Ohio | 001-15147 | 34-1897652 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
25435 Harvard Road, Beachwood, Ohio | 44122-6201 | |||
(Address of Principal Executive Offices) | (Zip Code) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition |
Item 9.01. | Financial Statements and Exhibits |
Exhibit Number | Description | |
99.1 | Press Release, dated September 22, 2016, issued by OMNOVA Solutions Inc. | |
OMNOVA SOLUTIONS INC. | ||
By: | /s/ James C. LeMay | |
Name: | James C. LeMay | |
Title: | Senior Vice President, Corporate Development; General Counsel | |
Date: | September 22, 2016 |
Exhibit Number | Description | |
99.1 | Press Release, dated September 22, 2016, issued by OMNOVA Solutions Inc. |
• | Earnings per diluted share (EPS) in the third quarter of 2016 grew to $0.10, exceeding the $0.01 EPS in the third quarter of 2015. Adjusted Earnings Per Diluted Share in the third quarter expanded to $0.14, compared to $0.13 last year, marking the sixth consecutive quarter of year-over-year improvement. Both EPS and Adjusted EPS for the third quarter of 2016 were negatively impacted by approximately $0.03, due to country-wide labor strikes in France earlier in the quarter. |
• | Segment operating profit margins were 10.8%, compared to 6.0% in the third quarter of 2015. Adjusted Segment Operating Profit margins grew to 11.0% versus 10.1% last year. (See Tables A and B.) |
• | Strong earnings and cash flow led to the continued reduction in net leverage as net debt to trailing twelve month Adjusted EBITDA improved to 3.5x, compared to 3.8x at the end of last year’s third quarter. (See Tables E and F.) |
• | During the quarter, the Company successfully completed a refinancing, which will lower costs, increase flexibility and extend maturities through 2023. |
• | After three quarters, the Company remains on track to deliver significant growth in Adjusted Diluted Earnings Per Share for fiscal year 2016, driven by cost reductions, margin expansion, improved mix and accelerated growth in key specialty businesses. |
Three Months Ended | Nine Months Ended | ||||||||||||||
August 31 | August 31 | ||||||||||||||
(In millions) | 2016 | 2015 | 2016 | 2015 | |||||||||||
Net Sales | |||||||||||||||
Performance Chemicals | |||||||||||||||
Performance Materials | $ | 71.5 | $ | 83.0 | $ | 215.5 | $ | 252.9 | |||||||
Specialty Chemicals | 72.0 | 70.6 | 200.0 | 214.1 | |||||||||||
Total Performance Chemicals | $ | 143.5 | $ | 153.6 | $ | 415.5 | $ | 467.0 | |||||||
Engineered Surfaces | |||||||||||||||
Coated Fabrics | $ | 17.1 | $ | 21.7 | $ | 54.5 | $ | 65.9 | |||||||
Laminates and Performance Films | 35.0 | 35.6 | 102.9 | 105.1 | |||||||||||
Total Engineered Surfaces | $ | 52.1 | $ | 57.3 | $ | 157.4 | $ | 171.0 | |||||||
Total Net Sales | $ | 195.6 | $ | 210.9 | $ | 572.9 | $ | 638.0 | |||||||
Segment Operating Profit | |||||||||||||||
Performance Chemicals | $ | 17.3 | $ | 7.5 | $ | 42.4 | $ | 27.4 | |||||||
Engineered Surfaces | 3.9 | 5.2 | 13.8 | 14.2 | |||||||||||
Interest expense | (5.9 | ) | (6.8 | ) | (17.4 | ) | (20.5 | ) | |||||||
Corporate expense | (6.6 | ) | (6.0 | ) | (20.9 | ) | (18.7 | ) | |||||||
Shareholder activist costs | — | — | — | (1.9 | ) | ||||||||||
Operational, administrative, and other improvement costs | — | — | .4 | (.4 | ) | ||||||||||
Asset impairment | — | — | — | (.6 | ) | ||||||||||
Acquisition and integration related expense | (.4 | ) | — | (.4 | ) | (.4 | ) | ||||||||
Deferred financing fees write-off | (1.7 | ) | — | (1.7 | ) | — | |||||||||
Income (Loss) From Continuing Operations Before Income Taxes | 6.6 | (.1 | ) | 16.2 | (.9 | ) | |||||||||
Income tax expense (benefit) | 1.9 | (.5 | ) | 5.4 | (1.1 | ) | |||||||||
Income from continuing operations | 4.7 | .4 | 10.8 | .2 | |||||||||||
