BEACHWOOD, Ohio, Sept. 28, 2017 /PRNewswire/ --
Third Quarter 2017 Highlights
- Diluted Earnings per Share of $0.18 compared to $0.10 in last year's third quarter. Adjusted
Diluted Earnings per Share increased 79% to $0.25, compared to $0.14 last year driven by margin expansion and
growth in the specialties.
- Specialty Solutions sales in the quarter grew 7.5% compared to
the prior year, with adjusted segment operating margins of 16.4%,
while Performance Materials increased sales by 2.3%, excluding
China Coated Fabrics, with adjusted segment operating margins of
9.7%. Overall adjusted segment operating margins reached 13.5%
compared to 11.0% last year.
- Net Debt to Adjusted EBITDA decreased to 3.3x from 3.7x at the
end of this year's second quarter.
- Completed sale of the unprofitable China Coated Fabrics
business during the quarter as anticipated.
OMNOVA Solutions Inc. (NYSE: OMN) today announced earnings per
diluted share of $0.18 for the third
quarter ended August 31, 2017,
compared to earnings of $0.10 per
share in last year's comparable quarter. Adjusted Diluted
Earnings Per Share was $0.25 for the
third quarter of 2017, compared with $0.14 last year. In the third quarter of
2017, the Company recorded charges of $1.8
million, primarily related to the sale of the Company's
unprofitable China Coated Fabrics business (CCF), and a
restructuring associated with implementation of a consolidated "One
OMNOVA" organizational structure, compared to charges of
$2.5 million in last year's third
quarter primarily related to debt refinancing.
"During the quarter, we continued to make progress on our key
strategic initiatives. I am particularly pleased with the margin
expansion during the quarter as we recaptured the entirety of our
pricing and margin shortfalls from the styrene and butadiene cost
increases earlier in the fiscal year. We also saw volume
growth in our specialty segment despite a strong quarter for Oil
and Gas in last year's third quarter related to initial orders for
a new customer," said Anne Noonan,
OMNOVA's President and Chief Executive Officer. "The strongest
volume growth in the quarter was in our Laminates & Films
business, where we saw broad strength especially in two of our key
markets: kitchen & bath and recreational vehicles. We
also had good growth in nonwovens resulting from our initiatives to
expand into filtration and building materials along with sales
increases in hygiene from a new product introduced earlier in the
year," Noonan continued. "Strong growth in innovative
specialty products has driven our vitality index (sales from new
products introduced over the last five years as a percentage of
total sales), to approximately 25% at the end of the quarter, up
from 20% at the end of last year's third quarter. Operating profit
margins on the new product portfolio were up 140 basis points from
last year as well."
"Our thoughts go out to all of those impacted by Hurricanes
Harvey and Irma. Our Houston Oil & Gas operations were
directly affected, but we were spared from the worst of the
physical damages. Unfortunately, the storm has caused
disruption to the broader chemical industry and significantly
affected the oil and gas markets we serve, resulting in reduced
fourth quarter 2017 sales for our Oil & Gas chemicals. In
addition, raw material and freight costs have sharply increased and
become much more volatile. Longer term, we do not expect the
hurricane issues to unfavorably impact the business as we are
beginning to see momentum resulting from our focus on specialty
segments such as the CASE (Coatings, Adhesives, Sealants,
Elastomers) space, nonwovens, laminates and flooring," continued
Noonan. "Additionally, at the end of the third quarter, we
experienced start-up issues with recently installed equipment at
our Ningbo, China antioxidant
plant, which should be resolved during the fourth quarter.
Between the hurricane effect and lost sales and higher costs
related to these start-up issues, we are expecting a $2-4 million operating profit impact in the
fourth quarter," Noonan concluded.
Consolidated Results for the Third Quarter of Fiscal
2017
Net sales for the third quarter were $200.9 million, up 2.7% from last year's
$195.6 million. CCF, which was
sold at the end of July 2017,
accounted for $0.9 million of sales
in this year's third quarter and $5.0
million in last year's comparable quarter. Excluding
the effect of CCF, sales increased 5.2%. Sales in Specialty
Solutions increased 7.5% to $115.1
million, while sales in Performance Materials increased
2.3%, excluding the effect of CCF. Volume declined
$9.5 million, or 4.9%, primarily
related to continued soft market conditions in paper, antioxidants
start-up issues, and a strong comparable quarter for Oil & Gas
last year related to initial orders for a new key customer.
The volume decline was partially offset by improved overall volumes
in Laminates & Films, nonwovens and carpet. Pricing
improved by $17.7 million, or 9.0%,
reflecting index pricing adjustments and the results of the
Company's non-indexed price increase initiatives. Currency
translation was favorable by $1.0
million.
Gross profit in the third quarter of 2017 was $57.8 million, or 28.8% of net sales, compared to
$52.1 million, or 26.6% of net sales
last year. The increases from the comparable quarter last
year were the result of increased pricing, primarily in performance
materials and improved mix from specialty products, offsetting
higher raw material costs earlier in the year.
SG&A in the third quarter was $28.9
million, down from $29.3
million in the same quarter last year, primarily reflecting
the sale of CCF, which accounted for a decline of $0.8 million, and the "One OMNOVA" cost reduction
initiatives partially offset by inflation and investments in
specialty markets.
Interest expense of $5.5 million
reflected lower interest rates resulting from the third quarter
2016 refinancing; a year-over-year improvement of $0.4 million.
Income tax expense was $6.1
million in the third quarter of 2017, compared to
$1.9 million last year. The
increase in third quarter tax expense compared to 2016, primarily
relates to increased pre-tax earnings of approximately $7.4 million during the third quarter of
2017. The Company's effective tax rate was 43.6% for the
third quarter of 2017, compared to 28.8% for the third quarter of
2016. The increase in the rate is primarily due to CCF losses
in which no tax benefit was allowed in the third quarter of 2017,
compared to 2016 where tax benefits were realized. U.S. cash
tax payments were minimal as the Company has approximately
$98.9 million of U.S. federal net
operating loss carryforwards and $108.7
million of state and local tax net operating loss
carryforwards. In addition, during the third quarter of 2017,
the Company incurred $8.6 million of
U.S. federal capital losses as a result of the sale of CCF.
The Company does not anticipate utilizing these capital losses in
the foreseeable future; however, they would be available in the
event a future capital gain arises.
Cash provided by operations in the third quarter of 2017 was
$19.9 million, compared to
$21.6 million last year.
Increased accounts receivable was the largest driver of the
decline. Working capital improved by 3.1 days at quarter-end
to 55.9 days, compared with 59 days last year. Trailing
twelve month adjusted EBITDA increased to $86.8 million from $83.4
million in the comparable period. Adjusted net
leverage declined to 3.3x adjusted EBITDA as compared to 3.5x last
year (see Tables E and F), reflecting the increased earnings and
cash generation.
Specialty Solutions Segment Results
Net sales for the Specialty Solutions segment during the third
quarter of 2017 increased $8.0
million, or 7.5%, to $115.1
million, compared with $107.1
million last year. The improvement was driven by volume
increases of $1.1 million, or 1%, and
pricing and mix increases of $6.2
million, or 5.8%. Foreign currency translation had a
favorable effect of $0.6
million. Volumes were strong in Laminates & Films
and Nonwovens, but Oil & Gas was down as compared to
particularly strong sales in the third quarter last year from a new
customer's initial sales orders.
