Share-Based Employee Compensation

3 Months Ended

Feb. 28, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Employee Compensation

Share-Based Employee Compensation

The OMNOVA Solutions Third Amended and Restated 1999 Equity and Performance Incentive Plan (the “Plan”) permits the Company to grant to officers, key employees and non-employee directors of the Company, incentives directly linked to the price of OMNOVA Solutions’ common stock. The Plan, by virtue of the three amendments approved by shareholders since the original plan was approved in 1999, authorizes up to 9.6 million shares of Company stock in the aggregate for a) awards of options to purchase shares of OMNOVA Solutions’ common stock, b) performance stock and performance units, c) restricted stock, d) deferred stock or e) appreciation rights. Shares used may be either newly issued shares or treasury shares or both. As of February 28, 2013, approximately 3.3 million shares of Company common stock remained available for grants under the Plan. All options granted under the Plan have been granted at exercise prices equal to the market value of the Company’s common stock on the date of grant. Additionally, the Plan provides that the term of any stock option granted under the Plan may not exceed 10 years.

Share-based compensation is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite service period (generally the vesting period).

For stock options, the fair value calculation is estimated using a Black-Scholes based option valuation model. For restricted stock grants, which consist of the Company’s common stock, the fair value is equal to the market price of the Company’s stock on the date of grant. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive equity awards, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made by the Company.

During the first three months of 2013, no stock options were issued, 17,750 stock options expired or were forfeited and 22,500 stock options were exercised.

During the first three months of 2013, 179,500 restricted shares were issued, 10,491 restricted shares vested and 3,950 shares were forfeited.

Compensation expense for all share-based payments including defined contribution plans, included in general and administrative expense, was $0.5 million during each of the first three months of 2013 and 2012.

As of February 28, 2013, there was $3.7 million of unrecognized compensation cost related to non-vested share-based compensation arrangements.

Cash received from stock options exercised was $0.1 million during the first quarter of 2013.