Form 8-K OMNOVA SOLUTIONS INC For: Apr 11
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E-mailSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): April 11, 2018
OMNOVA SOLUTIONS INC.
(Exact Name of Registrant as Specified in its Charter)
Ohio | 1-15147 | 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) | |||
Registrant’s telephone number, including area code: (216) 682-7000
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ | 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 7.01 | Regulation FD Disclosures |
Attached as Exhibit 99.1 hereto and incorporated by reference are presentation slides that will form the basis of investor presentations beginning on April 12, 2018. The presentation slides are also available on OMNOVA Solutions Inc.'s website at www.omnova.com.
The information contained in this Item 7.01, including the related information set forth in the Investor Presentation provided as an exhibit hereto and incorporated by reference herein, is being “furnished” and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise. The information in this Item 7.01 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or into any filing or other document pursuant to the Exchange Act, except as otherwise expressly stated in any such filing.
Item 9.01. | Financial Statements and Exhibits |
(c) Exhibits
Exhibit No. | Description | |
99.1 | ||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
OMNOVA SOLUTIONS INC. | ||
By: | /s/ Frank P. Esposito | |
Name: | Frank P. Esposito | |
Title: | Corporate Secretary and Investor Relations; Assistant General Counsel | |
Date: | April 11, 2018 | |
EXHIBIT INDEX
Exhibit No. | Description | |
99.1 | ||
NYSE LISTED: “OMN”
Global Innovator of Performance-Enhancing Chemistries
and Surfaces
Investor Presentation – First Quarter 2018
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
› Forward Looking Statements
Cautionary Statements
This presentation includes descriptions of OMNOVA's current business, operations, assets and other matters affecting the Company as well as "forward-looking statements" as defined by federal securities laws. All forward-looking statements by the Company,
including verbal statements, are intended to qualify for the protections afforded forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect management's current expectation, judgment, belief,
assumption, estimate or forecast about future events, circumstances or results and may address business conditions and prospects, strategy, capital structure, debt and cash levels, sales, profits, earnings, markets, products, technology, operations, customers,
raw materials, claims and litigation, financial condition, and accounting policies among other matters. Words such as, but not limited to, "will," "may," "should," "projects," "forecasts," "seeks," "believes," "expects," "anticipates," "estimates," "intends," "plans,"
"targets," "optimistic," "likely," "would," "could," "committed," and similar expressions or phrases identify forward-looking statements.
All descriptions of OMNOVA's current business, operations and assets, as well as all forward-looking statements, involve risks and uncertainties. Many risks and uncertainties are inherent in business generally. Other risks and uncertainties are more specific to
the Company's businesses and strategy, or to any new businesses the Company may enter into or acquire. There also may be risks and uncertainties not currently known to the Company. The occurrence of any such risks and uncertainties and the impact of
such occurrences is often not predictable or within the Company's control. Such impacts could adversely affect the Company's business, operations or assets as well as the Company's results and the value of your investment in the Company. In some cases,
such impact could be material. Certain risks and uncertainties facing the Company are described below or in the Company's Quarterly Report on Form 10-Q and Annual Report and the value of your investment in the Company on Form 10-K.
All written and verbal descriptions of OMNOVA's current business, operations and assets and all forward-looking statements attributable to the Company or any person acting on the Company's behalf are expressly qualified in their entirety by the risks,
uncertainties, and cautionary statements contained or referenced herein. All such descriptions and any forward-looking statement speak only as of the date on which such description or 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 such description or forward-looking statements whether as a result of new information, future events or otherwise.