Discontinued operations, net of tax | — | — | — | .9 | |||||||||||
Net Income | $ | 4.7 | $ | .4 | $ | 10.8 | $ | 1.1 | |||||||
Depreciation and amortization | $ | 6.8 | $ | 9.8 | $ | 23.5 | $ | 23.9 | |||||||
Capital expenditures | $ | 5.8 | $ | 4.8 | $ | 16.5 | $ | 15.3 |
OMNOVA SOLUTIONS INC. | ||||||||||||||||||||
Non-GAAP and other Financial Matters (Continued) | ||||||||||||||||||||
Three Months Ended August 31, 2016 | ||||||||||||||||||||
Table A | ||||||||||||||||||||
(In millions except per share data) | Performance Chemicals | Engineered Surfaces | Combined Segments | Corporate | Consolidated | |||||||||||||||
Sales | $ | 143.5 | $ | 52.1 | $ | 195.6 | $ | — | $ | 195.6 | ||||||||||
Segment Operating Profit / Corporate Expense | $ | 17.3 | $ | 3.9 | $ | 21.2 | $ | (8.7 | ) | $ | 12.5 | |||||||||
Interest Expense | — | — | — | (5.9 | ) | (5.9 | ) | |||||||||||||
Income (loss) From Continuing Operations Before Income Taxes | $ | 17.3 | $ | 3.9 | $ | 21.2 | $ | (14.6 | ) | $ | 6.6 | |||||||||
Management Excluded Items | ||||||||||||||||||||
Restructuring and severance | .2 | .2 | .4 | — | .4 | |||||||||||||||
Asset impairment, facility closure costs and other | .6 | .3 | .9 | .1 | 1.0 | |||||||||||||||
Deferred Financing Fees written-off | — | — | — | 1.7 | 1.7 | |||||||||||||||
Acquisition and integration related expense | — | — | — | .4 | .4 | |||||||||||||||
Vacation policy change | (.6 | ) | (.3 | ) | (.9 | ) | (.1 | ) | (1.0 | ) | ||||||||||
Subtotal for Management Excluded Items | .2 | .2 | .4 | 2.1 | 2.5 | |||||||||||||||
Adjusted Segment Operating Profit / Corporate Expense from Continuing Operations before Income Taxes | $ | 17.5 | $ | 4.1 | $ | 21.6 | $ | (12.5 | ) | $ | 9.1 | |||||||||
Tax Expense (30% rate)* | (2.7 | ) | ||||||||||||||||||
Adjusted Income From Continuing Operations | $ | 6.4 | ||||||||||||||||||
Adjusted Diluted Earnings Per Share from Adjusted Income from Continuing Operations | $ | 0.14 | ||||||||||||||||||
*Tax rate is based on the Company's estimated normalized annual effective tax rate | ||||||||||||||||||||
Adjusted segment operating profit from continuing operations as a % of sales | 12.2 | % | 7.9 | % | 11.0 | % | ||||||||||||||
Segment / Corporate Capital Expenditures | $ | 3.5 | $ | 1.8 | $ | 5.3 | $ | 0.5 | $ | 5.8 | ||||||||||
Adjusted segment operating profit / corporate expense from continuing operations before income taxes | $ | 17.5 | $ | 4.1 | $ | 21.6 | $ | (12.5 | ) | $ | 9.1 | |||||||||
Unallocated Corporate Interest Expense | — | — | — | 5.9 | 5.9 | |||||||||||||||
Segment / Consolidated Adjusted EBIT | $ | 17.5 | $ | 4.1 | $ | 21.6 | $ | (6.6 | ) | $ | 15.0 | |||||||||
Depreciation and Amortization excluding accelerated depreciation | 5.1 | 1.6 | 6.7 | 0.1 | 6.8 | |||||||||||||||
Segment / Consolidated Adjusted EBITDA | $ | 22.6 | $ | 5.7 | $ | 28.3 | $ | (6.5 | ) | $ | 21.8 | |||||||||
Adjusted EBITDA as a % of sales | 15.7 | % | 10.9 | % | 14.5 | % | 11.1 | % |
OMNOVA SOLUTIONS INC. | ||||||||||||||||||||
Non-GAAP and other Financial Matters (Continued) | ||||||||||||||||||||
Three months ended August 31, 2015 | ||||||||||||||||||||
Table B | ||||||||||||||||||||
(In millions except per share data) | Performance Chemicals | Engineered Surfaces | Combined Segments | Corporate | Consolidated | |||||||||||||||
Sales | $ | 153.6 | $ | 57.3 | $ | 210.9 | $ | — | $ | 210.9 | ||||||||||
Segment Operating Profit / Corporate Expense | $ | 7.5 | $ | 5.2 | $ | 12.7 | $ | (6.0 | ) | $ | 6.7 | |||||||||
Interest Expense | — | — | — | (6.8 | ) | (6.8 | ) | |||||||||||||
Income (loss) From Continuing Operations Before Income Taxes | $ | 7.5 | $ | 5.2 | $ | 12.7 | $ | (12.8 | ) | $ | (.1 | ) | ||||||||
