OMN OMNOVA Solutions Inc

FAIRLAWN, Ohio, Oct. 24 /PRNewswire-FirstCall/ -- OMNOVA Solutions Inc. (NYSE:OMN), in response to shareholder inquiries, today announced that it is unaware of any new developments concerning its business operations that could account for the recent sharp decline to the current market price of the Company's common shares. As previously disclosed in the earnings release for the third fiscal quarter of 2008, with a softening economy, the Company continues to face weakening end-use market demand. "As a matter of policy, the Company generally does not address trading trends of its stock," said Kevin McMullen, OMNOVA Solutions' Chairman and Chief Executive Officer. "However, in light of the recent unprecedented stock price decline and shareholder inquiries we thought it appropriate to communicate to our shareholders." While there is uncertainty in the general economic outlook, OMNOVA has and continues to take actions to strengthen its operating leverage and its position in key end-use markets: -- OMNOVA has favorable long-term financing arrangements put in place in 2007 that fully support its operational needs. The Company has a $144 million term loan credit agreement, led by Deutsche Bank, which matures in 2014, and a $90 million revolving asset based credit facility, led by JP Morgan Chase, which matures in 2012. As of September 30, 2008 there was $37.1 million of unused and available liquidity under the revolving asset based credit facility. For the month of September 2008, the weighted average cost of borrowing was 5.8%. -- EBITDA, as defined in the Company's borrowing agreements for the calculation of the net leverage ratio, improved to $15.1 million for the third quarter of 2008 (ending August 31, 2008). EBITDA for the twelve months ended August 31, 2008 was $44.6 million. OMNOVA's leverage ratio of Net Debt to EBITDA was 4.3 at August 31, 2008, well under the covenant limit of 5.5. Definitions of EBITDA and Net Debt and reconciliations of EBITDA to income from continuing operations and Net Debt to total debt are provided in the Non-GAAP and Other Financial Measures section of this release. -- Pricing actions across the Company late in the second quarter and throughout the third quarter of 2008 enabled OMNOVA to achieve significant improvement in third quarter profitability as compared to the first half of the year. -- The Company has executed focused cost reduction initiatives to significantly reduce SG&A and manufacturing costs. In addition, OMNOVA continues to drive LEAN SixSigma deeper into its production facilities in an ongoing effort to streamline costs. The Company's cost structure, excluding raw materials, is lower than anytime since OMNOVA's formation in 1999. -- The Company is focused on numerous product innovations that deliver enhanced value to customers. As an example, the Company's innovative GenCryl Pt(R) product, a high-strength latex binder for high-grade coated paper applications, continues to drive new customer wins in Performance Chemicals. -- The Company has leading positions in several key end-use markets in North America and a growing global presence, particularly in Asia. Over the past few years, leveraging its innovative products and leading market positions, the Company believes that it has gained share in most of its end- use markets. -- OMNOVA's Decorative Products segment is one of the largest and broadest-based competitors in its markets. During the past two years several competitors in these markets have ceased operations and the Company is well positioned to gain market share. "Our employees are focused on continuing to drive operating improvements in our Company. Showing our commitment to and confidence in OMNOVA's future, senior management have purchased nearly 120,000 shares of stock in the public market over the last few days," Mr. McMullen said. Conference Call -- OMNOVA Solutions has scheduled a conference call to discuss this release for Tuesday, October 28, 2008 at 2:30 p.m. ET. The live audio event will be hosted by OMNOVA Solutions' Chairman and Chief Executive Officer, Kevin McMullen, and may be accessed by the public from the Company's website ( http://www.omnova.com/ ). Webcast attendees will be in a listen only mode. Following the live webcast, OMNOVA will archive the call on its website until 5:00 p.m. ET on November 4, 2008. A telephone replay will also be available. Further details regarding the telephone replay will be posted on the Company's website. Non-GAAP and Other Financial Measures Reconciliation of income (loss) from continuing operations to EBITDA and total debt to Net Debt This earnings release includes EBITDA and Net Debt which are non-GAAP financial measures as defined by the Securities and Exchange Commission. EBITDA is calculated in accordance with the definition of Net Leverage Ratio as set forth in the Company's $150,000,000 Term Loan Credit Agreement dated as of May 22, 2007 and excludes charges for interest, taxes, depreciation and amortization, amortization of deferred financing costs, net earnings of joint ventures less cash dividends, net earnings of foreign subsidiaries less cash dividends, loss on debt transactions, gains or losses on sale or disposal of capital assets, loss from write-down of non-current assets, non-cash income or expense for the Company's pension plans, gains or losses from changes in the LIFO reserve, and non-cash charges for the 401(k) company match and up to $2.0 million annually for restructuring, severance and non-recurring charges. Net Debt is calculated as total debt, outstanding letters of credit and the fair value of the interest rate swap if in a loss position less cash, cash equivalents and restricted cash. EBITDA and Net Debt are not measures of financial performance under GAAP. EBITDA and Net Debt are not calculated in the same manner by all companies and accordingly are not necessarily comparable to similarly titled measures of other companies and may not be an appropriate measure for