EXHIBIT 99
FOR IMMEDIATE RELEASE
OM GROUP ANNOUNCES STRONG 2007 FIRST QUARTER RESULTS
— Net Sales Soar 52 Percent on Higher Pricing —
— Operating Profit Jumps to $46.8 Million from $11.6 Million —
— Net Sales Soar 52 Percent on Higher Pricing —
— Operating Profit Jumps to $46.8 Million from $11.6 Million —
CLEVELAND, OH — May 3, 2007 — OM Group, Inc. (NYSE: OMG) today announced results for the first quarter of 2007. (Note: On March 1, 2007, the company announced that it had completed the sale of its Nickel business to Norilsk Nickel for $408 million in cash, on a debt-free/cash-free basis, plus a net working capital adjustment. Therefore, the company’s results for 2007 and 2006 reflect the Nickel business as a discontinued operation. The company’s continuing operations include its Specialties business, ongoing corporate expenses and other income/expenses of the company’s continuing operations. On February 5, 2007, the company announced that it had called for redemption all $400 million of its outstanding 9.25% Senior Subordinated Notes due 2011. The Notes were redeemed at a premium on March 7, 2007. Interest expense related to the Notes, and a special charge of $21.7 million related to the redemption, is classified in continuing operations.)
“I am pleased to report that, in the first quarter of 2007, we continued to achieve strong financial results through, among other things, favorable pricing and continued strong customer demand across our product lines ,” said Joseph M. Scaminace, chairman and chief executive officer. “While certain special charges recorded below the operating profit line negatively impacted our earnings for the quarter, we remain confident that our transformational strategy is taking root and that the company is clearly headed in the right direction.”
Net sales for the three months ended March 31, 2007 were $216.2 million, compared to net sales of $142.4 million reported in the corresponding three-month period of 2006. This 52 percent increase was primarily due to higher product selling prices resulting from higher cobalt prices, as well as higher sales volumes. In the first quarter of 2007, the average price of cobalt was $25.82 per pound, compared to $12.43 per pound in the first quarter of 2006.
Gross profit increased to $72.2 million in the first quarter of 2007, compared to $34.2 million in the first quarter of 2006. Operating profit in the first quarter of 2007 was $46.8 million, up significantly over 2006’s operating profit of $11.6 million. These sharp increases were due primarily to higher cobalt prices, improved results at the Company’s joint venture smelter in the Democratic Republic of Congo and increased sales volumes.
Loss from continuing operations was $18.5 million, or $0.63 per diluted share, compared to income from continuing operations of $2.7 million, or $0.09 per share in the 2006 period. The loss in 2007 includes a special charge included in other expense of $21.7 million ($14.1 million after tax) related to the Note redemption, and income tax expense of $38.8 million related to repatriation of cash from overseas primarily as a result of the proceeds from the sale of the Nickel business. Together, these two items negatively impacted income from continuing operations in the 2007 first quarter by $1.77 per diluted share.
Income from discontinued operations was $133.3 million in the 2007 first quarter, compared to $15.1 million a year ago. The amount in 2007 includes the results of the Nickel business up to the sale on March 1, 2007 of $61.0 million, and a gain on the sale of the Nickel business of $72.3 million.
Net income increased to $114.8 million, or $3.85 per diluted share, for the first quarter of 2007, up significantly from last year’s first quarter net income of $18.2 million, or $0.62 per diluted share.
Selling, general and administrative (“SG&A”) expenses rose slightly in the first quarter of 2007 to $25.4 million, compared to $22.6 million in the first quarter of 2006. These amounts include Corporate expenses for the first quarter of 2007 of $8.4 million, compared to $8.1 million a year ago. The $2.8 million increase in SG&A is primarily due to increased selling expenses as a result of higher net sales. The cash balance at March 31, 2007 was $326.8 million.
OUTLOOK
Based on the current market conditions and anticipated customer demand, coupled with raw material projections, the company fully expects to continue to build upon its strong start throughout 2007.
