- Net Income Improved to $0.47 per share - - Income from Continuing Operations as Adjusted for Special Items was $0.66 per share - - Cash Balance Grows to $355.4 Million at Year-End with Strong Cash from Operations - CLEVELAND, Feb. 25 /PRNewswire-FirstCall/ -- OM Group, Inc. (NYSE:OMG) today announced financial results for the fourth quarter ended December 31, 2009. Net sales were $241.4 million, down 19 percent from the fourth quarter of 2008, due primarily to lower selling prices for cobalt-containing products. Net income was $14.3 million, or $0.47 per diluted share, compared with a loss of $32.7 million, or $1.08 per diluted share, during the same period last year. Adjusted for special items, income from continuing operations was $0.66 per diluted share compared with a loss of $1.51 per diluted share in the fourth quarter of 2008. "While we saw steady improvement in customer demand across our product lines, as well as some improvement in cobalt supply and demand fundamentals, neither were enough to achieve year-over-year revenue growth in the fourth quarter," said Joseph M. Scaminace, chairman and chief executive officer. "That said, thanks to our ongoing profit enhancement initiatives, we were able to create positive growth on the bottom line and continue to generate strong cash flow from operations." Gross profit was $62.1 million (25.7 percent of sales), significantly higher than the fourth quarter of 2008, which was $3.6 million and included a non-cash inventory charge of $26.9 million. Selling, general and administrative expenses were $32.8 million (13.6 percent of sales), down 20 percent from the same period in 2008. Operating profit was $29.2 million (12.1 percent of sales), compared with an operating loss of $46.0 million in the fourth quarter of 2008. The improved profitability compared with last year is due to a rising cobalt reference price, benefits from profit enhancement initiatives, and an increase in demand. Income tax expense for the fourth quarter was $14.2 million, including discrete tax expense items totaling $5.7 million, related primarily to repatriation of foreign earnings and tax matters in the Democratic Republic of Congo. The income tax benefit of $18.8 million in the fourth quarter of 2008 included a non-recurring income tax benefit of $21.5 million related to the company's electing to take foreign tax credits on prior-year U.S. tax returns. BUSINESS SEGMENT RESULTS (all comparisons to the fourth quarter of 2008) Advanced Materials -- Net sales were $132.8 million, down 32 percent -- Excluding metal resale and copper by-product sales, sales volumes improved 5 percent due primarily to a rebound in battery materials, chemicals and ceramics -- Operating profit was $25.9 million (19.5 percent of sales), compared with a loss of $16.0 million (the fourth quarter of 2008 included an inventory charge of $19.9 million) -- Average quarterly reference price of cobalt was $18.35 per pound, down 12 percent Specialty Chemicals -- Net sales were $109.1 million, up 6 percent -- Demand was higher in most end markets, especially printed circuit board, memory disk and tire -- Operating profit was $11.1 million (10.2 percent of sales), compared with a loss of $19.1 million (the fourth quarter of 2008 included an inventory charge of $7.0 million and goodwill impairment charges of $8.8 million) OUTLOOK The acquisition of EaglePicher Technologies, LLC, announced February 1, 2010, will be a source of top-line growth in 2010. The Joplin, Missouri-based company is a leader in designing and manufacturing batteries, battery management systems and energetic devices for the defense, aerospace and medical industries. In addition to top-line growth, the acquisition is expected to provide operating cash flow and contribute to operating profit. Interest expense will increase as the company utilized its revolving credit facility to finance a portion of the transaction. "We are pleased to see that the momentum we were able to generate at the end of 2009 seems to be continuing into the first quarter, as demand from most of the end markets we serve continues to strengthen," said Scaminace. "Similarly, our businesses are stronger today than this time last year, thanks to the lower cost