WLM Wellman

Wellman, Inc. (NYSE: WLM) today reported a net loss from continuing operations attributable to common stockholders of $11.6 million, or $0.36 per share, for the quarter ended June 30, 2007. This compares to a net loss from continuing operations attributable to common stockholders of $14.5 million, or $0.46 per share, for the same period in 2006. For the first six months of 2007, Wellman reported a net loss from continuing operations attributable to common stockholders of $38.7 million, or $1.20 per share, compared to a net loss from continuing operations attributable to common stockholders of $33.4 million, or $1.05 per share for the same period in 2006. Tom Duff, Wellman�s Chairman and Chief Executive Officer, stated, �Demand for PET resins remained strong in the second quarter. Force majeures on PTA and PIA kept the NAFTA PET resin market tight by limiting the introduction of net capacity additions into the market. In addition, as part of our strategy to focus on our U.S. chemical-based business, we have agreed to sell our European recycled-based polyester staple fiber business to an affiliate of AURELIUS AG, a publicly traded group focused on investing in medium-sized industrial companies. The sale is expected to be completed this week.� Keith Phillips, Wellman�s Chief Financial Officer, stated, �Our second quarter 2007 EBITDA, as defined, improved substantially, compared to first quarter 2007, as a result of continued strong PET resin demand and improved PET resin margins.� The following table summarizes our results for the five quarters ending with the second quarter of 2007. (in millions, except per share data) 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 Net Sales $345.2 $336.3 $324.5 $354.5 $333.7 Gross Profit 13.9 8.8 6.5 5.9 11.5 SG&A Expenses 13.0 � � 14.0 � � 14.3 � � 13.7 � � 12.1 � Operating Income (Loss) Excluding Other Items 0.9 (5.2 ) (7.8 ) (7.8 ) (0.6 ) Other Items 2.2 � � 35.2 � � 1.8 � � 0.3 � � (8.1 ) Operating Income (Loss) (1.3 ) (40.4 ) (9.6 ) (8.1 ) 7.5 Interest Expense, net 14.0 � � 15.9 � � 15.5 � � 15.2 � � 15.3 � Loss from Continuing Operations Before Income Tax Expense (Benefit) (15.3 ) (56.3 ) (25.1 ) (23.3 ) (7.8 ) Income Tax Expense (Benefit) (4.4 ) � (20.8 ) � (3.3 ) � 0.1 � � 0.0 � Loss from Continuing Operations (10.9 ) (35.5 ) (21.8 ) (23.4 ) (7.8 ) Loss from Discontinued Operations, net of tax (0.8 ) � (0.1 ) � (27.3 ) � (0.9 ) � (3.6 ) Net Loss (11.7 ) (35.6 ) (49.1 ) (24.3 ) (11.4 ) Accretion (3.6 ) � (3.6 ) � (3.8 ) � (3.7 ) � (3.8 ) Net Loss Attributable to Common Stockholders ($15.3 ) � ($39.2 ) � ($52.9 ) � ($28.0 ) � ($15.2 ) Basic and Diluted Net Loss per Common Share: Net Loss Attributable to Common Stockholders from Continuing Operations ($0.46 ) ($1.22 ) ($0.80 ) ($0.84 ) ($0.36 ) Net Loss Attributable to Common Stockholders from Discontinued Operations (0.02 ) � 0.00 � � (0.85 ) � (0.03 ) � (0.11 ) Net Loss Attributable to Common Stockholders ($0.48 ) � ($1.22 ) � ($1.65 ) � ($0.87 ) � ($0.47 ) Other Items included in Operating Income (Loss) for the same periods were comprised of the following: (in millions) 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 Hurricane Katrina Costs, net $1.4 $0.9 ($6.6 ) $0.2 ($6.1 ) Sale of Assets, net - - - - (1.4 ) Johnsonville Fibers Disposal Costs, net - 34.1 (0.8 ) (1.0 ) (1.1 ) Restructuring Charges 1.1 - - 2.9 0.2 Legal and Settlement Costs - - - (1.9 ) - Goodwill Impairment - - 33.4 - - Pension Actuarial Gains - - (22.2 ) - - Miscellaneous (0.3 ) � 0.2 � (2.0 ) � 0.1 � � 0.3 � Total Other Items $2.2 � � $35.2 � $1.8 � � $0.3 � � ($8.1 ) EBITDA We have provided the