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OM Group, Inc. (OMG)

Q4 2010 Earnings Call

February 24, 2011 10:00 am ET


Troy Dewar – Investor Relations

Joseph M. Scaminace – Chairman and Chief Executive Officer

Kenneth Haber – Chief Financial Officer

Stephen D. Dunmead – Vice President and General Manager, Specialties Group


Michael Harrison – First Analysis

Andrew Dunn – KeyBanc Capital Markets

Saul Ludwig – Northcoast Research



Good morning. My name is Falisha and I will be your conference operator today. At this time, I would like to welcome everyone to the Forth Quarter Year-End 2010 Results Conference Call. All lines have been placed on mute to prevent any background noise. (Operator Instructions) Thank you.

Mr. Dewar, you may begin your conference.

Troy Dewar – Investor Relations

Thank you, Falisha. I’d like to welcome everyone to our review of OM Group's 2010 fourth quarter and full-year results. Joining me this morning are Joe Scaminace, Chairman and Chief Executive Officer; Ken Haber, Chief Financial Officer; Steve Dunmead, Vice President and General Manager of Specialties; and Greg Griffith, Vice President, Strategic Planning, Development and Investor Relations.

A copy of the press release we issued earlier this morning as well as the presentation materials that will accompany our discussion can be found on the Investor Relations portion of our website at

During the course of this call, we will be discussing certain non-GAAP financial measures. I refer you to the company presentation materials for the reconciliation of those measures to GAAP financial measures.

Comments made this morning by any of the participants on the call may include forward-looking statements based upon specific assumptions and subject to uncertainties and factors, which are difficult to predict. Actual results could differ materially from those expressed or implied. A more complete disclosure regarding forward-looking statements can be found at the bottom of our press release or in our Form 10-K and applies to this call.

At this time, I will turn the call over to Joe Scaminace.

Joseph M. Scaminace

Thank you, Troy. And good morning, everyone. As you can tell from our release this morning, 2010 was a strong year for the company. Total sales improved 37% over last year and finished closed to $1.2 billion for the year.

Excluding acquisitions, sales grew 24%, reflecting strong volume growth in our global markets. The acquisition of EaglePicher Technologies added another 13% to our top line growth.

Organic volume growth was driven by a global recovery in end market demand and customer restocking across most of the sectors we serve. Particularly, we were excited about the growth in the following markets: powered metallurgy, memory disk, printed circuit boards and semiconductors. In addition, higher selling prices and favorable product mix contributed to our top line growth.

We were able to meet the surging demand without adding costs that were taken out during the downturn. And as a result, we were able to convert this improved top line into profitable earnings growth.

Excluding special items from both years, income from continuing operations was nearly three times higher in 2010 than in 2009. The strength of our operational strategy can be found in our ability to continue to generate positive cash flow from operations.

We are able to self-fund our future growth by reinvesting in our business through high-return capital projects, new product development and acquiring strategic assets. For example, we’ve laid down a formidable foundation to grow in the battery business through our acquisition of EaglePicher Technologies.

This business has excellent access to attractive end markets, such as aerospace, defense, medical, and alternative energy as well as giving us an in depth knowledge of battery chemistries and technologies. Its contributions to our 2010 results are just the beginning of our growth in the battery business. And EaglePicher is representative of the type of transformative deals we will continue to seek as we move OM Group forward. I'm confident in our ability to deliver value creation to its full potential.

Here are a few of the reasons why I’m optimistic about our future. First of all, I truly believe that we've made progress in achieving sustainable earnings performance going forward. And so long as the global economy permits, we fully expect continued and meaningful growth across the various markets we serve. The diversity of our product offerings and the broad geographical footprint of our operations gives us exposure to various global market economic sectors.

Here are a few examples of events that reflect my confidence and the confidence of all of us at the company. The electronics sector will benefit from new products and investments by corporations upgrading their IT networks. The battery materials business is expected to grow from strong portable electronic sales and growth in electronic and hybrid vehicles.

Industrial production should be supportive of increasing volumes for our powdered metallurgy products and we believe that the construction markets are nearing the bottom and will continue to recover this year and begin to recover this year. By maintaining our financial discipline, we expect to translate our increasing revenues into additional earnings growth.

We've seen a surge in M&A activity. And we remain confident that we will ultimately be rewarded for our diligence and discipline in this arena. We'll also selectively increase our funding levels to achieve organic growth with prudent capital expenditures, especially for capacity expansions that offer us attractive returns and funding for R&D to develop new products.

2010 was a very good year for the OM Group. And as you heard if my comments, I believe the momentum is building for us. Looking ahead to 2011, we believe that we’re well positioned for growth and profitability.

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