Segment Operating Profit and Adjusted Segment Operating Profit
was $18.9 million, or 16.4% of net
sales, compared to $16.9 million or
$15.8% of net sales last year. (See Tables A and B.)
Increased pricing, favorable mix and cost controls drove the
increase in operating profit.
Performance Materials Segment Results
Net sales for the Performance Materials segment during the third
quarter of 2017 was $85.8 million
compared to $88.5 million last
year. CCF accounted for $0.9
million of sales in the third quarter of 2017 before it was
sold and $5.0 million in last year's
comparable quarter. Excluding the impact of CCF, sales
increased 2.3%. The improvement was driven by pricing
increases of $11.3 million, or 12.8%,
partially offset by volume declines of $10.6
million, or 12.0%. Foreign currency translation had a
favorable effect of $0.4
million. Growth in carpet partially offset declines in
paper and antioxidants.
Performance Materials' segment operating profit for the quarter
was $8.3 million, compared with an
operating profit of $4.3 million last
year. Adjusted Segment Operating Profit was $8.3 million or 9.7% of net sales, compared to
$4.7 million, or 5.3% of net sales,
last year. (See Tables A and B.) As expected, favorable
pricing, including the catch up from the second quarter of 2017,
and lower SG&A spending, more than offset lower volume and
higher raw material cost.
Outlook
During the fourth quarter, the Company expects to incur a
$2-4 million operating profit
reduction related to Hurricane Harvey and the antioxidant plant
start-up issues discussed above. The Company continues to
expect margin expansion from its various strategic initiatives and
remains on track to deliver Adjusted Diluted Earnings per Share
growth in fiscal 2017.
Earnings Conference Call - OMNOVA Solutions has scheduled its
Earnings Conference Call for Thursday,
September 28th, 2017, at 11:00 a.m. ET. The live audio event will be
hosted by OMNOVA Solutions' President and Chief Executive Officer,
Anne Noonan. The call is anticipated
to be approximately one hour in length and may be accessed by the
public from the investor relations section of the Company's website
(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 noon ET,
October 19, 2017. A telephone
replay also will be available beginning at 1:00 p.m. ET on September
28, 2017, and ending at 11:59 p.m. ET on October 19, 2017. To listen to the
telephone replay, callers should dial: (USA) 800-475-6701, access code 429712 or
(International) 320-365-3844, access code 429712.
|
Non-GAAP and Other
Financial Matters
|
|
|
This Earnings Release
includes Adjusted Segment Operating Profit, Adjusted Income,
Adjusted Diluted Earnings Per Share, Adjusted EBIT, Net Debt and
Adjusted EBITDA which are non-GAAP financial measures as defined by
the Securities and Exchange Commission. Management reviews the
adjusted financial measures in assessing the performance of the
business segments and in making decisions regarding the allocation
of resources to the business segments. Management also believes
that the adjusted information is useful for providing investors
with an understanding of the Company's business and operating
performance. Management excludes the items shown in the tables
below because Management does not consider them to be reflective of
normal operations. These adjusted financial measurements are not
measurements of financial performance under GAAP and such financial
measures should not be considered as an alternative to Segment
Operating Profit, Net Income, Diluted Earnings Per Share or other
measures of financial performance determined in accordance with
GAAP. These non-GAAP financial measures may not be comparable to
similarly titled measures reported by other companies. Presented on
Tables E and F is the Company's Net Leverage Ratio calculation (Net
Debt / Adjusted EBITDA). Presented on Table G is the
Company's Adjusted Return on Invested Capital calculation (Adjusted
Net Operating Profit After Tax / Total Debt and Equity). The tables
below provide the reconciliation of these financial measures to the
comparable GAAP financial measures.
|
|
|
Reconciliation of
Reported Segment Net Sales and Operating Profit to Net Sales and
Net Income
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
August
31
|
|
August
31
|
|
(In
millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Net
Sales
|
|
|
|
|
|
|
|
|
Specialty
Solutions
|
$
|
115.1
|
|
|
$
|
107.1
|
|
|
$
|
330.3
|
|
|
$
|
302.9
|
|
|
Performance
Materials
|
85.8
|
|
|
88.5
|
|
|
266.5
|
|
|
270.0
|
|
|
Total Net
Sales
|
$
|
200.9
|
|
|
$
|
195.6
|
|
|
$
|
596.8
|
|
|
$
|
572.9
|
|
|
Segment Operating
Profit
|
|
|
|
|
|
|
|
|
Specialty
Solutions
|
$
|
18.9
|
|
|
$
|
16.9
|
|
|
$
|
45.6
|
|
|
$
|
47.6
|
|
|
Performance
Materials
|
8.3
|
|
|
4.3
|
|
|
5.8
|
|
|
8.6
|
|
|
Interest
expense
|
(5.5)
|
|
|
(5.9)
|
|
|
(16.0)
|
|
|
(17.4)
|
|
|
Corporate
expense
|
(7.5)
|
|
|
(6.6)
|
|
|
(23.1)
|
|
|
(20.9)
|
|
|
Operational
improvement costs
|
—
|
|
|
—
|
|
|
—
|
|
|
.4
|
|
|
Acquisition and
integration costs
|
(.2)
|
|
|
(.4)
|
|
|
(.2)
|
|
|
(.4)
|
|
|
Debt issuance costs
write-off
|
—
|
|
|
(1.7)
|
|
|
—
|
|
|
(1.7)
|
|
|
Income (Loss)
Before Income Taxes
|
14.0
|
|
|
6.6
|
|
|
12.1
|
|
|
16.2
|
|
|
Income tax
expense
|
6.1
|
|
|
1.9
|
|
|
7.0
|
|
|
5.4
|
|
|
Net Income
(Loss)
|
$
|
7.9
|
|
|
$
|
4.7
|
|
|
$
|
5.1
|
|
|
$
|
10.8
|
|
|
Depreciation and
amortization
|
$
|
7.1
|
|
|
$
|
6.8
|
|
|
$
|
20.7
|
|
|
$
|
23.5
|
|
|
Capital
expenditures
|
$
|
7.1
|
|
|
$
|
5.8
|
|
|
$
|
17.0
|
|
|
$
|
16.5
|
|
|
OMNOVA SOLUTIONS
INC.
