Wellman triples 2Q profits to $9.4M

Don Hogsett, Staff Staff, August 5, 2002

Lifted by stronger margins, modestly higher sales and deep cuts in interest expense, polyester producer Wellman Inc. more than tripled second-quarter profits, to $9.4 million from $3.1 million last year, marking a second quarterly improvement in operations.

With the fiber business exceeding expectations, and the resin business improving as well, sales in the period climbed higher by 1.9 percent, to $267.5 million from $262.4 million last year.

"While we anticipated the improvement in our resins business, our fibers business has performed above expectations," said Tom Duff, chairman and ceo.

But looking ahead, the outlook is more muted, he observed. "In the third quarter, we expect income from continuing operations to be lower than the second quarter as a result of lower volumes, due to seasonality and higher product costs."

Helping to fuel the big improvement in profits, average gross margin widened substantially, by 310 basis points, or 3.1 percentage points, to 14.3 percent from 11.2 percent a year ago. Gross margin dollars shot up by 29.5 percent. Operating costs held relatively steady, edging up by 10 basis points, to 18.4 percent of sales from 18.3 percent a year ago.

In another lift to the bottom line, interest costs were slashed in half, reduced by 51.1 percent, to $2.3 million from $4.7 million a year ago. Further boosting profits, Wellman recorded a $1.8 million income-tax benefit from discontinued operations, compared with a year-ago benefit of $1.0 million.

Wellman more than doubled earnings from continuing operations, which shot up by 156.0 percent, to $12.8 million from $5.0 million last year. The loss from discontinued operations widened substantially, to $5.2 million from $2.9 million the preceding year.

Wellman Inc.

Qtr. 6/30 (x000) 2002 2001 % change
a-Second-quarter results include a $12.8 million after-tax profit from discontinued operations, up 156.0 percent from $5.0 million last year, partially offset by a $5.2 million loss from discontinued operations, compared with a prior-year loss of $2.9 million; and an income-tax benefit of $1.8 million vs. $1.0 million last year.
b-Six-month results include an after-tax profit of $18.4 million from continuing operations, up 106.7 percent from $8.9 million last year; a $36.2 million loss from discontinued operations, compared with a $4.6 million deficit the prior year; an income-tax benefit of $12.7 million vs. $1.6 million in the same period a year ago; and a $197.1 million after-tax charge stemming from a change in accounting.
Sales $267,500 $262,400 1.9
Oper. income (EBIT) 19,800 11,200 76.8
Net income 9,400a 3,100a 203.2
Per share (diluted) 0.29 0.10
Average gross margin 14.3% 11.2%
SG&A expenses 6.9% 7.0%
Six months
Sales 506,900 530,700 -4.5
Oper. income (EBIT) 30,100 22,100 36.2
Net income (202,200)b 5,900b
Per share (diluted) (6.31) 0.18
Average gross margin 12.8% 10.9%
SG&A expenses 6.8% 6.8%

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