Management Excluded Items | ||||||||||||||||||||
Restructuring and severance | 3.1 | — | 3.1 | .1 | 3.2 | |||||||||||||||
Accelerated depreciation on production transfer | 2.9 | — | 2.9 | — | 2.9 | |||||||||||||||
Operational improvements costs | 1.6 | — | 1.6 | — | 1.6 | |||||||||||||||
Asset impairment, facility closure costs and other | — | .9 | .9 | — | .9 | |||||||||||||||
Subtotal for Management Excluded Items | 7.6 | .9 | 8.5 | .1 | 8.6 | |||||||||||||||
Adjusted Segment Operating Profit / Corporate Expense from Continuing Operations before Income Taxes | $ | 15.1 | $ | 6.1 | $ | 21.2 | $ | (12.7 | ) | $ | 8.5 | |||||||||
Tax Expense (30% rate)* | — | (2.6 | ) | |||||||||||||||||
Adjusted Income From Continuing Operations | — | $ | 5.9 | |||||||||||||||||
Adjusted Diluted Earnings Per Share from Adjusted Income from Continuing Operations | — | $ | 0.13 | |||||||||||||||||
*Tax rate is based on the Company's estimated normalized annual effective tax rate | ||||||||||||||||||||
Adjusted segment operating profit from continuing operations as a % of sales | 9.8 | % | 10.6 | % | 10.1 | % | ||||||||||||||
Segment / Corporate Capital Expenditures | $ | 2.6 | $ | 1.7 | $ | 4.3 | $ | .5 | $ | 4.8 | ||||||||||
Adjusted segment operating profit / corporate expense from continuing operations before income taxes | $ | 15.1 | $ | 6.1 | $ | 21.2 | $ | (12.7 | ) | $ | 8.5 | |||||||||
Unallocated Corporate Interest Expense | — | — | — | 6.8 | 6.8 | |||||||||||||||
Segment / Consolidated Adjusted EBIT | 15.1 | 6.1 | 21.2 | (5.9 | ) | 15.3 | ||||||||||||||
Depreciation and Amortization excluding accelerated depreciation | 5.2 | 1.4 | 6.8 | 0.3 | 6.9 | |||||||||||||||
Segment / Consolidated Adjusted EBITDA | $ | 20.3 | $ | 7.5 | $ | 28.0 | $ | (5.6 | ) | $ | 22.2 | |||||||||
Adjusted EBITDA as a % of sales | 13.2 | % | 13.1 | % | 13.3 | % | 10.5 | % |
OMNOVA SOLUTIONS INC. | ||||||||||||||||||||
Non-GAAP and other Financial Matters (Continued) | ||||||||||||||||||||
Nine Months Ended August 31, 2016 | ||||||||||||||||||||
Table C | ||||||||||||||||||||
(In millions except per share data) | Performance Chemicals | Engineered Surfaces | Combined Segments | Corporate | Consolidated | |||||||||||||||
Sales | $ | 415.5 | $ | 157.4 | $ | 572.9 | $ | — | $ | 572.9 | ||||||||||
Segment Operating Profit / Corporate Expense | $ | 42.4 | $ | 13.8 | $ | 56.2 | $ | (22.6 | ) | $ | 33.6 | |||||||||
Interest Expense | — | — | — | (17.4 | ) | (17.4 | ) | |||||||||||||
Income (loss) From Continuing Operations Before Income Taxes | 42.4 | 13.8 | 56.2 | (40.0 | ) | 16.2 | ||||||||||||||
Management Excluded Items | ||||||||||||||||||||
Restructuring and severance | 2.3 | .7 | 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 | 1.7 | .4 | 2.1 | .1 | 2.2 | |||||||||||||||
Deferred Financing Fees written-off | — | — | — | 1.7 | 1.7 | |||||||||||||||
Corporate Headquarters relocation costs | — | — | — | (.2 | ) | (.2 | ) | |||||||||||||
Acquisition and integration related expense | — | — | — | .4 | .4 | |||||||||||||||
Vacation policy change | (1.3 | ) | (1.0 | ) | (2.3 | ) | (.6 | ) | (2.9 | ) | ||||||||||
Subtotal for Management Excluded Items | 5.3 | .1 | 5.4 | 1.5 | 6.9 | |||||||||||||||
Adjusted Segment Operating Profit / Corporate Expense from Continuing Operations before Income Taxes | $ | 47.7 | $ | 13.9 | 61.6 | $ | (38.5 | ) | $ | 23.1 | ||||||||||
Tax Expense (30% rate)* | (6.9 | ) | ||||||||||||||||||
Adjusted Income From Continuing Operations | $ | 16.2 | ||||||||||||||||||
Adjusted Diluted Earnings Per Share from Adjusted Income from Continuing Operations | $ | 0.36 | ||||||||||||||||||
*Tax rate is based on the Company's estimated normalized annual effective tax rate | ||||||||||||||||||||