structure and improving operational excellence metrics we put in place." Scaminace noted that while there are many positives going into the new fiscal year, there are still areas of concern. "Demand expectations are still off from the levels seen prior to the downturn and visibility is still limited in some end markets as we look beyond the first half of 2010." According to Scaminace, the company's primary challenge in the near term is to remain focused on optimizing its variable cost structure as volumes continue to rise. Longer term, the company remains focused on executing its transformational strategy through highly profitable organic and acquired growth. 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. For purposes of this release, discussions related to income (loss) from continuing operations or net income (loss) pertains to amounts attributable to OM Group, Inc. common shareholders. 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 Condensed Consolidated Balance Sheets December 31, December 31, 2009 2008 ------------ ------------ (In thousands) ASSETS Current assets Cash and cash equivalents $355,383 $244,785 Accounts receivable, less allowances 123,641 130,217 Inventories 287,096 306,128 Refundable and prepaid income taxes 44,474 55,059 Other current assets 32,394 59,227 ------- ------- Total current assets 842,988 795,416 Property, plant and equipment, net 227,115 245,202 Goodwill 234,189 268,677 Intangible assets 79,229 84,824 Notes receivable from joint venture partner, less allowance 13,915 13,915 Other non-current assets 46,700 26,393 ---------- ---------- Total assets $1,444,136 $1,434,427 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current portion of long-term debt $ - $ 80 Accounts payable 139,173 89,470 Accrued income taxes 7,522 17,677 Accrued employee costs 18,168 31,168 Other current liabilities 24,099 21,074 ------- ------- Total current liabilities 188,962 159,469 Long-term debt - 26,064 Deferred income taxes 27,453 26,764 Uncertain tax positions 15,733 6,123 Other non-current liabilities 35,856 37,929 ------- ------- Total liabilities 268,004 256,349 Total OM Group, Inc. stockholders' equity 1,131,305 1,130,649 Noncontrolling interest 44,827 47,429 ---------- ---------- Total liabilities and equity $1,444,136 $1,434,427 ========== ========== OM Group, Inc. and Subsidiaries Condensed Statements of Consolidated Operations Three Months Ended Year Ended December 31, December 31, ------------------- --------------------- (In thousands, except per share data) 2009 2008 2009 2008 -------- -------- -------- ---------- Net sales $241,372 $296,599 $871,669 $1,736,849 Cost of products sold (excluding restructuring charges) 178,640 293,001 693,832 1,384,301 Restructuring charges 677 - 12,054 - ------- ------- ------- --------- Gross profit 62,055 3,598 165,783 352,548 Selling, general and administrative expenses 32,760 40,748 133,302 166,126 Goodwill impairment, net - 8,800 37,504 8,800 Restructuring charges 103 - 654 - Gain on termination of retiree medical plan - - (4,693) - ------ -------- ------- ------- Operating profit (loss) 29,192 (45,950) (984) 177,622 Other income (expense): Interest expense (81) (305) (689) (1,597) Interest income 202 511 928 1,920 Foreign exchange loss (671) (4,613) (21) (3,744) Other income (expense), net (57) (1,348) (292) (1,913) ------- ------- ----- ------- (607) (5,755) (74) (5,334) ------- ------- ----- ------- Income (loss) from continuing operations before income tax (expense) benefit 28,585 (51,705) (1,058) 172,288 Income tax (expense) benefit (14,249) 18,842 (20,899) (16,076) -------- ------- -------- -------- Income (loss) from continuing operations, net of tax 14,336 (32,863) (21,957) 156,212 Income from discontinued operations, net of tax (289) 303 1,496 92 ------ -------- -------- ------- Consolidated net income (loss) 14,047 (32,560) (20,461) 156,304 Net (income) loss attributable to noncontrolling interest 279 (155) 2,604 (21,301) ------- --------- --------- -------- Net income (loss) attributable to OM Group, Inc. common shareholders $14,326 $(32,715) $(17,857) $135,003 ======= ========= ========= ======== Earnings per common share - basic: Income (loss) from continuing operations attributable to OM