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)

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 ended


Three months ended


March 31, 2010


March 31, 2009

(in thousands, except per share data)

$

Diluted EPS


$

Diluted EPS







Net income (loss) attributable to OM Group, Inc.
- as reported

$ 22,600

$          0.74


$ (8,277)

$      (0.27)







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)
   and deferred revenue (sales) valuation, net of tax

(1,011)

(0.03)


-

-

  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.

Related Stocks:
Stock Market XML and JSON Data API provided by FinancialContent Services, Inc.
Nasdaq quotes delayed at least 15 minutes, all others at least 20 minutes.
Markets are closed on certain holidays. Stock Market Holiday List
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.
Press Release Service provided by PRConnect.
Stock quotes supplied by Six Financial
Postage Rates Bots go here