OM GROUP, INC. CLEVELAND, Aug. 1, 2014 /PRNewswire/ -- OM Group, Inc. (NYSE: OMG) today announced financial results for the three months ended June 30, 2014. For the quarter, the Company reported adjusted pro forma EBITDA of $31 million, excluding the results of its divested Advanced Materials cobalt business and charges of $0.4 million related to cost-reduction actions. The Company also reported second quarter 2014 income from continuing operations of $0.16 per diluted share, or $0.28 per diluted share on an adjusted pro forma basis, and operating cash flows of $24 million. At June 30, 2014, the Company had $114 million of cash and no debt. Reconciliations of the Company's adjusted pro forma results to corresponding U.S. GAAP results are included in this press release.
During the quarter, the Company repurchased $10 million of its common shares. In 2013, the Company's Board of Directors authorized a share repurchase program of up to $50 million. Including $14 million of share repurchases in 2013, the Company has now returned a total of $24 million to shareholders under this program; at June 30, 2014, $26 million of availability remained under the authorization.
"In the second quarter we delivered impressive cash flow from operations, which supported recent share repurchases and the quarterly dividend we initiated this year," said Joe Scaminace, Chairman and Chief Executive Officer of OM Group, Inc. "Sales and EBITDA increased over last year's second quarter and were higher sequentially from this year's first quarter. However, business conditions are not developing as we expected."
Second quarter net sales were $298 million, or $254 million on a pro forma basis excluding the divested Advanced Materials business. Excluding Advanced Materials, sales were up slightly compared to the second quarter of 2013. Sales were higher in Magnetic Technologies due primarily to a stronger Euro versus the US Dollar and increased sales volumes, offset by lower rare earth price pass-throughs to customers. Battery Technologies net sales increased compared to the second quarter of 2013 due to increased sales volumes in medical applications. Sales in Specialty Chemicals were down compared to the second quarter of 2013 due to lower sales volumes, partly resulting from the Company's initiatives to focus on more-profitable products.
"We remain confident in the potential of our portfolio of businesses," said Mr. Scaminace. "However, it is clear that we need to take action to stay ahead of the pace of change in our key end markets. European business conditions are not developing as expected, our growth initiatives are taking longer than expected to contribute to our results, and global electronics markets have been slower to recover than planned. As a result, we are reducing our near-term forecasts and taking actions to strengthen our operating capabilities and improve business performance."
The Company recently implemented leadership changes in its Magnetic Technologies business, as well as in its Electronic Chemicals and Advanced Organics product lines. Concurrently, the Company also began developing initiatives to improve business results across the enterprise. The immediate phase of these actions is expected to cost approximately $5-6 million and contribute savings of $3-4 million annually beginning in 2015.
In light of the factors noted above, the Company is now expecting approximately $120 million of adjusted pro forma EBITDA in 2014. This forecast excludes the results of the divested Advanced Materials business, costs related to business improvement initiatives and M&A.
Mr. Scaminace concluded, "Our long-term strategy to create shareholder value remains intact. Our operating capabilities, supported by our strengthened business leadership, continue to improve, our acquisition pipeline of complementary transactions is active, and we have ample financial resources to execute our strategy."
Webcast Information
OM Group has scheduled a conference call and live audio broadcast on the Web for 10 AM EDT 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 OM Group's website before 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 - Webcasts" page of the company's website three hours after the call.
About OM Group
OM Group is a technology-driven diversified industrial company serving attractive global markets, including automotive systems, electronic devices, aerospace, industrial and renewable energy. Its business platforms use innovation and technology to address customers' complex applications and demanding requirements. 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: uncertainty in worldwide economic conditions; extended business interruption at our facilities; fluctuations in the price and uncertainties in the supply of rare earth materials and other raw materials; our ability to identify, complete and integrate acquisitions aligned with our strategy; 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; the timing and amount of common share repurchases, if any; fluctuations in foreign exchange rates; unanticipated costs or liabilities for compliance with 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; successful execution of the GTL supply agreement signed in connection with the Advanced Materials sale; 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, 2013.
OM Group, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
June 30, 2014 December 31,
2013
------------- ------------
(in millions)
ASSETS
Current assets
Cash and cash
equivalents $114.3 $118.4
Accounts receivable,
net 170.5 150.7
Inventories 243.8 240.9
Other current assets 19.4 32.3
---- ----
Total current assets 548.0 542.3
Property, plant and
equipment, net 328.6 345.6
Goodwill 431.6 432.7
Intangible assets, net 388.6 403.0
Other non-current
assets 58.5 59.5
Total assets $1,755.3 $1,783.1
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $87.3 $93.6
Accrued employee costs 35.4 36.2
Purchase price of VAC
payable to seller 52.6 52.5
Other current
liabilities 54.3 63.4
---- ----
Total current
liabilities 229.6 245.7
Deferred income taxes 101.3 102.5
Pension liabilities 218.4 220.5
Purchase price of VAC
payable to seller 11.3 11.3
Other non-current
liabilities 38.7 43.3
Total equity 1,156.0 1,159.8
-------
Total liabilities and
equity $1,755.3 $1,783.1
======== ========
Certain financial data may have been rounded. As a result of such rounding, the totals of data
presented in this document may vary slightly from the actual arithmetical totals of such data.