“Furthermore, with the proceeds from the sale of our Nickel business and our continued cash generation from continuing operations, we believe we are uniquely positioned to execute our transformational strategy at an accelerated rate,” said Scaminace. The company has previously stated its intent to grow through strategic acquisitions and continued product development.
At the end of the third quarter of 2006, the company indicated that it would suspend its past practice of offering earnings guidance. The company believes that significant metal price volatility makes the practice increasingly less meaningful to current or prospective shareholders who use the company’s expectations to form a view of future performance.
WEBCAST INFORMATION
The company has scheduled a conference call and live audio broadcast on the Web for today at 10 a.m. (ET). Investors may access the live audio broadcast by logging on tohttp://www.omgi.com/investorrelations/webcasts.htm. A copy of management’s presentation materials will be available on OMG’s Web site at the time of the call. The company recommends visiting the Web site at least 15 minutes prior to the webcast to download and install any necessary software. Also, a webcast audio replay will be available on the “Investor Audio Archive” page of the company’s Web site, commencing three hours after the call.
ABOUT OM GROUP, INC.
OM Group is a leading, vertically integrated international producer and marketer of value-added, metal-based specialty chemicals and related materials. Headquartered in Cleveland, Ohio, OM Group operates manufacturing facilities in the Americas, Europe, Asia and Africa. For more information, visit the company’s Web site athttp://www.omgi.com/.
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For more information, contact: Greg Griffith, vice president, strategic planning, development and investor relations, at +1-216-263-7455
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: the direction and pace of our strategic transformation, including our use of proceeds from the sale of our Nickel business on March 1, 2007 and identification of potential acquisitions; the speed and sustainability of price changes in cobalt; the potential for lower of cost or market write-downs of the carrying value of inventory
necessitated by decreases in the market price of cobalt or the selling prices of the Company’s finished products; the availability of competitively priced supplies of raw materials, particularly cobalt; the risk that new or modified internal controls, implemented in response to the 2004 investigation by the audit committee of the Company’s board of directors and the Company’s examination of its internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, are not effective and need to be improved; the demand for metal-based specialty chemicals and products in the Company’s markets; the effect of fluctuations in currency exchange rates on the Company’s international operations; the effect of non-currency risks of investing and conducting operations in foreign countries, including political, social, economic and regulatory factors; the effect of changes in domestic or international tax laws; the outcome of the previously announced SEC Division of Enforcement review of the investigation conducted by the Company’s audit committee; and the general level of global economic activity and demand for the Company’s products.
OM Group, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
Unaudited Condensed Consolidated Balance Sheets
March 31, | December 31, | |||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 326,823 | $ | 282,288 | ||||
Accounts receivable, less allowances | 110,217 | 82,931 | ||||||
Inventories | 245,906 | 216,492 | ||||||
Receivable from Norilsk Nickel | 84,997 | — | ||||||
Other current assets | 47,525 | 30,648 | ||||||
Assets of discontinued operations | — | 597,682 | ||||||
Total current assets | 815,468 | 1,210,041 | ||||||
Property, plant and equipment, net | 207,174 | 210,953 | ||||||
Goodwill | 137,774 | 137,543 | ||||||