Adjusted segment operating profit from continuing operations as a % of sales | 11.5 | % | 8.8 | % | 10.8 | % | ||||||||||||||
Segment / Corporate Capital Expenditures | $ | 9.7 | $ | 5.1 | $ | 14.8 | $ | 1.7 | $ | 16.5 | ||||||||||
Adjusted segment operating profit / corporate expense from continuing operations before income taxes | $ | 47.7 | $ | 13.9 | $ | 61.6 | $ | (38.5 | ) | $ | 23.1 | |||||||||
Unallocated Corporate Interest Expense | — | — | — | 17.4 | 17.4 | |||||||||||||||
Segment / Consolidated Adjusted EBIT | 47.7 | 13.9 | 61.6 | (21.1 | ) | 40.5 | ||||||||||||||
Depreciation and Amortization excluding accelerated depreciation | 14.9 | 4.7 | 19.6 | 0.9 | 20.5 | |||||||||||||||
Segment / Consolidated Adjusted EBITDA | $ | 62.6 | $ | 18.6 | $ | 81.2 | $ | (20.2 | ) | $ | 61.0 | |||||||||
Adjusted EBITDA as a % of sales | 15.1 | % | 11.8 | % | 14.2 | % | 10.6 | % |
OMNOVA SOLUTIONS INC. | ||||||||||||||||||||
Non-GAAP and other Financial Matters (Continued) | ||||||||||||||||||||
Nine Months Ended August 31, 2015 | ||||||||||||||||||||
Table D | ||||||||||||||||||||
(In millions except per share data) | Performance Chemicals | Engineered Surfaces | Combined Segments | Corporate | Consolidated | |||||||||||||||
Sales | $ | 467.0 | $ | 171.0 | $ | 638.0 | $ | — | $ | 638.0 | ||||||||||
Segment Operating Profit / Corporate Expense | $ | 27.4 | $ | 14.2 | $ | 41.6 | $ | (22.0 | ) | $ | 19.6 | |||||||||
Interest Expense | — | — | — | (20.5 | ) | (20.5 | ) | |||||||||||||
Income (loss) From Continuing Operations Before Income Taxes | 27.4 | 14.2 | 41.6 | (42.5 | ) | (.9 | ) | |||||||||||||
Management Excluded Items | ||||||||||||||||||||
Restructuring and severance | 3.6 | .5 | 4.1 | .1 | 4.2 | |||||||||||||||
Accelerated depreciation on production transfer | 2.9 | — | 2.9 | — | 2.9 | |||||||||||||||
Operational Improvements costs | 4.1 | — | 4.1 | .4 | 4.5 | |||||||||||||||
Asset impairment, facility closure costs and other | — | 1.3 | 1.3 | .6 | 1.9 | |||||||||||||||
Environmental costs | — | .2 | .2 | — | .2 | |||||||||||||||
Shareholder activist costs | — | — | — | 1.9 | 1.9 | |||||||||||||||
Acquisition and integration related expense | — | — | — | .4 | .4 | |||||||||||||||
Subtotal for Management Excluded Items | 10.6 | 2.0 | 12.6 | 3.4 | 16.0 | |||||||||||||||
Adjusted Segment Operating Profit / Corporate Expense from Continuing Operations before Income Taxes | $ | 38.0 | $ | 16.2 | $ | 54.2 | $ | (39.1 | ) | $ | 15.1 | |||||||||
Tax Expense (30% rate)* | (4.5 | ) | ||||||||||||||||||
Adjusted Income From Continuing Operations | $ | 10.6 | ||||||||||||||||||
Adjusted Diluted Earnings Per Share from Adjusted Income from Continuing Operations | $ | 0.23 | ||||||||||||||||||
*Tax rate is based on the Company's estimated normalized annual effective tax rate | ||||||||||||||||||||
Adjusted segment operating profit from continuing operations as a % of sales | 8.1 | % | 9.5 | % | 8.5 | % | ||||||||||||||
Segment / Corporate Capital Expenditures | $ | 7.7 | $ | 5.7 | $ | 13.4 | $ | 1.9 | $ | 15.3 | ||||||||||
Adjusted segment operating profit / corporate expense from continuing operations before income taxes | $ | 38.0 | $ | 16.2 | $ | 54.2 | $ | (39.1 | ) | $ | 15.1 | |||||||||
Unallocated Corporate Interest Expense | — | — | — | 20.5 | 20.5 | |||||||||||||||
Segment / Consolidated Adjusted EBIT | 38.0 | 16.2 | 54.2 | (18.6 | ) | 35.6 | ||||||||||||||
Depreciation and Amortization excluding accelerated depreciation | 15.7 | 4.4 | 20.1 | .9 | 21.0 | |||||||||||||||
Segment / Consolidated Adjusted EBITDA | $ | 53.7 | $ | 20.6 | $ | 74.3 | $ | (17.7 | ) | $ | 56.6 | |||||||||
Adjusted EBITDA as a % of sales | 11.5 | % | 12.0 | % | 11.6 | % | 8.9 | % |
OMNOVA SOLUTIONS INC. | ||||||||||||||||||||