OM Group, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
(in millions, except per share data) Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2014 2013 2014 2013
---- ---- ---- ----
Net sales $297.5 $279.4 $559.2 $621.1
Cost of goods sold 234.4 215.6 434.2 483.1
----- ----- ----- -----
Gross profit 63.1 63.8 125.0 138.0
Selling, general and administrative expenses 53.2 54.6 106.6 114.7
---- ---- ----- -----
Operating profit 9.9 9.2 18.4 23.3
Other expense:
Interest expense (0.6) (1.8) (1.3) (9.5)
Foreign exchange (loss) gain (0.9) 2.8 (1.2) 0.2
Loss on divestiture of Advanced Materials business (0.8) (0.5) (1.0) (112.1)
Other, net (0.7) 0.3 (1.4) (0.3)
---- --- ---- ----
Income (loss) from continuing operations before income tax expense 6.9 10.0 13.5 (98.4)
Income tax expense 1.8 1.9 3.1 4.5
--- --- --- ---
Income (loss) from continuing operations, net of tax 5.1 8.1 10.4 (102.9)
Loss from discontinued operations, net of tax (0.3) (11.4) (0.3) (11.9)
---- ----- ---- -----
Consolidated net income (loss) 4.8 (3.3) 10.1 (114.8)
Net loss attributable to noncontrolling interests - - - 1.7
--- ---
Net income (loss) attributable to OM Group, Inc. common $4.8 $(3.3) $10.1 $(113.1)
stockholders
Earnings (loss) per common share - basic:
Income (loss) from continuing operations attributable to OM $0.16 $0.26 $0.33 $(3.19)
Group, Inc. common stockholders
Loss from discontinued operations attributable to OM Group, (0.01) (0.37) (0.01) (0.38)
Inc. common stockholders
Net income (loss) attributable to OM Group, Inc. common stockholders $0.15 $(0.11) $0.32 $(3.57)
===== ====== ===== ======
Earnings (loss) per common share - assuming dilution:
Income (loss) from continuing operations attributable to OM Group, Inc. common stockholders $0.16 $0.26 $0.33 $(3.19)
Loss from discontinued operations attributable to OM Group, Inc. common stockholders (0.01) (0.37) (0.02) (0.38)
----- ----- ----- -----
Net income (loss) attributable to OM Group, Inc. common stockholders $0.15 $(0.11) $0.31 $(3.57)
===== ====== ===== ======
Weighted average shares outstanding
Basic 31.5 31.5 31.5 31.7
Assuming dilution 31.8 31.6 31.9 31.7
Dividends declared per common share $0.075 $ - $0.15 $ -
====== === === ===== === ===
Amounts attributable to OM Group, Inc. common stockholders:
Income (loss) from continuing operations, net of tax $5.1 $8.1 $10.4 $(101.2)
Loss from discontinued operations, net of tax (0.3) (11.4) (0.3) (11.9)
---- -----
Net income (loss) $4.8 $(3.3) $10.1 $(113.1)
==== ===== ===== =======
OM Group, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
(in millions) 2014 2013 2014 2013
---- ---- ---- ----
Operating activities
Consolidated net income (loss) $4.8 $(3.3) $10.1 $(114.8)
Adjustments to reconcile consolidated net income (loss) to
net cash used for operating activities:
Loss from discontinued operations 0.3 11.4 0.3 11.9
Depreciation and amortization 18.3 16.6 36.4 38.1
Amortization of deferred financing fees 0.3 1.0 0.5 2.0
Share-based compensation expense 1.8 1.6 4.4 3.2
Foreign exchange loss (gain) 0.9 (2.8) 1.2 (0.2)
Loss on divestiture of Advanced Materials business 0.8 0.5 1.0 112.1
Other non-cash items 1.0 (2.9) 1.2 5.8
Changes in operating assets and liabilities, excluding the effect of divestitures:
Accounts receivable (19.5) (7.7) (20.3) (34.7)
Inventories (0.5) 16.3 (4.5) 16.8
Accounts payable 14.8 7.6 (6.1) 1.6
Accrued tax (1.8) (14.7) (2.6) (23.9)
Other, net 3.3 (12.4) 0.2 (24.7)
--- ----- --- -----
Net cash provided by (used for) operating activities 24.5 11.2 21.8 (6.8)
Investing activities
Expenditures for property, plant and equipment (7.6) (8.7) (10.8) (21.3)
Proceeds from divestiture of Advanced Materials business - - - 302.1
Proceeds from divestiture of UPC business - 63.3 - 63.3
Proceeds from sale of property 1.0 - 1.0 -
--- ---
Net cash (used for) provided by investing activities (6.6) 54.6 (9.8) 344.1
Financing activities
Payments of long-term debt - (92.5) - (466.5)
Dividends paid (2.4) (4.8) -
