PRESS RELEASE
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 - February 28, 2012 - 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.
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For more information, contact: Troy Dewar, director, investor relations, at +1-216-263-7765.
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. and Subsidiaries | |||||||||||||
| 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. | |||||||||||||