|
|
Non-GAAP and other
Financial Matters (Continued)
|
|
Three Months Ended
August 31, 2017
|
|
|
|
|
|
|
|
|
|
|
Table
A
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions except
per share data)
|
|
Specialty
Solutions
|
|
Performance
Materials
|
|
Combined
Segments
|
|
Corporate
|
|
Consolidated
|
|
Net
Sales
|
|
$
|
115.1
|
|
|
$
|
85.8
|
|
|
$
|
200.9
|
|
|
$
|
—
|
|
|
$
|
200.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Operating
Profit / Corporate Expense
|
|
$
|
18.9
|
|
|
$
|
8.3
|
|
|
$
|
27.2
|
|
|
$
|
(7.7)
|
|
|
$
|
19.5
|
|
|
Interest
expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.5)
|
|
|
(5.5)
|
|
|
Income (Loss)
Before Income Taxes
|
|
$
|
18.9
|
|
|
$
|
8.3
|
|
|
$
|
27.2
|
|
|
$
|
(13.2)
|
|
|
$
|
14.0
|
|
|
Management
Excluded Items
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and severance
|
|
—
|
|
|
.3
|
|
|
.3
|
|
|
—
|
|
|
.3
|
|
|
Asset
impairment, facility closure costs and other
|
|
—
|
|
|
(.6)
|
|
|
(.6)
|
|
|
1.2
|
|
|
.6
|
|
|
Environmental costs
|
|
—
|
|
|
.3
|
|
|
.3
|
|
|
—
|
|
|
.3
|
|
|
Pension
curtailment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
.4
|
|
|
.4
|
|
|
Acquisition
and integration related expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
.2
|
|
|
.2
|
|
|
Subtotal for management excluded Items
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.8
|
|
|
1.8
|
|
|
Adjusted Segment
Operating Profit / Corporate
Expense before Income Taxes
|
|
$
|
18.9
|
|
|
$
|
8.3
|
|
|
$
|
27.2
|
|
|
$
|
(11.4)
|
|
|
$
|
15.8
|
|
|
Tax expense (30%
rate)*
|
|
|
|
|
|
|
|
|
|
(4.7)
|
|
|
Adjusted
Income
|
|
|
|
|
|
|
|
|
|
$
|
11.1
|
|
|
Adjusted Diluted
Earnings Per Share from
Adjusted Income
|
|
|
|
|
|
|
|
|
|
$
|
0.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Tax rate is based on
the Company's estimated normalized annual effective tax
rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Segment
Operating Profit As A % Of
Sales
|
|
|
16.4
|
%
|
|
9.7
|
%
|
|
13.5
|
%
|
|
|
|
|
|
Segment /
Corporate Capital Expenditures
|
|
$
|
3.3
|
|
|
$
|
3.7
|
|
|
$
|
7.0
|
|
|
$
|
.1
|
|
|
$
|
7.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Segment
Operating Profit / Corporate
Expense Before Income Taxes
|
|
$
|
18.9
|
|
|
$
|
8.3
|
|
|
$
|
27.2
|
|
|
$
|
(11.4)
|
|
|
$
|
15.8
|
|
|
Unallocated corporate
interest expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5.5
|
|
|
5.5
|
|
|
Segment /
Consolidated Adjusted EBIT
|
|
18.9
|
|
|
8.3
|
|
|
27.2
|
|
|
(5.9)
|
|
|
21.3
|
|
|
Depreciation and
amortization
|
|
3.7
|
|
|
2.7
|
|
|
6.4
|
|
|
.7
|
|
|
7.1
|
|
|
Segment /
Consolidated Adjusted EBITDA
|
|
$
|
22.6
|
|
|
$
|
11.0
|
|
|
$
|
33.6
|
|
|
$
|
(5.2)
|
|
|
$
|
28.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA as
a % of sales
|
|
19.6
|
%
|
|
12.8
|
%
|
|
16.7
|
%
|
|
|
|
14.1
|
%
|
|
OMNOVA SOLUTIONS
INC.
|
|
Non-GAAP and other
Financial Matters (Continued)
|
|
Three Months Ended
August 31, 2016
|
|
|
|
|
|
|
|
|
|
|
Table
B
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions except
per share data)
|
|
Specialty
Solutions
|
|
Performance
Materials
|
|
Combined
Segments
|
|
Corporate
|
|
Consolidated
|
|
Net
Sales
|
|
$
|
107.1
|
|
|
$
|
88.5
|
|
|
$
|
195.6
|
|
|
$
|
—
|
|
|
$
|
195.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Operating
Profit / Corporate Expense
|
|
$
|
16.9
|
|
|
$
|
4.3
|
|
|
$
|
21.2
|
|
|
$
|
(8.7)
|
|
|
$
|
12.5
|
|
|
Interest
expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5.9)
|
|
|
(5.9)
|
|
|
Income (Loss)
Before Income Taxes
|
|
$
|
16.9
|
|
|
$
|
4.3
|
|
|
$
|
21.2
|
|
|
$
|
(14.6)
|
|
|
$
|
6.6
|
|
|
Management
Excluded Items
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and severance
|
|
.1
|
|
|
.3
|
|
|
.4
|
|
|
—
|
|
|
.4
|
|
|
Acquisition
and integration related expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
.4
|
|
|
.4
|
|
|
Deferred
financing fees written-off
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.7
|
|
|
1.7
|
|
|
Asset
impairment, facility closure costs and other
|
|
.2
|
|
|
.7
|
|
|
.9
|
|
|
.1
|
|
|
1.0
|
|
|
Vacation
policy change
|
|
(.3)
|
|
|
(.6)
|
|
|
(.9)
|
|
|
(.1)
|
|
|
(1.0)
|
|
|
Subtotal for management excluded Items
|
|
—
|
|
|
.4
|
|
|
.4
|
|
|
2.1
|
|
|
2.5
|
|
|
Adjusted Segment
Operating Profit / Corporate
Expense before Income Taxes
|
|
$
|
16.9
|
|
|
$
|
4.7
|
|
|
$
|
21.6
|
|
|
$
|
(12.5)
|
|
|
$
|
9.1
|
|
|
Tax expense (30%
rate)*
|
|
|
|
|
|
|
|
|
|
(2.7)
|
|
|
Adjusted
Income
|
|
|
|
|
|
|
|
|
|
$
|
6.4
|
|
|
Adjusted Diluted
Earnings Per Share from
Adjusted Income
|
|
|
|
|
|
|
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Tax rate is based on
the Company's estimated normalized annual effective tax
rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Segment
Operating Profit As A % Of
Sales
|
|
15.8
|
%
|
|
5.3
|
%
|
|
11.0
|
%
|
|
|
|
|
|
Segment /
Corporate Capital Expenditures
|
|
$
|
2.9
|
|
|
$
|
2.4
|
|
|
$
|
5.3
|
|
|
$
|
.5
|
|
|
$
|
5.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Segment
Operating Profit / Corporate
Expense Before Income Taxes
|
|
$
|
16.9
|
|
|
$
|
4.7
|
|
|
$
|
21.6
|
|
|
$
|
(12.5)
|
|
|
$
|
9.1
|
|
|
Unallocated corporate
interest expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5.9
|
|
|
5.9
|
|
|
Segment /
Consolidated Adjusted EBIT
|
|
16.9
|
|
|
4.7
|
|
|
21.6
|
|
|
(6.6)
|
|
|
15.0
|
|
|
Depreciation and
amortization
|
|
3.4
|
|
|
3.3
|
|
|
6.7
|
|
|
.1
|
|
|
6.8
|
|
|
Segment /
Consolidated Adjusted EBITDA
|
|
$
|
20.3
|
|
|
$
|
8.0
|
|
|
$
|
28.3
|
|
|
$
|
(6.5)
|
|
|
$
|
21.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA as
a % of sales
|
|
19.0
|
%
|
|
9.0
|
%
|
|
14.5
|
%
|
|
|
|
11.1
|
%
|
|
OMNOVA SOLUTIONS
INC.