Proceeds from exercise of stock options - 1.0 0.5 1.0
Debt issuance costs - - (0.1) -
Payment related to surrendered shares - - (0.7) (0.6)
Share repurchases (10.0) (9.1) (10.0) (14.1)
----- ---- ----- -----
Net cash used for financing activities (12.4) (100.6) (15.1) (480.2)
Effect of exchange rate changes on cash (0.1) 0.6 (0.2) (1.4)
---- --- ---- ----
Cash and cash equivalents
Decrease from continuing operations 5.4 (34.2) (3.3) (144.3)
Discontinued operations - net cash provided by (used for) operating activities (0.7) 0.1 (0.8) (0.3)
Discontinued operations - net cash used for investing activities - (0.5) - (2.4)
--- ---- --- ----
Balance at the beginning of the period 109.6 115.2 118.4 227.6
----- ----- ----- -----
Balance at the end of the period $114.3 $80.6 $114.3 $80.6
====== ===== ====== =====
OM Group, Inc. and Subsidiaries
Unaudited Segment Information
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
(in millions) 2014 2013 2014 2013
---- ---- ---- ----
Net Sales
Magnetic Technologies $130.9 $128.9 $260.1 $266.0
Battery Technologies 41.0 40.2 81.5 81.2
Specialty Chemicals (a) 81.9 83.4 158.8 160.7
Advanced Materials 43.7 26.9 58.8 113.3
Intersegment items - - - (0.1)
--- --- --- ----
$297.5 $279.4 $559.2 $621.1
====== ====== ====== ======
Operating profit (loss)
Magnetic Technologies (b)(c) $3.2 $1.2 $8.9 $7.5
Battery Technologies (b)(c) 8.1 8.2 14.5 16.5
Specialty Chemicals (a)(b)(c) (d) 8.5 8.2 15.9 15.2
Advanced Materials (2.5) (0.4) (3.5) 1.4
Corporate (7.4) (8.0) (17.4) (17.3)
$9.9 $9.2 $18.4 $23.3
==== ==== ===== =====
(a) The 2013 results related to the UPC business are excluded from the Specialty Chemicals segment.
(b) The three months ended June 30, 2013 include charges related to cost-reduction initiatives of $0.4 million in Magnetic Technologies, $0.5 million in Battery Technologies and $1.1 million in Specialty Chemicals.
(c) The six months ended June 30, 2013 include charges related to cost-reduction initiatives of $4.2 million in Magnetic Technologies, $0.7 million in Battery Technologies and $1.1 million in Specialty Chemicals.
(d) The three months and six ended June 30, 2014 include costs related to cost reduction initiatives of $0.4 million in Specialty Chemicals.
OM Group, Inc. and Subsidiaries
Unaudited Non-U.S. GAAP Financial Measures, Adjusted Operating Profit and Adjusted EBITDA
Three Months Ended June 30, 2014
--------------------------------
(in millions) Magnetic Battery Specialty Corporate Subtotal Advanced
Technologies Technologies Chemicals Materials Consolidated
------------- ------------- ---------- --------- -------- --------- ------------
Operating profit $3.2 $8.1 $8.5 $(7.4) $12.4 $(2.5) $9.9
(loss) - as reported
Charges related to cost-
reduction initiatives - - 0.4 - 0.4 - 0.4
--- --- --- --- --- --- ---
Adjusted operating profit 3.2 8.1 8.9 (7.4) 12.8 (2.5) 10.3
Depreciation and amortization 11.9 2.6 3.5 0.3 18.3 - 18.3
Adjusted EBITDA $15.1 $10.7 $12.4 $(7.1) $31.1 $(2.5) $28.6
===== ===== ===== ===== ===== ===== =====
Three Months Ended June 30, 2013
--------------------------------
(in millions) Magnetic Battery Specialty Corporate Subtotal Advanced
Technologies Technologies Chemicals Materials Consolidated
------------- ------------- ---------- --------- -------- --------- ------------
Operating profit (loss) -as
reported $1.2 $8.2 $8.2 $(8.0) $9.6 $(0.4) $9.2
Charges related to cost-
reduction initiatives 0.4 0.5 1.1 - 2.0 - 2.0
--- --- --- --- --- --- ---
Adjusted operating profit 1.6 8.7 9.3 (8.0) $11.6 (0.4) 11.2
Depreciation and amortization 10.7 2.5 3.6 0.1 16.9 (0.3) 16.6
Adjusted EBITDA $12.3 $11.2 $12.9 $(7.9) 28.5 $(0.7) $27.8
===== ===== ===== ===== ==== ===== =====
Six Months Ended June 30, 2014
------------------------------
Magnetic Battery Specialty Corporate Subtotal Advanced
Technologies Technologies Chemicals Materials Consolidated
------------- ------------- ---------- --------- -------- --------- ------------
Operating profit (loss) -as
