CLEVELAND, Aug. 6 /PRNewswire-FirstCall/ -- OM Group, Inc. (NYSE: OMG) today announced financial results for the second quarter and six months ended June 30, 2009.

Second-quarter summary:

• Net sales fell 60 percent from the year-ago period as lower cobalt prices resulted in lower product selling prices in the Company's Advanced Materials segment and the global economic slowdown led to a continued decline in demand across nearly all end markets.
• Net loss attributable to OM Group, Inc. common shareholders was $1.17 per diluted share. As adjusted for special items, net loss was $0.11 per diluted share, much lower than the second quarter of 2008 but slightly better than the first quarter of 2009 net loss of $0.13 per diluted share.
• Sales volumes improved sequentially from the first quarter of 2009 across all business units, led by Electronic Chemicals, Ultra Pure Chemicals and Advanced Organics, resulting in revenue growth of 21 percent in the Specialty Chemicals segment.
• Net cash flow from operating activities was $31.0 million, resulting in a cash balance at the end of the quarter of $268.3 million. The company repaid its debt of $26.1 million in the second quarter and as of June 30, 2009 had no debt outstanding.
  

Net sales for the second quarter of 2009 were $203.4 million compared with $510.8 million in the second quarter of 2008. Lower cobalt reference prices resulted in lower selling prices in Advanced Materials. Sales volumes were significantly lower due to the global economic slowdown and its negative impact on nearly all end markets.

Net loss attributable to OM Group, Inc. common shareholders in the second quarter of 2009 was $35.3 million, or $1.17 per diluted share, compared with net income attributable to OM Group, Inc. common shareholders of $56.2 million, or $1.85 per diluted share in the second quarter of last year. Included in the 2009 period is a non-cash goodwill impairment charge of $35.0 million, or $1.16 per diluted share; an intangible asset impairment charge of $1.2 million, or $0.04 per diluted share; and a gain on termination of retiree medical plan of $4.7 million, or $0.16 per diluted share

"As we experienced during the first quarter, challenging global market conditions and depressed end market demand negatively impacted our financial performance during the second quarter," said Joseph M. Scaminace, chairman and chief executive officer. "While there is room for improvement in our top- and bottom-line results, we are pleased that our aggressive cash management efforts allowed us to achieve positive cash flow from operations and eliminate our remaining debt. This will serve us well as we move forward with our strategy and evaluate various growth opportunities."

Gross profit fell to $34.4 million, or 16.9 percent of sales, in the second quarter of 2009 versus $126.0 million, or 24.7 percent of sales, in the comparable 2008 quarter. The decline was attributable primarily to the impact of lower selling prices and lower sales volumes partially offset by decreased spending through profit enhancement initiatives.

Selling, general and administrative (SG&A) expenses decreased to $33.6 million, or 16.5 percent of sales, in the second quarter of 2009 compared with $42.4 million, or 8.3 percent of sales, in the comparable period of 2008, due primarily to lower sales volumes and the impact of profit enhancement initiatives. As a percent of sales, SG&A expenses increased due to being spread over lower net sales.

Operating loss in the second quarter of 2009 was $29.5 million compared with operating profit of $83.6 million in the prior-year period. Included in the 2009 period is a $35.0 million goodwill impairment charge in the Specialty Chemicals segment related to the Ultra Pure Chemicals and Photomasks business units, a $4.7 million gain on the termination of a retiree medical plan and a $1.2 million intangible asset impairment charge related to the Ultra Pure Chemicals and Photomasks business units.

Tax expense for the second quarter was $3.5 million on pre-tax loss of $29.8 million, due primarily to the fact that the goodwill impairment charge is not deductible for tax purposes.

Loss from continuing operations attributable to OM Group, Inc. common shareholders was $35.0 million, or $1.16 per diluted share, in the second quarter of 2009, compared with income from continuing operations attributable to OM Group, Inc. common shareholders of $56.6 million, or $1.86 per diluted share, in the second quarter of 2008.

Net cash provided by operating activities in the second quarter of 2009 was $31.0 million compared with $68.6 million in the second quarter of 2008. The cash balance was $268.3 million at the end of the second quarter. During the period, the company repaid $25 million outstanding under its revolver and a $1.1 million term loan, eliminating all outstanding debt.

