- Earnings per share of $0.12, an improvement of $0.19 per share
compared to the second quarter of 2008. FAIRLAWN, Ohio, June 23
/PRNewswire-FirstCall/ -- OMNOVA Solutions Inc. (NYSE:OMN) today
reported net income of $5.1 million, or $0.12 per diluted share,
for the second quarter ended May 31, 2009, compared to a net loss
of $3.1 million, or $0.07 per diluted share, for the second quarter
of 2008. Included in the second quarter of 2009 were restructuring
and severance charges of $0.8 million and a net pension plan
curtailment gain of $0.7 million resulting from the suspension of
the accrual of future service benefits for all salary and non-union
hourly employees and certain union hourly employees. Net sales
decreased $58.4 million, or 26.6%, to $161.3 million for the second
quarter of 2009 compared to $219.7 million for the second quarter
of 2008. The second quarter decrease was the result of lower
selling prices and weak market demand which were partially offset
by market share gains and penetration into new adjacent markets.
Gross profit improved to $40.0 million, with margins of 24.8%, in
the second quarter of 2009 compared to $33.8 million, and margins
of 15.4%, in the second quarter of 2008. The margin improvement was
due primarily to lower raw material and manufacturing costs. "Our
improved second quarter performance reflects the impact from a
number of positive actions by the Company, including broad-based
cost reductions, structurally improved pricing and the introduction
of innovative new products, as well as lower raw material costs,"
said Kevin McMullen, OMNOVA Solutions' Chairman and Chief Executive
Officer. "Despite weak market conditions, we achieved significantly
improved earnings and cash flow from operations which allowed us to
further reduce our debt and increase the Company's financial
flexibility. This was the fourth consecutive quarter that the
Company reduced its Net Debt-to-EBITDA leverage ratio, ending the
quarter at 2.8, and the second consecutive quarter of
year-over-year earnings improvement. Though the overall economic
environment remains uncertain, because of the fundamental
improvements occurring at OMNOVA we expect the second half of 2009
to be profitable and cash flow positive." McMullen added. Selling,
general and administrative expense in the second quarter of 2009
fell to $25.7 million, compared to $27.5 million in the second
quarter of 2008. Second quarter 2009 interest expense was $2.0
million, a decrease of $1.5 million as compared to the second
quarter of 2008, due to lower average interest rates and debt. The
weighted average cost of borrowing during the second quarter of
2009 was 4.4%, a significant improvement from 6.6% in the second
quarter of 2008. The Company's Net Debt declined $26.1 million
during the quarter to $141.0 million as compared to $167.1 million
at the end of the first quarter of 2009. Since November 30, 2008,
debt has been reduced by $38.0 million. Debt is comprised of a term
loan facility with $143.1 million outstanding which matures in
2014, a revolving asset-based credit facility with $9.1 million
outstanding which matures in 2012 and $4.4 million in short-term
debt, primarily in Asia, which matures in 2009. Unused and
available borrowing capacity under the Company's revolving
asset-based credit facility grew to $46.4 million at May 31, 2009.
Cash on hand, primarily in foreign operations, increased $8.4
million in the quarter. EBITDA, as defined in the Company's
borrowing agreements for the calculation of the net leverage ratio,
was $11.5 million for the second quarter of 2009, compared to $9.7
million for the second quarter of 2008. EBITDA for the twelve
months ended May 31, 2009 was $50.3 million, compared to $47.8
million for the twelve months ended November 30, 2008. OMNOVA's
leverage ratio of Net Debt-to-EBITDA improved for the fourth
consecutive quarter, ending at 2.8 on May 31, 2009. The loan
covenant requires a ratio of 5.5 or less. An explanation of how the
Company defines EBITDA and Net Debt and reconciliations of EBITDA
to income (loss) from continuing operations and Net Debt to total
debt are provided in the Non-GAAP and Other Financial Measures
section of this earnings release. Performance Chemicals - Net sales
during the second quarter of 2009 decreased 30.5%, to $87.0
million, compared to $125.2 million in the second quarter of 2008.