Non-GAAP and other Financial Matters (Continued) | ||||||||||||||||||||
Trailing Twelve Months Ended August 31, 2016 | ||||||||||||||||||||
Table E | ||||||||||||||||||||
(In millions except per share data) | Performance Chemicals | Engineered Surfaces | Combined Segments | Corporate | Consolidated | |||||||||||||||
Sales | $ | 556.6 | $ | 216.3 | $ | 772.9 | $ | — | $ | 772.9 | ||||||||||
Segment Operating Profit / Corporate Expense | $ | 30.9 | $ | 18.5 | $ | 49.4 | $ | (28.1 | ) | $ | 21.3 | |||||||||
Interest Expense | — | — | — | (25.2 | ) | (25.2 | ) | |||||||||||||
Income (loss) From Continuing Operations Before Income Taxes | $ | 30.9 | $ | 18.5 | $ | 49.4 | $ | (53.3 | ) | $ | (3.9 | ) | ||||||||
Management Excluded Items | ||||||||||||||||||||
Restructuring and severance | 3.0 | 1.7 | 4.7 | 0.1 | 4.8 | |||||||||||||||
Accelerated depreciation on production transfer | 5.9 | — | 5.9 | — | 5.9 | |||||||||||||||
Operational Improvements costs | 0.5 | — | 0.5 | — | 0.5 | |||||||||||||||
Asset impairment, facility closure costs and other | 20.1 | 0.7 | 20.8 | — | 20.8 | |||||||||||||||
Environmental costs | 2.8 | — | 2.8 | — | 2.8 | |||||||||||||||
Deferred Financing Fees written-off | — | — | — | 2.4 | 2.4 | |||||||||||||||
Corporate Headquarters relocation costs | — | — | — | (0.2 | ) | (0.2 | ) | |||||||||||||
Other financing costs | — | — | — | 1.0 | 1.0 | |||||||||||||||
Acquisition and integration related expense | — | — | — | 0.4 | 0.4 | |||||||||||||||
Vacation policy change | (1.4 | ) | (1.0 | ) | (2.4 | ) | (0.6 | ) | (3.0 | ) | ||||||||||
Subtotal for Management Excluded Items | 30.9 | 1.4 | 32.3 | 3.1 | 35.4 | |||||||||||||||
Adjusted Segment Operating Profit / Corporate Expense from Continuing Operations before Income Taxes | $ | 61.8 | $ | 19.9 | $ | 81.7 | $ | (50.2 | ) | $ | 31.5 | |||||||||
Tax Expense (30% rate)* | (9.5 | ) | ||||||||||||||||||
Adjusted Income From Continuing Operations | $ | 22.0 | ||||||||||||||||||
Adjusted Diluted Earnings Per Share from Adjusted Income from Continuing Operations | $ | 0.49 | ||||||||||||||||||
*Tax rate is based on the Company's estimated normalized annual effective tax rate. | ||||||||||||||||||||
Adjusted segment operating profit from continuing operations as a % of sales | 11.1 | % | 9.2 | % | 10.6 | % | ||||||||||||||
Segment / Corporate Capital Expenditures | $ | 14.6 | $ | 7.8 | $ | 22.4 | $ | 2.7 | $ | 25.1 | ||||||||||
Adjusted segment operating profit / corporate expense from continuing operations before income taxes | $ | 61.8 | $ | 19.9 | $ | 81.7 | $ | (50.2 | ) | $ | 31.5 | |||||||||
Unallocated Corporate Interest (Excluding Debt Premium) | — | — | — | 24.2 | 24.2 | |||||||||||||||
Segment / Consolidated Adjusted EBIT | 61.8 | 19.9 | 81.7 | (26.0 | ) | 55.7 | ||||||||||||||
Depreciation and Amortization excluding accelerated depreciation | 20.3 | 6.3 | 26.6 | 1.1 | 27.7 | |||||||||||||||
Segment / Consolidated Adjusted EBITDA | $ | 82.1 | $ | 26.2 | $ | 108.3 | $ | (24.9 | ) | $ | 83.4 | |||||||||
Adjusted EBITDA as a % of sales | 14.8 | % | 12.1 | % | 14.0 | % | 10.8 | % | ||||||||||||
Net Leverage | ||||||||||||||||||||
Total short and long-term debt (excluding OID of $3.5M) | $ | 517.0 | ||||||||||||||||||
Less Cash and restricted cash | (226.2 | ) | ||||||||||||||||||
Net Debt (Debt less Cash and restricted cash) | $ | 290.8 | ||||||||||||||||||
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) | ||||||||||||||||||||
Trailing Twelve Months Ended August 31, 2015 | ||||||||||||||||||||
Table F | ||||||||||||||||||||
(In millions except per share data) | Performance Chemicals | Engineered Surfaces | Combined Segments | Corporate | Consolidated | |||||||||||||||
Sales | $ | 648.4 | $ | 232.6 | $ | 881.0 | $ | — | $ | 881.0 | ||||||||||