non-GAAP measure, �EBITDA, as defined� because our major debt agreements use this measurement as a key component which affects our ability to incur additional indebtedness, make investments, and make certain restricted payments, such as dividends. It is also an important measurement tool for (1) financial institutions that provide us with capital; (2) investors; and (3) our Board and management. In each instance, we use EBITDA, as defined because it excludes items that are not expected to impact the long-term cash flow of the business and are not an indication of our ongoing operating performance. We provide EBITDA, as defined as an additional measure frequently used to value an enterprise and to enable investors to analyze the efficiency of our operations and to compare and/or rank us with other companies with differing capital structures. We also believe it assists investors in analyzing our future ability to pay dividends, which is a key component in many investment decisions. Our Board, our chief decision maker, and senior management use EBITDA, as defined to evaluate the operating performance of our business segments. EBITDA, as defined, is calculated in accordance with our debt agreements by adding Earnings (Loss) from Continuing Operations, Income Tax Expense (Benefit), Interest Expense, Depreciation & Amortization and Permitted Adjustments. The following table reconciles Loss from Continuing Operations to EBITDA, as defined for the previous five quarters. (in millions) 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 Loss from Continuing Operations ($10.9 ) ($35.5 ) ($21.8 ) ($23.4 ) ($7.8 ) Income Tax Expense (Benefit) (4.4 ) ( 20.8 ) (3.3 ) 0.1 0.0 Interest Expense, net 14.0 15.9 15.5 15.2 15.3 Depreciation & Amortization 17.7 17.1 16.3 17.0 17.3 Permitted Adjustments 2.3 � � 37.6 � � 2.9 � � (2.6 ) � (8.2 ) EBITDA, as defined $18.7 � � $14.3 � � $9.6 � � $6.3 � � $16.6 � Trailing Four Quarters EBITDA, as defined $94.7 � � $72.9 � � $54.8 � � $48.9 � � $46.8 � Permitted Adjustments are adjustments specified in our debt agreements, which are used in the calculation of EBITDA, as defined. Permitted Adjustments for the same period include: (in millions) 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 Hurricane Katrina Costs, net $ 1.4 $ 0.9 ($6.6) $ 0.2 ($6.1) Sale of Assets, net - - - - (1.4) Johnsonville Fibers Disposal Costs, net - 34.1 (2.4) (1.0) (1.1) Legal and Settlements Costs - - - (1.9) - Goodwill Impairment - - 33.4 - - Pension Actuarial Gains - - (22.2) - - Other � 0.9 � � 2.6 - � � 0.7 � � 0.1 � 0.4 Total Permitted Adjustments $ 2.3 � $ 37.6 � $ 2.9 � � ($2.6) � ($8.2) Despite the importance of EBITDA, as defined we recognize that this non-GAAP financial measure does not replace the presentation of our GAAP financial results and is not intended to represent cash flows or an alternative to net earnings (loss). The EBITDA information we provide is simply supplemental information and an additional measurement tool to assist our management and certain investors in analyzing our performance. Wellman, Inc. manufactures and markets high-quality polyester products, including PermaClear� brand PET (polyethylene terephthalate) packaging resin and Fortrel� brand polyester fiber. Non-GAAP financial measures This press release includes non-GAAP financial measures, as defined by the Securities and Exchange Commission. Specifically, management believes �EBITDA, as defined� as described on the Company�s web site is an important measure used by investors, analysts and financial institutions to evaluate the Company�s performance. EBITDA, as defined is calculated by adding