OM Group Announces Second Quarter 2012 Financial Results Strong contributions from newer transformative platforms; Significant cash flow generation

CLEVELAND, Aug. 9, 2012 /PRNewswire/ -- OM Group, Inc. (NYSE: OMG) today announced financial results for the second quarter ended June 30, 2012. Diluted earnings per share from continuing operations were $(0.71), or $0.59 excluding non-cash charges relating to inventory step-up and lower-of-cost-or-market adjustments.  Prior year second quarter diluted earnings per share from continuing operations were $0.80, or $0.87 as adjusted primarily for acquisition-related costs.

Second quarter consolidated net sales increased 32 percent compared with last year's comparable quarter, increasing to $436.5 million primarily as a result of the August 2011 acquisition of VAC, partly offset by lower selling prices in its Advanced Materials business and lower volumes in its Specialty Chemicals business.  Adjusted EBITDA was $53.8 million in the 2012 period compared to $45.6 million in the 2011 period, an increase of 18 percent due to the VAC acquisition. Second quarter 2012 adjusted results exclude non-cash charges of $53.9 million relating to the step-up of inventory values from the VAC acquisition and lower-of-cost-or-market charges resulting from declining rare-earth prices.

"The strong performance of our newer platforms, Magnetic Technologies and Battery Technologies, drove our enterprise results for the second quarter," said Joe Scaminace, Chairman and Chief Executive Officer of OM Group, Inc.  "In spite of challenging cobalt prices and global economic conditions, we delivered solid adjusted profits and strong cash flows for the quarter.  Our strategy to diversify away from commodity businesses to value-added businesses is having the intended effect – to derive a greater portion of the Company's profitability from transformative platforms with more predictable and sustainable longer-term earnings potential."

OM Group generated $75 million of cash from operations in the second quarter of 2012 and finished the quarter with $318 million of cash and $662 million of debt. Lower working capital levels, particularly inventory, contributed to the performance.

Mr. Scaminace commented, "Our operating teams demonstrated our effective working capital management capabilities in the quarter, leading us to generate the highest level of operating cash flow in almost four years. This enabled us to grow our cash balances to over $300 million. We have the resources to support our strategic growth plans, which are focused on synergistic transactions within our transformative platforms."

The Company commented that the results of its Magnetic Technologies business were driven by benefits from rare-earth pricing effects and strong sales for automotive applications.  Battery Technologies delivered another quarter of high margins.  In Specialty Chemicals, results were negatively impacted by weakness in Europe, which resulted in lower demand in the coatings and additives end markets.  Advanced Materials was affected by lower metal prices and a scheduled annual maintenance shut-down at its principal operating facility, the effects of which more than offset the benefit from higher sales volumes.  The second quarter of 2012 includes a consolidated foreign exchange gain of $5.9 million which resulted from the Company's effective currency hedging strategy.

Looking ahead to the third quarter, the Company expects positive operating cash flow as net working capital levels continue to be optimized.  The Company continues to expect lower operating profit due principally to European weakness and minimal rare-earth pricing benefits.  These profitability headwinds are expected to be partially offset by sequentially higher sales volumes in its Specialty Chemicals and Advanced Materials businesses, along with higher cobalt pricing and no additional facility shut-downs in Advanced Materials. 

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 website at the time of the call. The company recommends visiting the website 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 website three hours after the call.

ABOUT OM GROUP, INC.

OM Group, Inc. is a diversified specialty chemicals and materials company serving attractive global markets. The Company develops, produces and distributes innovative, high-quality chemicals, materials, products and technologies that contribute to customer success by addressing complex applications and demanding requirements.  For more information, visit the company's website at www.omgi.com.

Presentation of Non-GAAP Financial Information

The Company is including certain non-GAAP financial measures, including adjusted operating profit, adjusted income from continuing operations and adjusted EBITDA, in this press release and the corresponding presentation materials. The Company believes that these non-GAAP financial measures facilitate a comparative assessment of the Company's operating performance and enhance investors' understanding of the performance of the Company's operations during 2012 and the comparability of the 2012 results to the results of the corresponding prior period. The non-GAAP financial measures are defined and reconciled to applicable U.S. GAAP measures in this release. The non-GAAP financial information should not be construed as an alternative to reported results determined in accordance with U.S. GAAP.

