News Headlines

OMNOVA reports seventh consecutive quarter of year-over-year growth in Specialty Segment volume in Q3 2018 and acquisition of Portugal-based manufacturer for its Specialty Solutions segment

BEACHWOOD, Ohio, Sept. 26, 2018 /PRNewswire/ --

OMNOVA Solutions logo (PRNewsfoto/OMNOVA Solutions)

Third Quarter 2018 Highlights

  • Loss per share for Q3 of 2018 was $0.04 compared to earnings per Share of $0.18 last year, driven by asset writedowns related to the Company's strategic decision to exit the commodity coated paper market.
  • Adjusted Diluted Earnings per Share for the quarter was $0.18 compared to $0.25 last year.
  • Specialty Solutions Segment Operating Profit for the quarter was $19.5 million compared to $18.9 million last year.  Adjusted Segment Operating Profit for Specialty Solutions was $19.7 million, up 4.2% from $18.9 million last year, driven by higher volumes.
  • OMNOVA's Specialty Solutions segment achieved its seventh consecutive quarter of volume growth.  The Company's specialization strategy continues to show traction.
  • Net Debt to Adjusted EBITDA improved to 3.0x from 3.3x at the end of last year's third quarter.
  • The Company strengthened its specialty coatings market position through the acquisition of Resiquímica, bringing annual revenues of approximately $65 million to OMNOVA.
  • The Company's Board of Directors authorized a share repurchase program for up to $20 million in recognition of the Company's improved financial position and cash generation.
  • The Company's 2018 full year performance expectations remain unchanged - the fourth consecutive year of growth in Adjusted Diluted Earnings per Share.

OMNOVA Solutions Inc. (NYSE: OMN) Chief Executive Officer Anne Noonan, commenting on the third quarter of fiscal 2018, said, "We recorded our seventh consecutive quarter of volume growth in our specialties, and improved year-over-year profitability in specialties, as our strategy continues to gain momentum.  Coatings was particularly strong this quarter, and sales of recently introduced products, developed through our enhanced innovation process, continued to drive the adhesives and sealants business.  We also saw volume growth in our elastomeric modifiers and antioxidants businesses, and in our offerings to the luxury vinyl tile market.  For the quarter, Adjusted Segment Operating Profit for Specialty Solutions was $19.7 million, up 4.2% from $18.9 million last year and representing 90% of Combined Adjusted Segment Operating Profit.  Sales in Specialty Solutions were up 6.1% to $122.1 million, representing 63% of total Company sales for the quarter.

"Adjusted Segment Operating Profit for the Performance Materials segment was $2.2 million, or 3.1% of net sales, an improvement from the second quarter.  Last year we reported Adjusted Segment Operating Profit of $8.3 million in this segment, an exceptionally high result driven by margin recovery from significant raw material cost spikes in early fiscal 2017.

"Following our strategic decision to exit the commodity coated paper market, our Green Bay, Wisconsin plant closure remains on track.  We continue to expect $7-8 million of annual run-rate savings, predominately benefiting our Performance Materials segment, beginning in the second half of fiscal 2019. 

"This morning we were pleased to announce the acquisition of Resiquímica, a Portugal-based manufacturer of polymers and resins for coatings and construction applications.  Resiquímica will add approximately $65 million of annual revenues while expanding our presence in Portugal, Spain, and North Africa.

"In light of our improved financial position and cash generation, we have re-evaluated our overall capital allocation strategy to include a return of capital component.  Accordingly, our Board of Directors has authorized a share repurchase program of up to $20 million, allowing us to repurchase shares from time to time depending on business and market conditions and other factors such as dilution from equity programs. The program will support our existing capital deployment strategies and enable us to drive attractive returns over the long-term.

"Our full-year outlook remains unchanged—we continue to expect a fourth consecutive year of Adjusted EPS growth," concluded Noonan.

Consolidated Results for the Third Quarter of Fiscal 2018

Loss per share for the third quarter ended August 31, 2018 was $0.04, compared to diluted earnings per share of $0.18 last year.  In the third quarter of 2018, the Company recorded charges of $10.4 million primarily for asset writedowns in connection with the Green Bay, Wisconsin plant closure.  In the third quarter of 2017, the Company recorded charges of $1.8 million primarily related to the "One OMNOVA" cost reduction initiative.

