Fairlawn, OH, Mar. 23--Omnova Solutions Inc. today reported a loss of $5.8 million or $(0.14) per diluted share for the first quarter of 2004, compared to a loss of $6.9 million or $(0.17) per diluted share during the first quarter of 2003. Included in the first quarter of 2004 and 2003 were restructuring and severance charges of $0.3 million and $1.1 million, respectively, related to workforce reductions.
Excluding the restructuring and severance charges, the Company reported a net loss of $5.5 million, or $(0.14) per diluted share, for the first quarter of 2004 as compared to a loss of $5.8 million, or $(0.14) per diluted share for the first quarter of 2003.
Sales increased 4.2% to $159.9 million for the first quarter of 2004, compared to $153.4 million during the same period a year ago. Cost of goods sold for the first quarter of 2004 increased $4.9 million to $120.3 million versus the same quarter last year while gross profit improved to $39.6 million in the first quarter of 2004 as compared to $38.0 million in 2003.
Raw material cost increases of $3.3 million, due to continued inflation in oil and natural gas based feedstock costs, and higher pension expense, were offset by improvements in manufacturing productivity and lower spending.
The Company's total debt at the end of the first quarter of 2004 was $203.0 million, an increase of $10.8 million since the fourth quarter of 2003. The increase resulted from normal seasonal working capital needs.
"The first quarter, which begins in December, is always our weakest due to seasonality. However, we are encouraged with the good progress in top line sales growth, and the improved operating profit in all three of our business segments. Actions taken in 2003 to reduce our fixed cost structure are yielding the benefits we projected, approximately $16 million annualized. We are seeing improvement in most of our end-use markets after a weak economic environment over the past two years and we are optimistic that the improvement should continue throughout 2004," said Kevin McMullen, OMNOVA Solutions' Chairman and Chief Executive Officer.
"Earnings per share, excluding restructuring and severance charges, remained flat versus last year due to higher interest expense and significant raw material cost inflation, with styrene prices hitting 13-year highs in the quarter. While we made progress in the first quarter in implementing price increases to partially offset raw material costs, most of the benefits will occur starting in the second quarter. Our LEAN SixSigma initiatives to eliminate waste and improve customer satisfaction are generating early positive results."
Performance Chemicals - Net sales during the first quarter of 2004 increased 7.4% to $80.2 million versus $74.7 million in the first quarter of 2003. Stronger customer demand and new product introductions positively impacted revenues for paper, carpet, nonwovens and adhesive/tape products.
Segment operating profit was $1.9 million in the first quarter of 2004 as compared to $1.3 million in the first quarter of 2003. Excluding restructuring and severance charges of $0.2 million in 2003 related to reduction in workforce actions, segment operating profit in the first quarter of 2003 was $1.5 million.
As compared to last year, raw material costs were up $3.2 million during the quarter, primarily related to higher styrene costs driven by high oil and natural gas feedstock costs and temporary industry capacity reductions for planned maintenance.
In response to the raw material inflation, the Company implemented price increases across all product lines in the first quarter and has announced an additional price increase in paper chemicals to take effect in the second quarter. Annualized price increases totaling $8.0 million have been achieved.
Trialing activity for new business continues with the potential to increase volumes by over five percent annually in commercial carpet, high performance paper latex and various specialty chemical applications. The North American coated paper market continues to improve, driven by higher print ad spending.
Also, the Company's first generation POLYFOX(TM) fluorosurfactants received full regulatory approval from the EPA, allowing the Company to manufacture and sell this environmentally-preferred product in all areas of application.