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: risks arising from uncertainty in worldwide economic conditions; extended business interruption at our facilities; fluctuations in the price and uncertainties in the supply of cobalt, rare earth materials and other raw materials; our ability to identify, complete and integrate acquisitions aligned with our strategy; current circumstances and developments regarding the Democratic Republic of Congo; restrictive covenants in our Senior Secured Credit Facility which may affect our ability to operate our business successfully; indebtedness may impair our ability to operate our business successfully; changes in effective tax rates or adverse outcomes resulting from examination of our income tax returns; the majority of our operations are outside the United States, which subjects us to risks that may adversely affect our operating results; level of returns on pension plan assets and changes in the actuarial assumptions; the majority of our cash is generated and held outside the United States; fluctuations in foreign exchange rates; unanticipated costs or liabilities for compliance with stringent environmental regulation; changes in environmental, health and safety regulatory requirements; technological changes in our industry or in our customers' products; our ability to adequately protect or enforce our intellectual property rights; disruption of our relationship with key customers or any material adverse change in their businesses; and the risk factors set forth in Part 1, Item 1a of our Annual Report on Form 10-K for the year ended December 31, 2011.

  






OM Group, Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets








June 30, 2012


December 31, 2011

(In thousands)





ASSETS

Current assets





  Cash and cash equivalents


$      317,560


$               292,146

  Restricted cash on deposit


99,382


92,813

  Accounts receivable, net


226,165


212,152

  Inventories


478,195


615,018

  Other current assets


96,917


97,313

Total current assets


1,218,219


1,309,442

Property, plant and equipment, net


474,268


482,313

Goodwill


531,428


544,471

Intangible assets, net


427,511


433,275

Other non-current assets


102,510


100,222

Total assets


$    2,753,936


$            2,869,723






LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities





  Current portion of long-term debt


$        10,703


$                 13,265

  Accounts payable


107,883


170,466

  Liability related to joint venture partner injunction


99,382


92,813

  Other current liabilities


149,088


171,980

Total current liabilities


367,056


448,524

Long-term debt


651,594


663,167

Deferred income taxes


137,565


129,945

Pension liabilities


197,523


204,248

Purchase price of VAC payable to seller


86,513


86,513

Other non-current liabilities


58,864


62,032

Stockholders' equity:





Total OM Group, Inc. stockholders' equity


1,210,667


1,230,793

Noncontrolling interests


44,154


44,501

Total equity


1,254,821


1,275,294

Total liabilities and equity


$    2,753,936


$            2,869,723

  










OM Group, Inc. and Subsidiaries

Unaudited Condensed Statements of Consolidated Operations












Three Months Ended June 30,


Six Months Ended June 30, 



2012


2011


2012


2011

(In thousands, except per share data)









Net sales


$   436,467


$    329,522


$   902,646


$    660,867

Cost of goods sold


380,312


256,016


733,655


505,323

Gross profit


56,155


73,506


168,991


155,544

Selling, general and administrative expenses


78,318


45,489


156,718


89,767

Operating profit (loss)


(22,163)


28,017


12,273


65,777

Other income (expense):









    Interest expense


(11,828)


(1,393)


(24,040)


(2,815)

    Interest income


186


467


338


687

    Foreign exchange gain (loss)


5,861


(636)


840


(161)

    Other, net


(357)


(324)


(648)


(329)



(6,138)


(1,886)


(23,510)


(2,618)

Income (loss) from continuing operations before income tax (expense) benefit


(28,301)


26,131


(11,237)


63,159

Income tax (expense) benefit


5,544


(330)


464


(6,076)

Income (loss) from continuing operations, net of tax


(22,757)


25,801


(10,773)


57,083

Income (loss) from discontinued operations, net of tax


174


(89)


38


(329)

Consolidated net income (loss)


(22,583)


25,712


(10,735)


56,754

Net (income) loss attributable to noncontrolling interests


244


(1,092)


345


(1,482)

Net income (loss) attributable to OM Group, Inc. common stockholders


$    (22,339)


$      24,620


$    (10,390)


$      55,272

Earnings per common share — basic:









Income (loss) from continuing operations attributable to OM Group, Inc.









common stockholders


$       (0.71)


$         0.81


$       (0.33)


