OMG Announces Unaudited Financial Information for Second Quarter and YTD 2004

• Published in: PR Newswire p. 1
• Format: Newsletter
• Language: English
• Published: New York PR Newswire Association LLC 02.08.2004
• Subjects: Accounting; Accounting records; Audits; Cobalt; Consolidated financial statements; Corporate profits; Dilution; Employees; FIFO; Form 10-K; Income taxes; Inventory; Litigation; Net income; Nickel; Prices; Profitability; Raw materials; Retained earnings; Safe harbor; Sales; Special counsels; Ohio

The cobalt group includes cobalt and other metal-based organics, inorganics, powders and metal. For the second quarter 2004, net sales were $164.5 million and operating profit was $36.0 million. These results reflect the favorable impact from a combination of factors, including higher metal prices, strong volumes and a mix change to higher profitability products. Demand during the second quarter for cobalt and a number of the company's products remained strong, primarily in battery grade chemicals and cobalt powders. The Metal Bulletin reference price for 99.3% cobalt averaged $24.93 per pound during the second quarter of 2004 versus $9.57 per pound in the 2003 second quarter. The previously announced maintenance shutdown of the company's cobalt refinery in Finland was completed on schedule during the 2004 second quarter and the refinery has resumed normal production. The nickel group includes nickel-based inorganics, powders and metal. For the second quarter 2004, net sales were $149.2 million and operating profit was $10.8 million. Nickel sales reflected strong volume and higher average nickel prices. The London Metal Exchange quoted price for nickel averaged $5.67 per pound for the 2004 second quarter versus $3.80 per pound in the 2003 second quarter. Operating profit during the quarter was negatively affected by the timing of nickel price fluctuations. Nickel price fluctuations, which affect raw material purchase price as well as sales price, resulted in losses on certain hedge contracts that closed during the quarter as well as an unfavorable position at the end of the quarter when the company marked certain positions to market. As a result of its investigation, the audit committee has determined, among other things, that certain adjustments to inventory and other accounts were improperly recorded for a number of years, resulting in overstatements of net earnings for 1999, 2000, and 2001. Most of these adjustments represent amounts written off in 2002 and 2003, resulting in understatements of net earnings for those two years. At this time, the company is still finalizing the tax impacts of the restatement adjustments on its continuing and discontinued operations in each year. Although the results of the investigation are subject to audit by the company's independent auditors, the company believes that aggregate earnings before income taxes for 1999 - 2001 will be reduced by approximately $115 million to $120 million, and that aggregate earnings before income taxes for 2002 - 2003 will be increased by approximately $116 million to $121 million. Considering the negative impact on retained earnings of restatement issues that relate to periods prior to 1999, the aggregate reduction in retained earnings as of September 30, 2003 is expected to be less than $25 million.