OMNOVA Solutions Q3 net income $1.8 millionStaff writer ▼ | September 26, 2014
OMNOVA Solutions announced net income of $1.8 million, or $0.04 per diluted share, for the third quarter ending August 31, 2014, compared to net income of $9.0 million, or $0.19 per diluted share, for Q3 2013.
Results $0.04 per diluted share
Net sales decreased $9.1 million, or 3.5%, to $252.1 million for the third quarter of 2014, compared to $261.2 million for the third quarter of 2013. The sales decline was a result of reduced pricing of $5.8 million, or 2.2%, and reduced volume of $3.6 million, or 1.4%, partially offset by favorable currency translation effects of $0.3 million.
The pricing decline was primarily the result of contract pricing reductions, particularly in paper coatings, negotiated earlier in the year in response to increased competitive intensity, and lower raw material costs and their related impact on index pricing formulas in the Performance Materials product lines. The volume decline also was related primarily to paper coatings. Key specialty lines of business continued to increase with particular strength in oil & gas, specialty coatings and in Engineered Surfaces' laminates.
Gross profit in the third quarter of 2014 was $49.2 million, or 19.5%, compared to $54.7 million and 20.9% in the third quarter of 2013. The decline in gross profit was due primarily to volume shortfalls, the previously negotiated price reductions in Performance Materials and higher global logistics costs.
Including the effect of an unfavorable LIFO inventory valuation reserve adjustment of $2.8 million, net raw material costs increased by $1.0 million in the third quarter versus the same period last year.
Selling, general and administrative expense (SG&A) in the third quarter of 2014 was $29.9 million, or 11.9% of sales, compared to $28.5 million, or 10.9% of sales, in the third quarter of 2013, reflecting increased investments in sales and marketing resources for OMNOVA's specialty lines of business.
Interest expense in the third quarter of 2014 was $7.8 million, up $0.1 million from the third quarter of 2013.
Income tax expense was $0.3 million, representing a 14.3% effective income tax rate for the third quarter of 2014, compared to $3.4 million or a 27% effective income tax rate in the third quarter of 2013. The rate in the third quarter of 2014 was lower than the statutory rate due primarily to higher income in foreign jurisdictions with lower tax rates.
The Company continues to estimate the full-year 2014 effective tax rate will be approximately 27% to 30%. Cash tax payments in the U.S. over the next few years are expected to be minimal as the Company has approximately $113.6 million of U.S. federal net operating loss carryforwards and $108.9 million of state and local tax net operating loss carryforwards with expiration dates between 2021 and 2033.
Net income for the third quarter of 2014 was $1.8 million, or $0.04 per diluted share. This is compared to net income of $9.0 million, or $0.19 per diluted share, for the third quarter of 2013.
Adjusted Income from Continuing Operations was $2.2 million, or $0.05 per diluted share, for the third quarter of 2014, compared to Adjusted Income from Continuing Operations of $8.7 million, or $0.19 per diluted share, in the third quarter of 2013 ■