$         1.82

Income (loss) from discontinued operations attributable to OM Group, Inc.









common stockholders


0.01


-


-


(0.01)

Net income (loss) attributable to OM Group, Inc. common









stockholders


$       (0.70)


$         0.81


$       (0.33)


$         1.81

Earnings per common share — assuming dilution:









Income (loss) from continuing operations attributable to OM Group, Inc.









common stockholders


$       (0.71)


$         0.80


$       (0.33)


$         1.81

Income (loss) from discontinued operations attributable to OM Group, Inc.









common stockholders


0.01


-


-


(0.01)

Net income (loss) attributable to OM Group, Inc. common









stockholders


$       (0.70)


$         0.80


$       (0.33)


$         1.80

Weighted average shares outstanding









Basic


31,882


30,535


31,878


30,531

Assuming dilution


31,882


30,721


31,878


30,708

Amounts attributable to OM Group, Inc. common stockholders:









Income (loss) from continuing operations, net of tax


$    (22,513)


$      24,709


$    (10,428)


$      55,601

Income (loss) from discontinued operations, net of tax


174


(89)


38


(329)

Net income (loss)


$    (22,339)


$      24,620


$    (10,390)


$      55,272










  










OM Group, Inc. and Subsidiaries

Unaudited Condensed Statements of Consolidated Cash Flows








Three Months Ended June 30,


Six Months Ended June 30,



2012


2011


2012


2011

(In thousands)









Operating activities









Consolidated net income (loss)


$       (22,583)


$    25,712


$       (10,735)


$    56,754

Adjustments to reconcile consolidated net income (loss) to net
cash provided by operating activities:









    (Income) loss from discontinued operations


(174)


89


(38)


329

    Depreciation and amortization


22,103


13,592


44,252


26,901

    Amortization of deferred financing fees


1,378


217


2,748


433

    Share-based compensation expense


1,414


1,443


3,821


3,523

    Foreign exchange (gain) loss


(5,861)


636


(840)


161

    VAC lower of cost or market ("LCM") charges (a)


49,050


-


53,751


-

    Other non-cash items


(7,954)


(1,461)


(18,775)


(1,538)

Changes in operating assets and liabilities, excluding the effect of
business acquisitions









    Accounts receivable


11,176


(2,656)


(16,305)


(24,124)

    Inventories (b)


55,335


3,193


76,034


(2,198)

    Accounts payable


(22,874)


6,471


(61,810)


13,747

    Other, net


(5,943)


3,737


(10,611)


(9,366)

Net cash provided by operating activities


75,067


50,973


61,492


64,622

Investing activities









Expenditures for property, plant and equipment


(18,309)


(9,117)


(29,127)


(12,445)

Proceeds from sale of property


-


-


5,138


-

Cash paid for acquisitions


-


-


-


(4,107)

Net cash used for investing activities


(18,309)


(9,117)


(23,989)


(16,552)

Financing activities









Payments on long-term debt


(2,608)


-


(8,027)


-

Payment related to surrendered shares


-


-


(254)


(193)

Proceeds from exercise of stock options


-


141


-


157

Net cash provided by (used for) financing activities


(2,608)


141


(8,281)


(36)

Effect of exchange rate changes on cash


(6,498)


480


(3,808)


3,081

Cash and cash equivalents









Increase in cash and cash equivalents


47,652


42,477


25,414


51,115

Balance at the beginning of the period


269,908


409,235


292,146


400,597

Balance at the end of the period


$       317,560


$  451,712


$       317,560


$  451,712



















(a) Includes $27.7 million and $31.4 million related to purchase accounting step-up of inventory in the three and six months ended June 30, 2012, respectively.
(b) Includes $4.8 million and $15.9 million related to purchase accounting step-up of inventory in the three and six months ended June 30, 2012, respectively.