The Company's actual results and the value of your investment in OMNOVA may differ, perhaps materially, from expectations due to a number of risks and uncertainties including, but not limited to: (1) the Company's exposure to general economic, business,
and industry conditions; (2) the risk of doing business in foreign countries and markets; (3) changes in raw material prices and availability; (4) the highly competitive markets the Company serves and continued consolidations among its competitors and customer
base; (5) extraordinary events such as natural disasters, political disruptions, terrorist attacks and acts of war; (6) extensive and increasing governmental regulation, including environmental, health and safety regulations; (7) the Company's failure to protect its
intellectual property or defend itself from intellectual property claims; (8) claims and litigation; (9) changes in accounting policies, standards, and interpretations; (10) the actions of activist shareholders; (11) the Company's inability to achieve or achieve in a timely
manner the objectives and benefits of cost reduction initiatives; (12) the Company's ability to develop and commercialize new products at competitive prices; (13) the Company's use of purchase orders rather than long-term contracts for most of its business; (14)
the disproportionate impact of certain product lines on the Company's operating profitability; (15) customer credit risk; (16) the Company's ability to identify and complete strategic transactions; (17) the Company’s ability to successfully integrate acquired
companies; (18) unanticipated capital expenditures; (19) risks associated with the use, production, storage, and transportation of chemicals; (20) information system failures and breaches in security; (21) continued increases in healthcare costs; (22) the
Company's ability retain or attract key employees; (23) the Company's ability to renew collective bargaining agreements with employees on acceptable terms and the risk of work stoppages; (24) the Company's contribution obligations under its U.S. pension plan;
(25) the Company's reliance on foreign financial institutions to hold some of its funds; (26) the effect of goodwill impairment charges; (27) the volatility in the market price of the Company’s common shares; (28) the Company's substantial debt position; (29) a
decision to incur additional debt; (30) the operational and financial restrictions contained in the Company's debt agreements; (31) the effects of a default under the Company's term loan or revolving credit facility; (32) the Company's ability to generate sufficient
cash to service its outstanding debt; and (33) the Company's subsidiaries' ability to provide the Company with cash.
OMNOVA Solutions provides greater detail regarding these risks and uncertainties in its 2017 Form 10-K and subsequent filings, which are available online at www.omnova.com and www.sec.gov.
OMNOVA Solutions Inc. is a global innovator of performance-enhancing chemistries and surfaces used in products for a variety of commercial, industrial and residential applications. As a strategic business-to-business supplier, OMNOVA provides The Science
in Better Brands, with emulsion polymers, specialty chemicals, and functional and decorative surfaces that deliver critical performance attributes to top brand-name, end-use products sold around the world. OMNOVA's sales for the trailing twelve months ended
February 28, 2018, were approximately $787 million. The Company has a global workforce of approximately 1,800 employees. Visit OMNOVA Solutions on the internet at www.omnova.com.
NON-GAAP FINANCIAL MEASURES
This presentation includes certain non-GAAP financial measures as defined by the Securities and Exchange Commission, such as Adjusted Segment Operating Profit, Adjusted Segment EBITDA, Adjusted Income, Adjusted Diluted Earnings Per Share from
Adjusted Income, Adjusted Consolidated EBITDA and Net Leverage Ratio. For a reconciliation to the most directly comparable GAAP financial measures, refer to the Appendix.
2
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
About OMNOVA Solutions
› Global technology-based supplier of customized
performance-critical products
› Established in 1999; formerly part of General
Tire/GenCorp and Goodyear
› Deep focus on Research and Development (R&D) and
Innovation across all our businesses
› Diverse end-markets with synergies in specialty
chemistries and performance materials
› World Class manufacturing facilities, optimized through
LEAN SixSigma to achieve operational excellence
3
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
Our Vision and Values
To be a mid-sized premier global specialties provider delivering innovative,
tailored solutions to win leading positions in targeted high value markets.
