- 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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