The decrease was driven primarily by weaker market conditions,
which led to volume decreases of $20.8 million, or 16.6%, lower
selling prices of $15.6 million and unfavorable currency
translation effects of $1.8 million. Segment operating profit was
$11.4 million for the second quarter of 2009, up from $1.9 million
for the second quarter of 2008. The year-over-year operating profit
improvement was driven by cost reduction actions in both
manufacturing and SG&A, improved contribution margin per pound
and lower raw material costs, which were partially offset by lower
volumes. While volumes were weaker on a year-over-year basis, the
daily sales run rate in the second quarter of 2009 was better than
the prior quarter. Additionally, the Company's industry-leading
technology won new business in several markets. Decorative Products
- Net sales were $74.3 million during the second quarter of 2009, a
decrease of $20.2 million, or 21.4%, compared to the second quarter
of 2008. Sales were lower due to volume decreases of $16.7 million
and an unfavorable currency translation effect of $4.2 million,
which were offset by price increases of $0.7 million. Segment
operating profit for the second quarter of 2009 was $0.2 million,
compared to $1.1 million for the second quarter of 2008, but is a
sequential improvement over the first quarter 2009 loss of $2.9
million. The improvement in the second quarter of 2009 versus the
first quarter of 2009 was due to significant cost reduction actions
and lower raw material costs. This quarter's operating profit
includes restructuring and severance charges of $0.8 million.
Included in Decorative Products' results for the quarter are sales
of $23.4 million from its Asian businesses, compared to $24.0
million in the second quarter of 2008. The Asian businesses
generated operating profit of $1.9 million during the second
quarter of 2009 as compared to a loss of $0.9 million for last
year's second quarter. This improvement was driven by lower raw
material costs, significant cost reduction actions and improved
productivity. OMNOVA continues to offer an ever-broader selection
of innovative products serving core and adjacent markets, including
recyclable and 30% recycled-content wallcovering, pool liner films
and health care products. Pension - During the quarter, the Company
froze future pension plan benefit accruals for all salary and
non-union hourly employees, as well as employees at one union
hourly location, resulting in a consolidated net pension plan
curtailment gain of $0.7 million. The impact in the second quarter
of 2009 was an increase in manufacturing costs of $0.7 million and
a reduction in SG&A expense of $1.4 million. The impact on
segment operating profit for Performance Chemicals was an expense
of $0.3 million while Decorative Products recorded a benefit of
$0.7 million and Corporate Expense included a benefit of $0.3
million in the quarter. Earnings Conference Call - OMNOVA Solutions
has scheduled its Earnings Conference Call for Wednesday, June 24,
2009, at 11:00 a.m. ET. The live audio event will be hosted by
OMNOVA Solutions' Chairman and Chief Executive Officer, Kevin
McMullen. It is anticipated to be approximately one hour in length
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 noon ET, July 15, 2009. A telephone
replay will also be available beginning at 1:00 p.m. ET on June 24,
2009, and ending at 11:59 p.m., ET on July 15, 2009. To listen to
the telephone replay, callers should dial: (USA) 800-475-6701 or
(Int'l) 320-365-3844. The Access Code is 102261. Non-GAAP and Other
Financial Measures Reconciliation of segment sales and operating
profit to consolidated net sales and income (loss) before income
taxes Management reviews the information below in assessing the
performance of the business segments and in making decisions
regarding the allocation of resources to the business segments.
Management believes that this information is useful for providing
the investor with an understanding of the Company's business and
operating performance. (Dollars in millions) Three Months Ended Six
Months Ended May 31, May 31, 2009 2008 2009 2008 Performance
Chemicals $87.0 $125.2 $181.6 $244.1 Decorative Products 74.3 94.5
139.9 166.2 ---- ---- ----- ----- Total Sales $161.3 $219.7 $321.5
$410.3 ====== ====== ====== ====== Segment Operating Profit (1)
Performance Chemicals $11.4 $1.9 $19.2 $4.5 Decorative Products .2
1.1 (2.7) 1.0 Interest expense (2.0) (3.5) (4.2) (6.9) Corporate
expense (4.0) (2.4) (6.6) (4.4) ----- ----- ----- ----- Income
(Loss) Before Income Taxes $5.6 $(2.9) $5.7 $(5.8) ==== ====== ====
====== Capital expenditures $1.7 $3.8 $3.1 $6.9 (1) Segment
operating profit for the second quarter 2009 included restructuring
and severance charges of $0.8 million for Decorative Products.
