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 -

 

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.



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