OM Group Reports Results for 2011 Fourth Quarter and Full Year

- Acquisition drives strong revenue and earnings growth -

- Company delivers sixth consecutive year of positive cash flow from operations -

- Strategy execution positions the company for long-term profitable growth -

Feb 28, 2012, 07:30 ET from OM Group, Inc.

 

CLEVELAND, Feb. 28, 2012 /PRNewswire/ -- OM Group, Inc. (NYSE: OMG) today announced financial results for the fourth quarter and full year ended December 31, 2011.

Driven by the strategic acquisition of VAC and solid organic growth, full year consolidated net sales increased 27 percent in 2011 to $1,514.5 million. Net income was $37.9 million. Excluding special items such as acquisition-related expenses, adjusted income from continuing operations was $120.9 million, or $3.87 per diluted share, compared with $88.2 million, or $2.89 per diluted share, in 2010. Net cash provided by operating activities for the year was $124.8 million.

“In many ways, 2011 was a breakthrough year for OM Group,” said Joseph Scaminace, chairman and chief executive officer. “We continued to grow our business profitably, achieving adjusted EBITDA of $224 million, and delivered our sixth consecutive year of positive cash flow from operations. Through the creation of our Magnetic Technologies platform and our market-driven initiatives, we now have greater opportunity to expand in targeted higher-growth, higher-margin applications for mobile energy storage, electronic devices, renewable energy and transportation. Our acquisition of Rahu Catalytics secured the technology to support our product development pipeline for advanced additives used in coating and composites. And we are working more closely with our customers, using our application expertise to meet their performance requirements and create value.”

In the fourth quarter of 2011, net sales were $438.6 million, an increase of 50 percent compared with the fourth quarter of 2010 due to the VAC acquisition. Net income in the fourth quarter of 2011 was $50.9 million or $1.59 per diluted share.   Adjusted income from continuing operations was $23.3 million ($0.73 per diluted share), compared with $22.2 million ($0.72 per diluted share) during the 2010 period. Net cash provided by operating activities in the fourth quarter was $38.3 million, compared with a $35.0 million use of cash in the prior year comparable period.

“During the fourth quarter we felt the impacts of the slowing European economy and disruptions to the electronics industry from the Thailand floods,” said Scaminace. “We expect these performance challenges to begin to moderate in the second quarter of 2012, and will closely manage spending across the company until business conditions improve. At the same time, our strong balance sheet enables us to continue to invest in those initiatives that support our strategy to create long-term shareholder value.”

Presentation of Non-GAAP Financial Information

The Company is including certain non-GAAP financial measures, including adjusted operating profit and adjusted income from continuing operations. The Company believes that the non-GAAP financial measures facilitate a comparative assessment of the Company's operating performance and will enhance investors' understanding of the performance of the Company's operations during 2011 and of the comparability of the 2011 results to the results of the relevant 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.

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. (NYSE: OMG) develops the innovative materials, systems and technologies necessary to power fast-growing, global applications such as mobile energy storage, electronic devices, renewable energy and automotive systems. With 2011 pro forma net sales of $1.9 billion, OM Group is headquartered in Cleveland, Ohio and operates manufacturing facilities in North America, Europe, Asia and Africa. For more information, visit the company's website at 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: 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; ability to identify or complete additional 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; 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

Condensed Consolidated Balance Sheets

December 31, 2011

December 31, 2010

(In thousands, except share data)

ASSETS

Current assets

Cash and cash equivalents

$                 292,146

$                 400,597

Restricted cash on deposit

92,813

68,096

Accounts receivable, net

212,152

155,465

Inventories

615,018

293,625

Other current assets

97,313

85,342

Total current assets

1,309,442

1,003,125

Property, plant and equipment, net

482,313

256,098

Goodwill

544,471

306,888

Intangible assets, net

433,275

153,390

Other non-current assets

100,222

53,207

Total assets

$              2,869,723

$              1,772,708

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Current portion of long-term debt

