OM Group Announces First Quarter 2015 Financial Results

OM Group, Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

March 31, 2015

December 31, 2014

(in millions)

ASSETS

Current assets

Cash and cash equivalents

$

53.1

$

91.7

Accounts receivable, net

152.2

134.5

Inventories

214.2

228.4

Other current assets

25.8

21.5

Total current assets

445.3

476.1

Property, plant and equipment, net

277.3

308.3

Goodwill

244.5

252.6

Intangible assets, net

296.7

324.8

Other non-current assets

48.3

57.7

Total assets

$

1,312.1

$

1,419.5

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Revolving credit facility

$

40.1

$

12.5

Accounts payable

78.3

74.7

Accrued employee costs

34.9

34.9

Purchase price of VAC payable to seller

4.1

46.2

Other current liabilities

50.9

57.4

Total current liabilities

208.3

225.7

Deferred income taxes

67.5

74.8

Pension liabilities

223.3

244.4

Other non-current liabilities

34.2

37.7

Total equity

778.8

836.9

Total liabilities and equity

$

1,312.1

$

1,419.5

OM Group, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(in millions, except per share data)

Three Months Ended
March 31,

2015

2014

Net sales

$

247.8

$

261.7

Cost of goods sold

197.5

199.8

Gross profit

50.3

61.9

Selling, general and administrative expenses

54.8

53.4

Operating profit

(4.5)

8.5

Other income (expense):

Interest expense

(0.6)

(0.7)

Foreign exchange loss

(4.4)

(0.3)

Gain (loss) on divestiture of Advanced Materials business

2.0

(0.2)

Charges associated with VAC arbitration conclusion

(10.4)

—

Other income (expense), net

2.9

(0.6)

Income (loss) from continuing operations before income tax expense

(15.0)

6.7

Income tax (benefit) expense

(3.9)

1.4

Income (loss) from continuing operations, net of tax

(11.1)

5.3

Income (loss) from discontinued operations, net of tax

0.1

(0.1)

Consolidated net income (loss)

(11.0)

5.2

Earnings (loss) per common share — basic:

Income (loss) from continuing operations

$

(0.37)

$

0.17

Income (loss) from discontinued operations

0.01

—

Net income (loss)

$

(0.36)

$

0.17

Earnings (loss) per common share — assuming dilution:

Income (loss) from continuing operations

$

(0.37)

$

0.16

Income (loss) from discontinued operations

0.01

—

Net income (loss)

$

(0.36)

$

0.16

Weighted average shares outstanding

Basic

30.3

31.5

Assuming dilution

30.3

31.9

Dividends declared per common share

$

0.0825

$

0.0750

OM Group, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

Three Months Ended
March 31,

(in millions)

2015

2014

Operating activities

Consolidated net income (loss)

$

(11.0)

$

5.2

Adjustments to reconcile consolidated net income (loss) to net cash used for operating activities:

(Gain) loss from discontinued operations

(0.1)

0.1

Depreciation and amortization

14.9

18.1

Amortization of deferred financing fees

0.3

0.3

Share-based compensation expense

3.2

2.6

Foreign exchange loss

4.4

0.3

(Gain) loss on divestiture of Advanced Materials business

(2.0)

0.2

Deferred income tax benefit

(0.7)

(1.0)

Other non-cash items

(1.2)

1.0

Changes in operating assets and liabilities, excluding the effect of divestitures:

Accounts receivable

(27.5)

(0.8)

Inventories

(3.9)

(4.0)

Accounts payable

9.2

(20.8)

Other, net

(0.8)

(4.0)

Net cash used for operating activities

(15.2)

(2.8)

Investing activities

Expenditures for property, plant and equipment

(4.6)

(3.2)

Cash received from acquisition purchase price adjustments

1.5

—

Proceeds from sale of property

1.2

—

Net cash used for investing activities

(1.9)

(3.2)

Financing activities

Payments related to VAC purchase price payable

(41.8)

—

Net proceeds from revolving credit facility

27.6

—

<span class="prnews_span">Dividends paid

(2.5)

(2.4)

Proceeds from exercise of stock options

0.1

0.5

Debt issuance costs

(0.1)

(0.1)

Payment related to surrendered shares

(0.5)

(0.7)

Net cash used for financing activities

(17.2)

(2.7)

Effect of exchange rate changes on cash

(4.2)

(0.1)