Agility
We swiftly and efficiently adapt to
changing environments
We make timely, data-driven decisions
Integrity
Our legal, regulatory and ethical behavior is impeccable
We are candid, transparent and respectful
Safety
We promote a safety-first culture
PRODUCE PRODUCT SAFELY – and
encourage safe working conditions
and behaviors
Accountability
We own our work and our results
We are committed to development –
ourselves and others
OMNOVA
VALUES
4
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
› More than a century of Transformation and Innovation
Long Heritage as Solutions Provider
1915 1952
CHEMICAL/PLASTICS
DIVISION
1984 1999
THE GOODYEAR TIRE &
RUBBER COMPANY
1898 1941
GOODYEAR CHEMICALS
2001 2010 2015 2017
NEW FLUID
SOLUTIONS
CREOLE
CHEMICALS
5
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
› An expanding geographic footprint
A GLOBAL COMPANY WITH MANUFACTURING ON THREE CONTINENTS
OMNOVA Locations
● World Headquarters
● Chemicals Manufacturing
● Surfaces Manufacturing
● Sales, Technology and / or Distribution
Shanghai (Regional HQ)
Rayong, Thailand
London, U.K.
Le Havre, France
Villejust, France
(Regional HQ)
Mumbai, India
Singapore
Caojing, China
Ningbo, China
Monroe, NC
Chester, SC
Calhoun, GA
Fitchburg, MA
Auburn, PA
Jeannette, PA
Green Bay, WI
Akron, OH (Technology Center)
Mogadore/Akron, OH
Beachwood, OH (Headquarters)
Houston, TX
Columbus, MS
Plus Broad Distribution Network
6
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
GROUPINGS REFLECT DISTINCT OPERATING MODELS AND MARKET STRATEGIES
OMNOVA at a Glance
OMNOVA consolidated sales for trailing twelve months ended February 28, 2018, represent Company estimates.
*Non-GAAP adjusted values, GAAP reconciliation in the Appendix. Excludes corporate expense.
Sales by end market
Sales by segment
Specialty Solutions
Coatings, Adhesives, Sealants, Elastomers (C.A.S.E.) │
Laminates and Films │ Nonwovens │ Oil & Gas
Profitable Growth Model:
Growth at GDP+ underlying market
LTM Sales: $457M
LTM Adj. EBITDA: $81M*
Adj. EBITDA margin: 17.7%*
Higher Growth Markets:
Specialization is valued and more sustainable
LTM Sales: $787M
LTM Adj. EBITDA: $87M*
Adj. EBITDA Margin: 11.1%*
Reinforcing Resins │ Antioxidants │ Coated Fabrics │
Paper & Carpet Chemicals │ Tire Cord
Operational Excellence Model:
Margin Growth and Cash Generation
LTM Sales: $330M
LTM Adj. EBITDA: $29M*
Adj. EBITDA margin: 8.9%*
Performance Materials
More Mature Markets:
OMNOVA leading positions with established product
brands
Specialty
Solutions
58%
Performance
Materials
42%
Oilfrield
8%
Personal
Hygiene
8%
Refurbishment &
New
Construction
42%
Paper &
Packaging
13%
Transportation
16%
Industrial/
Other
13%
7
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
0
CAPITALIZING ON UNIQUE OPPORTUNITY IN SPECIALTY SPACE
Goals Reflect Continuing Transition to Specialty Focus
Growth:
GDP+ Underlying
Specialty Markets
› Specialty Volume Growth
› High Margin New Product
Introductions
› Commercial Excellence
› Cost Reductions
› Value Based Pricing
› Mix Improvement
Adjusted Segment
Operating Margin*
L
e
v
e
l
o
f
T
e
c
hnolog
y
High
2014 Goal2017
6.9%
Mid
Teens
10.4%
* Non-GAAP adjusted values, GAAP reconciliation in the Appendix. Excludes corporate expense.