$                   13,265

$                   30,000

Accounts payable

170,466

105,900

Liability related to joint venture partner injunction

92,813

68,096

Other current liabilities

171,980

80,328

Total current liabilities

448,524

284,324

Long-term debt

663,167

90,000

Deferred income taxes

129,945

23,499

Pension liabilities

204,248

58,107

Purchase price of VAC payable to seller

86,513

-

Other non-current liabilities

62,032

40,160

Stockholders’ equity:

Total OM Group, Inc. stockholders’ equity

1,230,793

1,236,784

Noncontrolling interests

44,501

39,834

Total equity

1,275,294

1,276,618

Total liabilities and equity

$              2,869,723

$              1,772,708

OM Group, Inc. and Subsidiaries

Condensed Statements of Consolidated Income

Three Months Ended December 31 Unaudited

Year Ended December 31

2011

2010

2011

2010

(In thousands, except per share data)

Net sales

$   438,611

$   293,128

$   1,514,535

$    1,196,646

Cost of goods sold

336,410

222,533

1,240,048

911,958

Gross profit

102,201

70,595

274,487

284,688

Selling, general and administrative expenses

86,058

45,000

247,653

162,042

Gain on sale of land

-

-

(9,693)

-

Operating profit

16,143

25,595

36,527

122,646

Other income (expense):

Interest expense

(11,941)

(1,461)

(23,268)

(5,255)

Foreign exchange gain (loss)

3,300

(2,591)

10,564

(10,679)

Other, net

906

172

1,011

603

(7,735)

(3,880)

(11,693)

(15,331)

Income from continuing operations before income tax expense

8,408

21,715

24,834

107,315

Income tax (expense) benefit

42,293

2,135

17,796

(29,656)

Income from continuing operations, net of tax

50,701

23,850

42,630

77,659

Income (loss) from discontinued operations, net of tax

36

104

(59)

726

Consolidated net income

50,737

23,954

42,571

78,385

Net (income) loss attributable to noncontrolling interests

147

(170)

(4,669)

4,989

Net income attributable to OM Group, Inc. common stockholders

$     50,884

$     23,784

$        37,902

$         83,374

Earnings per common share — basic:

Income from continuing operations attributable to OM Group, Inc.

common stockholders

$         1.60

$         0.78

$            1.22

$             2.72

Income from discontinued operations attributable to OM Group, Inc.

common stockholders

-

-

-

0.02

Net income attributable to OM Group, Inc. common

stockholders

$         1.60

$         0.78

$            1.22

$             2.74

Earnings per common share — assuming dilution:

Income from continuing operations attributable to OM Group, Inc.

common stockholders

$         1.59

$         0.77

$            1.21

$             2.70

Income from discontinued operations attributable to OM Group, Inc.

common stockholders

-

0.01

-

0.03

Net income attributable to OM Group, Inc. common

stockholders

$         1.59

$         0.78

$            1.21

$             2.73

Weighted average shares outstanding

Basic

31,856

30,481

31,079

30,433

Assuming dilution

31,989

30,653

31,244

30,565

Amounts attributable to OM Group, Inc. common stockholders:

Income from continuing operations, net of tax

$     50,848

$     23,680

$        37,961

$         82,648

Income (loss) from discontinued operations, net of tax

36

104

(59)

726

Net income

$     50,884

$     23,784

$        37,902

$         83,374

OM Group, Inc. and Subsidiaries

Condensed Statements of Consolidated Cash Flows

Three Months Ended December 31 Unaudited

Year Ended December 31

2011

2010

2011

2010

(In thousands)

Operating activities

Consolidated net income

$     50,737

$     23,954

$     42,571

$     78,385

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

(Income) loss from discontinued operations

(36)

(104)

59

(726)

Depreciation and amortization

25,408

13,911

72,672

54,097

Deferred income tax benefit

(4,245)

(5,085)

(31,567)

(5,131)

Lower of cost or market inventory charge

(47,910)

-

14,534

-

Gain on sale of land

-

-

(9,693)

