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OM Group Revenues Up More Than 50 Percent in First Quarter

May 6, 2010

CLEVELAND, May 6 /PRNewswire-FirstCall/ — OM Group, Inc. (NYSE: OMG) today announced financial results for the first quarter ended March 31, 2010.

Net sales were $303.2 million, up 58 percent from the first quarter of 2009, due primarily to higher volumes and more favorable pricing, combined with the incremental revenues from the recently acquired EaglePicher Technologies. Net income in the first quarter of 2010 was $22.6 million, or $0.74 per diluted share, compared with a loss of $8.3 million, or $0.27 per diluted share, during the same period last year. Adjusted for special items, income from continuing operations was $0.69 per diluted share compared with a loss of $0.13 per diluted share in the first quarter of 2009.

“We are pleased that the positive momentum we created for the company by the end of 2009 has carried over into 2010,” said Joseph M. Scaminace, chairman and chief executive officer. “During the first quarter, we experienced strong organic growth within Advanced Materials and Specialty Chemicals due to both growing end market demand and favorable market fundamentals. We also realized incremental growth from the EaglePicher business we added earlier this year to energize our Battery Technologies platform. Thanks to the aggressive moves we took last year to optimize our cost structure, we were able to translate our growing top line into a significant improvement on the bottom line.”

Gross profit was $71.8 million (23.7 percent of sales), significantly higher than the first quarter of 2009, which was $26.6 million (13.9 percent of sales). Selling, general and administrative expenses were $39.8 million (13.1 percent of sales), up 14 percent from the same period in 2009, but lower as a percent of sales. Operating profit was $31.9 million (10.5 percent of sales), compared with an operating loss of $10.9 million in the first quarter of 2009. The improved profitability compared with last year is due to a rising cobalt reference price, an increase in demand and benefits from profit enhancement initiatives.

Income tax expense for the first quarter of $4.3 million includes net discrete tax benefits totaling $4.0 million, of which $2.6 million relates to the smelter joint venture in the Democratic Republic of Congo (DRC) and $0.9 million relates to uncertain prior-year tax positions. The tax expense of $2.2 million in the first quarter of 2009 included net discrete tax expense of $4.7 million, including $5.9 million related to the DRC joint venture.

Cash provided by operating activities was $50.2 million in the first quarter of 2010 compared with $36.6 million in the first quarter of 2009. Higher net income was partially offset by less cash provided from changes in working capital. Our cash balance increased $10.4 million to $365.7 million. Total debt increased $140 million, reflecting borrowings against the new credit revolver to fund a portion of the acquisition of EaglePicher Technologies.

BUSINESS SEGMENT RESULTS (all comparisons with the first quarter of 2009)

Advanced Materials

  • Net sales were $170.0 million, up 56 percent
  • Excluding metal resale and by-product sales, volumes rose 27 percent, driven by economic recovery and share gains, particularly in battery materials (up 20%) and powder metallurgy (up 154%)
  • Operating profit was $29.3 million (17.2 percent of sales), up 357 percent
  • Average quarterly reference price of cobalt was $20.11 per pound, up 50 percent

Specialty Chemicals

  • Net sales were $115.0 million, up 39 percent
  • Demand was higher in most end markets, especially printed circuit board, memory disk and tire
  • Operating profit was $15.3 million (13.3 percent of sales), compared with a loss of $8.0 million (the first quarter of 2009 included an inventory LCM charge of $3.3 million and a net goodwill impairment charge of $2.6 million)

Battery Technologies

  • Net sales were $18.6 million for the two months since date of acquisition
  • Operating loss of $1.5 million includes $1.5 million of charges for inventory and deferred revenue fair value step-up in the acquired balance sheet
  • Note: This segment is comprised of EaglePicher Technologies, which was acquired on January 29, 2010; all results are from the date of acquisition.

OUTLOOK

“We believe our performance in the first quarter of 2010 accurately demonstrates our value-creating potential in a recovering economy,” said Scaminace. “In addition to the impressive margin expansion, we continue to generate positive cash flow which is critical to our ability to fund future growth opportunities.”

Scaminace shared his optimism regarding the EaglePicher acquisition. “This is a significant investment in our portable power growth platform. EaglePicher has well-defined positions in established, existing markets such as defense and aerospace along with exciting growth opportunities in emerging medical and alternative energy sectors,” he said.

Scaminace said the company currently sees no signs of weakening demand across the company’s end markets. “Battery materials, semiconductors, memory disk and printed circuit board are benefiting from growth in electronic-related components for consumer and industrial applications. Automotive, energy, mining and general construction are driving demand for powder metallurgy, tire, coatings and chemical.”

Full-year volumes for Advanced Materials are expected to be up from 2009, while revenue and operating profit will remain largely dependent on cobalt price movements. Specialty Chemicals revenue in 2010 is expected to be up from 2009, with the balance of the year being in line with the first quarter. Battery Technologies revenue is expected to experience sequential growth due to steady market demand and new applications.