Segment Operating Profit / Corporate Expense | $ | 36.5 | $ | 21.2 | $ | 57.7 | $ | (26.6 | ) | $ | 31.1 | |||||||||
Interest Expense | — | — | — | (30.1 | ) | $ | (30.1 | ) | ||||||||||||
Income (loss) From Continuing Operations Before Income Taxes | $ | 36.5 | $ | 21.2 | 57.7 | $ | (56.7 | ) | $ | 1.0 | ||||||||||
Management Excluded Items | ||||||||||||||||||||
Restructuring and severance | 3.7 | 0.6 | 4.3 | 0.1 | 4.4 | |||||||||||||||
Accelerated depreciation on production transfer | 3.3 | — | 3.3 | — | 3.3 | |||||||||||||||
Operational Improvements costs | 4.1 | — | 4.1 | 0.4 | 4.5 | |||||||||||||||
Asset impairment, facility closure costs and other | — | 1.2 | 1.2 | 0.6 | 1.8 | |||||||||||||||
Environmental costs | 1.0 | 0.2 | 1.2 | — | 1.2 | |||||||||||||||
Gain on settlement of note receivable | — | (0.4 | ) | (0.4 | ) | — | (0.4 | ) | ||||||||||||
Deferred Financing Fees written-off | — | — | — | 0.8 | 0.8 | |||||||||||||||
Corporate Headquarters relocation costs | — | — | — | 0.2 | 0.2 | |||||||||||||||
Other financing costs | — | — | — | 2.4 | 2.4 | |||||||||||||||
Shareholder activist costs | — | — | — | 1.9 | 1.9 | |||||||||||||||
Acquisition and integration related expense | — | — | — | 0.4 | 0.4 | |||||||||||||||
Subtotal for Management Excluded Items | 12.1 | 1.6 | 13.7 | 6.8 | 20.5 | |||||||||||||||
Adjusted Segment Operating Profit / Corporate Expense from Continuing Operations before Income Taxes | $ | 48.6 | $ | 22.8 | 71.4 | $ | (49.9 | ) | $ | 21.5 | ||||||||||
Tax Expense (30% rate)* | (6.4 | ) | ||||||||||||||||||
Adjusted Income From Continuing Operations | $ | 15.1 | ||||||||||||||||||
Adjusted Diluted Earnings Per Share from Adjusted Income from Continuing Operations | $ | 0.34 | ||||||||||||||||||
*Tax rate is based on the Company's estimated normalized annual effective tax rate. | ||||||||||||||||||||
Adjusted segment operating profit from continuing operations as a % of sales | 7.5 | % | 9.8 | % | 8.1 | % | ||||||||||||||
Segment / Corporate Capital Expenditures | $ | 15.1 | $ | 7.7 | $ | 22.8 | $ | 2.5 | $ | 25.3 | ||||||||||
Adjusted segment operating profit / corporate expense from continuing operations before income taxes | $ | 48.6 | $ | 22.8 | $ | 71.4 | $ | (49.9 | ) | $ | 21.5 | |||||||||
Unallocated Corporate Interest Expense | — | — | — | 30.1 | 30.1 | |||||||||||||||
Segment / Consolidated Adjusted EBIT | 48.6 | 22.8 | 71.4 | (19.8 | ) | 51.6 | ||||||||||||||
Depreciation and Amortization excluding accelerated depreciation | 22.0 | 5.9 | 27.9 | 1.1 | 29.0 | |||||||||||||||
Segment / Consolidated Adjusted EBITDA | $ | 70.6 | $ | 28.7 | $ | 99.3 | $ | (18.7 | ) | $ | 80.6 | |||||||||
Adjusted EBITDA as a % of sales | 10.9 | % | 12.3 | % | 11.3 | % | 9.1 | % | ||||||||||||
Net Leverage | ||||||||||||||||||||
Total short and long-term debt | $ | 408.2 | ||||||||||||||||||
Less Cash and restricted cash | (101.6 | ) | ||||||||||||||||||
Net Debt (Debt less Cash and restricted cash) | $ | 306.6 | ||||||||||||||||||
Net Leverage Ratio** | 3.8 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) | |||||||||||
Nine Months Ended August 31,2016 | |||||||||||
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 | 2016 | 2015 | 2014 | ||||||||
Adjusted Income from Continuing Operations | $ | 22.0 | $ | 16.5 | $ | 12.9 | |||||
Interest add back excluding debt premium | 24.2 | 27.3 | 30.9 | ||||||||
Tax effect of interest add back* | (7.3 | ) | (8.2 | ) | (9.3 | ) | |||||
Total Adjusted Net Operating Profit after Tax | $ | 38.9 | $ | 35.6 | $ | 34.5 | |||||
Debt and Equity | |||||||||||
Short-term Debt | $ | 4.0 | $ | 2.5 | $ | 5.6 | |||||
Senior Notes | 150.0 | 150.0 | 200.0 | ||||||||
Long-term Debt | 359.5 | 204.2 | 206.4 | ||||||||