8
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
Our Value-Creating Overarching Strategic Priorities
Accelerate
Growth In
Specialty
Businesses
Expand Margins,
Generate Cash
In Mature
Businesses
Portfolio
Optimization
“One OMNOVA”
Excellence
9
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
Targeting Specialty Growth Markets
› Higher growth/higher margin businesses
› Significant opportunities to grow share
Strengthening Commercial Excellence
› Integrated sales, marketing and product development
› Cross-selling
› Value based pricing
› Aggressive strategic marketing plans
› Stronger key account value added selling
Strengthening Leadership & Capabilities
› Enhanced organization in place
Strong, Broad-Based Innovation w/ Global Footprint
› Facilities on three continents
› Transformed innovation pipeline
› Tailored solutions
>80%
of revenue
targeted from
specialty
businesses
10
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
› Targeting robust markets with demand for high performance, high margin products
COMMON CHARACTERISTICS: HIGHER MARGIN, LARGE AND GROWING MARKETS, CUSTOMER NEED FOR
DIFFERENTIATION, STRONG OMNOVA NICHE POSITION WITH OPPORTUNITIES FOR GROWTH
Specialty Growth: Targeted Markets
MARKET
SIZE:*
Coatings Adhesives Sealants Elastomers Laminates Nonwovens Oil & Gas
› Masonry
› Intumescent (fire
resistant)
› Direct-to-Metal
› Primers
› Odor and Stain
Blocking
› Wood Treatment
› Tapes
› Release Coatings
› Adhesives
› Construction
Binders
› Roofing
› Caulking
› Casting
› Cement
› Gaskets
› Foam Sealants
› Concrete
› Transportation
› Industrial
› Consumer
Thermoplastic
Products
› Retail Display
› Cabinets
› Food Service
› Kitchen and Bath
› Recreational Vehicles
› Flooring
› Healthcare
› Commercial Furniture
› Diapers
› Adult Incontinence
› Healthcare
› Wipes
› Transportation
› Filtration
› Drilling
› Cementing
› Fracking
>$25.0B >$20.0B >$5.0B >$10.0B >$5.0B >$25.0B >$5.5B
3 – 4% /yr 4 – 5% /yr 3 – 4% /yr 3 – 5% /yr 2 – 3% /yr 3 – 5% /yr 3 – 5% /yr
C.A.S.E
GROWTH
RATE:**
* Market data based on internal estimates and OMNOVA’s place in the value chain.
** Estimated market growth rate.
11
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
› Increased access to specialty markets
Diversifying Chemistries & Geographies
Total OMNOVA
Global Expansion
Total Company
Other
Chemistries
SB Latex
Total Company
80%
20%
69%
31%
Pre-2010 2017
87%
11%
2%
21%
11%
87%
15%
2017Pre-2010
Asia
N. America
Europe
64%
Diversifying Chemistries
and Markets
12
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
› Transforming the portfolio to be a leading provider of Sustainable, Greener, SMARTer innovative solutions
Targeting Vitality Index >25% at Specialty Margins
2017 New Product Introductions
Voice of the
Customer
Sustainable
Solutions
SMART
Technologies
Disruptive
Innovation
2017 New Products
Pliotec PA145 – Acrygen Product
Modification for Rollers
Pliotec SC140 – Base Polymer for Zero
VOC, Direct to Metal Coatings
Novajet 3800 – Specialty Coating
Binder for Inkjet Print Media
Hydro Pliolite 211 – Base Polymer
Waterborne Intumescent Coatings
GenFlo 3967 – Improved Binder for
Sports Surfaces
OMNAPEL – Hydrophobic Polymer for
Sealants
GenFlo – Binder for Softer Personal
Hygiene Products
SoftWick SF20 – Hydrophilic Surface
Treatment for Nonwovens
GenFlo 6850 – Best-in-class Carpet
Binder
Paint Replacement Films – For Kitchen &
Bath Cabinetry
Premium Woodgrain Paper – For cabinet
exteriors harmonized with wood.