|
|
Non-GAAP and other
Financial Matters (Continued)
|
|
Nine Months Ended
August 31, 2017
|
|
|
|
|
|
|
|
|
|
|
Table
C
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions except
per share data)
|
|
Specialty
Solutions
|
|
Performance
Materials
|
|
Combined
Segments
|
|
Corporate
|
|
Consolidated
|
|
Net
Sales
|
|
$
|
330.3
|
|
|
$
|
266.5
|
|
|
$
|
596.8
|
|
|
$
|
—
|
|
|
$
|
596.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Operating
Profit / Corporate Expense
|
|
$
|
45.6
|
|
|
$
|
5.8
|
|
|
$
|
51.4
|
|
|
$
|
(23.3)
|
|
|
$
|
28.1
|
|
|
Interest
expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(16.0)
|
|
|
(16.0)
|
|
|
Income (Loss)
Before Income Taxes
|
|
$
|
45.6
|
|
|
$
|
5.8
|
|
|
$
|
51.4
|
|
|
$
|
(39.3)
|
|
|
$
|
12.1
|
|
|
Management
Excluded Items
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and severance
|
|
.6
|
|
|
1.7
|
|
|
2.3
|
|
|
2.6
|
|
|
4.9
|
|
|
Asset
impairment, facility closure costs and other
|
|
—
|
|
|
12.3
|
|
|
12.3
|
|
|
1.4
|
|
|
13.7
|
|
|
Environmental costs
|
|
—
|
|
|
(2.2)
|
|
|
(2.2)
|
|
|
—
|
|
|
(2.2)
|
|
|
Pension
curtailment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
.4
|
|
|
.4
|
|
|
Acquisition
and integration related expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
.2
|
|
|
.2
|
|
|
Subtotal for management excluded items
|
|
.6
|
|
|
11.8
|
|
|
12.4
|
|
|
4.6
|
|
|
17.0
|
|
|
Adjusted Segment
Operating Profit / Corporate
Expense before Income Taxes
|
|
$
|
46.2
|
|
|
$
|
17.6
|
|
|
$
|
63.8
|
|
|
$
|
(34.7)
|
|
|
$
|
29.1
|
|
|
Tax expense (30%
rate)*
|
|
|
|
|
|
|
|
|
|
(8.7)
|
|
|
Adjusted
Income
|
|
|
|
|
|
|
|
|
|
$
|
20.4
|
|
|
Adjusted Diluted
Earnings Per Share from
Adjusted Income
|
|
|
|
|
|
|
|
|
|
$
|
0.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Tax rate is based on
the Company's estimated normalized annual effective tax
rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Segment
Operating Profit As A % Of
Sales
|
|
14.0
|
%
|
|
6.6
|
%
|
|
10.7
|
%
|
|
|
|
|
|
Segment /
Corporate Capital Expenditures
|
|
$
|
8.5
|
|
|
$
|
7.9
|
|
|
$
|
16.4
|
|
|
$
|
.6
|
|
|
$
|
17.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Segment
Operating Profit / Corporate
Expense Before Income Taxes
|
|
$
|
46.2
|
|
|
$
|
17.6
|
|
|
$
|
63.8
|
|
|
$
|
(34.7)
|
|
|
$
|
29.1
|
|
|
Unallocated corporate
interest expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16.0
|
|
|
16.0
|
|
|
Segment /
Consolidated Adjusted EBIT
|
|
46.2
|
|
|
17.6
|
|
|
63.8
|
|
|
(18.7)
|
|
|
45.1
|
|
|
Depreciation and
amortization
|
|
10.7
|
|
|
8.5
|
|
|
19.2
|
|
|
1.5
|
|
|
20.7
|
|
|
Segment /
Consolidated Adjusted EBITDA
|
|
$
|
56.9
|
|
|
$
|
26.1
|
|
|
$
|
83.0
|
|
|
$
|
(17.2)
|
|
|
$
|
65.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA as
a % of sales
|
|
17.2
|
%
|
|
9.8
|
%
|
|
13.9
|
%
|
|
|
|
11.0
|
%
|
|
OMNOVA SOLUTIONS
INC.
|
|
Non-GAAP and other
Financial Matters (Continued)
|
|
Nine Months Ended
August 31, 2016
|
|
|
|
|
|
|
|
|
|
|
Table
D
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions except
per share data)
|
|
Specialty
Solutions
|
|
Performance
Materials
|
|
Combined
Segments
|
|
Corporate
|
|
Consolidated
|
|
Net
Sales
|
|
$
|
302.9
|
|
|
$
|
270.0
|
|
|
$
|
572.9
|
|
|
$
|
—
|
|
|
$
|
572.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Operating
Profit / Corporate Expense
|
|
$
|
47.6
|
|
|
$
|
8.6
|
|
|
$
|
56.2
|
|
|
$
|
(22.6)
|
|
|
$
|
33.6
|
|
|
Interest
expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17.4)
|
|
|
(17.4)
|
|
|
Income (Loss)
Before Income Taxes
|
|
47.6
|
|
|
8.6
|
|
|
56.2
|
|
|
(40.0)
|
|
|
16.2
|
|
|
Management
Excluded Items
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and severance
|
|
.2
|
|
|
2.8
|
|
|
3.0
|
|
|
.1
|
|
|
3.1
|
|
|
Accelerated depreciation on production transfer
|
|
—
|
|
|
3.0
|
|
|
3.0
|
|
|
—
|
|
|
3.0
|
|
|
Operational improvements costs
|
|
—
|
|
|
(.4)
|
|
|
(.4)
|
|
|
—
|
|
|
(.4)
|
|
|
Asset
impairment, facility closure costs and other
|
|
.8
|
|
|
.2
|
|
|
1.0
|
|
|
.1
|
|
|
1.1
|
|
|
Deferred
financing fees written-off
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.7
|
|
|
1.7
|
|
|
Corporate headquarters relocation costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(.2)
|
|
|
(.2)
|
|
|
Acquisition and integration related expense
|
|
—
|
|
|
1.1
|
|
|
1.1
|
|
|
.4
|
|
|
1.5
|
|
|
Vacation
policy change
|
|
(1.0)
|
|
|
(1.4)
|
|
|
(2.4)
|
|
|
(.5)
|
|
|
(2.9)
|
|
|
Subtotal for management excluded items
|
|
—
|
|
|
5.3
|
|
|
5.3
|
|
|
1.6
|
|
|
6.9
|
|
|
Adjusted Segment
Operating Profit / Corporate
Expense before Income Taxes
|
|
$
|
47.6
|
|
|
$
|
13.9
|
|
|
$
|
61.5
|
|
|
$
|
(38.4)
|
|
|
$
|
23.1
|
|
|
Tax expense (30%
rate)*
|
|
|
|
|
|
|
|
|
|
(6.9)
|
|
|
Adjusted
Income
|
|
|
|
|
|
|
|
|
|
$
|
16.2
|
|
|
Adjusted Diluted
Earnings Per Share from
Adjusted Income
|
|
|
|
|
|
|
|
|
|
$
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Tax rate is based on
the Company's estimated normalized annual effective tax
rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Segment
Operating Profit As A % Of
Sales
|
|
15.7
|
%
|
|
5.1
|
%
|
|
10.7
|
%
|
|
|
|
|
|
Segment /
Corporate Capital Expenditures
|
|
$
|
7.8
|
|
|
$
|
7.0
|
|
|
$
|
14.8
|
|
|
$
|
1.7
|
|
|
$
|
16.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Segment
Operating Profit / Corporate
Expense Before Income Taxes
|
|
$
|
47.6
|
|
|
$
|
13.9
|
|
|
$
|
61.5
|
|
|
$
|
(38.4)
|
|
|
$
|
23.1
|
|
|
Unallocated corporate
interest expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
17.4
|
|
|
17.4
|
|
|
Segment /
Consolidated Adjusted EBIT
|
|
47.6
|
|
|
13.9
|
|
|
61.5
|
|
|
(21.0)
|
|
|
40.5
|
|
|
Depreciation and
amortization excluding
accelerated depreciation
|
|
9.8
|
|
|
9.9
|
|
|
19.7
|
|
|
.8
|
|
|
20.5
|
|
|
Segment /
Consolidated Adjusted EBITDA
|
|
$
|
57.4
|
|
|
$
|
23.8
|
|
|
$
|
81.2
|
|
|
$
|
(20.2)
|
|
|
$
|
61.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA as
a % of sales
|
|
18.9
|
%
|
|
8.8
|
%
|
|
14.2
|
%
|
|
|
|
10.6
|
%
|
|
OMNOVA SOLUTIONS
INC.