reported $8.9 $14.5 $15.9 $(17.4) $21.9 $(3.5) $18.4
Charges related to cost-
reduction - - 0.4 - 0.4 - 0.4
--- --- --- --- --- --- ---
Adjusted operating profit 8.9 14.5 16.3 (17.4) 22.3 (3.5) 18.8
Depreciation and amortization 23.7 5.1 7.1 0.5 36.4 - 36.4
Adjusted EBITDA $32.6 $19.6 $23.4 $(16.9) $58.7 $(3.5) $55.2
===== ===== ===== ====== ===== ===== =====
Six Months Ended June 30, 2013
------------------------------
Magnetic Battery Specialty Corporate Subtotal Advanced
Technologies Technologies Chemicals Materials Consolidated
------------- ------------- ---------- --------- -------- --------- ------------
Operating profit (loss) -as
reported $7.5 $16.5 $15.2 $(17.3) $21.9 $1.4 $23.3
Charges related to cost-
reduction 4.2 0.7 1.1 - 6.0 - 6.0
--- --- --- --- --- --- ---
Adjusted operating profit 11.7 17.2 16.3 (17.3) 27.9 1.4 29.3
Depreciation and amortization 21.5 5.0 7.5 0.2 34.2 3.9 38.1
Adjusted EBITDA $33.2 $22.2 $23.8 $(17.1) $62.1 $5.3 $67.4
===== ===== ===== ====== ===== ==== =====
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, providing a baseline for evaluating and comparing our operating results and isolating the impact of certain items on our results. 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, 2014 June 30, 2013
------------- -------------
(in millions, except per share data) $ Diluted EPS $ Diluted EPS
--- ----------- --- -----------
Income from continuing operations attributable to OM Group, Inc. $5.1 $0.16 $8.1 $0.26
common stockholders - as reported
Add (less):
Loss on Advanced Materials divestiture 0.8 0.03 0.5 0.02
Charges related to cost-reduction initiatives 0.4 0.01 2.0 0.06
Acceleration of deferred financing fees - - 0.5 0.01
Tax effect of special items - - (0.3) (0.01)
Adjusted income from continuing operations attributable to OM $6.3 $0.20 $10.8 $0.34
Group, Inc. common stockholders
Exclude: Operating results from divested Advanced Materials (2.5) (0.08) (0.6) (0.02)
business, net of tax
Adjusted income from continuing operations attributable to OM $8.8 $0.28 $11.4 $0.36
Group, Inc. common stockholders - pro forma excluding Advanced
Materials
Weighted average shares outstanding - diluted 31.8 31.6
Six Months Ended Six Months Ended
June 30, 2014 June 30, 2013
------------- -------------
(in millions, except per share data) $ Diluted EPS $ Diluted EPS
--- ----------- --- -----------
Income (loss) from continuing operations attributable to OM Group, $10.4 $0.33 $(101.2) $(3.17)
Inc. common stockholders - as reported
Add (less):
Loss on Advanced Materials divestiture 1.0 0.03 112.1 3.52
Charges related to cost-reduction initiatives 0.4 0.01 6.0 0.19
Acceleration of deferred financing fees - - 0.5 0.01
Tax effect of special items - - (0.9) (0.03)
Adjusted income from continuing operations attributable to OM $11.8 $0.37 $16.5 $0.52
Group, Inc. common stockholders
Exclude: Operating results from divested Advanced Materials (3.6) (0.11) - -
business, net of tax
Adjusted income from continuing operations attributable to OM $15.4 $0.48 $16.5 $0.52
Group, Inc. common stockholders - pro forma excluding Advanced
Materials
Weighted average shares outstanding - diluted (a) 31.9 31.8
(a) For the six months ended June 30, 2013, because the reported loss from continuing operations is income on an adjusted
basis, we used diluted shares to calculate EPS.
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. We are also providing the amounts as pro forma adjusted to exclude the results of the divested Advanced Materials business. The Company's management believes that these are important
metrics in evaluating the performance of the Company's business, providing a baseline for evaluating and comparing our operating results and isolating the impact of certain items on our results. 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, adjusted for both special items as identified in the
table and to exclude the results of the divested Advanced Materials business. 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.