Adjusted Diluted Earnings per Share was $0.18 for the quarter, compared with last year's unusually high $0.25.  For context, Adjusted Diluted Earnings per Share for the third quarters of fiscal 2016 and 2015 were $0.14 and $0.13, respectively.

Net sales for the quarter were $193.6 million, down 3.6% from last year's $200.9 million.  Net sales in Specialty Solutions increased 6.1% to $122.1 million, while net sales in Performance Materials decreased 16.7% to $71.5 million.  Overall volume was unfavorable by $12.2 million, or 6%, as growth in Specialty Solutions was offset predominantly by the decline in Performance Materials due to the Company's strategic exit from the commodity paper market.  Price and mix had a favorable impact on net sales of $4.1 million, or 2%, primarily in Specialty Solutions.  Currency translation was favorable by $1.5 million, or 0.7%, chiefly reflecting the strengthening of the Euro.

SG&A in the quarter was $25.9 million, down from $28.9 million in the same quarter last year.  The primary drivers of the decrease were benefits from the "One OMNOVA" cost reduction initiatives and reduced incentive compensation expense.

Interest expense for the quarter was $4.7 million, compared to $5.5 million last year, reflecting lower average borrowing balances due to the Company's $40 million debt pre-payment in December 2017, but partially offset by rising variable interest rates. 

Income tax expense in the quarter was $2.3 million compared to $6.1 million in 2017.  Cash taxes were $2.4 million for the quarter compared to $1.3 million last year.  The Company has approximately $91.3 million of U.S. federal net operating loss carryforwards and $86.8 million of state and local tax net operating loss carryforwards.

Working capital days at the end of the quarter were 50.8, five days better compared to last year, driven by higher days payable.  Cash provided by operations was $21.6 million, compared to $19.9 million last year, reflecting the strong operating performance in Specialty Solutions and working capital favorability.  The Company's Net Leverage Ratio decreased to 3.0x Adjusted EBITDA, as compared to 3.3x last year (see Tables E and F), reflecting the benefit from cash generation.

The Company's €28.5 million acquisition of Resiquímica reflects a 7.0x EBITDA multiple before cost synergies.  The transaction was funded with cash on hand and available liquidity from OMNOVA's senior revolving credit facility, and is anticipated to increase OMNOVA's annual revenues by approximately €56 million, or U.S. $65 million.  The acquisition is expected to be accretive to earnings and operating margins in 2019.    

Specialty Solutions Segment Results

Net sales for Specialty Solutions during the third quarter of 2018 increased $7.0 million, or 6.1%, to $122.1 million, compared with $115.1 million last year.  The year-over-year improvement was driven by volume increases of $2.3 million, or 2.0%, and price and mix improvements of $4.2 million, or 3.6%.  Foreign currency translation accounted for the remainder of the increase in net sales.  Volumes were strong in the Company's coatings, adhesives and sealants, films, elastomeric modifiers, and home & personal care businesses.

Segment operating profit was $19.5 million compared with $18.9 million last year.  Adjusted Segment Operating Profit grew 4.2% to $19.7 million, or 16.1% of net sales, compared to $18.9 million, or 16.4% of net sales, last year.  (See Tables A and B.)  Increased volume, healthy mix, and cost controls continued to drive the operating profit improvements.

Performance Materials Segment Results

Net sales for Performance Materials during the third quarter of 2018 were $71.5 million, down $14.3 million from $85.8 million last year.  The divested China Coated Fabrics business accounted for $0.7 million of net sales in the third quarter of 2017.  Volume, excluding China Coated Fabrics, was down $14.5 million, or 16.8% from last year, primarily driven by the Company's strategic exit from the commodity paper market.  Volume in antioxidants and tire cord were favorable and the impact of foreign exchange was slightly favorable. 

Performance Materials' segment operating loss for the quarter was $7.9 million, compared with operating profit of $8.3 million last year.  The operating loss this year includes $10.1 million of charges primarily related to the closure of the Company's Green Bay, Wisconsin manufacturing facility.  Adjusted Segment Operating Profit was $2.2 million, or 3.1% of net sales, compared to $8.3 million, or 9.7% of net sales, last year.  (See Tables A and B.)  Last year's exceptionally high result was driven by margin recovery from significant raw material cost spikes in early fiscal 2017. 