Total Shareholders' Equity | 130.4 | 109.1 | 150.5 | ||||||||
Total Debt and Equity | $ | 643.9 | $ | 465.8 | $ | 562.5 | |||||
Adjusted Return on Invested Capital | 6.0 | % | 7.6 | % | 6.1 | % | |||||
*Tax rate is based on the Company's estimated normalized annual effective tax rate |
OMNOVA SOLUTIONS INC. | |||||||||||||||
Consolidated Statements of Operations | |||||||||||||||
(In Millions, Except Per Share Data) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
August 31 | August 31 | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net Sales | $ | 195.6 | $ | 210.9 | $ | 572.9 | $ | 638.0 | |||||||
Cost of goods sold | 143.5 | 159.4 | 418.1 | 491.9 | |||||||||||
Gross Profit | 52.1 | 51.5 | 154.8 | 146.1 | |||||||||||
Selling, general and administrative | 29.3 | 29.9 | 91.0 | 91.7 | |||||||||||
Depreciation and amortization | 6.8 | 9.8 | 23.5 | 23.9 | |||||||||||
Asset impairment | — | .5 | .4 | 1.1 | |||||||||||
Restructuring and severance | .4 | 3.4 | 3.1 | 4.5 | |||||||||||
Interest expense | 5.9 | 6.8 | 17.4 | 20.5 | |||||||||||
Deferred financing write-off costs | 1.7 | — | 1.7 | — | |||||||||||
Acquisition and integration related expense | .4 | — | .4 | .4 | |||||||||||
Other expense, net | 1.0 | 1.2 | 1.0 | 4.9 | |||||||||||
45.5 | 51.6 | 138.6 | 147.0 | ||||||||||||
Income (Loss) From Continuing Operations Before Income Taxes | 6.6 | (.1 | ) | 16.2 | (.9 | ) | |||||||||
Income tax expense (benefit) | 1.9 | (.5 | ) | 5.4 | (1.1 | ) | |||||||||
Income From Continuing Operations | 4.7 | .4 | 10.8 | .2 | |||||||||||
Discontinued Operations | |||||||||||||||
Total discontinued operations | — | — | — | .9 | |||||||||||
Net Income | $ | 4.7 | $ | .4 | $ | 10.8 | $ | 1.1 | |||||||
Income Per Share - Basic | |||||||||||||||
Income per share - continuing operations | $ | .11 | $ | .01 | $ | .25 | $ | — | |||||||
Income per share - discontinued operations | — | — | — | .02 | |||||||||||
Basic Income Per Share | $ | .11 | $ | .01 | $ | .25 | $ | .02 | |||||||
Income Per Share - Diluted | |||||||||||||||
Income per share - continuing operations | $ | .10 | $ | .01 | $ | .24 | $ | — | |||||||
Income per share - discontinued operations | — | — | — | .02 | |||||||||||
Diluted Income Per Share | $ | .10 | $ | .01 | $ | .24 | $ | .02 | |||||||
Weighted average shares outstanding - Basic | 44.1 | 45.2 | 44.0 | 45.7 | |||||||||||
Weighted average shares outstanding - Diluted | 44.7 | 45.8 | 44.4 | 46.2 |
OMNOVA SOLUTIONS INC. | |||||||
Consolidated Balance Sheets | |||||||
(In Millions, Except Per Share Data) | |||||||
August 31, | November 30, | ||||||
2016 | 2015 | ||||||
(Unaudited) | (Audited) | ||||||
ASSETS: | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 70.3 | $ | 44.9 | |||
Restricted cash | 155.9 | — | |||||
Accounts receivable, net | 105.2 | 105.3 | |||||
Inventories | 80.2 | 81.9 | |||||
Prepaid expenses and other | 19.6 | 18.8 | |||||
Total Current Assets | 431.2 | 250.9 | |||||
Property, plant and equipment, net | 212.7 | 214.9 | |||||
Trademarks and other intangible assets, net | 58.7 | 60.9 | |||||
Goodwill | 82.0 | 80.8 | |||||
Deferred income taxes | 66.8 | 67.8 | |||||
Deferred financing fees | 7.2 | 4.7 | |||||
Other assets | 3.7 | 7.2 | |||||
Total Assets | $ | 862.3 | $ | 687.2 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY: | |||||||
Current Liabilities | |||||||
Amounts due banks | $ | 4.0 | $ | 2.5 | |||
Senior notes | 150.0 | — | |||||
Accounts payable | 75.5 | 72.0 | |||||
Accrued payroll and personal property taxes | 25.4 | 25.0 | |||||
Employee benefit obligations | 3.7 | 3.2 | |||||
Accrued interest | 4.3 | 1.1 | |||||
Other current liabilities | 2.7 | 8.7 | |||||
Total Current Liabilities | 265.6 | 112.5 | |||||
Senior notes | — | 150.0 | |||||
Long-term debt - other | 359.5 | 204.2 | |||||
