OMNOVA Solutions Updates Fourth Quarter And Full Year 2013 Earnings Guidance
FAIRLAWN, Ohio, Nov. 15, 2013 /PRNewswire/ -- OMNOVA Solutions Inc. (NYSE: OMN) today announced that it is updating earnings guidance for the fourth quarter and full year ending November 30, 2013.
The Company now expects reported GAAP earnings per diluted share for the fourth quarter of 2013 will be approximately $0.16 to $0.18 per diluted share, significantly above the $0.01 per diluted share for the fourth quarter a year ago, and slightly below the $0.19 per diluted share third quarter 2013 results.
The previously forecasted fourth quarter 2013 results are now expected to be negatively impacted by several items:
- Engineered Surfaces' Minhang, China coated fabrics facility experienced a major typhoon-related flood in early October. Through diligent efforts by OMNOVA's global associates, the plant is now operating again; however, it will take additional time to return to normalized manufacturing, inventory and sales levels. The Company is compiling its claim costs related to the flood and expects to receive insurance recovery proceeds in 2014. Customers are now being fully serviced, and the impact is not expected to continue into 2014.
- The Performance Chemicals operation in Ningbo, China, declared force majeure to customers of its antioxidant products after a sudden and unanticipated raw material supply disruption. The Company anticipates it will be manufacturing product for only two of the final seven weeks of the quarter, but alternative raw material supply is being secured and the Company does not believe that the impact will continue into 2014.
- Performance Chemicals' paper chemical volumes and margins are lower than expected, due to slower ramp-up of new volume wins and lower pricing. However, the Company has successfully negotiated a new two-year contract with its largest paper customer in advance of the contract expiration date.
- Raw material costs are expected to be higher in the fourth quarter – driven by a 27% increase in butadiene – and the Company does not believe these costs will be completely passed on to customers in the quarter.
- The Company now expects higher health care costs in the quarter due to higher claims in its employer-sponsored plan.
These items are expected to be partially offset by a one-time gain on the asset sale of a previously idled plant in China and projected lower effective tax rates in several countries.
Additionally, the Company now estimates that full-year 2013 Adjusted Income from Continuing Operations, which excludes certain items, will be in the range of $22.5 million to $24.5 million, compared to $28.5 million in 2012.
"While fourth quarter 2013 results are now expected to be lower than we previously forecasted, we expect them to be well above last year's fourth quarter. We continue to work on a number of key structural improvements in Performance Chemicals and Engineered Surfaces that should positively contribute to future results. Included in those improvements are the recent start-up of new specialty chemicals capacity in China, emulsion polymer and engineered surfaces manufacturing footprint consolidation in the U.S., and several exciting new product launches," said Kevin McMullen, Chairman and Chief Executive Officer.
NON-GAAP FINANCIAL INFORMATION
This Press Release includes a reference to Adjusted Income From Continuing Operations, which is a non-GAAP financial measure as defined by the Securities and Exchange Commission. Management reviews adjusted financial measures in assessing the performance of the business segments and in making decisions regarding the allocation of resources to the business segments. Management also believes that this adjusted information is useful for providing investors with an understanding of the Company's business and operating performance. In determining Adjusted Income from Continuing Operations, Management excludes income and losses resulting from certain items because Management does not consider such items to be reflective of normal operations. Such items include restructuring and severance, facility closures and production transfers (including related accelerated depreciation, asset impairment and transition costs), asset sales, natural disasters, raw material supply disruptions and other similar items. This adjusted financial measurement is not a measurement of financial performance under GAAP and should not be considered as an alternative to Income From Continuing Operations, Net Income, Diluted Earnings Per Share or other measures of financial performance determined in accordance with GAAP. This non-GAAP financial measure may not be comparable to similarly titled measures reported by other companies.
FORWARD LOOKING STATEMENTS
This press release includes descriptions of OMNOVA's current business, operations, assets and other matters affecting the Company as well as "forward-looking statements" as defined by federal securities laws. All forward-looking statements by the Company, including verbal statements, are intended to qualify for the protections afforded forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect management's current expectation, judgment, belief, assumption, estimate or forecast about future events, circumstances or results and may address business conditions and prospects, strategy, capital structure, sales, profits, earnings, markets, products, technology, operations, customers, raw materials, claims and litigation, financial condition, and accounting policies among other matters. Words such as, but not limited to, "will," "may," "should," "projects," "forecasts," "seeks," "believes," "expects," "anticipates," "estimates," "intends," "plans," "targets," "optimistic," "likely," "would," "could," and similar expressions or phrases identify forward-looking statements.
