FAIRLAWN, OH -- OMNOVA Solutions Inc. announced net income of $81.5 million, or $1.80 diluted earnings per share, for the fourth quarter ended Nov. 30, 2010. This compares to net income of $11.1 million, or diluted earnings per share of $0.25, for the fourth quarter of 2009. Included in the fourth quarter of 2010 were a number of unusual items, which included non-cash income of $90.5 million, or $2.01 per share, primarily due to the reversal of a tax valuation allowance of $98.2 million; expenses of $13.7 million, or $(0.30) per share, related to the acquisition of Eliokem; and other unusual items totaling $3.5 million, or $(0.09) per share. Excluding these items, adjusted net income for the fourth quarter of 2010 was $8.2 million, or adjusted diluted earnings per share of $0.18.
"Our fourth quarter marks the end of a very successful year for OMNOVA Solutions. The company's Performance Chemicals segment closed the year with record segment operating profit. This was partially offset by weaker results in our Decorative Products segment, which was impacted by rapidly rising raw material costs and continued weak demand in certain product lines. Cash flow was strong for the quarter and the year, and improvements in our balance sheet were instrumental in providing the financial flexibility to complete the Eliokem acquisition early in our fiscal 2011 first quarter. While challenges remain, we have made significant progress on many fronts, including the introduction of numerous innovative products, penetration into new, adjacent markets, the accelerated globalization of our business, and aggressive productivity gains and cost reductions," said Kevin McMullen, OMNOVA Solutions' Chairman and Chief Executive Officer.
"For the second consecutive year, OMNOVA Solutions generated significant year-over-year improvement in adjusted diluted earnings per share. We achieved this improvement despite record raw material inflation in 2010 of almost $97 million and continued end-market weakness in our carpet chemicals and commercial wallcovering product lines. Full-year adjusted net income was $39.5 million, or an increase of 36 percent versus 2009, and full-year adjusted diluted earnings per share was $0.88, or an increase of 35 percent, compared to $0.65 a year ago," McMullen added.
"As we look to 2011, we are focused on continuing the positive trend in Performance Chemicals, successfully integrating the Eliokem acquisition and generating improved operating results in our Decorative Products segment," said McMullen.
The company reported net income for 2010 of $107.9 million, or diluted earnings per share of $2.40. The 2010 results include the impact of several unusual items including $90.5 million of non-cash income primarily related to the reversal of a tax valuation allowance; a gain of $9.7 million related to the dissolution of the RohmNova paper chemical joint venture; asset impairment charges of $6.2 million; Eliokem acquisition-related expenses of $16.3 million; and strike-related costs of $5.5 million. Excluding these items, adjusted net income in 2010 was $39.5 million, or adjusted diluted earnings per share of $0.88. Net income for 2009 was $26.2 million, or diluted earnings per share of $0.59. Included in the 2009 results are restructuring, severance, asset impairment and other charges of $2.8 million. Excluding these items, 2009 adjusted net income was $29.0 million, and adjusted diluted earnings per share was $0.65.
In the Performance Chemicals division, net sales during the fourth quarter of 2010 increased 18.4 percent, to $131.2 million, compared to $110.8 million in the fourth quarter of 2009. The improvement was driven primarily by volume increases of $9.5 million, or 8.6 percent, and higher selling prices of $11.3 million, or 10.2 percent. Segment operating profit was a record $17.6 million for the fourth quarter of 2010 compared to $14.0 million in the fourth quarter of 2009, an increase of $3.6 million.
For the full year, Performance Chemicals segment sales were a record $527.9 million, an increase of $131.1 million, or 33 percent, compared to $396.8 million in 2009. The sales increase was driven primarily by higher selling prices of $85.3 million and volume increases of $45.8 million, or 11.5 percent. Raw material costs increased $83.5 million during 2010. Segment operating profit in 2010 was $73.3 million, with margins of 13.9 percent, compared to $48.0 million and margins of 12.1 percent in 2009.
The Decorative Products division reported net sales of $76.8 million during the fourth quarter of 2010, a decrease of $1.2 million, or 1.5 percent, compared to the fourth quarter of 2009. Sales improved in laminates, North American wallcovering and performance films while North American coated fabrics, the Asian businesses and European wallcovering declined. Segment operating loss was $8.5 million in the fourth quarter of 2010, compared to segment operating profit of $3.6 million for the fourth quarter of 2009. Major contributors to the year-over-year operating profit decline during the quarter were higher raw material costs of $7.0 million partially offset by price increases of $2.0 million, non-cash expenses of $3.2 million related to net retirement benefit plan curtailments, $1.2 million of expense related to the strike in Columbus, MS, and unfavorable sales mix.
For the full year, Decorative Products segment sales were up $18.7 million, or 6.2 percent, to $318.3 million compared to $299.6 million in 2009. The sales increase was primarily attributable to higher laminate and Thailand coated fabric sales, increased pricing of $4.3 million, and favorable foreign exchange currency translation effects of $4.0 million. Segment operating loss in 2010 was $18.0 million, compared to segment operating profit $1.6 million in 2009. Included in the loss for 2010 were $6.2 million of non-cash asset impairment charges related to the Columbus, MS, facility, $5.5 million of strike-related costs, $3.2 million of net retirement benefit plan curtailment expenses, and higher raw material costs of $13.3 million, which were partially offset by $4.3 million in higher pricing to customers.
OMNOVA Solutions Completes Strong 2010
January 19, 2011