The Company now expects reported GAAP earnings per diluted share for the fourth quarter of 2013 will be approximately $0.16 to $0.18 per diluted share, significantly above the $0.01 per diluted share for the fourth quarter a year ago, and slightly below the $0.19 per diluted share third quarter 2013 results.
The previously forecasted fourth quarter 2013 results are now expected to be negatively impacted by several items:
Engineered Surfaces' Minhang, China coated fabrics facility experienced a major typhoon-related flood in early October. Through diligent efforts by OMNOVA's global associates, the plant is now operating again; however, it will take additional time to return to normalized manufacturing, inventory and sales levels. The Company is compiling its claim costs related to the flood and expects to receive insurance recovery proceeds in 2014. Customers are now being fully serviced, and the impact is not expected to continue into 2014.
The Performance Chemicals operation in Ningbo, China, declared force majeure to customers of its antioxidant products after a sudden and unanticipated raw material supply disruption. The Company anticipates it will be manufacturing product for only two of the final seven weeks of the quarter, but alternative raw material supply is being secured and the Company does not believe that the impact will continue into 2014.
Performance Chemicals' paper chemical volumes and margins are lower than expected, due to slower ramp-up of new volume wins and lower pricing. However, the Company has successfully negotiated a new two-year contract with its largest paper customer in advance of the contract expiration date.
Raw material costs are expected to be higher in the fourth quarter – driven by a 27% increase in butadiene – and the Company does not believe these costs will be completely passed on to customers in the quarter.
The Company now expects higher health care costs in the quarter due to higher claims in its employer-sponsored plan.
These items are expected to be partially offset by a one-time gain on the asset sale of a previously idled plant in China and projected lower effective tax rates in several countries.
Additionally, the Company now estimates that full-year 2013 Adjusted Income from Continuing Operations, which excludes certain items, will be in the range of $22.5 million to $24.5 million, compared to $28.5 million in 2012.
"While fourth quarter 2013 results are now expected to be lower than we previously forecasted, we expect them to be well above last year's fourth quarter. We continue to work on a number of key structural improvements in Performance Chemicals and Engineered Surfaces that should positively contribute to future results.
"Included in those improvements are the recent start-up of new specialty chemicals capacity in China, emulsion polymer and engineered surfaces manufacturing footprint consolidation in the U.S., and several exciting new product launches," said Kevin McMullen, Chairman and Chief Executive Officer.
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