CLEVELAND, Feb. 26 /PRNewswire-FirstCall/ -- OM Group, Inc. (NYSE: OMG) announced today financial results for the fourth quarter and full year ended December 31, 2008.

Fourth-quarter and full-year highlights:

-- Full year 2008 net sales grew 70 percent to a record $1.7 billion, despite a 4 percent drop in net sales during the fourth quarter compared to a year ago.

-- Fourth-quarter net loss of $1.08 per diluted share included a non- recurring income tax benefit of $0.71 per diluted share, a non-cash inventory charge of $0.63 per diluted share, and a non-cash goodwill impairment charge of $0.29 per diluted share.

-- Cash flow from operating activities climbed in 2008 to $119.7 million in the fourth quarter, $172.1 million for the full year.

-- Cash balance at year-end was $244.8 million with additional liquidity available from revolvers of $75 million in the US and euro 25 million in Finland.

FOURTH-QUARTER RESULTS

Net sales for the fourth quarter of 2008 were $296.6 million compared with $309.4 million in the corresponding period of 2007. Lower volume across most end markets, a decrease in metal resale and lower pricing in Advanced Materials were partially offset by the benefits from higher revenue from the electronic technologies acquisition and favorable pricing in Advanced Organics.

Net loss in the fourth quarter of 2008 was $32.7 million, or $1.08 per diluted share, compared with last year's fourth-quarter net income of $48.0 million, or $1.58 per diluted share. Included in the 2008 period is a non-cash inventory charge of $26.9 million, or $0.63 per diluted share, to reduce the carrying value of certain inventory to market value; a non-recurring income tax benefit of $21.5 million, or $0.71 per diluted share, related to the company's electing to take foreign tax credits on prior-year U.S. tax returns; and a non-cash $8.8 million charge, or $0.29 per diluted share, for goodwill impairment.

'Like many companies, we faced rapidly deteriorating market conditions in the fourth quarter of 2008, which partially mitigated the significant gains we had made earlier in the year,' said Joseph M. Scaminace, chairman and chief executive officer. 'The impact on profitability from this unprecedented drop in demand during the fourth-quarter was further compounded by a steep decline in cobalt prices. Despite these negative macroeconomic forces, we were able to generate significant cash from operations. Coupled with our low level of debt, we are pleased with the financial flexibility we created for the company during the year.'

Gross profit fell to $3.6 million, or 1.2 percent of sales, in the fourth quarter of 2008 versus $84.2 million, or 27.2 percent of sales, in the comparable 2007 quarter. The decline is attributable primarily to the lower volumes and the rapid decline in the cobalt reference price and its effect on selling prices relative to raw material costs. Included in the 2008 period was an inventory adjustment of $26.9 million to reduce the carrying value of certain inventory to market value.

Selling, general and administrative (SG&A) expenses increased to $40.7 million, or 13.7 percent of sales, in the fourth quarter of 2008 compared with $28.7 million, or 9.3 percent of sales, in the fourth quarter of 2007, due primarily to the acquired electronic technologies businesses that were not included in the 2007 period.

Operating loss in the fourth quarter of 2008 was $46.0 million compared with operating profit of $55.5 million in the prior-year period, driven primarily by the decline in gross profit and an $8.8 million goodwill impairment charge.

Loss from continuing operations was $33.0 million, or $1.09 per diluted share, in the fourth quarter of 2008, compared with income from continuing operations of $46.4 million, or $1.53 per diluted share, in the fourth quarter of 2007. Income tax in the fourth quarter of 2008 was a net benefit of $18.8 million, which includes the foreign tax credit benefit of $21.5 million previously mentioned and income tax expense of $21.1 million related to earlier periods of 2008, due to a change in the effective income tax rate for the full year 2008 made during the fourth quarter.

Net cash provided by operating activities in the fourth quarter of 2008 was $119.7 million compared with $12.2 million in the fourth quarter of 2007. The increase was the result of lower net working capital driven primarily by lower cobalt prices.

FULL-YEAR RESULTS

Net sales for 2008 were a record $1.7 billion compared with $1.0 billion in 2007. The improvement was driven by higher product selling prices, acquisitions, increased cobalt metal resale and sales volume growth. 2008 net income was $135.0 million, or $4.45 per diluted share, compared with $246.9 million, or $8.15 per diluted share, in 2007. Included in the results from 2007 are $63.1 million of income from discontinued operations and a $72.3 million gain on the sale of discontinued operations, both related principally to the Nickel business that was sold in the first quarter of 2007. Income from continuing operations was $134.9 million, or $4.45 per diluted share, for 2008 compared with $111.5 million, or $3.68 per diluted share, in 2007.

Gross profit rose to $352.5 million in 2008 compared with $313.2 million in 2007. As a percentage of net sales, gross profit fell to 20.3 percent from 30.7 percent, due primarily to the rapid decline in the cobalt reference price in the second half of the year and its effect on selling prices relative to raw material costs as well as $27.7 million in adjustments to reduce the carrying value of certain inventory to market value.

SG&A expenses were $166.1 million in 2008 compared with $117.0 million in 2007. The increase was due primarily to expenses from the acquired coatings and electronic technologies businesses. Operating profit fell to $177.6 million, or 10.2 percent of sales, in 2008 versus $196.2 million, or 19.2 percent of sales, in 2007.

Net cash provided by operating activities rose to $172.1 million in 2008 compared with $41.0 million last year. This improved performance was attributable to higher income from continuing operations and cash provided by working capital as cobalt prices fell in the second half of 2008. Cash provided by operations as well as available credit facilities should provide adequate liquidity for OMG's working capital, debt service and capital expenditure requirements in 2009.

    BUSINESS SEGMENT RESULTS

Advanced Materials

In the fourth quarter of 2008, net sales for the Advanced Materials segment were $194.1 million compared with $222.3 million in the fourth quarter of last year. The decrease was driven by lower sales volume of metal resale, lower product selling prices due to a decrease in the reference price for cobalt, and lower overall volume. Excluding metal resale and copper by-product sales, volume fell 4 percent in the fourth quarter of 2008 compared with the same quarter last year.

Operating loss for the segment for the fourth quarter was $16.0 million compared with a profit of $64.5 million in the prior-year quarter. The impact of a rapid decline in cobalt reference price, lower volume and higher manufacturing and non-cobalt raw material costs led to the decline in profit. For the 2008 fourth quarter, cobalt prices averaged $20.81 per pound compared with $32.54 per pound during the third quarter of 2008 and $32.68 per pound during the fourth quarter of 2007. The current period includes an inventory charge of $19.9 million to reduce the carrying value of certain inventory to market value.

Full year 2008 net sales for the segment were $1.2 billion, compared with $721.9 million in 2007. Increased product selling prices, higher cobalt metal resale and copper by-product sales, and higher volumes contributed to the increase.