Earnings Conference Call - OMNOVA Solutions has scheduled its Earnings Conference Call for September 26, 2018, at 11:00 a.m. ET.  OMNOVA Solutions' President and Chief Executive Officer, Anne Noonan will host the live audio event.  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 10, 2018.  A telephone replay also will be available beginning at 1:00 p.m. ET on September 26, 2018, and ending at 11:59 p.m. ET on October 10, 2018.  To listen to the telephone replay, callers should dial:  (USA) 800-475-6701, access code 454246 or (International) 320-365-3844, access code 454246.

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
August 31,


Nine Months Ended
August 31,

(In millions)

2018


2017


2018


2017

Net Sales:








Specialty Solutions

$

122.1



$

115.1



$

360.0



$

330.3


Performance Materials

71.5



85.8



218.5



266.5


Total Net Sales

$

193.6



$

200.9



$

578.5



$

596.8


Segment Operating Profit:








Specialty Solutions

$

19.5



$

18.9



$

55.0



$

45.6


Performance Materials

(7.9)



8.3



(5.6)



5.8


Interest expense

(4.7)



(5.5)



(14.4)



(16.0)


Corporate expense

(6.5)



(7.7)



(21.6)



(23.3)


Income (Loss) Before Income Taxes

.4



14.0



13.4



12.1


Income tax expense (benefit)

2.3



6.1



(.3)



7.0


Net Income (Loss)

$

(1.9)



$

7.9



$

13.7



$

5.1


Depreciation and amortization

$

7.8



$

7.1



$

22.3



$

20.7


Capital expenditures

$

5.7



$

7.1



$

12.8



$

17.0


 

 

OMNOVA SOLUTIONS INC.

Non-GAAP and other Financial Matters (Continued)

Three Months Ended August 31, 2018











Table A












(In millions except per share data)


Specialty
Solutions


Performance

Materials


Combined
Segments


Corporate


Consolidated

Net Sales


$

122.1



$

71.5



$

193.6



$



$

193.6













Segment Operating Profit / Corporate Expense


$

19.5



$

(7.9)



$

11.6



$

(6.5)



$

5.1


Interest expense








(4.7)



(4.7)


Income (Loss) Before Income Taxes


$

19.5



$

(7.9)



$

11.6



$

(11.2)



$

.4


Management Excluded Items











Restructuring and severance




.4



.4





.4


Accelerated depreciation on production transfer




.5



.5





.5


Asset impairment, facility closure costs and other


.8



9.6



10.4





10.4


Other financing costs


(.1)



(.1)



(.2)





(.2)


Acquisition and integration related expense


(.5)



(.3)



(.8)



.1



(.7)


            Subtotal for management excluded Items


.2



10.1



10.3



.1



10.4


Adjusted Segment Operating Profit / Corporate
  Expense before Income Taxes


$

19.7



$

2.2



$

21.9



$

(11.1)



$

10.8


Tax expense (25% rate)*










(2.7)


Adjusted Income










$

8.1


Adjusted Diluted Earnings per Share from
  Adjusted Income










$

0.18













*Tax rate is based on the Company's estimated normalized annual effective tax rate


















Adjusted Segment Operating Profit As A % Of Sales


16.1

%


3.1

%


11.3

%





Segment / Corporate Capital Expenditures


$

3.7



$

1.6



$

5.3



$

.4



$

5.7
























Adjusted Segment Operating Profit / Corporate
  Expense Before Income Taxes


$

19.7



$

2.2



$

21.9



$

(11.1)



$

10.8


Unallocated corporate interest expense








4.7



4.7


Segment / Consolidated Adjusted EBIT


19.7



2.2



21.9



(6.4)



15.5


Depreciation and amortization


4.6



2.6



7.2



.1



7.3


Segment / Consolidated Adjusted EBITDA


$

24.3



$

4.8



$

29.1



$

(6.3)



$

22.8













Adjusted EBITDA as a % of sales


19.9

%


6.7

%


15.0

%




11.8

%

 

 

OMNOVA SOLUTIONS INC.