|
|
Non-GAAP and other
Financial Matters (Continued)
|
|
Trailing Twelve
Months Ended August 31, 2017
|
|
|
|
|
|
|
|
|
|
|
Table
E
|
|
(In millions except
per share data)
|
|
Specialty
Solutions
|
|
Performance
Materials
|
|
Combined
Segments
|
|
Corporate
|
|
Consolidated
|
|
Net
Sales
|
|
$
|
431.7
|
|
|
$
|
352.1
|
|
|
$
|
783.8
|
|
|
$
|
—
|
|
|
$
|
783.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Operating
Profit / Corporate Expense
|
|
$
|
52.4
|
|
|
$
|
11.1
|
|
|
$
|
63.5
|
|
|
$
|
(34.4)
|
|
|
$
|
29.1
|
|
|
Interest
expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(23.3)
|
|
|
(23.3)
|
|
|
Income (Loss)
Before Income Taxes
|
|
$
|
52.4
|
|
|
$
|
11.1
|
|
|
$
|
63.5
|
|
|
$
|
(57.7)
|
|
|
$
|
5.8
|
|
|
Management
Excluded Items
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and severance
|
|
.6
|
|
|
2.2
|
|
|
2.8
|
|
|
7.4
|
|
|
10.2
|
|
|
Asset
impairment, facility closure costs and other
|
|
6.1
|
|
|
12.4
|
|
|
18.5
|
|
|
1.3
|
|
|
19.8
|
|
|
Environmental costs
|
|
—
|
|
|
(1.9)
|
|
|
(1.9)
|
|
|
—
|
|
|
(1.9)
|
|
|
Deferred
financing fees written-off
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3.2
|
|
|
3.2
|
|
|
Pension
curtailment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
.4
|
|
|
.4
|
|
|
Acquisition
and integration related expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
.7
|
|
|
.7
|
|
|
Vacation
policy change
|
|
(.3)
|
|
|
(.1)
|
|
|
(.4)
|
|
|
(.1)
|
|
|
(.5)
|
|
|
Subtotal for management excluded items
|
|
6.4
|
|
|
12.6
|
|
|
19.0
|
|
|
12.9
|
|
|
31.9
|
|
|
Adjusted Segment
Operating Profit / Corporate
Expense Before Income Taxes
|
|
$
|
58.8
|
|
|
$
|
23.7
|
|
|
$
|
82.5
|
|
|
$
|
(44.8)
|
|
|
$
|
37.7
|
|
|
Tax expense (30%
rate)*
|
|
|
|
|
|
|
|
|
|
(11.3)
|
|
|
Adjusted
Income
|
|
|
|
|
|
|
|
|
|
$
|
26.4
|
|
|
Adjusted Diluted
Earnings Per Share From
Adjusted Income
|
|
|
|
|
|
|
|
|
|
$
|
0.59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Tax rate is based on
the Company's estimated normalized annual effective tax
rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Segment
Operating Profit As A % Of
Sales
|
|
13.6
|
%
|
|
6.7
|
%
|
|
10.5
|
%
|
|
|
|
|
|
Segment /
Corporate Capital Expenditures
|
|
$
|
12.6
|
|
|
$
|
12.8
|
|
|
$
|
25.4
|
|
|
$
|
.7
|
|
|
$
|
26.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Segment
Operating Profit / Corporate
Expense Before Income Taxes
|
|
$
|
58.8
|
|
|
$
|
23.7
|
|
|
$
|
82.5
|
|
|
$
|
(44.8)
|
|
|
$
|
37.7
|
|
|
Unallocated corporate
interest
(excluding debt premium)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21.3
|
|
|
21.3
|
|
|
Segment /
Consolidated Adjusted EBIT
|
|
58.8
|
|
|
23.7
|
|
|
82.5
|
|
|
(23.5)
|
|
|
59.0
|
|
|
Depreciation and
amortization excluding
accelerated depreciation
|
|
14.2
|
|
|
11.8
|
|
|
26.0
|
|
|
1.8
|
|
|
27.8
|
|
|
Segment /
Consolidated Adjusted EBITDA
|
|
$
|
73.0
|
|
|
$
|
35.5
|
|
|
$
|
108.5
|
|
|
$
|
(21.7)
|
|
|
$
|
86.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA as
a % of sales
|
|
16.9
|
%
|
|
10.1
|
%
|
|
13.8
|
%
|
|
|
|
11.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Leverage
|
|
|
|
|
|
|
|
|
|
|
|
Total short and
long-term debt (excluding OID and deferred financing fees of
$8.5M.)
|
|
|
|
$
|
362.9
|
|
|
Less cash and
restricted cash
|
|
|
|
|
|
|
|
|
|
(74.6)
|
|
|
Net
Debt (Debt less Cash
and Restricted Cash)
|
|
|
|
|
|
|
|
|
|
$
|
288.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Leverage
Ratio**
|
|
|
|
|
|
|
|
|
|
3.3 x
|
|
|
** The above
calculation is not intended to be used for purposes of calculating
debt covenant compliance.
|
|
OMNOVA SOLUTIONS
INC.