Earnings (Loss) from Continuing Operations, Income Tax Expense (Benefit), Interest Expense, Depreciation, Amortization and Permitted Adjustments. All of the Permitted Adjustments were included in Earnings (Loss) from Continuing Operations. Webcast of Conference Call Wellman, Inc. will conduct a conference call to review 2nd quarter 2007 results at 1:30 P.M. Eastern Time on Thursday, July 26, 2007. This call is available in a live Webcast on the Wellman, Inc. web page. To access the Webcast, log onto the Wellman, Inc. website at: http://www.wellmaninc.com, go to the Investor Relations page and follow the prompts. Replay of the Webcast will be available late afternoon July 26, 2007 and will remain on the website for 7 days. The replay can be accessed by following the same procedure used to access the live Webcast. Presentation slides for the conference call will be available at 1:30 P.M. Thursday, July 26, 2007 on the Wellman, Inc. website Investor Relations page under the Webcasts and Conferences section as well as part of the live webcast. During the presentation, certain non-GAAP terms may be used. An explanation of these terms can be found on the Wellman, Inc. website, in the Financial Glossary section of the Investor Relations page. To access the Investor Relations page of our website, follow the same procedures used to access the Webcast. Forward-Looking Statements Statements contained in this release that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, words such as "believes," "expects," "anticipates," and similar expressions are intended to identify forward-looking statements. These statements are made as of the date hereof based upon current expectations, and we undertake no obligation to update this information contained herein. These forward-looking statements involve certain risks and uncertainties, including, but not limited to: reduced raw material margins; availability and cost of raw materials; reduced sales volumes; increase in costs; volumes of textile imports; prices and volumes of polyester staple fiber and PET resin imports; the actions of our competitors; the financial condition of our customers; availability of financing, changes in financial markets, interest rates, credit ratings, tax risks; inability to execute our strategy; environmental risks and foreign currency exchange rates; natural disasters; regulatory changes; U.S., European, Asian and global economic conditions; work stoppages; levels of production capacity and profitable operations of assets; prices of competing products; acts of terrorism; and maintaining the operations of our existing production facilities. Actual results may differ materially from those expressed herein. Results of operations in any past period should not be considered indicative of results to be expected in future periods. Fluctuations in operating results may result in fluctuations in the price of our common stock. For a more complete description of the prominent risks and uncertainties inherent in our business, see our Form 10-K for the year ended December 31, 2006. Wellman, Inc. Condensed Consolidated Statement of Operations (Unaudited) (In Millions, except per share data) � � � � � June 30, September 30, December 31, March 31, June 30, 2006 2006 2006 2007 2007 � Net Sales $345.2 $336.3 $324.5 $354.5 $333.7 � Cost of Sales 331.3 � � 327.5 � � 318.0 � � 348.6 � � 322.2 � � Gross Profit 13.9 8.8 6.5 5.9 11.5 � Selling, General and Administrative Expenses 13.0 14.0 14.3 13.7 12.1 � Restructuring Charges 1.1 -- -- 2.9 0.2 � Provision for Uncollectible Accounts -- -- 0.3 0.1 0.2 � Other (Income) Expense, Net 1.1 � � 35.2 � � 