Non-GAAP and other Financial Matters (Continued)

Three Months Ended August 31, 2017











Table B












(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


Acquisition and integration related expense








.2



.2


Environmental costs




.3



.3





.3


Pension curtailment








.4



.4


Asset impairment, facility closure costs and other




(.6)



(.6)



1.2



.6


            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)

Nine Months Ended August 31, 2018











Table C












(In millions except per share data)


Specialty
Solutions


Performance

Materials


Combined
Segments


Corporate


Consolidated

Net Sales


$

360.0



$

218.5



$

578.5



$



$

578.5













Segment Operating Profit / Corporate Expense


$

55.0



$

(5.6)



$

49.4



$

(21.6)



$

27.8


Interest expense








(14.4)



(14.4)


Income (Loss) Before Income Taxes


$

55.0



$

(5.6)



$

49.4



$

(36.0)



$

13.4


Management Excluded Items











Restructuring and severance


.7



.4



1.1



.7



1.8


Accelerated depreciation on production transfer


.1



.4



.5





.5


Asset impairment, facility closure costs and other


.9



10.0



10.9



.1



11.0


Environmental costs




.2



.2





.2


Deferred financing fees written-off








.8



.8


Other financing costs


(.1)



(.1)



(.2)





(.2)


Acquisition and integration related expense


(.1)



(.2)



(.3)



.7



.4


            Subtotal for management excluded items


1.5



10.7



12.2



2.3



14.5


Adjusted Segment Operating Profit / Corporate
  Expense before Income Taxes


$

56.5



$

5.1



$

61.6



$

(33.7)



$

27.9


Tax expense (25% rate)*










(7.0)


Adjusted Income (Loss)










$

20.9


Adjusted Diluted Earnings per Share from
  Adjusted Income










$

0.47













*Tax rate is based on the Company's estimated normalized annual effective tax rate


















Adjusted Segment Operating Profit As A % Of Sales


15.7

%


2.3

%


10.6

%





Segment / Corporate Capital Expenditures


$

8.8



$

3.3



$

12.1



$

.7



$

12.8
























Adjusted Segment Operating Profit / Corporate
  Expense Before Income Taxes


$

56.5



$

5.1



$

61.6



$

(33.7)



$

27.9


Unallocated corporate interest expense








14.4



14.4


Segment / Consolidated Adjusted EBIT


56.5



5.1



61.6



(19.3)



42.3


Depreciation and amortization


13.0



8.6



21.6



.2



21.8


Segment / Consolidated Adjusted EBITDA


$

69.5



$

13.7



$

83.2



$

(19.1)



$

64.1













Adjusted EBITDA as a % of sales


19.3

%


6.3

%


14.4

%




11.1

%

 

 

OMNOVA SOLUTIONS INC.

Non-GAAP and other Financial Matters (Continued)

Nine Months Ended August 31, 2017











Table D












(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 settlement








.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)

Trailing Twelve Months Ended August 31, 2018











Table E

(In millions except per share data)


Specialty
Solutions


Performance
Materials


Combined
Segments


Corporate


Consolidated

Net Sales


$

471.2



$

293.5



$

764.7



$



$

764.7













Segment Operating Profit / Corporate Expense


$

69.3



$

(24.0)



$

45.3



$

(28.1)



$

17.2


Interest expense








(19.9)



(19.9)


Income (Loss) Before Income Taxes


$

69.3



$

(24.0)



$

45.3



$

(48.0)



$

(2.7)


Management Excluded Items











Restructuring and severance


.7



.4



1.1



1.0



2.1


Accelerated depreciation on production transfer


.1



.4



.5





.5


Asset impairment, facility closure costs and other


1.2



31.3



32.5



.5



33.0


Environmental costs




.4



.4





.4


Deferred financing fees written-off








.8



.8


Pension settlement


(.1)



(.1)



(.2)





(.2)


Acquisition and integration related expense


(.1)



(.2)



(.3)



.7



.4


            Subtotal for management excluded items


1.8



32.2



34.0



3.0



37.0


Adjusted Segment Operating Profit / Corporate
  Expense Before Income Taxes


$

71.1



$

8.2



$

79.3



$

(45.0)



$

34.3


Tax expense










(10.3)


Adjusted Income










$

24.0


Adjusted Diluted Earnings per Share From
  Adjusted Income






$

0.54
























Adjusted Segment Operating Profit as a % Of Sales


15.1

%


2.8

%


10.4

%





Segment / Corporate Capital Expenditures


$

13.7



$

6.3



$

20.0



$

.9



$

20.9













Adjusted Segment Operating Profit / Corporate
  Expense Before Income Taxes


$

71.1



$

8.2



$

79.3



$

(45.0)