|
|
Non-GAAP and other
Financial Matters (Continued)
|
|
Trailing Twelve
Months Ended August 31, 2016
|
|
|
|
|
|
|
|
|
|
|
Table
F
|
|
(In millions except
per share data)
|
|
Specialty
Solutions
|
|
Performance
Materials
|
|
Combined
Segments
|
|
Corporate
|
|
Consolidated
|
|
Net
Sales
|
|
$
|
403.0
|
|
|
$
|
369.9
|
|
|
$
|
772.9
|
|
|
$
|
—
|
|
|
$
|
772.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Operating
Profit / Corporate Expense
|
|
$
|
61.4
|
|
|
$
|
(12.0)
|
|
|
$
|
49.4
|
|
|
$
|
(28.2)
|
|
|
$
|
21.2
|
|
|
Interest
expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(25.2)
|
|
|
$
|
(25.2)
|
|
|
Income (Loss)
Before Income Taxes
|
|
$
|
61.4
|
|
|
$
|
(12.0)
|
|
|
49.4
|
|
|
$
|
(53.4)
|
|
|
$
|
(4.0)
|
|
|
Management
Excluded Items
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and severance
|
|
.2
|
|
|
4.4
|
|
|
4.6
|
|
|
.1
|
|
|
4.7
|
|
|
Accelerated depreciation on production transfer
|
|
—
|
|
|
5.9
|
|
|
5.9
|
|
|
—
|
|
|
5.9
|
|
|
Operational improvements costs
|
|
1.3
|
|
|
(.8)
|
|
|
.5
|
|
|
—
|
|
|
.5
|
|
|
Asset
impairment, facility closure costs and other
|
|
.2
|
|
|
19.5
|
|
|
19.7
|
|
|
.1
|
|
|
19.8
|
|
|
Environmental costs
|
|
.1
|
|
|
2.8
|
|
|
2.9
|
|
|
—
|
|
|
2.9
|
|
|
Deferred
financing fees written-off
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.3
|
|
|
2.3
|
|
|
Corporate headquarters relocation costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(.2)
|
|
|
(.2)
|
|
|
Other
financing costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.0
|
|
|
1.0
|
|
|
Acquisition
and integration related expense
|
|
—
|
|
|
1.1
|
|
|
1.1
|
|
|
.4
|
|
|
1.5
|
|
|
Vacation
policy change
|
|
(1.0)
|
|
|
(1.4)
|
|
|
(2.4)
|
|
|
(.5)
|
|
|
(2.9)
|
|
|
Subtotal for management excluded items
|
|
.8
|
|
|
31.5
|
|
|
32.3
|
|
|
3.2
|
|
|
35.5
|
|
|
Adjusted Segment
Operating Profit / Corporate
Expense before Income Taxes
|
|
$
|
62.2
|
|
|
$
|
19.5
|
|
|
81.7
|
|
|
$
|
(50.2)
|
|
|
$
|
31.5
|
|
|
Tax expense (30%
rate)*
|
|
|
|
|
|
|
|
|
|
(9.5)
|
|
|
Adjusted
Income
|
|
|
|
|
|
|
|
|
|
$
|
22.0
|
|
|
Adjusted Diluted
Earnings Per Share from
Adjusted Income
|
|
|
|
|
|
|
|
|
|
$
|
0.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*Tax rate is based on
the Company's estimated normalized annual effective tax
rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Segment
Operating Profit As A % Of
Sales
|
|
15.4
|
%
|
|
5.3
|
%
|
|
10.6
|
%
|
|
|
|
|
|
Segment /
Corporate Capital Expenditures
|
|
$
|
11.6
|
|
|
$
|
10.9
|
|
|
$
|
22.5
|
|
|
$
|
2.7
|
|
|
$
|
25.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Segment
Operating Profit / Corporate
Expense Before Income Taxes
|
|
$
|
62.2
|
|
|
$
|
19.5
|
|
|
$
|
81.7
|
|
|
$
|
(50.2)
|
|
|
$
|
31.5
|
|
|
Unallocated corporate
interest expense
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24.2
|
|
|
24.2
|
|
|
Segment /
Consolidated Adjusted EBIT
|
|
62.2
|
|
|
19.5
|
|
|
81.7
|
|
|
(26.0)
|
|
|
55.7
|
|
|
Depreciation and
amortization excluding
accelerated depreciation
|
|
12.2
|
|
|
14.5
|
|
|
26.7
|
|
|
1.0
|
|
|
27.7
|
|
|
Segment /
Consolidated Adjusted EBITDA
|
|
$
|
74.4
|
|
|
$
|
34.0
|
|
|
$
|
108.4
|
|
|
$
|
(25.0)
|
|
|
$
|
83.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA as
a % of sales
|
|
18.5
|
%
|
|
9.2
|
%
|
|
14.0
|
%
|
|
|
|
10.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Leverage
|
|
|
|
|
|
|
|
|
|
|
|
Total short and
long-term debt (excluding OID and deferred financing fees of
$10.6M. )
|
|
|
|
$
|
516.9
|
|
|
Less cash and
restricted cash
|
|
|
|
|
|
|
|
|
|
(226.2)
|
|
|
Net
Debt (Debt less Cash
and Restricted Cash)
|
|
|
|
|
|
|
|
|
|
$
|
290.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Leverage
Ratio**
|
|
|
|
|
|
|
|
|
|
3.5 x
|
|
|
** The above
calculation is not intended to be used for purposes of calculating
debt covenant compliance.
|
|
OMNOVA SOLUTIONS
INC.
|
|
Non-GAAP and other
Financial Matters (Continued)
|
|
August 31,
2017
|
|
|
|
|
|
Table
G
|
|
Adjusted Return on
Invested Capital
|
|
|
|
|
|
|
(In
millions)
|
Trailing Twelve
Months Ended
|
|
Twelve Months
Ended
|
|
August 31,
|
|
November
30,
|
|
Adjusted Net
Operating Profit After Tax
|
2017
|
|
2016
|
|
2015
|
|
Adjusted income from
continuing operations
|
$
|
26.4
|
|
|
$
|
22.2
|
|
|
$
|
16.5
|
|
|
Interest add back
excluding debt premium
|
21.3
|
|
|
22.7
|
|
|
27.3
|
|
|
Tax effect of interest
add back*
|
(6.4)
|
|
|
(6.8)
|
|
|
(8.2)
|
|
|
Total Adjusted Net
Operating Profit After Tax
|
$
|
41.3
|
|
|
$
|
38.1
|
|
|
$
|
35.6
|
|
|
|
|
|
|
|
|
Debt and
Equity
|
|
|
|
|
|
|
Short-term
debt
|
$
|
4.2
|
|
|
$
|
4.2
|
|
|
$
|
2.5
|
|
|
Senior
notes
|
—
|
|
|
—
|
|
|
150.0
|
|
|
Long-term
debt
|
350.3
|
|
|
352.5
|
|
|
199.6
|
|
|
Total shareholders'
equity
|
126.0
|
|
|
109.8
|
|
|
109.1
|
|
|
Total Debt and
Equity
|
$
|
480.5
|
|
|
$
|
466.5
|
|
|
$
|
461.2
|
|
|
|
|
|
|
|
|
Adjusted Return on
Invested Capital
|
8.6
|
%
|
|
8.2
|
%
|
|
7.7
|
%
|
|
|
|
|
|
|
|
*Tax rate is based on
the Company's estimated normalized annual effective tax rate of
30%.
|
Notice on Forward-Looking Statements
This press release includes descriptions of OMNOVA's current
business, operations, assets and other matters affecting the
Company, as well as "forward-looking statements" as defined by
federal securities laws. All forward-looking statements by the
Company, including verbal statements, are intended to qualify for
the protections afforded forward-looking statements under the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements reflect Management's current expectation, judgment,
belief, assumption, estimate or forecast about future events,
circumstances or results and may address business conditions and
prospects, strategy, capital structure, debt and cash levels,
sales, profits, earnings, markets, products, technology,
operations, customers, raw materials, claims and litigation,
financial condition, and accounting policies among other matters.
Words such as, but not limited to, "will," "may," "should,"
"projects," "forecasts," "seeks," "believes," "expects,"
"anticipates," "estimates," "intends," "plans," "targets,"
"optimistic," "likely," "would," "could," "committed," and similar
expressions or phrases identify forward-looking statements.
All descriptions of OMNOVA's current business, operations and
assets, as well as all forward-looking statements, involve risks
and uncertainties. Many risks and uncertainties are inherent in
business generally. Other risks and uncertainties are more specific
to the Company's businesses and strategy, or to any new businesses
the Company may enter into or acquire. There also may be risks and
uncertainties not currently known to the Company. The occurrence of
any such risks and uncertainties and the impact of such occurrences
is often not predictable or within the Company's control. Such
impacts could adversely affect the Company's business, operations
or assets, as well as the Company's results and the value of your
investment in the Company. In some cases, such impact could be
material. Certain risks and uncertainties facing the Company are
described below or in the Company's Quarterly Report on Form 10-Q
and Annual Report on Form 10-K.
