Nov. 5, 2009 (PR Newswire) -- CLEVELAND, Nov. 5 /PRNewswire-FirstCall/ --
-- Net sales down 48 percent year-over-year; up 16 percent sequentially
-- Income from continuing operations attributable to OM Group, Inc. was
$0.32 per diluted share; $0.58 per diluted share after adjustments for
special items
-- Net cash provided by operating activities was $36.9 million; cash
balance climbs to $300.5 million at the end of the quarter
-- Company incurs charge of $11.9 million to restructure Advanced Organics
business
OM Group, Inc. (NYSE: OMG), a diversified global developer, producer and marketer of value-added specialty chemicals and advanced materials, today announced financial results for the third quarter ended September 30, 2009.
Net sales for the third quarter of 2009 were $235.2 million, down 48 percent from the third quarter of 2008, due to lower selling prices for cobalt-containing products and decreased sales volumes due to the global economic slowdown. Net income attributable to OM Group, Inc. in the third quarter of 2009 was $11.4 million, or $0.38 per diluted share, down 80 percent from the third quarter of 2008. Included in these results were restructuring charges of $11.9 million, or $0.33 per diluted share, in Advanced Organics (see "Restructuring" discussion below).
Sequentially, net sales grew 16 percent and results of continuing operations adjusted for special items improved from a loss of $3.5 million to income of $17.8 million. The significant improvement was achieved as sales volumes improved on increased demand, pricing improved due to a higher cobalt reference price, and benefits were realized from profit enhancement initiatives throughout the organization.
Gross profit fell to $42.7 million (18.1 percent of sales), down 51 percent from the third quarter of 2008. Selling, general and administrative (SG&A) expenses were $32.1 million (13.6 percent of sales), down 22 percent from the same period in 2008. Operating profit was $10.2 million (4.3 percent of sales), down 78 percent from the third quarter of 2008 as benefits from profit enhancement initiatives were offset by lower prices, decreased volume and restructuring expense.
Tax expense for the third quarter was $0.9 million, including a net discrete benefit of $1.2 million. The third-quarter 2008 tax benefit of $14.5 million included a discrete benefit of $25.1 million. The discrete benefits in both the 2009 and 2008 periods were primarily related to an election to take foreign tax credits on prior-year U.S. tax returns.
BUSINESS SEGMENT RESULTS (all comparisons to the third quarter of 2008)
Advanced Materials
-- Net sales were $126.7 million, down 59 percent
-- Excluding metal resale and copper by-product sales, sales volumes fell
23 percent due primarily to weakness in battery and powder metallurgy
end markets
-- Operating profit was $16.0 million (12.6 percent of sales), down 64
percent
-- Cobalt prices averaged $17.30 per pound, down 47 percent
Specialty Chemicals
-- Net sales were $109.4 million, down 23 percent
-- Demand lower for all end markets, especially coating, chemical, printed
circuit board and memory disk
-- Operating income was $1.7 million (1.6 percent of sales), down 82
percent
-- Results included restructuring expense of $11.9 million
-- Excluding restructuring, operating profit grew compared with last year
as profit enhancement initiatives and foreign currency benefit offset
impacts from lower volume and price
"Like so many companies, our performance in the third quarter continues to show the negative impact of the lingering global economic malaise," said Joseph M. Scaminace, chairman and chief executive officer. "That said, we are beginning to see some encouraging demand trends in a few of our key markets, including the battery market and within our electronic technologies businesses, which resulted in a sequential improvement in our quarterly results.
"While we are encouraged by these positive trends, we continually look for opportunities to lower our cost structure and optimize our operations. Therefore, we have decided to further enhance our business by restructuring our Advanced Organics business."
RESTRUCTURING
OM Group announced several actions to reduce capacity by restructuring the Advanced Organics business:
-- Terminate all production at Clayton, Manchester facility in the United
Kingdom
-- Eliminate all Advanced Organics production in Kokkola, Finland
-- Reduce production at Belleville, Ontario facility
Total restructuring costs are expected to be $17.2 million, $11.9 million of which was recognized in the third quarter of 2009. All significant actions are expected to be complete by June 30, 2010. The actions will result in the elimination of 94 positions worldwide. Net assets employed will be reduced by $15.7 million through a combination of fixed asset and net working capital reductions.
"These actions are necessary to ensure our business remains appropriately aligned with our end markets," said Scaminace. He noted in particular the automotive downturn as well as the geographic shift in demand for certain carboxylate products.
OUTLOOK
"We continue to see mixed data points when looking ahead over the next several quarters," said Scaminace. "On the one hand, we are starting to see some improving demand levels in such end markets as battery, semiconductor, printed circuit board and memory disk. At the same time, we are still confronted with challenging conditions in other sectors linked to automotive, construction and industrial production. Until we see more stability and consistency in demand and pricing trends, our optimism in the near term remains tempered."
Scaminace added that the company will remain vigilant in maintaining its enviable financial position in the near term to ensure the financial flexibility needed to fully leverage long-term growth opportunities during what appears to be the early stages of an economic recovery.
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 diversified global developer, producer and marketer of value-added specialty chemicals and advanced materials that are essential to complex chemical and industrial processes. Key technology-based end-use applications include affordable energy, portable power, clean air, clean water, and proprietary products and services for the microelectronics industry. 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.
