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Sales volume declines at Polymer Group in first quarter
14 May '09
5 min read
Gross profit increased 22.7%, or $9.7 million, compared to the prior year and represented a gross profit margin of 23.2% compared to 15.7% for the first quarter of 2008. Though volumes were lower, raw material costs during the quarter were reduced by $35.5 million while the combination of price and mix changes declined only $9.4 million. Although the average unit cost of raw materials in the first quarter was lower than the fourth quarter, there has been a moderate increase in the cost of certain raw materials, specifically polypropylene resin, during the first quarter.
Additionally, the company expects to see reductions in contracted selling prices in the second quarter of 2009 due to the quarterly lag effect of the recent decline in average raw material costs for the first quarter of 2009 versus the fourth quarter of 2008. Due to these factors, the company expects to experience a decline in gross profit margin during the second quarter versus the gross profit margin generated for the first quarter of fiscal 2009.
Operating income for the first quarter of 2009 was $22.2 million, compared to $12.1 million in the first quarter of the prior year. Sales, general and administrative (SG&A) expenses were $2.8 million lower than the first quarter of 2008 and $3.4 million lower on a sequential quarter basis. The year-over-year savings were primarily the result of lower incentive compensation costs and changes in foreign currency exchange rates.
The company recognized special charges of $2.9 million during the quarter, of which $1.6 million were non-cash impairment charges related to the write-down of assets held for sale in Germany to their fair market value. The remaining $1.3 million was associated with the previously announced restructuring initiatives in North America and Europe. Special charges were $15.2 million in the fourth quarter of 2008 and were $1.4 million in the first quarter of 2008.
The company successfully initiated debt repurchase activities in the first quarter and was able to purchase $15 million of its senior secured term loan in open market transactions below par value. The difference in the principal amount and the aggregate purchase costs resulted in a gain on the reacquisition of debt of $2.4 million during the quarter. Additionally, interest expense was $1.1 million lower than the first quarter of 2008 as the company reduced overall debt balances, and interest rates were lower.
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Additionally, the company expects to see reductions in contracted selling prices in the second quarter of 2009 due to the quarterly lag effect of the recent decline in average raw material costs for the first quarter of 2009 versus the fourth quarter of 2008. Due to these factors, the company expects to experience a decline in gross profit margin during the second quarter versus the gross profit margin generated for the first quarter of fiscal 2009.
Operating income for the first quarter of 2009 was $22.2 million, compared to $12.1 million in the first quarter of the prior year. Sales, general and administrative (SG&A) expenses were $2.8 million lower than the first quarter of 2008 and $3.4 million lower on a sequential quarter basis. The year-over-year savings were primarily the result of lower incentive compensation costs and changes in foreign currency exchange rates.
The company recognized special charges of $2.9 million during the quarter, of which $1.6 million were non-cash impairment charges related to the write-down of assets held for sale in Germany to their fair market value. The remaining $1.3 million was associated with the previously announced restructuring initiatives in North America and Europe. Special charges were $15.2 million in the fourth quarter of 2008 and were $1.4 million in the first quarter of 2008.
The company successfully initiated debt repurchase activities in the first quarter and was able to purchase $15 million of its senior secured term loan in open market transactions below par value. The difference in the principal amount and the aggregate purchase costs resulted in a gain on the reacquisition of debt of $2.4 million during the quarter. Additionally, interest expense was $1.1 million lower than the first quarter of 2008 as the company reduced overall debt balances, and interest rates were lower.
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Polymer Group Inc
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