,878)                    962                         5,237
        Depreciation & amortization                                                                    15,654                     15,764                      11,163
        Adjustments resulting from application from purchase accounting                                1,241                      383                         -
        Non-cash compensation                                                                          181                        205                         2,223
        Special charges                                                                                11,879                     1,399                       6,125
        Acquisition and Integration Expenses                                                           -                          -                           13
        Foreign currency and other non-operating loss, net                                             14,322                     4,776                       1,716
        Severance and relocation expenses                                                              419                        836                         847
        Unusual or non-recurring charges, net                                                          778                        (36)                        -
        Business optimization expense                                                                  112                        172                         304
        Management, monitoring and advisory fees                                                       813                        812                         -
        Impact of the Spain lease                                                                      -                          -                           1,386
        Annualized incremental contribution from Cali, Colombia spunmelt lines                         2,334                      2,891                       2,947
        Public company costs                                                                           -                          -                           318
                                                                                                       -------------------------  --------------------------  -----------------------------
        Adjusted EBITDA                                                                                $               33,684     $              35,724       $                 34,740
                                                                                                Successor                 Predecessor
                                                                                                ------------------------  ---------------------------------------------------------
                                                                                                Eleven Months             One Month                   Twelve Months
                                                                                                Ended                     Ended                       Ended
                                                                                                December 31,              January 28,                 January 1,
                                                                                                2011                      2011                        2011
                                                                                                ------------------------  --------------------------  -----------------------------
        Selected Financial Data
        Depreciation and amortization expense included in operating income                      $               54,747    $                3,472      $                 45,349
        Noncash compensation costs included in operating income                                 $                    728  $              13,591       $                   4,681
        Amortization of loan acquisition costs                                                  $                 2,480   $                     51    $                      867
        Capital expenditures                                                                    $               68,428    $                8,405      $                 45,170
        U.S. manufacturing line operating lease expense                                         $                 2,067   $                        -  $                           -
        Special charges, net
        Blackstone Acquisition Costs                                                            $               27,919    $                6,137      $                   6,388
        Accelerated vesting of share-based awards                                               -                         12,694                      -
        Goodwill impairment                                                                     7,647                     -                           -
        Colombia flood                                                                          1,037                     1,685                       1,585
        Asset impairment charges                                                                1,620                     -                           744
        Restructuring and plant realignment costs                                               1,515                     194                         9,098
        Other                                                                                   1,607                     114                         178
                                                                                                ------------------------  --------------------------  -----------------------------
        Special charges, net                                                                    $               41,345    $              20,824       $                 17,993
        Other operating (income) loss, net including Foreign Currency (Gain) Loss
        United States (includes Corporate)                                                      $                 2,486   $                    (42)   $                    (301)
        Canada                                                                                  22                        (22)                        235
        Europe                                                                                  (237)                     (148)                       (649)
        Asia                                                                                    24                        (24)                        (663)
        Latin America                                                                           339                       (328)                       563
                                                                                                ------------------------  --------------------------  -----------------------------
        Other operating (income) loss, net including Foreign Currency (Gain) Loss               $                 2,634   $                  (564)    $                    (815)
                                                                                                Last Twelve                                           Last Twelve
                                                                                                Months Ended                                          Months Ended
                                                                                                December 31,                                          January 1,
        Adjusted EBITDA                                                                         2011                                                  2011
                                                                                                ------------------------                              -----------------------------
        The following table reconciles Adjusted EBITDA to net income for the periods presented:
        Net (loss) income                                                                       $              (94,374)                               $                 10,407
        (Income) loss from discontinued operations                                              5,365                                                 766
        Loss from sale of discontinued operations                                               735                                                   -
        Net income attributable to noncontrolling interest                                      141                                                   623
        Interest expense, net                                                                   48,330                                                31,728
        Income and franchise tax benefit                                                        (2,278)                                               8,770
        Depreciation & amortization                                                             58,124                                                45,317
        Adjustments resulting from application from purchase accounting                         15,873                                                -
        Non-cash compensation                                                                   1,787                                                 6,918
        Special charges                                                                         62,170                                                17,993
        Acquisition and Integration Expenses                                                    -                                                     1,742
        Foreign currency and other non-operating loss, net                                      21,514                                                1,385
        Severance and relocation expenses                                                       2,403                                                 2,312
        Unusual or non-recurring charges, net                                                   1,287                                                 3,042
        Business optimization expense                                                           523                                                   716
        Management, monitoring and advisory fees                                                3,000                                                 -
        Impact of the Spain lease                                                               419                                                   5,453
        Annualized incremental contribution from Mexico spunmelt line                           -                                                     2,435
        Annualized incremental contribution from Cali, Colombia spunmelt lines                  15,692                                                2,947
        Public company costs                                                                    183                                                   775
                                                                                                ------------------------                              -----------------------------
        Adjusted EBITDA                                                                         $             140,894                                 $               143,329

SOURCE Polymer Group, Inc.

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