  









OM Group, Inc. and Subsidiaries

Unaudited Segment Information










Three Months Ended June 30,


Six Months Ended June 30,

(In thousands)

2012


2011


2012


2011

Net Sales








    Magnetic Technologies(a)

$   168,024


$             -


$   358,515


$             -

    Advanced Materials

124,261


165,206


257,234


345,286

    Specialty Chemicals

109,214


128,749


215,127


249,332

    Battery Technologies

35,205


35,843


72,237


66,819

    Intersegment items

(237)


(276)


(467)


(570)


$   436,467


$    329,522


$   902,646


$    660,867









Operating profit (loss)








    Magnetic Technologies(a)(b)

$    (30,146)


$             -


$    (16,243)


$             -

    Advanced Materials

923


16,864


12,034


48,981

    Specialty Chemicals(c)

10,696


17,858


24,217


31,592

    Battery Technologies

6,063


6,703


11,718


8,825

    Corporate(d)

(9,699)


(13,408)


(19,453)


(23,621)


$    (22,163)


$      28,017


$     12,273


$      65,777









(a) VAC was acquired on August 2, 2011.  Because we acquired VAC in the third quarter of 2011, the table above does not include comparable results
for the three and six months ended June 30, 2011.
(b) Includes $53.9 million and $69.6 million for the three and six months ended June 30, 2012, respectively, of non-cash charges related to VAC inventory
purchase accounting step-up and lower of cost or market charges
(c) The six months ended June 30, 2012 includes a $2.9 million property sale gain.
(d) Includes $4.0 million of acquisition-related fees related to VAC in the three and six months ended June 30, 2011.

  













OM Group, Inc. and Subsidiaries

Unaudited Non-U.S. GAAP Financial Measures, Adjusted Operating Profit and Adjusted EBITDA













Three Months Ended June 30, 2012

(in thousands)

Magnetic

Technologies


Advanced Materials


Specialty

Chemicals


Battery

Technologies


Corporate


Consolidated







Operating profit (loss) - as reported

$                         (30,146)


$                      923


$                   10,696


$                      6,063


$     (9,699)


$      (22,163)

VAC inventory purchase accounting step-up

and lower of cost or market charges

53,891


-


-


-


-


53,891

Adjusted operating profit

23,745


923


10,696


6,063


(9,699)


31,728

Depreciation and amortization

10,010


4,271


5,166


2,509


147


22,103

Adjusted EBITDA

$                          33,755


$                   5,194


$                   15,862


$                      8,572


$     (9,552)


$       53,831













Three Months Ended June 30, 2011

(in thousands)

Magnetic

Technologies(a)


Advanced Materials


Specialty Chemicals


Battery Technologies


Corporate


Consolidated







Operating profit - as reported

$                                  -


$                  16,864


$                   17,858


$                      6,703


$    (13,408)


$       28,017

Acquisition-related fees

-


-


-


-


4,000


4,000

Adjusted operating profit

-


16,864


17,858


6,703


(9,408)


32,017

Depreciation and amortization

-


5,151


5,790


2,503


148


13,592

Adjusted EBITDA

$                                  -


$                  22,015


$                   23,648


$                      9,206


$     (9,260)


$       45,609

























Six Months Ended June 30, 2012

(in thousands)

Magnetic

Technologies


Advanced Materials


Specialty

Chemicals


Battery

Technologies


Corporate


Consolidated







Operating profit (loss) - as reported

$                         (16,243)


$                  12,034


$                   24,217


$                    11,718


$    (19,453)


$       12,273

VAC inventory purchase accounting step-up

and lower of cost or market charges

69,620


-


-


-


-


69,620

Adjusted operating profit

53,377


12,034


24,217


11,718


(19,453)


81,893

Depreciation and amortization

20,222


8,495


10,262


5,011


262


44,252

Adjusted EBITDA

$                          73,599


$                  20,529


$                   34,479


$                    16,729


$    (19,191)


$     126,145













Six Months Ended June 30, 2011

(in thousands)

Magnetic

Technologies(a)


Advanced Materials


Specialty Chemicals


Battery Technologies


Corporate


Consolidated







Operating profit - as reported

$                                  -


$                  48,981


$                   31,592


$                      8,825


$    (23,621)


$       65,777

Acquisition-related fees

-


-


-


-


4,000


4,000

Adjusted operating profit

-


48,981


31,592


8,825


(19,621)


69,777

Depreciation and amortization

-


10,223


11,420


4,988


270


26,901

Adjusted EBITDA

$                                  -


$                  59,204


$                   43,012


$                    13,813


$    (19,351)


$       96,678

























(a) VAC was acquired on August 2, 2011.  Because we acquired VAC in the third quarter of 2011, the table above does not include comparable results for the three and six months ended June 30, 2011.