SIX-MONTH RESULTS

Net sales for the six months ended June 30, 2009 were $395.1 million versus $991.6 million for the comparable period in 2008, driven by lower product selling prices and decreased demand across all end markets. Net loss attributable to OM Group, Inc. common shareholders was $43.6 million, or $1.44 per diluted share, in the first half of 2009 compared with net income attributable to OM Group, Inc. common shareholders of $111.5 million, or $3.67 per diluted share, in the first half of 2008.

Gross profit was $61.0 million in the first half of 2009 compared with $262.7 million in the first half of 2008. As a percentage of net sales, gross profit fell to 15.5 percent from 26.5 percent, due primarily to a decrease in the cobalt reference price and lower sales volumes due to falling end-market demand. Operating loss was $40.3 million compared with a profit of $178.2 million in the 2008 period. Included in the 2009 period is a goodwill impairment charge of $37.6 million in the Specialty Chemicals segment and a $4.7 million gain on the termination of retiree medical plan.

SG&A expenses were $68.4 million in the first six months of 2009 compared with $84.5 million in the first six months of 2008. Lower expenses were the result of lower sales volumes and steps taken to enhance profitability in response to the global economic downturn.

Net cash provided by operating activities in the first six months of 2009 was $67.6 million compared with $14.9 million during the same period in 2008, primarily due to a decrease in cash used for working capital requirements.

BUSINESS SEGMENT RESULTS

Advanced Materials

In the second quarter of 2009, net sales for the Advanced Materials segment were $104.0 million compared with $359.1 million in the second quarter of 2008. The decrease was driven by lower product selling prices due to a decrease in the cobalt reference price and lower sales volumes. Excluding metal resale and copper by-product sales, sales volumes fell 10 percent in the second quarter of 2009 compared with the same quarter last year.

First-quarter operating profit for the segment was $5.0 million, or 4.8 percent of sales, compared with $79.5 million, or 22.1 percent of sales, in the prior-year quarter. The decline in cobalt price and lower sales volumes led to the decline in profitability. For the second quarter of 2009, cobalt prices averaged $14.44 per pound compared with $45.93 per pound during the second quarter of 2008.

The joint venture smelter maintenance shutdown previously scheduled for mid-2009 has been rescheduled for the first quarter of 2010 and is still expected to last six to ten weeks. Timing for the shutdown is discretionary and subject to change based on the operating conditions of the furnace. The annual maintenance shutdown at the cobalt refining facility in Finland did occur as planned in June 2009.

Net sales for the segment were $213.0 million in the first six months of 2009 compared with $691.5 million in the same period in 2008. Decreased product selling prices and lower sales volumes contributed to the decline. Operating profit fell to $11.4 million in the second half of 2009 from $174.8 million in the comparable 2008 period due to lower prices and lower sales volumes.

Specialty Chemicals

Net sales from the Specialty Chemicals segment were $100.3 million in the second quarter of 2009 compared with $152.5 million in the same quarter last year, driven by lower volumes, lower selling prices and unfavorable foreign currency.

Operating loss was $31.8 million in the second quarter of 2009 compared with operating profit of $12.4 million in the prior-year quarter. The decline was primarily attributable to a $35.0 million goodwill impairment charge and lower sales volumes.

Net sales for the segment were $183.3 million in the first half of 2009 compared with $301.6 million in the first half of 2008. Lower volumes, lower selling prices and unfavorable foreign currency led to the decrease. Operating loss was $39.8 million in the first six months of 2009 compared with operating profit of $20.8 million in the first six months of 2008. The 2009 period includes net goodwill impairment charges of $37.6 million.

OUTLOOK

Scaminace said the company is seeing some positive, near-term trends in the business. "Volumes in many of our end markets, most notably printed circuit board and semiconductor, improved sequentially from the first quarter of 2009 to the second quarter, and continue to do so in the third quarter," he said. "Similarly, our success in taking market share from competitors is aiding sales volumes. This volume uptick, coupled with profitability enhancement initiatives, should provide short-term earnings momentum. However, until there is a clear reversal in global demand, our long-term outlook remains cloudy at best."

According to Scaminace, the company's primary focus in the second half of 2009 will be enhancing margins and preserving financial flexibility, while pursuing its growth agenda. While the economic realities of the current environment have caused the company to adjust its near-term priorities, the strategic focus on transforming the business model remains constant. "We continue to validate and confirm the need for strategic transformation and the appropriateness of the direction we have chosen," he said.