$

34.3


Unallocated corporate interest








19.9



19.9


Segment / Consolidated Adjusted EBIT


71.1



8.2



79.3



(25.1)



54.2


Depreciation and amortization


16.8



11.5



28.3



0.7



29.0


Segment / Consolidated Adjusted EBITDA


$

87.9



$

19.7



$

107.6



$

(24.4)



$

83.2













Adjusted EBITDA as a % of sales


18.7

%


6.7

%


14.1

%




10.9

%












Net Leverage











Total short and long-term debt (excluding OID and deferred financing fees of $7.2M. )




$

318.8


Less cash










(66.2)


Net Debt (Debt less Cash)




$

252.6













Net Leverage Ratio**










3.0x



 

 

OMNOVA SOLUTIONS INC.

Non-GAAP and other Financial Matters (Continued)

Trailing Twelve Months Ended August 31, 2017











Table F

(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


Other financing costs








.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










(11.3)


Adjusted Income










$

26.4


Adjusted Diluted Earnings per Share from
  Adjusted Income






$

0.59
























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 expense








21.3



21.3


Segment / Consolidated Adjusted EBIT


58.8



23.7



82.5



(23.5)



59.0


Depreciation and amortization


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)

August 31, 2018






Table G

Adjusted Return on Invested Capital

Trailing Twelve
Months Ended


Twelve Months Ended


Aug 31,


November 30,


2018


2017


2016

Adjusted Net Operating Profit After Tax

(Dollars in Millions)

Adjusted income from continuing operations

$

24.0



$

24.8



$

22.2


Interest add back excluding debt premium

19.9



21.5



22.7


Tax effect of interest add back*

(5.0)



(6.5)



(6.8)


Total Adjusted Net Operating Profit After Tax

$

38.9



$

39.8



$

38.1








Debt and Equity






Short-term debt

$

4.2



$

4.2



$

4.2


Long-term debt

307.4



349.8



352.5


Total shareholders' equity

45.4



38.2



109.8


Total Debt and Equity

$

357.0



$

392.2



$

466.5








Adjusted Return on Invested Capital

10.9

%


10.1

%


8.2

%







*Tax rate is based on the Company's estimated normalized annual effective tax rate of 25% for 2018, and 30% for 2017 and 2016.

 

 

OMNOVA SOLUTIONS INC.

Consolidated Statements of Operations

(In Millions, Except Per Share Data)

(Unaudited)








Three Months Ended


Nine Months Ended


August 31


August 31


2018


2017


2018


2017

Net sales

$

193.6



$

200.9



$

578.5



$

596.8


Cost of goods sold (exclusive of depreciation)

144.5



143.1



431.3



441.9


Gross profit

49.1



57.8



147.2



154.9










Other costs and expenses:








Selling, general and administrative

25.9



28.9



82.0



88.2


Depreciation and amortization

7.8



7.1



22.3



20.7


Asset impairments

9.2



.4



9.6



13.3


Restructuring and severance

.4



.4



1.8



5.1


Interest expense

4.7



5.5



14.4



16.0


Debt issuance costs write-off





.8




Acquisition and integration related expense

(.3)



.2



.7



.2


Other (income) loss, net

1.0



1.3



2.2



(.7)


   Total other costs and expenses

48.7



43.8



133.8



142.8










Income (loss) before income taxes

.4



14.0



13.4



12.1


Income tax (benefit) expense

2.3



6.1



(.3)



7.0


Net Income (Loss)

$

(1.9)



$

7.9



$

13.7



$

5.1










Income (Loss) Per Share - Basic

$

(.04)



$

.18



$

.31



$

.12


Income (Loss) Per Share - Diluted

$

(.04)



$

.18



$

.31



$

.11










Weighted average shares outstanding - basic

44.5



44.4



44.6



44.3


Weighted average shares outstanding - diluted

44.5



44.7



44.8



44.7


 

 

OMNOVA SOLUTIONS INC.