In order to assist readers of our financial statements in understanding the operating results that the Company's management uses to evaluate the business, we are providing adjusted operating profit and adjusted EBITDA, both of which are non-U.S. GAAP financial measures. The Company's management believes that these are important metrics in evaluating the performance of the Company's business and in providing a baseline for evaluating and comparing our operating results. Adjusted operating profit and adjusted EBITDA are important in illustrating what our operating results would have been had we not incurred these inventory charges resulting from purchase accounting for the VAC acquisition and a lower of cost or market charge in 2012 and acquisition-related fees in 2011 and facilitate a comparative assessment of the Company's operating performance and enhance investors' understanding of the performance of the Company's operations. 

The table above presents a reconciliation of the Company's U.S. GAAP operating profit - as reported to adjusted operating profit and adjusted EBITDA. The non-U.S. GAAP financial information set forth in the table above should not be construed as an alternative to reported results determined in accordance with U.S. GAAP.

  









OM Group, Inc. and Subsidiaries

Unaudited Non-U.S. GAAP Financial Measures










Three Months Ended


Three Months Ended


June 30, 2012


June 30, 2011

(in thousands, except per share data)

$


Diluted EPS


$


Diluted EPS









Income (loss) from continuing operations attributable to

OM Group, Inc. - as reported

$  (22,513)


$            (0.71)


$   24,709


$             0.80









VAC inventory purchase accounting step-up and lower of

cost or market charges, net of tax

41,239


1.30


-


-









Acquisition-related fees

-


-


4,000


0.13









Other discrete tax items, net

-


-


(2,019)


(0.06)









Adjusted income from continuing operations attributable to

OM Group, Inc.

$   18,726


$             0.59


$   26,690


$             0.87









Weighted average shares outstanding - diluted



32,002




30,721


























Six Months Ended


Six Months Ended


June 30, 2012


June 30, 2011

(in thousands, except per share data)

$


Diluted EPS


$


Diluted EPS









Income (loss) from continuing operations attributable to

OM Group, Inc. - as reported

$  (10,428)


$            (0.33)


$   55,601


$             1.81









VAC inventory purchase accounting step-up and lower of

cost or market charges, net of tax

52,111


1.63


-


-









Acquisition-related fees

-


-


4,000


0.13









Other discrete tax items, net

-


-


(2,019)


(0.06)









Adjusted income from continuing operations attributable to

OM Group, Inc.

$   41,683


$             1.30


$   57,582


$             1.88









Weighted average shares outstanding - diluted



32,017




30,708

































In order to assist readers of our financial statements in understanding the operating results that the Company's management uses to evaluate the business, we are providing adjusted income from continuing operations attributable to OM Group, Inc. common stockholders and adjusted earnings per common share attributable to OM Group, Inc. common stockholders - assuming dilution, both of which are non-U.S. GAAP financial measures. The Company's management believes that these are important metrics in evaluating the performance of the Company's business and in providing a baseline for evaluating and comparing our operating results. Adjusted income from continuing operations attributable to OM Group, Inc. common stockholders and adjusted earnings per common share attributable to OM Group, Inc. common stockholders - assuming dilution are important in illustrating what our operating results would have been had we not incurred these inventory charges resulting from purchase accounting for the VAC acquisition and a lower of cost or market charge in 2012 and acquisition-related fees and discrete tax items in 2011 and facilitate a comparative assessment of the Company's operating performance and enhance investors' understanding of the performance of the Company's operations. 

The table above presents a reconciliation of the Company's U.S. GAAP income from continuing operations attributable to OM Group, Inc. common stockholders - as reported to adjusted income from continuing operations attributable to OM Group, Inc. common stockholders and earnings per common share attributable to OM Group, Inc. common stockholders - assuming dilution - as reported to adjusted earnings per common share attributable to OM Group, Inc. common stockholders - assuming dilution. The non-U.S. GAAP financial information set forth in the table above should not be construed as an alternative to reported results determined in accordance with U.S. GAAP.









 

SOURCE OM Group, Inc.



RELATED LINKS
http://www.omgi.com

More by this Source


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

 

PR Newswire Membership

Fill out a PR Newswire membership form or contact us at (888) 776-0942.

Learn about PR Newswire services

Request more information about PR Newswire products and services or call us at (888) 776-0942.