OMNOVA Solutions Inc. announced income from continuing operations of $2.6 million, or $0.06 per diluted share, for the second quarter ending May 31, 2013. Net income for the second quarter was $2.9 million or $0.06 per diluted share.
Included in the second quarter results were one-time costs related to restructuring, manufacturing transition, refinancing activities and other items which totaled $6.4 million pre-tax. Excluding these items, Adjusted Income from Continuing Operations was $7.1 million or $0.16 per diluted share compared to $8.3 million or $0.18 per diluted share a year ago.
Highlights:
For the second quarter of 2013, the Company reported income from continuing operations of $2.6 million or $0.06 per diluted share.
Adjusted Income from Continuing Operations for the second quarter of 2013 was $7.1 million, or $0.16 per diluted share, compared to $8.3 million, or $0.18 per diluted share, for the second quarter of 2012.
Gross profit margins improved to 21.2% in the second quarter of 2013 as compared to 19.5% a year ago, due to favorable product mix and cost reduction actions.
Sequential results were significantly better than the first quarter of 2013 as second quarter 2013 net sales grew $19.1 million, Adjusted Segment Operating Profit increased $6.6 million, and Adjusted Segment Operating Profit margins improved by 200 basis points to 8.7% as compared to the first quarter of 2013.
As a result of anticipated sequential improvement in the second half of 2013, the Company forecasts that full-year 2013 Adjusted Income from Continuing Operations is expected to exceed 2012 results.
Consolidated Results for the Second Quarter Ending May 31, 2013
Net sales decreased $36.7 million, or 11.9%, to $270.8 million for the second quarter of 2013, compared to $307.5 million for the second quarter of 2012. The sales decrease was driven by lower volume of $16.9 million, or 5.5%, reduced pricing of $18.6 million, or 6.0%, and unfavorable currency translation effects of $1.2 million. However, sequential net sales improved by $19.1 million or 7.6% as compared to the first quarter of 2013.
Gross profit in the second quarter of 2013 decreased to $57.3 million, compared to $60.0 million in the second quarter of 2012, due primarily to the lower volumes. Raw material costs declined $13.5 million in the second quarter versus the same period last year.
Gross profit margins in the second quarter of 2013 improved to 21.2%, compared to margins of 19.5% in the second quarter of 2012. The increase was due to better product mix and cost reduction actions. As compared to the first quarter of 2013, gross profit improved by $8.3 million and gross profit margins increased 170 basis points.
Selling, general and administrative expense (SG&A) in the second quarter of 2013 was $31.2 million, or 11.5% of sales, compared to $32.2 million, or 10.5% of sales, in the second quarter of 2012. The $1.0 million improvement was due to lower employee expenses and a reduction in discretionary spending.
Interest expense in the second quarter of 2013 declined to $8.0 million, a decrease of $1.5 million from the second quarter of 2012, due to lower borrowing spreads as a result of a March 2013 term loan amendment and the completed amortization of an interest rate swap agreement in 2012.
Income tax expense was $1.3 million, representing a 33.3% effective income tax rate, for the second quarter of 2013, compared to income tax expense of $2.9 million, or a 29.6% effective tax rate, in the second quarter of 2012. The Company estimates its full-year 2013 effective rate will be approximately 30%.
Additionally, cash tax payments in the U.S. over the next few years are expected to be minimal as the Company has $116.8 million of U.S. federal net operating loss carryforwards and $90.0 million of state and local tax net operating loss carryforwards with expiration dates between 2022 and 2032.
Net income for the second quarter of 2013 was $2.9 million, or $0.06 per diluted share, compared to net income of $7.0 million, or $0.15 per diluted share, for the second quarter of 2012.
This included income from discontinued operations of $0.3 million for the second quarter of 2013, compared to income from discontinued operations of $0.1 million in the second quarter of 2012. Income from continuing operations for the second quarter of 2013 was $2.6 million, or $0.06 per diluted share, compared to $6.9 million, or $0.15 per diluted share, for the second quarter of 2012.
Adjusted Income from Continuing Operations was $7.1 million, or $0.16 per diluted share for the second quarter of 2013, compared to Adjusted Income from Continuing Operations of $8.3 million, or $0.18 per diluted share, in the second quarter of 2012.