Group, Inc. common shareholders $0.48 $(1.09) $(0.64) $4.48 Income from discontinued operations attributable to OM Group, Inc. common shareholders (0.01) 0.01 0.05 - ------ ------- ------- ----- Net income (loss) attributable to OM Group, Inc. common shareholders $0.47 $(1.08) $(0.59) $4.48 ===== ======= ======= ===== Earnings per common share - assuming dilution: Income (loss) from continuing operations attributable to OM Group, Inc. common shareholders $0.48 $(1.09) $(0.64) $4.45 Income from discontinued operations attributable to OM Group, Inc. common shareholders (0.01) 0.01 0.05 - ------ ------- ------- ----- Net income (loss) attributable to OM Group, Inc. common shareholders $0.47 $(1.08) $(0.59) $4.45 ===== ======= ======= ===== Weighted average shares outstanding Basic 30,267 30,180 30,244 30,124 Assuming dilution 30,487 30,180 30,244 30,358 Amounts attributable to OM Group, Inc. common shareholders: Income (loss) from continuing operations, net of tax $14,615 $(33,018) $(19,353) $134,911 Income from discontinued operations, net of tax (289) 303 1,496 92 ------- --------- --------- -------- Net income (loss) $14,326 $(32,715) $(17,857) $135,003 ======= ========= ========= ======== OM Group, Inc. and Subsidiaries Condensed Statements of Consolidated Cash Flows Three Months Ended Year Ended December 31, December 31, ---------------------- ----------------------- (In thousands) 2009 2008 2009 2008 ------- --------- --------- -------- Operating activities Consolidated net income (loss) $14,047 $(32,560) $(20,461) $156,304 Adjustments to Reconcile consolidated net income (loss) to net cash provided by operating activities: Income from discontinued operations 289 (303) (1,496) (92) Gain on termination of retiree medical plan - - (4,693) - Depreciation and amortization 12,655 14,480 53,765 56,116 Share-based compensation expense 1,440 976 6,026 7,621 Foreign exchange loss 671 4,613 21 3,744 Interest income receivable from joint venture partner - - - 3,776 Deferred income tax benefit (10,514) 6,258 (7,471) (894) Lower of cost or market inventory charge - 26,922 - 27,728 Goodwill impairment charges, net - 8,800 37,504 8,800 Restructuring charges 780 - 12,708 - Other non-cash items (1,631) 5,746 801 506 Changes in operating assets and liabilities: Accounts receivable 2,556 70,963 6,739 48,641 Inventories (23,662) 119,616 17,142 76,985 Accounts payable 38,592 (59,825) 49,703 (124,712) Other, net 25,667 (46,023) 15,158 (92,399) ------ -------- ------ -------- Net cash provided by operating activities 60,890 119,663 165,446 172,124 Investing activities Expenditures for property, plant and equipment (3,558) (7,430) (25,686) (30,712) Proceeds from settlement of cobalt forward purchase contracts - - - 10,736 Proceeds from loans to consolidated joint venture partner - 5,750 - 10,264 Acquisitions - (511) - (5,799) Other, net (2,346) (347) (4,797) (2,423) ------- ----- ------- ------- Net cash used for investing activities (5,904) (2,538) (30,483) (17,934) Financing activities Payments of long- term debt and revolving line of credit - (28) (26,141) (45,513) Proceeds from the revolving line of credit - - - 70,000 Payment of loan from consolidated joint venture partner - (2,657) - (2,657) Payment related to surrendered shares - - (535) (3,251) Distribution to joint venture partners - (11,250) - (26,184) Proceeds from exercise of stock options - 2 11 874 Other, net 424 (1,083) - 28 --- -------- -------- ------- Net cash provided by (used for) financing activities 424 (15,016) (26,665) (6,703) Effect of exchange rate changes on cash (104) (1,890) 2,697 (2,889) ----- ------- ----- ------- Cash and cash equivalents Increase from continuing operations 55,306 100,219 110,995 144,598 Discontinued operations -net cash used for operating activities (397) - (397) - Balance at the beginning of the period 300,474 144,566 244,785 100,187 -------- -------- -------- -------- Balance at the end of the period $355,383 $244,785 $355,383 $244,785 ======== ======== ======== ======== OM Group, Inc. and Subsidiaries Segment Information Three Months Ended Year Ended December 31, December 31, ------------------ -------------------- (In thousands) 2009 2008 2009 2008 ---- ---- ---- ---- Net Sales Advanced Materials $132,762 $194,122 $472,412 $1,192,423 Specialty Chemicals 109,137 102,739 401,801 546,675 Intersegment items (527) (262) (2,544) (2,249) -------- -------- -------- ---------- $241,372 $296,599 $871,669 $1,736,849 ======== ======= ======= ========= Operating profit (loss) Advanced Materials $25,915 $(16,025) $53,301 $203,545 Specialty Chemicals (a) 11,116 (19,125) (26,981) 11,168 Corporate (b) (7,839) (8,623) (27,304) (37,540) Intersegment items - (2,177) - 449 ------- --------- ------ -------- $29,192 $(45,950) $(984) $177,622 ======= ========= ====== ======== (a) Speciality Chemicals includes a $37.5 million non-cash goodwill impairment charge and a $12.7 million restructuring charge in 2009. (b) Corporate includes a $4.7 million gain on the termination of the Company's retiree medical plan in 2009. Volumes Advanced Materials Sales volume - metric tons* 6,689 6,497 27,073 31,450 Cobalt refining volume - metric tons 2,344 2,353 8,962 9,639 *Sales volume includes cobalt metal resale and copper by-product sales. Speciality Chemicals Advanced Organics sales volume - metric tons 5,003 5,126 21,787 28,956 Electronic Chemicals sales volume - gallons (thousands) 2,720 1,851 8,994 11,270 Ultra Pure Chemicals sales volume - gallons (thousands) 1,230 1,274 4,564 5,152 Photomasks - number of masks 6,989 7,063 27,065 27,834 OM Group, Inc. and Subsidiaries Non-GAAP Financial Measure Three months ended Three months ended December 31, 2009 December 31, 2008 ----------------- -------------------- (in thousands, except per share data) $ Diluted EPS $ Diluted EPS ----------------- -------------------- Net income (loss) attributable to OM Group, Inc. - as reported $14,326 $0.47 $(32,715) $(1.08) Less: Income (loss) from discontinued operations, net of tax (289) (0.01) 303 0.01 ------------------- -------------------- Income (loss) from continuing operations attributable to OM Group, Inc. - as reported $14,615 $0.48 $(33,018) $(1.09) Special items -- income (expense): Goodwill impairment charge - - (8,800) (0.29) Intangible asset impairment charge (163) (0.01) - - Restructuring charge, net of tax (780) (0.02) - - Discrete tax items attributable to OMG, including foreign tax credits (4,449) (0.15) 21,536 0.71 ------------------ -------------------- Income (loss) from continuing operations attributable to OM Group, Inc. - as adjusted for special items $20,007 $0.66 $(45,754) $(1.51) ================== ==================== Weighted average shares outstanding - diluted 30,487 30,180 ----------------------------------------------------------------------- Year ended Year ended December 31, 2009 December 31, 2008 ----------------- ----------------- (in thousands, except per share data) $ Diluted EPS $ Diluted EPS ------------------- ------------------- Net income (loss) attributable to OM Group, Inc. - as reported $(17,857) $(0.59) $135,003 $4.45 Less: Income from discontinued operations, net of tax 1,496 0.05 92 - ------------------- ------------------- Income (loss) from continuing operations attributable to OM Group, Inc. - as reported $(19,353) $(0.64) $134,911 $4.45 Special items -- income (expense): Goodwill impairment charge (37,504) (1.24) (8,800) (0.29) Restructuring charge, net of tax (10,808) (0.36) - - Intangible asset impairment charges (1,550) (0.05) - - Gain on termination of retiree medical plan 4,693 0.16 - - Discrete tax items attributable to OMG, including foreign tax credits (6,128) (0.21) 46,636 1.54 REM - inventory step-up (COGS), net of tax - - (1,222) (0.04) Tax assessment in Canada - - (763) (0.03) ----------------- ------------------ Income from continuing operations attributable to OM Group, Inc. - as adjusted for special items $31,944 $1.06 $99,060 $3.26 ================= ================== Weighted average shares outstanding - diluted 30,244 30,358 ---------------------------------------------------------------------- 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 2009. 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 2009 and of the comparability of the 2009 results to the results of prior periods. DATASOURCE: OM Group, Inc. CONTACT: Troy Dewar, director, investor relations, +1-216-263-7765 Web Site: http://www.omgi.com/

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