Consolidated Balance Sheets










August 31, 2018


November 30, 2017


(Unaudited)


(Audited)


(Dollars in millions, except share amounts)

ASSETS:




Current Assets




Cash and cash equivalents

$

66.2



$

88.0


Accounts receivable, net

101.7



99.0


Inventories, net

77.7



76.5


Prepaid expenses and other

7.2



12.5


Total Current Assets

252.8



276.0






Property, plant and equipment, net

192.3



208.9


Intangible assets, net

52.9



56.0


Goodwill

65.7



66.3


Other non-current assets

5.6



5.6


Total Assets

$

569.3



$

612.8






LIABILITIES AND SHAREHOLDERS' EQUITY:




Current Liabilities




Amounts due banks

$

4.2



$

4.2


Accounts payable

89.8



78.3


Accrued payroll and personal property taxes

16.9



26.1


Employee benefits

3.4



2.9


Other current liabilities

8.0



5.1


Total Current Liabilities

122.3



116.6






Long-term debt

307.4



349.8


Post-retirement benefits other than pensions

5.8



6.3


Pension liabilities

61.1



70.5


Deferred income taxes

18.4



23.4


Other non-current liabilities

8.9



8.0


Total Liabilities

523.9



574.6






Shareholders' Equity




Common stock - $0.10 par value; 135 million shares authorized; 48.3
million shares issued; 44.9 million and 44.8 million shares outstanding
as of August 31, 2018 and November 30, 2017 respectively

4.8



4.8


Additional contributed capital

345.7



343.4


Retained deficit

(152.3)



(159.2)


Treasury stock at cost - 3.4 million and 3.5 million shares as of August
31, 2018 and November 30, 2017 respectively

(26.0)



(25.5)


Accumulated other comprehensive loss

(126.8)



(125.3)


Total Shareholders' Equity

45.4



38.2


Total Liabilities and Shareholders' Equity

$

569.3



$

612.8


 

 

OMNOVA SOLUTIONS INC.

Consolidated Statements of Cash Flows

(Dollars in Millions)

(Unaudited)








Three Months
Ended August 31,


Nine Months
Ended August 31,


2018


2017


2018


2017


(Dollars in Millions)

Operating Activities








Net income (loss)

$

(1.9)



$

7.9



$

13.7



$

5.1


Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:








   Depreciation and amortization

7.8



7.1



22.3



20.7


   Impairment of long-lived assets

9.2





9.6



12.9


   Amortization and write-off of debt issuance costs

.4



.4



1.8



1.1


   Non-cash stock compensation expense

.3



.6



2.1



1.6


   Provision for doubtful accounts





.4




   Provision for obsolete inventories

.6





1.3



.3


   Deferred income taxes

(.1)





(6.6)




   Other



(.3)





(.4)


Changes in operating assets and liabilities, net of effect from
acquisitions and divestitures of businesses:








   Accounts receivable

11.3



8.0



(3.8)



(18.7)


   Inventories

(2.3)



.3



(3.1)



(1.0)


   Other current assets

.1



3.1



5.3



9.8


   Current liabilities

(2.2)



(7.4)



1.4



(0.9)


   Other non-current assets

8.8



5.5



1.2



7.3


   Other non-current liabilities

(4.4)



1.7



(2.5)



(2.3)


   Contributions to defined benefit plan

(6.0)



(7.0)



(6.0)



(7.3)


      Net Cash Provided by (Used in) Operating Activities

21.6



19.9



37.1



28.2


Investing Activities








Capital expenditures

(5.7)



(7.1)



(12.8)



(17.0)


Proceeds from notes receivable







3.8


Business acquisitions

(.4)



(4.8)



(.5)



(7.3)


      Net Cash Provided by (Used In) Investing Activities

(6.1)



(11.9)



(13.3)



(20.5)


Financing Activities








Proceeds from borrowings





2.3




Repayment of debt obligations

(1.0)



(1.2)



(45.4)



(3.3)


Payments for debt refinancing





(1.0)




Employee tax withholding related to redemption of common shares



(.4)



(.5)



(2.2)


      Net Cash Provided by (Used In) Financing Activities

(1.0)



(1.6)



(44.6)



(5.5)


Effect of exchange rate changes on cash and cash equivalents

(1.1)



(.4)



(1.0)



.4


Net  Increase (Decrease) In Cash And Cash Equivalents

13.4



6.0



(21.8)



2.6


Cash and cash equivalents at beginning of period

52.8



68.6



88.0



72.0


Cash And Cash Equivalents At End Of Period

$

66.2



$

74.6



$

66.2



$

74.6


 

SOURCE OMNOVA Solutions Inc.

For further information: Frank Esposito, Investor Relations, (216) 682-7003