comparing performance relative to other companies. EBITDA and Net Debt should not be construed as indicators of the Company's operating performance or liquidity and should not be considered in isolation from or as a substitute for net income (loss), cash flows from operations or cash flow data which are all prepared in accordance with GAAP. EBITDA and Net Debt are not intended to represent and should not be considered more meaningful than, or as an alternative to, measures of operating performance as determined in accordance with GAAP. Management believes that presenting this information is useful to investors because these measures are commonly used as analytical indicators to evaluate performance, measure leverage capacity and debt service ability and by management to allocate resources. Set forth below are the reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures. The Company did not have any results from Discontinued Operations in the third quarters or first nine months of 2008 and 2007; therefore, the Company's net income (loss) for those periods is the equivalent of income (loss) from continuing operations as defined in the $150,000,000 Term Loan Credit Agreement. (Dollars in millions) Three Months Nine Months Ended Ended Reconciliation of income (loss) from August 31, August 31, continuing operations to EBITDA 2008 2007 2008 2007 Income (Loss) from continuing operations $3.1 $4.5 $(3.0) $(10.4) Interest 2.9 3.3 9.4 12.6 Taxes .2 - .5 - Depreciation and amortization 6.2 5.0 18.0 15.1 Amortization of deferred financing costs .1 .1 .5 .6 Net earnings of joint ventures less cash dividends - (.5) - (1.2) Net earnings of foreign subsidiaries less - cash dividends - (.4) (.1) (.6) Loss on debt transactions - - - 12.4 Gains or losses on sale or disposal of capital assets .1 .2 .1 .2 Loss from write-down of non-current assets .2 - .2 - Non-cash income or expense for pension plans 1.5 1.5 4.4 4.6 Gain or loss on change in LIFO reserve .3 - .3 .1 Non-cash charge for 401(k) company match .3 .5 1.4 1.6 Restructuring, severance and non-recurring charges .2 .1 (.4) .5 Consolidated EBITDA $15.1 $14.3 $31.3 $35.5 (Dollars in millions) August November August 31, 30, 31, Reconciliation of total debt to Net Debt 2008 2007 2007 Total debt $200.4 $149.9 $159.6 Outstanding letters of credit and interest rate swap 6.1 5.9 4.2 Cash and cash equivalents (16.4) (12.6) (12.4) Net Debt $190.1 $143.2 $151.4 This earnings release may contain forward-looking statements concerning trends, expectations, estimates, forecasts and projections relating to the Company and its business, industries, markets, products, results of operations, financial condition, accounting policies and management judgments, among other things. These statements are intended to qualify for the protections afforded forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements may generally be identified by the use of forward-looking terms such as "may," "should," "projects," "forecasts," "seeks," "believes," "expects," "anticipates," "estimates," "intends," "plans," "targets," "optimistic", "likely," "will," "would," "could," or similar terms. There are many risks, uncertainties and factors that could cause actual results or outcomes to differ materially from those expressed in or implied by the Company's forward-looking statements. Some of these risks, uncertainties and factors include, but are not limited to, the following: general economic trends affecting the Company's end-use markets; prices and availability of raw materials including styrene, butadiene, vinyl acetate monomer, polyvinyl chloride, acrylics and textiles; ability to increase pricing to offset raw material cost increases; product substitution and/or demand destruction due to product technology, performance or cost disadvantages; customer and/or competitor consolidation; ability to successfully develop and commercialize new products; customer ability to compete against increased foreign competition; ability to successfully implement productivity enhancement and cost reduction initiatives; operational issues at the Company's facilities; the Company's strategic alliance, joint venture and acquisition activities; acts of war or terrorism, natural disasters or other acts of God; changes in governmental and regulatory policies; compliance with extensive environmental, health and safety laws and regulations; rapid inflation in health care costs and assumptions used in determining health care cost estimates; risks associated with foreign operations including political unrest and fluctuations in exchange rates of foreign currencies; prolonged work stoppage resulting from labor disputes with unionized workforce; assumptions used in determining pension plan expense and funding, such as return on assets and discount rates and changes in pension funding regulations; litigation against the Company including adverse litigation judgment or settlement and absence of or inadequacy of insurance coverage for such litigation, judgments or settlements; availability of financing to fund operations at anticipated rates and terms; substantial debt and leverage and the ability to service that debt including increases in applicable short or long-term borrowing rates. The Company disclaims any obligation, other than imposed by law, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. OMNOVA Solutions Inc. is a technology-based company with proforma 2007 sales of $836 million and a current workforce of approximately 2,730 employees worldwide. OMNOVA is an innovator of emulsion polymers, specialty chemicals, and decorative and functional surfaces for a variety of commercial, industrial and residential end-uses. Visit OMNOVA Solutions on the internet at http://www.omnova.com/ . DATASOURCE: OMNOVA Solutions Inc. CONTACT: Sandi Noah, Communications, +1-330-869-4292, or Michael Hicks, Investor Relations, +1-330-869-4411, both of OMNOVA Solutions Inc. Web site: http://www.omnova.com/

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