Segment operating profit for the first half of 2009 Included
restructuring and severance charges of $0.1 million and $1.5
million for Performance Chemicals and Decorative Products,
respectively. Also included in segment operating profit for the
second quarter and first half of 2009 is a pension curtailment loss
of $0.3 million for Performance Chemicals and a gain of $0.7
million for Decorative Products. Management excludes these items
when evaluating the results of the Company's ongoing business.
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, beginning with income (loss)
from continuing operations and excluding 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, noncash 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 nonrecurring 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. (Dollars in millions)
Reconciliation of income Three Months Six Months (loss) from
continuing Ended Ended operations May 31, May 31, to EBITDA 2009
2008 2009 2008 Income (loss) from continuing operations $5.1 $(3.1)
$5.0 $(6.1) Interest 1.8 3.3 3.9 6.5 Tax expense .5 .2 .7 .3
Depreciation and amortization 5.7 6.4 11.3 11.8 Amortization of
deferred financing costs .2 .2 .3 .4 Net earnings of joint ventures
less cash dividends - .2 - - Net earnings of foreign subsidiaries
less cash dividends (1.5) .4 (1.5) (.1) Loss on debt transactions -
- - - (Gains) or losses on sale or disposal of capital assets .7 -
.7 - Non-cash (income) or expense for pension plans .4 1.4 1.5 2.9
(Gain) or loss on change in LIFO reserve (2.2) - (4.9) - Non-cash
charge for 401(k) company match .4 .7 .4 1.1 Restructuring,
severance and non-recurring charges .4 - 1.3 (.6) -- - --- ----
EBITDA $11.5 $9.7 $18.7 $16.2 ===== ==== ===== ===== (Dollars in
millions) May 31, Nov. 30, May 31, Reconciliation of total debt to
Net Debt 2009 2008 2008 Total debt $156.6 $188.3 $197.9 Outstanding
letters of credit and interest rate swap 8.1 8.1 9.0 Cash and cash
equivalents (23.7) (17.4) (13.1) ------ ------ ------ Net Debt
$141.0 $179.0 $193.8 ====== ====== ====== This press release
includes "forward-looking statements" as defined by federal
securities laws. 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 represent management's current judgment, belief,
assumption, estimate or forecast about future events, circumstances
or results and may address sales, profits, markets, products,
customers, raw materials, financial condition, and accounting
policies, among other matters. Words such as, but not limited to,
"may," "should," "projects," "forecasts," "seeks," "believes,"
"expects," "anticipates," "estimates," "intends," "plans,"
"targets," "optimistic," "likely," "will," "would," "could," and
similar expressions or phrases identify forward-looking statements.
All forward-looking statements involve risks and uncertainties.
Some risks and uncertainties are inherent in business generally and
other risks and uncertainties are specific to the Company's
businesses and operations. These risks and uncertainties and the
achievement of expected results depend on many factors, some of
which are not predictable or within the Company's control. The
occurrence of risk factors could adversely affect our results and,
in some cases, such effect could be material. Risk factors and
uncertainties that may cause actual results to differ materially
from expected results include, among others: economic trends
affecting the economy in general and/or 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; loss of a significant customer; customer and/or
competitor consolidation; customer bankruptcy; ability to
successfully develop and commercialize new products; increased
imports into and off-shoring production from North America; ability
to successfully implement productivity enhancement and cost
reduction initiatives; unexpected full or partial suspension of
plant operations; the Company's strategic alliance, joint venture
and acquisition activities; loss or damage due to acts of war or
terrorism, natural disasters, accidents, including fires, floods,
explosions and releases of hazardous substances; stock price
volatility; governmental legislative and regulatory changes,
including changes impacting environmental compliance, pension
plans, products and raw materials; 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; meeting required pension
plan funding obligations; infringement or loss of the Company's
intellectual property; litigation and claims against the Company
related to products, services, contracts, employment,
environmental, safety, intellectual property and other matters
arising out of the Company's business and adverse litigation
judgments or settlements; absence of or inadequacy of insurance
coverage for litigation, judgments, settlements or other losses;
availability of financing to fund operations at anticipated rates
and terms; loan covenant default arising from substantial debt and
leverage and the inability to service that debt, including
increases in applicable short-term borrowing rates. All written and
verbal forward-looking statements attributable to the Company or
any person acting on the Company's behalf are expressly qualified
in their entirety by these risk factors. Any forward-looking
statement speaks only as of the date on which such 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 forward-looking statements whether as a result
of new information, future events or otherwise. OMNOVA Solutions
Inc. is a technology-based company with 2008 sales of $869 million
and a current workforce of approximately 2,415 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/. OMNOVA SOLUTIONS INC.