Notes receivable from joint venture partner, less allowances | 24,179 | 24,179 | ||||||
Other non-current assets | 28,313 | 35,508 | ||||||
Total assets | $ | 1,212,908 | $ | 1,618,224 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Short-term debt and current portion of long-term debt | $ | 485 | $ | 493 | ||||
Debt to be redeemed | — | 402,520 | ||||||
Accounts payable | 124,407 | 90,768 | ||||||
Accrued income taxes | 62,666 | 17,497 | ||||||
Accrued employee costs | 19,084 | 28,806 | ||||||
Other current liabilities | 41,067 | 42,057 | ||||||
Liabilities of discontinued operations | — | 167,148 | ||||||
Total current liabilities | 247,709 | 749,289 | ||||||
Long-term debt | 1,204 | 1,224 | ||||||
Deferred income taxes | 3,989 | 4,118 | ||||||
Minority interests | 43,868 | 43,286 | ||||||
Other non-current liabilities | 40,036 | 38,228 | ||||||
Total stockholders’ equity | 876,102 | 782,079 | ||||||
Total liabilities and stockholders’ equity | $ | 1,212,908 | $ | 1,618,224 | ||||
OM Group, Inc. and Subsidiaries
Unaudited Condensed Statements of Consolidated Income
Unaudited Condensed Statements of Consolidated Income
Three Months Ended March 31, | ||||||||
(In thousands, except per share data) | 2007 | 2006 | ||||||
Net sales | $ | 216,196 | $ | 142,447 | ||||
Cost of products sold | 143,952 | 108,293 | ||||||
Gross profit | 72,244 | 34,154 | ||||||
Selling, general and administrative expenses | 25,432 | 22,573 | ||||||
Income from operations | 46,812 | 11,581 | ||||||
Other income (expense): | ||||||||
Interest expense | (7,105 | ) | (9,742 | ) | ||||
Loss on redemption of Notes | (21,733 | ) | — | |||||
Foreign exchange gain | 468 | 662 | ||||||
Other income, net | 4,952 | 1,362 | ||||||
(23,418 | ) | (7,718 | ) | |||||
Income from continuing operations before income taxes, minority interest and cumulative effect of change in accounting principle | 23,394 | 3,863 | ||||||
Income tax expense | (39,974 | ) | (1,722 | ) | ||||
Minority interest share of (income) loss | (1,961 | ) | 603 | |||||
Income (loss) from continuing operations before cumulative effect of change in accounting principle | (18,541 | ) | 2,744 | |||||
Discontinued operations | ||||||||
Income from discontinued operations, net of tax | 61,019 | 15,142 | ||||||
Gain on sale of discontinued operations, net of tax | 72,289 | — | ||||||
Total income from discontinued operations, net of tax | 133,308 | 15,142 | ||||||
Income before cumulative effect of change in accounting principle | 114,767 | 17,886 | ||||||
Cumulative effect of change in accounting principle | — | 287 | ||||||
Net income | $ | 114,767 | $ | 18,173 | ||||
Net income (loss) per common share — basic: | ||||||||
Continuing operations | $ | (0.63 | ) | $ | 0.09 | |||
Discontinued operations | 4.48 | 0.52 | ||||||
Cumulative effect of change in accounting principle | — | 0.01 | ||||||
Net income | $ | 3.85 | $ | 0.62 | ||||
Net income (loss) per common share — assuming dilution: | ||||||||
Continuing operations | $ | (0.63 | ) | $ | 0.09 | |||
Discontinued operations | 4.48 | 0.52 | ||||||
Cumulative effect of change in accounting principle | — | 0.01 | ||||||
Net income | $ | 3.85 | $ | 0.62 | ||||
Weighted average shares outstanding | ||||||||
Basic | 29,771 | 29,312 | ||||||
Assuming dilution | 29,771 | 29,334 |
OM Group, Inc. and Subsidiaries
Unaudited Condensed Statements of Consolidated Cash Flows
Unaudited Condensed Statements of Consolidated Cash Flows
Three Months Ended March 31, | ||||||||
(In thousands) | 2007 | 2006 | ||||||
Operating activities | ||||||||
Net income | $ | 114,767 | $ | 18,173 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Income from discontinued operations | (61,019 | ) | (15,142 | ) | ||||
Gain on sale of discontinued operations | (72,289 | ) | — | |||||
Income from cumulative effect of change in accounting principle | — | (287 | ) | |||||
Loss on redemption of Notes | 21,733 | — | ||||||
Depreciation and amortization | 8,065 | 7,870 | ||||||
Other non-cash items | (3,074 | ) | (7,779 | ) | ||||
Changes in operating assets and liabilities | ||||||||