All written and verbal descriptions of OMNOVA's current
business, operations and assets and all forward-looking statements
attributable to the Company or any person acting on the Company's
behalf are expressly qualified in their entirety by the risks,
uncertainties, and cautionary statements contained or referenced
herein. All such descriptions and any forward-looking statements
speak only as of the date on which such description or statement is
made, and the Company undertakes no obligation, and specifically
declines any obligation, other than that imposed by law, to
publicly update or revise any such description or forward-looking
statements whether as a result of new information, future events or
otherwise.
The Company's actual results and the value of your investment in
OMNOVA may differ, perhaps materially, from expectations due to a
number of risks and uncertainties including, but not limited to:
(1) the Company's exposure to general economic, business, and
industry conditions; (2) the risk of doing business in foreign
countries and markets; (3) changes in raw material prices and
availability; (4) the highly competitive markets the Company
serves; (5) extraordinary events such as natural disasters,
political disruptions, terrorist attacks and acts of war; (6)
extensive and increasing United
States and international governmental regulation, including
environmental, health and safety regulations; (7) the Company's
failure to protect its intellectual property or defend itself from
intellectual property claims; (8) claims and litigation; (9)
changes in accounting policies, standards, and interpretations;
(10) the actions of activist shareholders; (11) the Company's
inability to achieve, or achieve in a timely manner, the objectives
and benefits of cost reduction initiatives; (12) the Company's
ability to develop and commercialize new products at competitive
prices; (13) the concentration of certain of OMNOVA's businesses
and market segments among several large customers; (14) the
creditworthiness of the Company's customers; (15) the failure of a
joint venture partner to meet its commitments; (16) the Company's
ability to identify and complete strategic transactions; (17) the
Company's ability to successfully integrate acquired companies;
(18) unanticipated capital expenditures; (19) risks associated with
the use, production, storage, and transportation of chemicals; (20)
information system failures and breaches in security; (21)
continued increases in healthcare costs; (22) the Company's ability
to retain or attract key employees; (23) the Company's ability to
renew collective bargaining agreements with employees on acceptable
terms and the risk of work stoppages; (24) the Company's
contribution obligations under its U.S. pension plan; (25) the
Company's reliance on foreign financial institutions to hold some
of its funds; (26) the effect of goodwill impairment charges; (27)
the volatility in the market price of the Company's common shares;
(28) the Company's substantial debt position; (29) the decision to
incur additional debt; (30) the operational and financial
restrictions contained in the Company's indenture; (31) a default
under the Company's term loan or revolving credit facility; (32)
the Company's ability to generate sufficient cash to service its
outstanding debt; and (33) the Company's subsidiaries ability to
provide cash in order to pay debt.
OMNOVA Solutions provides greater detail regarding these risks
and uncertainties in its 2016 Form 10-K and subsequent filings,
which are available online at www.omnova.com and
www.sec.gov.
OMNOVA Solutions Inc. is a global innovator of
performance-enhancing chemistries and surfaces used in products for
a variety of commercial, industrial and residential applications.
As a strategic business-to-business supplier, OMNOVA provides
The Science in Better Brands, with emulsion polymers,
specialty chemicals, and functional and decorative surfaces that
deliver critical performance attributes to top brand-name, end-use
products sold around the world. OMNOVA's sales for the last twelve
months ended August 31, 2017 were approximately $784 million. The Company has a global workforce
of approximately 1,800. Visit OMNOVA Solutions on the internet at
www.omnova.com.
|
OMNOVA SOLUTIONS
INC.
|
|
Consolidated
Statements of Operations
|
|
(In Millions,
Except Per Share Data)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
August
31
|
|
August
31
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Net
sales
|
$
|
200.9
|
|
|
$
|
195.6
|
|
|
$
|
596.8
|
|
|
$
|
572.9
|
|
|
Cost of goods sold
(exclusive of depreciation)
|
143.1
|
|
|
143.5
|
|
|
441.9
|
|
|
418.1
|
|
|
Gross
profit
|
57.8
|
|
|
52.1
|
|
|
154.9
|
|
|
154.8
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
28.9
|
|
|
29.3
|
|
|
88.2
|
|
|
91.0
|
|
|
Depreciation and
amortization
|
7.1
|
|
|
6.8
|
|
|
20.7
|
|
|
23.5
|
|
|
Asset
impairments
|
.4
|
|
|
—
|
|
|
13.3
|
|
|
.4
|
|
|
Loss on asset
sales
|
—
|
|
|
—
|
|
|
—
|
|
|
.1
|
|
|
Restructuring and
severance
|
.4
|
|
|
1.3
|
|
|
5.1
|
|
|
4.9
|
|
|
Interest
expense
|
5.5
|
|
|
5.9
|
|
|
16.0
|
|
|
17.4
|
|
|
Debt issuance costs
write-off
|
—
|
|
|
1.7
|
|
|
—
|
|
|
1.7
|
|
|
Acquisition and
integration related expense
|
.2
|
|
|
.4
|
|
|
.2
|
|
|
.4
|
|
|
Other income (loss),
net
|
1.3
|
|
|
.1
|
|
|
(.7)
|
|
|
(.8)
|
|
|
Total other costs and
expenses
|
43.8
|
|
|
45.5
|
|
|
142.8
|
|
|
138.6
|
|
|
|
|
|
|
|
|
|
|
Income before
income taxes
|
14.0
|
|
|
6.6
|
|
|
12.1
|
|
|
16.2
|
|
|
Income tax
expense
|
6.1
|
|
|
1.9
|
|
|
7.0
|
|
|
5.4
|
|
|
Net
income
|
$
|
7.9
|
|
|
$
|
4.7
|
|
|
$
|
5.1
|
|
|
$
|
10.8
|
|
|
|
|
|
|
|
|
|
|
Income per share -
basic
|
$
|
.18
|
|
|
$
|
.11
|
|
|
$
|
.12
|
|
|
$
|
.25
|
|
|
Income per share -
diluted
|
$
|
.18
|
|
|
$
|
.10
|
|
|
$
|
.11
|
|
|
$
|
.24
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding - basic
|
44.4
|
|
|
44.1
|
|
|
44.3
|
|
|
44.0
|
|
|
Weighted average
shares outstanding - diluted
|
44.7
|
|
|
44.7
|
|
|
44.7
|
|
|
44.4
|
|
|
OMNOVA SOLUTIONS
INC.
