WELLMAN NET DIPS INTO RED IN QUARTER
NEW YORK — Losses from Wellman Inc.’s shuttered businesses overwhelmed earnings from continuing operations and pulled the company into the red in the first quarter of fiscal 2002.
For the three months ended March 31, the Shrewsbury, N.J.-based fiber and resin producer reported a net loss of $221.6 million, or $6.61 a diluted share. That compares with net income of $2.9 million, or 9 cents, in the year-ago period. Sales fell 10.8 percent to $239.4 million from $269.3 million last year.
Earlier in the quarter, Wellman discontinued an unfinished yarn business in Fayetteville, N.C., and a polyester staple fiber unit in Marion, S.C. Excluding losses from those two segments and an accounting change, net earnings from continuing operations increased 43.6 percent to $5.6 million, or 18 cents, compared with profits of $3.9 million, or 12 cents last year.
The continuing operations’ bottom line also benefited from the required adoption Jan. 1 of a new accounting standard regarding the amortization of goodwill. As a result, Wellman determined that goodwill allocated to its fiber and recycled products group should be reduced by approximately $197 million, which was taken as a one-time charge. Eliminating the amortization of goodwill reduced the total loss and increased continuing operations net income by approximately $2.1 million, or 7 cents.
Discontinued operations posted a net loss of $20.1 million, or 63 cents, compared with last year’s loss of $1 million, or 3 cents. Those results include an after-tax impairment charge of $19 million related to the reduction of certain long-lived assets to fair value minus the estimated cost of disposal.
“We expect our level of profitability from continuing operations for the remainder of 2002 to improve over first-quarter levels,” said chief executive officer Thomas Duff in a statement.
Wellman said profitability from continuing operations was made possible by higher volumes, improved raw material margins and reduced unit costs.