Accounts receivable | (27,413 | ) | 4,895 | |||||
Inventories | (29,414 | ) | 7,036 | |||||
Accounts payable | 33,638 | 5,247 | ||||||
Other, net | 20,160 | 8,417 | ||||||
Net cash provided by operating activities | 5,154 | 28,430 | ||||||
Investing activities | ||||||||
Expenditures for property, plant and equipment | (3,660 | ) | (2,058 | ) | ||||
Proceeds from the sale of the Nickel business | 411,142 | — | ||||||
Other investing activities | 2,309 | (8,546 | ) | |||||
Net cash provided by (used for) investing activities | 409,791 | (10,604 | ) | |||||
Financing activities | ||||||||
Payments of long-term debt | (400,000 | ) | (1,438 | ) | ||||
Premium for redemption of Notes | (18,500 | ) | — | |||||
Distribution to joint venture partners | (1,350 | ) | — | |||||
Proceeds from exercise of stock options | 248 | 167 | ||||||
Net cash used for financing activities | (419,602 | ) | (1,271 | ) | ||||
Effect of exchange rate changes on cash | 1,109 | 896 | ||||||
Cash and cash equivalents | ||||||||
Increase (decrease) from continuing operations | (3,548 | ) | 17,451 | |||||
Discontinued operations — net cash provided by operating activities | 49,623 | 22,347 | ||||||
Discontinued operations — net cash used for investing activities | (1,540 | ) | (1,596 | ) | ||||
Balance at the beginning of the period | 282,288 | 114,618 | ||||||
Balance at the end of the period | $ | 326,823 | $ | 152,820 | ||||
OM Group, Inc. and Subsidiaries
Unaudited Segment Information
Unaudited Segment Information
Three Months Ended March 31, | ||||||||
(In thousands) | 2007 | 2006 | ||||||
Net Sales | ||||||||
Specialties | $ | 216,196 | $ | 142,447 | ||||
Income (loss) from operations | ||||||||
Specialties | $ | 55,163 | $ | 19,654 | ||||
Corporate | (8,351 | ) | (8,073 | ) | ||||
$ | 46,812 | $ | 11,581 | |||||
Reconciliation of GAAP to Non-GAAP Financial Measure
Amounts in thousands except per share data
Amounts in thousands except per share data
Three months ended March 31, | |||||||||||||||||
2007 | 2006 | ||||||||||||||||
$ | EPS | $ | EPS | ||||||||||||||
Net income — as reported | $ | 114,767 | $ | 3.85 | $ | 18,173 | $ | 0.62 | |||||||||
Less: | |||||||||||||||||
Total Income from Discontinued operations, net of tax | 133,308 | 4.48 | 15,142 | 0.52 | |||||||||||||
Cumulative effect of change in accounting principle | 287 | 0.01 | |||||||||||||||
Income (loss) from continuing operations before cumulative effect of change in accounting principle — as reported | $ | (18,541 | ) | (0.63 | ) | $ | 2,744 | 0.09 | |||||||||
Special items: | |||||||||||||||||
Loss on redemption of Notes | 21,733 | 0.73 | |||||||||||||||
Tax benefit related to redemption of Notes | (7,607 | ) | (0.26 | ) | |||||||||||||
Tax expense related to repatriation of foreign cash | 38,789 | 1.30 | |||||||||||||||
Income from continuing operations before cumulative effect of change in accounting principle — as adjusted for special items | $ | 34,374 | $ | 1.14 | $ | 2,744 | $ | 0.09 | |||||||||
Use of Non-GAAP Financial Information:
“Income from continuing operations before cumulative effect of change in accounting principle — as adjusted for special items” is a non-GAAP financial measure that the Company’s management has used as an important metric in evaluating the performance of the Company’s business for the first quarter of 2007. The above table presents a reconciliation of the Company’s GAAP results, as reported (both net income and income from continuing operations before cumulative effect of change in accounting principle), to its non-GAAP results after adjusting for the special items shown. The Company believes that the non-GAAP financial measure presented in the above table facilitates a comparative assessment of the Company’s operating performance by its management. In addition, the Company believes that this non-GAAP financial measure will enhance investors’ understanding of the performance of the Company’s operations during the 2007 first quarter and of the comparability of the 2007 first quarter results to the results of prior periods.