For purposes of this release, discussions related to income (loss) from continuing operations or net income (loss) pertain to amounts attributable to OM Group, Inc. common shareholders.

PRESENTATION OF NON-GAAP FINANCIAL INFORMATION

“Income (loss) from continuing operations attributable to OM Group, Inc. – as adjusted for special items” is a non-GAAP measure used in this release. It is defined and reconciled to what management believes to be the most comparable GAAP measure in a schedule attached to this release. The Company’s management uses this metric in evaluating the performance of the Company’s business. The Company believes that the non-GAAP financial measure facilitates a comparative assessment of the Company’s operating performance by its management. In addition, the Company believes that this non-GAAP financial measure will enhance investors’ understanding of the performance of the Company’s operations and of the comparability to the results of prior periods.

WEBCAST INFORMATION

OM Group has scheduled a conference call and live audio broadcast on the Web for 10 a.m. Eastern time today. Investors may access the live audio broadcast by logging on to http://investor.omgi.com. A copy of management’s presentation materials will be available on OMG’s Web site at the time of the call. The company recommends visiting the Web site at least 15 minutes prior to the webcast to download and install any necessary software. A webcast audio replay will be available on the “Investor Relations – Presentations” page of the company’s Web site three hours after the call.

ABOUT OM GROUP, INC.

OM Group, Inc. is a leading global solutions provider of specialty chemicals, advanced materials, electrochemical energy storage and unique technologies crucial to enabling our customers to meet increasingly stringent market and application requirements. The company serves a wide variety of sectors, including rechargeable batteries, electronic devices, cutting tools, petrochemical catalysts, electronics manufacturing, industrial coatings, defense, aerospace, and medical devices. Headquartered in Cleveland, Ohio, OM Group operates manufacturing facilities in the Americas, Europe, Asia and Africa.

For more information, visit the company’s Web site at http://www.omgi.com/.

FORWARD-LOOKING STATEMENTS

The foregoing discussion may include forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based upon specific assumptions and are subject to uncertainties and factors relating to the company’s operations and business environment, all of which are difficult to predict and many of which are beyond the control of the company. These uncertainties and factors could cause actual results of the company to differ materially from those expressed or implied in the forward-looking statements contained in the foregoing discussion. Such uncertainties and factors include: the potential impact that the current global economic and financial market crisis may have on our business and operations, including future goodwill impairments; the direction and pace of our strategic transformation, including identification of and the ability to finance potential acquisitions; the operation of our critical business facilities without interruption; the speed and sustainability of price changes in cobalt; the potential for lower of cost or market write-downs of the carrying value of inventory necessitated by decreases in the market price of cobalt or the selling prices of the Company’s finished products; the availability of competitively priced supplies of raw materials, particularly cobalt; the demand for metal-based specialty chemicals and products in the Company’s markets; the impact of environmental regulations on our operating facilities and the impact of new or changes to current environmental, health and safety laws on our products and their use by our customers; the effect of fluctuations in currency exchange rates on the Company’s international operations; the effect of non-currency risks of investing and conducting operations in foreign countries, including political, social, economic and regulatory factors; the effect of changes in domestic or international tax laws; and the general level of global economic activity and demand for the Company’s products.

                      OM Group, Inc. and Subsidiaries
              Unaudited Condensed Consolidated Balance Sheets

                                               March 31,        December 31,
                                                      2010               2009
                                                      ----               ----
    (In thousands)
    ASSETS:
    Current assets
             Cash and cash equivalents           $365,737           $355,383
              Accounts receivable, less
              allowances                          162,278            123,641
             Inventories                          279,322            287,096
              Refundable and prepaid
              income taxes                         48,193             44,474
             Other current assets                  42,227             32,394
                                                   ------
                 Total current assets             897,757            842,988

    Property, plant and equipment, net            266,243            227,115
    Goodwill                                      302,748            234,189
    Intangible assets                             154,783             79,229
    Notes receivable from joint venture
     partner, less allowance                       13,915             13,915
    Other non-current assets                       54,769             46,700
                                                   ------             ------
                 Total assets                  $1,690,215         $1,444,136
                                               ==========

    LIABILITIES:
    Current liabilities
              Current portion of long-
              term debt                           $20,000                 $-
             Accounts payable                     147,212            139,173
             Accrued income taxes                  11,292              7,522
             Accrued employee costs                25,363             18,168
             Other current liabilities             42,325             24,099
                                                   ------
                 Total current liabilities        246,192            188,962

    Long-term debt                                120,000                  -
    Deferred income taxes                          25,586             27,453
    Uncertain tax positions                        15,130             15,733
    Pension liability                              58,638             15,799
    Other non-current liabilities                  23,733             20,057