-

Allowance on GTL prepaid tax asset

-

-

(6,225)

11,465

Other non-cash items

(2,100)

6,078

(6,118)

20,900

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

Accounts receivable

31,569

986

19,391

(21,668)

Inventories

(129)

(9,462)

(1,702)

20,931

Advances to suppliers

540

(4,365)

7,174

(7,136)

Accounts payable

38,203

(69,685)

24,718

(39,558)

Refundable, prepaid and accrued income taxes

(44,710)

(13,880)

(1,345)

1,763

Other, net

(9,034)

22,609

327

13,309

Net cash provided by (used for) operating activities

38,293

(35,043)

124,796

126,631

Investing activities

Expenditures for property, plant and equipment

(30,077)

(10,427)

(56,482)

(26,430)

Proceeds from sale of land

-

-

9,693

-

Cash paid for acquisitions

(55,493)

-

(729,401)

(171,979)

Other, net

(2,976)

(641)

(2,976)

(1,418)

Net cash used for investing activities

(88,546)

(11,068)

(779,166)

(199,827)

Financing activities

Payments of revolving line of credit

-

-

(120,000)

(125,000)

Proceeds from revolving line of credit

-

-

-

245,000

Proceeds from long-term debt

-

-

697,975

-

Debt issuance costs

(893)

-

(30,176)

(2,596)

Other, net

-

227

168

2,913

Net cash provided by (used for) financing activities

(893)

227

547,967

120,317

Effect of exchange rate changes on cash

(3,077)

(255)

(2,048)

(1,854)

Cash and cash equivalents

Increase (decrease) from continuing operations

(54,223)

(46,139)

(108,451)

45,267

Discontinued operations — net cash used for operating activities

-

(20)

-

(53)

Balance at the beginning of the year

346,369

446,756

400,597

355,383

Balance at the end of the year

$   292,146

$   400,597

$   292,146

$   400,597

OM Group, Inc. and Subsidiaries

Segment Information

Three Months Ended December 31 Unaudited

Year Ended December 31

(In thousands)

2011

2010

2011

2010

Net Sales

Magnetic Technologies(a)

$   169,574

$              -

$      276,147

$                 -

Advanced Materials

142,002

151,953

640,879

620,638

Specialty Chemicals

100,068

109,957

470,022

462,743

Battery Technologies(d)

27,317

31,218

128,814

113,941

Intersegment items

(350)

-

(1,327)

(676)

$   438,611

$   293,128

$   1,514,535

$    1,196,646

Operating profit

Magnetic Technologies(a)(b)

$     10,987

$              -

$      (66,914)

$                 -

Advanced Materials

11,438

20,708

81,186

95,633

Specialty Chemicals(c)

5,940

11,597

62,251

59,558

Battery Technologies(d)(e)

(442)

3,087

12,125

5,061

Corporate(f)

(11,780)

(9,797)

(52,121)

(37,606)

$     16,143

$     25,595

$        36,527

$       122,646

(a) Includes activity since the acquisition of VAC on August 2, 2011.

(b) The three months ended December 31, 2011 includes charges of $13.1 million as a result of purchase accounting related to acquired inventory and $2.2 million of severance charges.  The year ended December 31, 2011 includes charges of $106.6 million as a result of purchase accounting related to acquired inventory, $2.4 million of acquisition-related fees, and $2.2 million of severance charges.

(c) The year ended December 31, 2011 includes a $9.7 million gain for the sale of land at the Manchester, England manufacturing facility.

(d) Includes activity since the acquisition of EaglePicher on January 29, 2010.

(e) The year ended December 31, 2010 includes charges of $3.2 million as a result of purchase accounting.

(f) The three months ended December 31, 2011 includes $2.6 million of acquisition-related fees.  The years ended December 31, 2011 and 2010 include $15.4 million and $2.2 million of acquisition-related fees, respectively.

