OM Group Revenues Up More Than 50 Percent in First Quarter
- Higher volumes and pricing, plus EaglePicher revenues, drive net sales increase -
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)
"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.
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/.
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.
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.
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