Consolidated Statements of Operations (Dollars in Millions, Except
Per Share Data) (Unaudited) Three Months Six Months Ended Ended May
31, May 31, 2009 2008 2009 2008 Net Sales $161.3 $219.7 $321.5
$410.3 Cost of goods sold 121.3 185.9 249.8 346.0 ----- ----- -----
----- Gross Profit 40.0 33.8 71.7 64.3 Selling, general and
administrative 25.7 27.5 48.6 52.6 Depreciation and amortization
5.7 6.4 11.3 11.8 Restructuring and severance .8 - 1.7 - Interest
expense 2.0 3.5 4.2 6.9 Other expense (income), net .2 (.7) .2
(1.2) -- ---- -- ----- 34.4 36.7 66.0 70.1 ---- ---- ---- ----
Income (Loss) Before Income Taxes 5.6 (2.9) 5.7 (5.8) Income tax
expense .5 .2 .7 .3 -- -- -- -- Net Income (Loss) $5.1 $(3.1) $5.0
$(6.1) ==== ====== ==== ====== Basic and Diluted Income (Loss) Per
Share Net income (loss) per share $.12 $(.07) $.12 $(.14) ====
====== ==== ====== OMNOVA SOLUTIONS INC. Condensed Balance Sheets
(Dollars in millions, except per share amounts) May 31, Nov. 30,
2009 2008 ASSETS: (Unaudited) Current Assets Cash and cash
equivalents $23.7 $17.4 Accounts receivable, net 93.1 118.3
Inventories 36.1 46.1 Prepaid expenses and other 3.5 4.5 Deferred
income taxes 1.6 1.5 --- --- Total Current Assets 158.0 187.8
Property, plant and equipment, net 145.8 153.7 Trademarks and other
intangible assets, net 4.9 5.5 Other assets 4.2 4.6 --- --- Total
Assets $312.9 $351.6 ====== ====== LIABILITIES AND SHAREHOLDERS'
EQUITY: Current Liabilities Amounts due banks $5.9 $6.2 Accounts
payable 56.8 68.1 Accrued payroll and personal property taxes 11.3
13.0 Employee benefit obligations 3.3 3.2 Other current liabilities
2.6 3.4 --- --- Total Current Liabilities 79.9 93.9 Long-term debt
150.7 182.1 Postretirement benefits other than pensions 9.0 9.3
Pension liabilities 14.0 13.0 Deferred income taxes 2.2 2.3 Other
liabilities 15.1 14.4 ---- ---- Total liabilities 270.9 315.0
Shareholders' Equity Preference stock - $1.00 par value; 15 million
shares authorized; none outstanding - - Common stock - $0.10 par
value; 135 million shares authorized; 43.9 million shares issued at
May 31, 2009 and November 30, 2008 4.4 4.4 Additional contributed
capital 312.6 311.8 Retained deficit (239.6) (245.4) Treasury stock
at cost; .1 million shares at May 31, 2009 and November 30, 2008
(.1) (.6) Accumulated other comprehensive loss (35.3) (33.6) ------
------ Total Shareholders' Equity 42.0 36.6 ---- ---- Total
Liabilities and Shareholders' Equity $312.9 $351.6 ====== =======
DATASOURCE: OMNOVA Solutions Inc. CONTACT: Sandi Noah,
Communications, +1-330-869-4292; Michael Hicks, Investor Relations,
+1-330-869-4411 Web Site: http://www.omnova.com/
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