OK
The Universal Selection Source:
Coatings Ingredients
Industry News

OMNOVA Solutions Reports Improved Results for Fiscal First Quarter 2009

Published on 2009-03-17. Author : SpecialChem

FAIRLAWN, Ohio -- OMNOVA Solutions Inc. reported a net loss of $0.1 million, or $0.00 per diluted share, for the first quarter ended February 28, 2009, compared to a net loss of $3.0 million, or $0.07 per diluted share, for the first quarter of 2008. Included in the first quarter of 2009 were restructuring, severance and other charges of $0.9 million.

Net sales decreased $30.4 million, or 15.9%, to $160.2 million, for the first quarter of 2009 compared to $190.6 million during the first quarter of 2008. The first quarter decrease was primarily the result of weaker volumes as customers took significant downtime to reduce inventories early in the quarter, which began December 1. Gross profit improved to $31.7 million, with margins of 19.8% in the first quarter of 2009, compared to $30.5 million and margins of 16.0%, in the first quarter of 2008. The margin improvement was due primarily to lower raw material costs.

"We are encouraged by our improved performance in the first quarter despite what was obviously a very challenging global economy," said Kevin McMullen, OMNOVA Solutions' Chairman and Chief Executive Officer. "Our first quarter is seasonally our weakest, and while we benefited from significant raw material cost declines, we also aggressively managed our controllable costs and cash flow to generate improved financial results and increased financial flexibility. Looking forward, though the economic environment remains difficult, there are a number of positive fundamental improvements occurring at OMNOVA which we expect will drive significant year-over-year improvement during the first half of 2009 in earnings and cash flow from operations, as well as substantial debt reduction," McMullen added.

Selling, general and administrative expense in the first quarter of 2009 fell to $23.0 million, compared to $25.1 million in the first quarter of 2008. Due to lower average interest rates, first quarter 2009 interest expense was $2.2 million, a decrease of $1.2 million as compared to the first quarter of 2008. The weighted average cost of borrowing during the first quarter of 2009 was 4.4%, a significant improvement from 7.2% in the first quarter of 2008.

Total debt of $174.1 million represents a reduction of $22.5 million as compared to February 28, 2008, and $14.2 million lower as compared to November 30, 2008. Debt is comprised primarily of a term loan facility with $143.5 million outstanding which matures in 2014 and a revolving asset-based credit facility with $26.0 million outstanding which matures in 2012. Unused and available borrowing capacity grew to $37.9 million under the Company's revolving asset-based credit facility at February 28, 2009.

EBITDA, as defined in the Company's borrowing agreements for the calculation of the net leverage ratio, was $7.2 million for the first quarter of 2009, compared to $6.5 million for the first quarter of 2008. EBITDA for the twelve months ended February 28, 2009 was $48.5 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 third consecutive quarter, ending at 3.4 on February 28, 2009, well under the loan covenant limit of 5.5. 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 first quarter of 2009 decreased 20.4%, to $94.6 million, compared to $118.9 million in the first quarter of 2008. The decrease was driven primarily by weaker market conditions, which led to volume decreases of $32.0 million, or 27%, partially offset by higher selling prices of $7.7 million. Segment operating profit was $7.8 million for the first quarter of 2009, up from $2.6 million for the first quarter of 2008. The year-over-year operating profit improvement was driven by lower raw material costs, which were partially offset by the lower volumes. Segment operating profit margin was 8.2% for the first quarter of 2009 as compared to 2.2% for the first quarter of 2008.

While volumes were weaker on a year-over-year basis, the daily sales run rate was equivalent to the fourth quarter of 2008. Additionally, late in the first quarter of 2009 the Company's industry leading paper coating technology won new business at two coated paper mills.

Decorative Products -- Net sales were $65.6 million during the first quarter of 2009, a decrease of $6.1 million, or 8.5%, compared to the first quarter of 2008. The decrease was due primarily to weaker markets. Price increases totaled $1.4 million, which were offset by lower U.S. and European volumes. The operating loss of $2.9 million for the first quarter of 2009 compares to an operating loss of $0.1 million for the first quarter of 2008, but was an improvement compared to the fourth quarter 2008 loss of $5.3 million. The first quarter 2009 operating loss was driven primarily by the lower volumes and restructuring and severance charges of $0.7 million.

Included in Decorative Products' results for the quarter are sales of $20.6 million from its Asian businesses, compared to $8.1 million from one month of consolidated Asian sales in the first quarter of 2008. The Asian businesses generated operating profit of $0.4 million during the first quarter of 2009 as compared to breakeven in last year's first quarter. This improvement was driven by lower raw material costs and reduced spending.

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 disposable blood pressure cuffs, as the Company enters new markets in consolidating industries.

Decorative Products has implemented cost reduction actions that will reduce 2009 costs by approximately $10 million annually through global personnel reductions and lower discretionary spending.

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.

About OMNOVA Solutions Inc.:

OMNOVA Solutions Inc. is a technology-based company with 2008 sales of $869 million and a current workforce of approximately 2,460 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.

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.

Source: OMNOVA Solutions Inc.


Halcyon Group 3rd R&D Innovation Summit
Back to Top