Postretirement benefits other than pensions | 6.7 | 6.9 | |||||
Pension liabilities | 75.4 | 84.9 | |||||
Deferred income taxes | 13.3 | 9.5 | |||||
Other liabilities | 11.4 | 10.1 | |||||
Total Liabilities | 731.9 | 578.1 | |||||
Shareholders’ Equity | |||||||
Common stock - $0.10 par value; 135 million shares authorized, 48.3 million shares issued as of August 31, 2016 and November 30, 2015 | 4.8 | 4.8 | |||||
Additional contributed capital | 339.3 | 339.7 | |||||
Retained deficit | (63.1 | ) | (73.9 | ) | |||
Treasury stock at cost; 3.2 million and 3.5 million shares at August 31, 2016 and November 30, 2015 | (23.1 | ) | (25.6 | ) | |||
Accumulated other comprehensive loss | (127.5 | ) | (135.9 | ) | |||
Total Shareholders’ Equity | 130.4 | 109.1 | |||||
Total Liabilities and Shareholders’ Equity | $ | 862.3 | $ | 687.2 |
OMNOVA SOLUTIONS INC. | |||||||||||||||
Consolidated Statements of Cash Flows | |||||||||||||||
(Dollars in Millions) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
August 31 | August 31 | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Operating Activities | |||||||||||||||
Net income | $ | 4.7 | $ | .4 | $ | 10.8 | $ | 1.1 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||
Depreciation and amortization | 6.8 | 9.8 | 23.5 | 23.9 | |||||||||||
Impairment of long-lived assets | — | .5 | .4 | 1.1 | |||||||||||
Amortization of deferred financing fees | 2.2 | .6 | 3.1 | 1.7 | |||||||||||
Non-cash stock compensation expense | .6 | .5 | 1.8 | 1.7 | |||||||||||
Provision for doubtful accounts | — | .1 | — | .2 | |||||||||||
Provision for obsolete inventories | (.4 | ) | (.3 | ) | — | .3 | |||||||||
Other | — | — | (.7 | ) | — | ||||||||||
Changes in operating assets and liabilities: | |||||||||||||||
Accounts receivable | 3.5 | 13.3 | .6 | 13.9 | |||||||||||
Inventories | 3.3 | (2.2 | ) | 2.4 | (4.2 | ) | |||||||||
Other current assets | 6.6 | 1.6 | (1.8 | ) | 9.2 | ||||||||||
Current liabilities | 4.8 | 8.6 | 11.0 | 4.0 | |||||||||||
Other non-current assets | (4.8 | ) | (.8 | ) | (7.1 | ) | (3.2 | ) | |||||||
Other non-current liabilities | .1 | (.8 | ) | 3.2 | (7.4 | ) | |||||||||
Contributions to defined benefit plan | (5.8 | ) | (4.0 | ) | (6.2 | ) | (4.5 | ) | |||||||
Net Cash Provided By Operating Activities | 21.6 | 27.3 | 41.0 | 37.8 | |||||||||||
Investing Activities | |||||||||||||||
Capital expenditures | (5.8 | ) | (4.8 | ) | (16.5 | ) | (15.3 | ) | |||||||
Proceeds from asset sales | — | — | 5.3 | — | |||||||||||
Acquisition of business | — | (5.0 | ) | — | (5.0 | ) | |||||||||
Other | — | — | .1 | — | |||||||||||
Net Cash Used In Investing Activities | (5.8 | ) | (9.8 | ) | (11.1 | ) | (20.3 | ) | |||||||
Financing Activities | |||||||||||||||
Proceeds from borrowings | 346.5 | — | 346.5 | — | |||||||||||
Repayment of debt obligations | (188.7 | ) | (.6 | ) | (190.0 | ) | (1.9 | ) | |||||||
Short-term debt borrowings | — | 3.3 | — | 12.3 | |||||||||||
Short-term debt payments | — | (3.6 | ) | — | (14.4 | ) | |||||||||
Payments for debt refinancing | (4.2 | ) | — | (4.2 | ) | — | |||||||||
Restricted cash | (155.9 | ) | — | (155.9 | ) | — | |||||||||
Purchase of treasury shares | (.5 | ) | (4.3 | ) | (.5 | ) | (12.2 | ) | |||||||
Net Cash Provided By (Used In) Financing Activities | (2.8 | ) | (5.2 | ) | (4.1 | ) | (16.2 | ) | |||||||
Effect of exchange rate changes on cash | (3.3 | ) | (1.6 | ) | (.4 | ) | 0.8 | ||||||||
Net Increase In Cash And Cash Equivalents | 9.7 | 10.7 | 25.4 | 2.1 | |||||||||||
Cash and cash equivalents at beginning of period | 60.6 | 90.9 | 44.9 | 99.5 | |||||||||||
Cash And Cash Equivalents At End Of Period | $ | 70.3 | $ | 101.6 | $ | 70.3 | $ | 101.6 |
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