|
|
Consolidated
Balance Sheets
|
|
(In Millions,
Except Per Share Data)
|
|
|
|
|
|
August
31,
|
|
November
30,
|
|
2017
|
|
2016
|
|
(Unaudited)
|
|
(Audited)
|
|
ASSETS:
|
|
|
|
|
Current
Assets
|
|
|
|
|
Cash and cash
equivalents
|
$
|
74.6
|
|
|
$
|
72.0
|
|
|
Accounts receivable,
net
|
105.8
|
|
|
87.2
|
|
|
Inventories,
net
|
77.2
|
|
|
74.0
|
|
|
Prepaid expenses and
other
|
16.2
|
|
|
18.1
|
|
|
Assets held for sale
- current
|
—
|
|
|
25.7
|
|
|
Total Current
Assets
|
273.8
|
|
|
277.0
|
|
|
|
|
|
|
Property, plant and
equipment, net
|
206.7
|
|
|
202.7
|
|
|
Trademarks and other
intangible assets, net
|
56.9
|
|
|
56.7
|
|
|
Goodwill
|
85.9
|
|
|
80.2
|
|
|
Deferred income
taxes
|
62.5
|
|
|
66.7
|
|
|
Other
assets
|
5.1
|
|
|
4.0
|
|
|
Total
Assets
|
$
|
690.9
|
|
|
$
|
687.3
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY:
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Amounts due
banks
|
$
|
4.2
|
|
|
$
|
4.2
|
|
|
Accounts
payable
|
77.8
|
|
|
68.7
|
|
|
Accrued payroll and
personal property taxes
|
24.2
|
|
|
23.4
|
|
|
Employee benefit
obligations
|
3.0
|
|
|
4.5
|
|
|
Accrued
interest
|
.1
|
|
|
—
|
|
|
Other current
liabilities
|
5.8
|
|
|
7.4
|
|
|
Liabilities held for
sale - current
|
—
|
|
|
5.2
|
|
|
Total Current
Liabilities
|
115.1
|
|
|
113.4
|
|
|
|
|
|
|
Long-term
debt
|
350.3
|
|
|
352.5
|
|
|
Postretirement
benefits other than pensions
|
6.0
|
|
|
6.3
|
|
|
Pension
liabilities
|
74.9
|
|
|
82.3
|
|
|
Deferred income
taxes
|
11.4
|
|
|
11.4
|
|
|
Other
liabilities
|
7.2
|
|
|
11.6
|
|
|
Total
Liabilities
|
564.9
|
|
|
577.5
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
Common stock - $0.10
par value; 135 million shares authorized, 48.3 million
shares issued, 44.8 million and 45.1 million outstanding as of
August 31, 2017
and November 30, 2016, respectively
|
4.8
|
|
|
4.8
|
|
|
Additional
contributed capital
|
343.0
|
|
|
341.0
|
|
|
Retained
deficit
|
(66.3)
|
|
|
(74.4)
|
|
|
Treasury stock at
cost; 3.4 million and 3.2 million shares at August 31, 2017
and
November 30, 2016, respectively
|
(25.4)
|
|
|
(23.2)
|
|
|
Accumulated other
comprehensive loss
|
(130.1)
|
|
|
(138.4)
|
|
|
Total
Shareholders' Equity
|
126.0
|
|
|
109.8
|
|
|
Total Liabilities
and Shareholders' Equity
|
$
|
690.9
|
|
|
$
|
687.3
|
|
|
OMNOVA SOLUTIONS
INC.
|
|
Consolidated
Statements of Cash Flows
|
|
(Dollars in
Millions)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
August
31,
|
|
August
31,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Operating
Activities
|
|
|
|
|
|
|
|
|
Net income
|
$
|
7.9
|
|
|
$
|
4.7
|
|
|
$
|
5.1
|
|
|
$
|
10.8
|
|
|
Adjustments to
reconcile net income (loss) to net cash
provided by operating activities:
|
|
|
|
|
|
|
|
|
Impairment of long-lived
assets
|
12.9
|
|
|
.4
|
|
|
12.9
|
|
|
.4
|
|
|
Depreciation and amortization
|
7.1
|
|
|
6.8
|
|
|
20.7
|
|
|
23.5
|
|
|
Impairment of long-lived assets
|
(12.9)
|
|
|
(.4)
|
|
|
—
|
|
|
—
|
|
|
Amortization and debt issuance costs write-off
|
.4
|
|
|
2.2
|
|
|
1.1
|
|
|
3.1
|
|
|
Non-cash
stock compensation expense
|
.6
|
|
|
.6
|
|
|
1.6
|
|
|
1.8
|
|
|
Provision for obsolete inventories
|
—
|
|
|
(.4)
|
|
|
.3
|
|
|
—
|
|
|
Other
|
(.3)
|
|
|
—
|
|
|
(.4)
|
|
|
(.7)
|
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
8.0
|
|
|
3.5
|
|
|
(18.7)
|
|
|
0.6
|
|
|
Inventories
|
.3
|
|
|
3.3
|
|
|
(1.0)
|
|
|
2.4
|
|
|
Other
current assets
|
3.1
|
|
|
6.6
|
|
|
9.8
|
|
|
(1.8)
|
|
|
Current
liabilities
|
(7.4)
|
|
|
4.8
|
|
|
(.9)
|
|
|
11.0
|
|
|
Other
non-current assets
|
5.5
|
|
|
(4.8)
|
|
|
7.3
|
|
|
(7.1)
|
|
|
Other
non-current liabilities
|
1.7
|
|
|
.1
|
|
|
(2.3)
|
|
|
3.2
|
|
|
Contributions to defined benefit plan
|
(7.0)
|
|
|
(5.8)
|
|
|
(7.3)
|
|
|
(6.2)
|
|
|
Net Cash Provided
by Operating Activities
|
19.9
|
|
|
21.6
|
|
|
28.2
|
|
|
41.0
|
|
|
Investing
Activities
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
(7.1)
|
|
|
(5.8)
|
|
|
(17.0)
|
|
|
(16.5)
|
|
|
Proceeds
from notes receivable
|
—
|
|
|
—
|
|
|
3.8
|
|
|
—
|
|
|
Proceeds
from sale of businesses
|
—
|
|
|
(5.3)
|
|
|
—
|
|
|
—
|
|
|
Acquisition and
disposals of businesses
|
(4.8)
|
|
|
5.3
|
|
|
(7.3)
|
|
|
5.3
|
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
.1
|
|
|
Net Cash Used In
Investing Activities
|
(11.9)
|
|
|
(5.8)
|
|
|
(20.5)
|
|
|
(11.1)
|
|
|
Financing
Activities
|
|
|
|
|
|
|
|
|
Proceeds
from borrowings
|
—
|
|
|
346.5
|
|
|
—
|
|
|
346.5
|
|
|
Repayment of debt obligations
|
(1.2)
|
|
|
(188.7)
|
|
|
(3.3)
|
|
|
(190.0)
|
|
|
Payments
for debt refinancing
|
—
|
|
|
(4.2)
|
|
|
—
|
|
|
(4.2)
|
|
|
Restricted cash
|
—
|
|
|
(155.9)
|
|
|
—
|
|
|
(155.9)
|
|
|
Withholding taxes on share-based compensation
|
(.4)
|
|
|
(.5)
|
|
|
(2.2)
|
|
|
(.5)
|
|
|
Net Cash Used In
Financing Activities
|
(1.6)
|
|
|
(2.8)
|
|
|
(5.5)
|
|
|
(4.1)
|
|
|
Effect of exchange
rate changes on cash and cash
equivalents
|
(.4)
|
|
|
(3.3)
|
|
|
.4
|
|
|
(.4)
|
|
|
Net Increase
(Decrease) In Cash And Cash Equivalents
|
6.0
|
|
|
9.7
|
|
|
2.6
|
|
|
25.4
|
|
|
Cash and cash
equivalents at beginning of period
|
68.6
|
|
|
60.6
|
|
|
72.0
|
|
|
44.9
|
|
|
Cash And Cash
Equivalents At End Of Period
|
$
|
74.6
|
|
|
$
|
70.3
|
|
|
$
|
74.6
|
|
|
$
|
70.3
|
|
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SOURCE OMNOVA Solutions Inc.