Cash and cash equivalents

Decrease from continuing operations

(38.5)

(8.8)

Discontinued operations - net cash used for operating activities

(0.1)

—

Balance at the beginning of the period

91.7

118.4

Balance at the end of the period

$

53.1

$

109.6

OM Group, Inc. and Subsidiaries

Unaudited Segment Information

Three Months Ended March 31,

(in millions)

2015

2014

Net sales

Magnetic Technologies

$

104.3

$

129.2

Battery Technologies

39.7

40.5

Specialty Chemicals

75.1

76.9

Advanced Materials

28.7

15.1

$

247.8

$

261.7

Operating profit (loss)

Magnetic Technologies (a)

$

(0.6)

$

5.7

Battery Technologies (b)

3.0

6.3

Specialty Chemicals (a)

6.3

7.4

Advanced Materials

(0.8)

(1.0)

Corporate (a)

(12.4)

(9.9)

$

(4.5)

$

8.5

(a) The first quarter of 2015 included costs related to enterprise initiatives, including fees related to a potential proxy contest and competitive repositioning and cost optimization opportunities announced on February 18, 2015 of $0.6 million in Magnetic Technologies,  $0.9 million in Specialty Chemicals, and $2.0 million in Corporate.  Certain of these opportunities are subject to ongoing negotiations with employee works councils and unions.

(b) The first quarter of 2015 includes costs related to inventory purchase accounting step-up charges of $1.0 million related to the Yardney acquisition in Battery Technologies.

OM Group, Inc. and Subsidiaries

Unaudited Non-U.S. GAAP Financial Measures, Adjusted Operating Profit and Adjusted EBITDA

Three Months Ended March 31, 2015

(in millions)

Magnetic Technologies

Battery Technologies

Specialty Chemicals

Corporate

Subtotal

Advanced Materials

Consolidated

Operating profit (loss) - as reported

$

(0.6)

$

3.0

$

6.3

$

(12.4)

$

(3.7)

$

(0.8)

$

(4.5)

Charges related to initiatives

0.6

—

0.9

2.0

3.5

—

3.5

Yardney inventory purchase accounting step up

—

1.0

—

—

1.0

—

1.0

Adjusted operating profit

—

4.0

7.2

(10.4)

0.8

(0.8)

—

Depreciation and amortization

8.6

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3.0

3.2

0.1

14.9

—

14.9

Adjusted EBITDA

$

8.6

$

7.0

$

10.4

$

(10.3)

$

15.7

$

(0.8)

$

14.9

Three Months Ended March 31, 2014

(in millions)

Magnetic Technologies

Battery Technologies

Specialty Chemicals

Corporate

Subtotal

Advanced Materials

Consolidated

Operating profit (loss) - as reported

$

5.7

$

6.3

$

7.4

$

(9.9)

$

9.5

$

(1.0)

$

8.5

Depreciation and amortization

11.8

2.6

3.6

0.1

18.1

—

18.1

EBITDA

$

17.5

$

8.9

$

11.0

$

(9.8)

$

27.6

$

(1.0)

$

26.6

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

March 31, 2015

March 31, 2014

(in millions, except per share data)

$

Diluted
EPS

$

Diluted
EPS

Income (loss) from continuing operations - as reported

$

(11.1)

$

(0.37)

$

5.3

$

0.16

Add (less):

(Gain) loss on Advanced Materials divestiture

(2.0)

(0.07)

0.2

0.01

Charges related to initiatives

3.5

0.12

—

—

Yardney inventory purchase accounting step up

1.0

0.03

—

—

Charges associated with VAC arbitration conclusion

10.4

0.34

—

—

Gain on sale of property

(3.4)

(0.11)

—

—

Tax effect of special items

(3.7)

(0.12)

—

—

Adjusted income (loss) from continuing operations

$

(5.3)

$

(0.18)

$

5.5

$

0.17

Exclude: Operating results from divested Advanced Materials business, net of tax

(1.4)

(0.05)

(1.1)

(0.03)

Adjusted income (loss) from continuing operations - excluding Advanced Materials

$

(3.9)

$

(0.13)

$

6.6

$

0.20

Weighted average shares outstanding - diluted

30.3

31.9

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 and adjusted earnings per common share - assuming dilution, both of which are non-U.S. GAAP financial measures. We are also providing the amounts as 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 - as reported to adjusted income from continuing operations and earnings per common share - 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.