1.5 � � (2.7 ) � (8.5 ) � Operating Income (Loss) (1.3 ) (40.4 ) (9.6 ) (8.1 ) 7.5 � Interest Expense, Net 14.0 � � 15.9 � � 15.5 � � 15.2 � � 15.3 � � � Loss From Continuing Operations Before Income Tax Expense (Benefit) (15.3 ) (56.3 ) (25.1 ) (23.3 ) (7.8 ) � Income Tax Expense (Benefit) (4.4 ) � (20.8 ) � (3.3 ) � 0.1 � � 0.0 � � Loss From Continuing Operations (10.9 ) (35.5 ) (21.8 ) (23.4 ) (7.8 ) � � Loss From Discontinued Operations, Net of Income Taxes (Benefit) (0.8 ) (0.1 ) (27.3 ) (0.9 ) (3.6 ) � � � � � � � � � Net Loss ($11.7 ) � ($35.6 ) � ($49.1 ) � ($24.3 ) � ($11.4 ) � Net Loss Attributable to Common Stockholders: � Net Loss ($11.7 ) ($35.6 ) ($49.1 ) ($24.3 ) ($11.4 ) � Accretion (3.6 ) � (3.6 ) � (3.8 ) � (3.7 ) � (3.8 ) � Net Loss Attributable to Common Stockholders ($15.3 ) � ($39.2 ) � ($52.9 ) � ($28.0 ) � ($15.2 ) � Basic and Diluted Net Loss Per Common Share: Net Loss Attributable to Common Stockholders From Continuing Operations ($0.46 ) ($1.22 ) ($0.80 ) ($0.84 ) ($0.36 ) Net Loss Attributable to Common Stockholders From Discontinued Operations (0.02 ) � 0.00 � � (0.85 ) � (0.03 ) � (0.11 ) Net Loss Attributable to Common Stockholders ($0.48 ) � ($1.22 ) � ($1.65 ) � ($0.87 ) � ($0.47 ) � � Basic and Diluted Weighted-Average Common Shares Outstanding 31.9 � � 32.0 � � 32.0 � � 32.2 � � 32.3 � WELLMAN, INC. SUPPLEMENTAL INFORMATION** � � � � � � � � � � � � NET SALES BY GROUP � � � � � � � � � � 2Q06 3Q06 4Q06 1Q07 2Q07 (Millions $) Segments: Chemical-Based $275 $271 $252 $296 $284 Recycled-Based 70 65 73 59 50 Total Net Sales $345 $336 $325 $355 $334 � � � BALANCE SHEET DATA � 6/30/07 (Millions $) Accounts Receivable $186 Inventories $146 Debt, Net $600 � � � � � � � � � � � CASH FLOW DATA � � � � � � � � � � (Millions $) 2Q06 3Q06 4Q06 1Q07 2Q07 Depreciation from continuing operations $13.3 $12.8 $12.0 $12.9 $13.0 Amortization (non-interest) 4.4 4.3 4.3 4.1 4.3 Amortization (Interest) 1.1 1.1 1.1 1.1 1.0 Total Depreciation & Amortization from continuing operations $18.8 $18.2 $17.4 $18.1 $18.3 Capital expenditures from continuing operations $12.2 $3.9 $4.0 $2.7 $3.4 � � � � � � � � � � � SEGMENT PROFIT * � � � � � � � � � � � Segments: (Millions $) 2Q06 3Q06 4Q06 1Q07 2Q07 Chemical-Based $16.0 $14.4 $7.9 $4.8 $16.7 Recycled-Based 2.7 (0.1) 1.7 1.5 (0.1) Segment Profit 18.7 14.3 9.6 6.3 16.6 Interest Expense, Net (14.0) (15.9) (15.5) (15.2) (15.3) Depreciation and Amortization (17.7) (17.1) (16.3) (17.0) (17.3) Permitted Adjustments (2.3) (37.6) (2.9) 2.6 8.2 Loss From Continuing Operations before Income Tax Expense (Benefit) ($15.3) ($56.3) ($25.1) ($23.3) ($7.8) � * Segment profit is based on EBITDA, as defined, which is the primary financial measure used by Wellman, Inc.'s Chief Operating Decision Maker to assess performance and allocate resources. Despite the importance of EBITDA, as defined, we recognize that this non-GAAP financial measure does not replace the presentation of our GAAP financial results and is not intended to represent cash flows or an alternative to Loss From Continuing Operations. **Preliminary information. � � CONFERENCE CALL INFO � Wellman, Inc. will host a conference call to review 2Q 2007 on Thursday, July 26, 2007 at 1:30 p.m. ET. You are invited to listen to the live Webcast of the conference call by logging onto Wellman, Inc.'s home page http://www.wellmaninc.com, go the Investor Relations page, and follow the prompts. � � The call and related documents contain copyrighted material. It cannot be recorded, rebroadcast or reprinted without Wellman's express permission. Participation implies consent to the taping and above terms.