PGI continues to experience stability in hygiene & medical markets
Polymer Group Inc announced preliminary summary results of operations for the second quarter and six-months ended July 4, 2009. Additionally, the company announced it is unable to timely file its Quarterly Report on Form 10-Q for the fiscal quarter ended July 4, 2009 primarily due to the additional time and effort necessary to finalize the company's accounting for income taxes, to ensure that foreign currency effects of certain intercompany loans are properly accounted for and to reconcile intercompany account balances.
PGI's chief executive officer, Veronica (Ronee) Hagen, stated, "The core operations of PGI continued to show strength during the quarter, even as we address the unexpected delays in filing our results. We continued to experience stability in our global hygiene and medical markets and have achieved a successful start-up of our new capacity in Mexico to serve North America. While industrial volumes remained weak, we are taking necessary steps to align our cost structure with demand levels and to ensure that we maintain a sustainable long-term position in targeted niche markets."
During the quarter, the company concluded that it was probable within a twelve month time period that it would sell the operations associated with its FabPro Oriented Polymers, LLC ("FabPro") subsidiary. However, at this time, no definitive agreement has been entered into associated with FabPro. In accordance with requirements of SFAS No. 144 "Accounting for Impairment and Disposal of Long-Lived Assets", the FabPro business has been classified as held for sale. FabPro income was $2.0 million for the second quarter of 2009 compared to $0.8 million for the second quarter of 2008. For the first six months of 2009, FabPro income was $4.2 million compared to $0.7 million for the same period the prior year.
Net sales were $206.0 million for the three months ended July 4, 2009, a decrease of $64.7 million from the comparable period of fiscal 2008 net sales of $270.7 million. The decline in sales was primarily driven by lower volumes in the industrial segment as a result of the recessionary environment, and by lower overall selling prices to reflect lower raw material costs. Global hygiene and medical spunmelt volumes remained relatively stable and supported solid results in the U.S., Latin America and Asia. Additionally, foreign currency translation rates impacted sales by approximately $12.6 million as most currencies weakened against the U.S. dollar. The declines were offset somewhat by improvements in sales product mix, primarily in Asia, reflecting an increase in medical product volumes. Similar overall trends drove net sales for the first six months of 2009 of $416.0 million compared to $528.3 million for the first six months of 2008.
Gross profit for the second quarter of 2009 of $42.6 million was relatively flat compared to the second quarter of 2008 gross profit of $43.9 million. As a percent of sales, the gross profit margin for the second quarter was 20.7% compared to 16.2% for the same period the prior year, reflecting an improved spread of sales prices to raw materials that offset lower sales volumes. Raw material costs during the quarter were reduced by $30.9 million while the combination of price and mix changes declined only $19.2 million. For the year-to-date period, gross profit was $92.0 million, representing a gross margin of 22.1%, compared to $85.8 million and 16.2% for the first six months of 2008. The improvement in gross profit and, more significantly, gross profit margin, for the first six months was primarily due to significant reductions in raw material costs experienced during the fourth quarter of 2008 that remained at low levels during the first quarter of 2009. Generally, the Company's sales prices lag changes in raw material cost changes by approximately one quarter. As raw material costs began to increase during the first quarter and continued to increase into the second quarter, gross profit was impacted but continued to be at higher levels than the prior year period.