    EQUITY:
    Total OM Group, Inc. stockholders'
     equity                                     1,154,718          1,131,305
    Noncontrolling interest                        46,218             44,827
    Total equity                                1,200,936          1,176,132
                                                ---------          ---------
    Total liabilities and equity               $1,690,215         $1,444,136
                                               ==========         ==========

                             OM Group, Inc. and Subsidiaries
                Unaudited Condensed Statements of Consolidated Operations

                                                      Three Months Ended
                                                          March 31,
                                                      ------------------
    (In thousands, except per share data)             2010           2009
                                                      ----           ----
    Net sales                                     $303,197       $191,706
    Cost of products sold (excluding
     restructuring charge)                         230,861        165,091
    Restructuring charge                               514              -
    Gross profit                                    71,822         26,615
    Selling, general and administrative
     expenses                                       39,843         34,858
    Goodwill impairment, net                             -          2,629
    Restructuring charge                                86              -
                                                       ---            ---
    Operating profit (loss)                         31,893        (10,872)
    Other income (expense):
       Interest expense                               (669)          (296)
       Interest income                                 167            297
       Foreign exchange gain (loss)                 (3,176)         1,081
       Other expense, net                               (9)           (50)
                                                       ---            ---
                                                    (3,687)         1,032
                                                    ------          -----
    Income (loss) from continuing operations
     before income tax expense                      28,206         (9,840)
    Income tax expense                              (4,349)        (2,249)
    Income (loss) from continuing operations,
     net of tax                                     23,857        (12,089)
    Income from discontinued operations, net of
     tax                                               137            264
                                                       ---            ---
    Consolidated net income (loss)                  23,994        (11,825)
    Net (income) loss attributable to the
     noncontrolling interest                        (1,394)         3,548
    Net income (loss) attributable to OM Group,
     Inc.                                          $22,600        $(8,277)
                                                   =======        =======

    Earnings per common share - basic:
      Income (loss) from continuing operations
       attributable to OM Group, Inc. common
       shareholders                                  $0.74         $(0.28)
      Income from discontinued operations
       attributable to OM Group, Inc. common
       shareholders                                   0.01           0.01
      Net income (loss) attributable to OM Group,
       Inc. common shareholders                      $0.75         $(0.27)
                                                     =====         ======
    Earnings per common share -assuming
     dilution:
      Income (loss) from continuing operations
       attributable to OM Group, Inc. common
       shareholders                                  $0.74         $(0.28)
      Income from discontinued operations
       attributable to OM Group, Inc. common
       shareholders                                      -           0.01
      Net income (loss) attributable to OM Group,
       Inc. common shareholders                      $0.74         $(0.27)
                                                     =====         ======

    Weighted average shares outstanding
      Basic                                         30,303         30,187
      Assuming dilution                             30,451         30,187

    Amounts attributable to OM Group, Inc.
     common shareholders:
      Income (loss) from continuing operations,
       net of tax                                  $22,463        $(8,541)
      Income from discontinued operations, net of
       tax                                             137            264
      Net income (loss)                            $22,600        $(8,277)
                                                   =======        =======

                          OM Group, Inc. and Subsidiaries
             Unaudited Condensed Statements of Consolidated Cash Flows

                                                    Three Months Ended
                                                         March 31,
                                                    ------------------
    (In thousands)                                  2010            2009
                                                    ----            ----
    Operating activities
    Consolidated net income (loss)               $23,994        $(11,825)
    Adjustments to reconcile consolidated net
     income (loss) to net cash provided by
    operating activities:
      Income from discontinued operations           (137)           (264)
      Depreciation and amortization               13,173          13,290
      Share-based compensation expense             1,674           1,700
      Tax deficiency (excess tax benefit) on
       exercise/vesting of share awards              (92)            420
      Foreign exchange (gain) loss                 3,176          (1,081)
      Goodwill impairment charges, net                 -           2,629
      Restructuring charges                          600               -
      Other non-cash items                         1,327           3,972
    Changes in operating assets and
     liabilities, excluding the effect of
     business acquisitions
      Accounts receivable                        (25,805)         24,930
      Inventories                                 35,237          30,062
      Accounts payable                             1,753         (27,939)
      Other, net                                  (4,682)            712
                                                  ------             ---
    Net cash provided by operating activities     50,218          36,606

    Investing activities
    Expenditures for property, plant and
     equipment                                    (4,581)         (5,590)
    Acquisitions                               (171,979)               -
    Expenditures for software                       (104)           (663)
                                                    ----            ----
    Net cash used for investing activities     (176,664)          (6,253)