OM Group, Inc. and Subsidiaries

Unaudited Non-GAAP Financial Measures, Adjusted Operating Profit

2011

(in thousands)

Magnetic Technologies

Advanced Materials

Specialty Chemicals

Battery Technologies

Corporate

Consolidated

Operating profit (loss) - as reported

$                      (66,914)

$                 81,186

$                  62,251

$                    12,125

$   (52,121)

$         36,527

Acquisition-related charges

111,200

-

-

-

15,400

126,600

Gain on sale of land

-

-

(9,693)

-

-

(9,693)

Adjusted operating profit

$                        44,286

$                81,186

$                  52,558

$                    12,125

$   (36,721)

$       153,434 (a)

2010

(in thousands)

Magnetic Technologies

Advanced Materials

Specialty Chemicals

Battery Technologies

Corporate

Consolidated

Operating profit (loss) - as reported

$                                 -

$                 95,633

$                  59,558

$                      5,061

$   (37,606)

$       122,646

Acquisition-related charges

-

-

-

3,198

2,200

5,398

Adjusted operating profit

$                                 -

$                 95,633

$                  59,558

$                      8,259

$   (35,406)

$       128,044

(a) Adjusted EBITDA equals adjusted operating profit of $153.4 million plus depreciation and amortization of $70.4 million (which excludes amortization of deferred financing fees).

Non-GAAP Financial Measures: The Company is providing adjusted operating profit, a non-GAAP financial measure that the Company's management believes is an important metric in evaluating the performance of the Company's business.  The table above presents a reconciliation of the Company's U.S. GAAP operating profit (loss) - as reported to adjusted operating profit. The Company believes that the non-GAAP financial measures presented in the table facilitate a comparative assessment of the Company's operating performance and enhance investors' understanding of the performance of the Company's operations. The non-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.

Unaudited Non-GAAP Financial Measures

2011

Three Months Ended

Year Ended

December 31

December 31

(in thousands, except per share data)

$

Diluted EPS

$

Diluted EPS

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

$   50,884

$         1.59

37,902

$         1.21

Less:

Income (loss) from discontinued operations, net of tax

36

-

(59)

-

Income from continuing operations attributable

to OM Group, Inc. - as reported

$   50,848

$        1.59

$     37,961

$         1.21

Special items -- income (expense):

Acquisition-related charges, net of tax

(13,394)

(0.42)

(93,620)

(3.00)

Gain on sale of land, net of tax

-

-

8,568

0.27

Adjustment of GTL's prepaid tax allowance (OMG's 55% share)

-

-

3,424

0.11

Other discrete tax items, net

40,927

1.28

(1,327)

(0.04)

Adjusted income from continuing operations attributable to OM Group, Inc

$   23,315

$         0.73

$   120,916

$         3.87

Weighted average shares outstanding - diluted

31,989

31,244

2010

Three Months Ended

Year Ended

December 31

December 31

(in thousands, except per share data)

$

Diluted EPS

$

Diluted EPS

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

$   23,784

$         0.78

$     83,374

$         2.73

Less:

Income from discontinued operations, net of tax

104

0.01

726

0.03

Income from continuing operations attributable

to OM Group, Inc. - as reported

$   23,680

$         0.77

$     82,648

$         2.70

Special items -- income (expense):

Acquisition-related charges, net of tax

-

-

(4,948)

(0.17)

Other discrete tax items, net

1,487

0.05

(618)

(0.02)

Adjusted income from continuing operations attributable to OM Group, Inc

$   22,193

$         0.72

$     88,214

$         2.89

Weighted average shares outstanding - diluted

30,653

30,565

Non-GAAP Financial Measures:

The Company is providing adjusted income from continuing operations and diluted EPS, both attributable to OM Group, non-GAAP financial measures that the Company's management believes are important metrics in evaluating the performance of the Company's business.  The table above presents a reconciliation of the Company's U.S. GAAP income from continuing operations and diluted EPS - as reported to adjusted income from continuing operations and diluted EPS. The Company believes that the non-GAAP financial measures presented in the table facilitate a comparative assessment of the Company's operating performance and enhance investors' understanding of the performance of the Company's operations. The non-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