All descriptions of OMNOVA's current business, operations and assets, as well as all forward-looking statements involve risks and uncertainties. Many risks and uncertainties are inherent in business generally and the markets in which the Company operates or proposes to operate. Other risks and uncertainties are more specific to the Company's businesses including businesses the Company acquires. There also may be risks and uncertainties not currently known to the Company. The occurrence of such risks and uncertainties and the impact of such occurrences is often not predictable or within the Company's control. Such impacts could adversely effect the Company's business, operations or assets as well as the Company's results and, in some cases, such effect could be material. Certain risk factors facing the Company are described below or in the Company's Quarterly Report on Form 10-Q and Annual Report on Form 10-K.
All written and verbal descriptions of OMNOVA's current business, operations and assets and all forward-looking statements attributable to the Company or any person acting on the Company's behalf are expressly qualified in their entirety by the risks, uncertainties, and cautionary statements contained herein. All such descriptions and any forward-looking statement speaks only as of the date on which such description or statement is made, and the Company undertakes no obligation, and specifically declines any obligation, other than that imposed by law, to publicly update or revise any such description or forward-looking statements whether as a result of new information, future events or otherwise.
Risks and uncertainties that may adversely impact OMNOVA's business, operations, assets, or other matters affecting the Company, and which may cause actual results to differ materially from expected results include, among others: economic trends and conditions affecting the economy in general and/or the Company's end-use markets; prices and availability of raw materials including styrene, butadiene, vinyl acetate monomer, polyvinyl chloride, acrylonitrile, acrylics and textiles; ability to increase pricing to offset raw material cost increases; product substitution and/or demand destruction due to product technology, performance or cost disadvantages; high degree of customer concentration and potential loss of a significant customer; supplier, customer and/or competitor consolidation; customer credit and bankruptcy risk; failure to successfully develop and commercialize new products; a decrease in regional customer demand due to reduced in-region production or increased import competition; risks associated with international operations including political unrest, fluctuations in exchange rates, and regulatory uncertainty; failure to successfully implement productivity enhancement and cost reduction initiatives; risks associated with chemical handling and manufacturing and with acts of war, terrorism, natural disasters or accidents, including fires, floods, explosions and releases of hazardous substances; unplanned full or partial suspension of plant operations; ability to comply, and cost of compliance with legislative and regulatory changes, including changes impacting environmental, health and safety compliance and changes which may restrict or prohibit the Company from using or selling certain products and raw materials; losses from the Company's strategic alliance, joint venture, acquisition, integration and operational activities; rapid inflation in health care costs; loss of key employees and inability to attract and retain new key employees; prolonged work stoppage resulting from labor disputes with unionized workforce; changes in, and significant contributions required to meet pension plan funding obligations; attacks on and/or failure of the Company's information systems; infringement or loss of the Company's intellectual property; litigation and claims against the Company related to products, services, contracts, employment, environmental, safety, intellectual property and other matters; adverse litigation judgments or settlements; absence of or inadequacy of insurance coverage for litigation judgments, settlements or other losses; higher than expected capital expenditures; availability of financing at anticipated rates and terms; and loan covenant default arising from substantial debt and leverage and the inability to service that debt, including increases in applicable short-term or long-term borrowing rates.
For further information on risks and uncertainties, see the Company's Form 10-K and 10-Q filings with the Securities and Exchange Commission.
OMNOVA Solutions Inc. is a technology-based company with sales for the twelve month period ending August 31, 2013 of $1.0 billion and a global workforce of approximately 2,300. OMNOVA is an innovator of emulsion polymers, specialty chemicals, and functional and decorative surfaces for a variety of commercial, industrial and residential end uses. Visit OMNOVA Solutions on the internet at www.omnova.com.
SOURCE OMNOVA Solutions Inc.