FAIRLAWN, OH -- For the third quarter ended August 31, 2011, OMNOVA Solutions, Fairlawn, OH, reported net income of $0.4 million, compared to $3.5 million in the third quarter of 2010. Third-quarter 2011 adjusted net income was $4.3 million, compared to third-quarter 2010 pro forma adjusted net income of $7.2 million. Third-quarter 2011 results were negatively impacted by several non-recurring charges.
Third-quarter 2011 diluted earnings per share was $0.01 compared to $0.08 in the third quarter of 2010. Third-quarter 2011 adjusted diluted earnings per share was $0.09, compared to third-quarter 2010 pro forma adjusted diluted earnings per share of $0.16.
In the third quarter of 2011, there were a number of non-recurring pre-tax charges totaling $4.8 million. These charges resulted primarily from an increase in bad debt reserves of $2.6 million related to a customer bankruptcy and an asset impairment charge of $2.4 million for an idled coated fabrics manufacturing plant in China. Excluding these items, adjusted net income for the third quarter of 2011 was $4.3 million, with adjusted diluted earnings per share of $0.09, as compared to the adjusted pro forma net income of $7.2 million or $0.16 per diluted share for the third quarter of 2010.
“Many of the markets we serve slowed during the last half of the quarter as consumer confidence fell,” said Kevin McMullen, OMNOVA Solutions' Chairman and Chief Executive Officer. "As a result, many of our customers moderated their purchases in the quarter and lowered their outlook for the remainder of the year. Additionally, raw material input costs were at an all-time high despite declining oil prices in the quarter, and year-over-year raw material inflation increased during the period by almost $37 million in the legacy OMNOVA business. However, the company was able to cover this inflation with increased product pricing of $37 million.”
“Despite these headwinds, we have clearly improved our long-term position with the acquisition of ELIOKEM,” McMullen said. "In these very challenging conditions, our Performance Chemicals business, including ELIOKEM, is on pace to achieve its second-best yearly pro forma profit performance. We are making solid progress on realizing the benefits of this combination, including a larger global footprint with greater exposure to faster growing regions like India and China, a much broader technology portfolio, and an increased number of served markets.”
Previously, the company had provided guidance for full-year adjusted diluted earnings per share of $0.40 to $0.44. Based on the current outlook, the company expects to be at the top of that range.