OMNOVA Solutions Inc. recently reported net income of $3.5 million, or $0.08 per diluted share, for the third quarter ended August 31, compared to net income of $10.1 million, or $0.23 per diluted share, for the third quarter of 2009. Included in the third quarter of 2010 were non-recurring expenses totaling $6.7 million, including $3.9 million related to a strike at a Decorative Products manufacturing plant, $1.9 million related to a pending acquisition, $0.8 million for a foreign import duty claim, and $0.1 million for restructuring and severance actions and other items. Included in the third quarter last year were non-recurring expenses totaling $0.7 million including $0.6 million for flood-related damage, and $0.3 million for restructuring and severance actions offset by pension curtailment gains of $0.2 million.
Net sales increased $41.8 million, or 22.5%, to $227.9 million for the third quarter of 2010, compared to $186.1 million for the third quarter of 2009. The net sales increase was the result of improved volumes of $7.4 million and higher selling prices of $35 million partially offset by unfavorable foreign currency translation effects of $0.6 million. Gross profit declined to $39.1 million, with margins of 17.2%, in the third quarter of 2010, compared to $44.0 million and margins of 23.6% in the previous third quarter. Included in gross profit in the third quarter of 2010 is $2.6 million of strike-related costs. The decline in gross profit margin percentage was primarily due to a change in product mix, higher manufacturing costs as a result of the strike, and the effect of index pricing, in which higher raw materials are passed through without any gross margin benefit. "In OMNOVA's third quarter, our underlying business continued to post strong operating performance considering that results were adversely impacted by nearly $7 million of non-recurring expenses,” said Kevin McMullen, chairman and CEO. “Cash flow was strong, and our balance sheet continues to improve. We have made significant progress on many fronts, including the introduction of numerous innovative products, penetration into new, adjacent markets, the continued globalization of our business and aggressive productivity gains and cost reductions."
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