    Financing activities
    Payments of long-term debt and revolving
     line of credit                            (105,000)             (20)
    Proceeds from the revolving line of credit   245,000               -
    Debt issuance costs                           (2,483)              -
    Tax deficiency (excess tax benefit) on
     exercise/vesting of share awards                 92            (420)
    Proceeds from exercise of stock options        3,792               -
    Payment related to surrendered shares         (1,209)           (372)
    Net cash provided by (used for) financing
     activities                                  140,192            (812)

    Effect of exchange rate changes on cash       (3,394)         (1,954)
                                                  ------          ------

    Cash and cash equivalents
    Increase in cash and cash equivalents from
     continuing operations                        10,352          27,587
    Discontinued operations -net cash
     provided by operating activities                  2               -
    Balance at the beginning of the period       355,383         244,785
                                                 -------         -------
    Balance at the end of the period            $365,737        $272,372
                                                ========        ========

                       OM Group, Inc. and Subsidiaries
                        Unaudited Segment Information

                                                         Three Months Ended
                                                              March 31,
                                                         ------------------
    (In thousands)                                       2010            2009
                                                         ----            ----

    Net Sales
      Advanced Materials                             $169,964        $108,944
      Specialty Chemicals                             115,030          83,009
      Battery Technologies (a)                         18,589               -
      Intersegment items                                 (386)           (247)
                                                     $303,197        $191,706
                                                     ========        ========

    Operating profit (loss)
      Advanced Materials                              $29,258          $6,398
      Specialty Chemicals                              15,341          (7,978)
      Battery Technologies (a)                         (1,505)              -
      Corporate (b)                                  (11,201)          (9,292)
      Intersegment items                                    -               -
                                                      $31,893        $(10,872)
                                                      =======        ========

    (a) includes activity since the acquisition of EaglePicher
     Technologies on January 29, 2010.

    (b) includes $2.2 million of fees related to the EaglePicher
     Technologies acquisition.

    Volumes
      Advanced Materials
      Sales volume - metric tons*                       6,981           6,349
      Cobalt refining volume - metric tons              2,294           2,134
      *Sales volume includes cobalt metal resale and copper by-product
       sales.

      Specialty Chemicals
      Advanced Organics sales volume - metric tons      5,610           4,903
      Electronic Chemicals sales volume -gallons
       (thousands)                                      2,702           1,678
      Ultra Pure Chemicals sales volume -gallons
       (thousands)                                      1,284             945
      Photomasks - number of masks                      7,451           6,500

                         OM Group, Inc. and Subsidiaries
                            Non-GAAP Financial Measure

                                                       Three months
                             Three months ended                      ended
                               March 31, 2010         March 31, 2009
                               --------------         --------------
    (in thousands,
     except per share                  Diluted             Diluted
     data)                        $      EPS           $      EPS
                                ---   --------       ---  --------

    Net income (loss)
     attributable to OM
     Group, Inc.            $22,600       $0.74  $(8,277)    $(0.27)
     - as reported

    Less:
      Income from
       discontinued
       operations, net of
       tax                      137           -      264       0.01
                                ---         ---      ---       ----

    Income (loss) from
     continuing
     operations
     attributable
        to OM Group, Inc. -
         as reported        $22,463       $0.74  $(8,541)    $(0.28)

    Special items --
     income (expense):
       EaglePicher
        Technologies -
        inventory (COGS)     (1,011)      (0.03)       -          -
        and deferred
         revenue (sales)
         valuation, net of
         tax
       Discrete tax items
        -OMG portion          2,822        0.09   (2,031)     (0.07)
       Restructuring
        charges, net of
        tax                    (428)      (0.01)       -          -
      Q1 2009 Goodwill
       impairment charge          -           -   (6,768)     (0.22)
      Q4 2008 Goodwill
       impairment charge
       adjustment                 -           -    4,139       0.14

    Income (loss) from
     continuing
     operations
     attributable
        to OM Group, Inc. -
         as adjusted for
         special items      $21,080       $0.69  $(3,881)    $(0.13)
                            =======       =====  =======     ======

    Weighted average
     shares outstanding
     -diluted                            30,451              30,187

Use of Non-GAAP Financial Information:

“Income (loss) from continuing operations attributable to OM Group, Inc. – as adjusted for special items” is a non-GAAP financial measure that the Company’s management has used as an important metric in evaluating the performance of the Company’s business for 2010. The above table presents a reconciliation of the Company’s GAAP results, as reported (both net income (loss) attributable to OM Group, Inc. and income (loss) from continuing operations attributable to OM Group, Inc.), to its non-GAAP results after adjusting for the special items shown. The Company believes that the non-GAAP financial measure presented in the above table facilitates a comparative assessment of the Company’s operating performance by its management. In addition, the Company believes that this non-GAAP financial measure will enhance investors’ understanding of the performance of the Company’s operations during 2010 and of the comparability of the 2010 results to the results of prior periods.

SOURCE OM Group, Inc.


Source: newswire



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