Fairlawn, OH, Jan. 26—Omnova Solutions Inc. today reported a loss of $61.3 million or $(1.53) per diluted share for the fourth quarter of 2003, compared to income of $0.5 million or $0.01 per diluted share during the fourth quarter of 2002.
Included in the fourth quarter of 2003 were non-cash charges of $49.6 million related to SFAS 142, "Goodwill and Other Intangible Assets" and $5.7 million for the write-off of idle fixed assets, obsolete inventories and intangible assets; and a provision of $1.7 million associated with the restructuring and severance resulting primarily from the Company's previously announced decision to exit its heat transfer product line. Excluding these items, the Company reported a net loss of $4.3 million or $(0.11) per diluted share for the fourth quarter of 2003.
Sales increased 2.0% to $175.8 million for the fourth quarter of 2003, compared to $172.3 million during the same period a year ago. Cost of goods sold for the fourth quarter of 2003 increased $4.2 million to $133.5 million versus the same quarter last year. Raw material cost increases of $5.0 million were due to significant year-over-year inflation in the Company's oil and natural gas based feedstocks.
Selling, general and administrative costs declined $1.0 million to $33.2 million in the fourth quarter of 2003 versus $34.2 million in the fourth quarter of 2002, primarily due to reduced salary workforce and discretionary spending controls.
Interest expense increased to $5.1 million for the fourth quarter of 2003 versus $2.0 million for the same period a year ago. The increased interest expense was the result of higher borrowing rates associated with the May 2003 issuance of the Company's $165 million of long-term bonds.
"We were encouraged by a gradual strengthening in key markets within our Performance Chemicals and Building Products segments during the fourth quarter," said Kevin McMullen, OMNOVA Solutions' Chairman and Chief Executive Officer. "We anticipate that this trend, combined with the significant actions the Company took in the second half of the year, will lead to improved financial performance in 2004."
"Fourth quarter year-over-year sales and operating profit increased for Performance Chemicals and Building Products based on strength in the paper, carpet and commercial roofing markets we serve," said McMullen. "Actions taken by our Decorative Products segment should improve our cost position going forward, including a reduction in salary and hourly workforce and exiting the heat transfer product line, as well as the non-cash write-off of intangible assets. While raw material costs remain higher than expected, pricing actions initiated in 2003 allowed us to exceed raw material price increases in the quarter. Also, programs to eliminate waste and improve customer satisfaction through our LEAN SixSigma operating initiative, achieve global purchasing synergies, and deliver value-added new products and services are generating positive results.
We believe these actions, along with others we have taken, will position us well in 2004."
For the twelve months ended November 30, 2003, sales increased 0.2% to $682.6 million compared to $681.2 million during the same period a year ago. Cost of goods sold for the twelve months ended November 30, 2003 increased $20.0 million to $516.8 million versus the same period last year. Raw material cost increases of $34.4 million, due to significant inflation in oil and natural gas based feedstocks, were partially offset by $14.4 million of cost reductions through manufacturing productivity and lower spending. Selling, general and administrative expense declined $4.2 million to $136.1 million versus $140.3 million for the same period of 2002, primarily due to reductions in the salary workforce. Interest expense increased to $15.3 million versus $8.1 million for the same period a year ago due to the May 2003 refinancing.