Decorative
Laminates
Pexorate 332 – Rate of Penetration
Enhancer for Drilling
IF-201L – Dispersant for Well Cementing
Oil & Gas
13
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
Expand Margins, Increase Cas Generation in Performance Materials Businesses
Strengthening Customer Relationships
› Value-based pricing
› Capture growth in carpet and non-carpet flooring
› Working capital optimization
Lowering Our Cost Base
› Realigned manufacturing
› SG&A effectiveness and efficiency
Improving Ability to Serve
› New GM & management team
› Selective innovation
Expand and
grow margins
Increase cash generation
to fund specialty growth
Maintain leadership
positions
Exiting Commodity Paper in 2018
14
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
CONTINUED FOCUS ON COST SAVINGS & EFFICIENCY
Performance Materials Manufacturing Realignment and SG&A Restructuring
2018:
› Exit Commodity Paper
› Value Pricing
› Antioxidant Investment
› Cost Savings
› Selective Innovation in Carpet
2015 – 2017:
› Realigned Manufacturing Footprint
through facility closures, capacity reductions,
and manufacturing consolidations
› Restructured SG&A Company-Wide
by appointing new leadership and reorganizing
regional and commercial structure
N. America SB capacity
reduction~300M lbs
N. America SB capacity
utilization (previously 62%)>80%-90%
in annual operating savings by
year end 2017$17-$20M
15
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
Portfolio Optimization
M&A
1. Close-in
› Emulsion polymers
› Consolidation opportunities
2. Adjacencies
› Market driven
C.A.S.E.
Nonwovens
Oil & gas
Diversification
› Products
› Markets
› Geographies
› Customers
Strategic Alliances
› Lower investment risk
› Accelerate innovation
› Expand portfolio
› Geographic expansion
Balanced
specialty portfolio
Sustainable earnings
growth
› Joint development &
licensing agreements
› Geographic swaps/tolling
› Manufacturing and/or full
function JVs
16
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
Strategic Alliances and M&A to Accelerate Specialty Growth
C.A.S.E., Nonwovens, Oil & Gas
Emulsion Polymers
› N.A. SB consolidation
› Specialty acrylics
New Polymers Selected Additives
M&A
Close-In
Adjacencies
› Joint development
agreements
› License technology
› Geographic swaps / tolling
› License cost-saving
production technology
› Use contract
manufacturing
› Manufacturing JVs
› License 3rd party
technology
› Full function JVs
› Joint distribution
BENEFITS:
› Profitable growth
and minimal risk
› Accelerates
innovation
› Expands
portfolio
› Low investment
for geographic
expansion
TechnologyTech logy
Technology
Operations &
Supply Chain
TechnologyCommercial
STRATEGIC ALLIANCES
TARGET MARKETS
17
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
“One OMNOVA” Excellence
Excellence Focus
› Sales
› Innovation
› Marketing
› Operations
Reporting Segment Alignment with
Business Model
› Specialty Solutions
› Performance Materials
Reduced Complexity
› Common processes, tools and systems
› Reduced SG&A >$3M /yr
› Organizational redesign
› Cost competitive manufacturing
Agile, strong
foundation to drive
profitable growth
18
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
STRATEGIC ACTIONS DRIVING IMPROVEMENT IN PROFITABILITY, EARNINGS AND CASH FLOW
Adjusted Segment Operating Profit and Adjusted Earnings Per Share (EPS)
$68.4
$81.5
2014 2017
$0.28
$0.56
2014 2017
PM
8.9%
OPM
6.9%
Adjusted Segment Operating Profit* Adjusted EPS*
* Non-GAAP adjusted values, GAAP reconciliation in the Appendix.
OPM
10.4%
19
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
Record of Cash Generation and De-Leveraging
Volume growth
› Gaining traction on specialty growth
Refinancing completed in Q1 2018
Reduced gross debt by ~$140M since 2011
Increasing earnings and consistent cash flow driving
down adjusted net leverage
Strong cash conversion driven by:
› Improved earnings
› Low maintenance capex requirement
› Working capital management
› No US cash taxes in near term (Federal N.O.L. $99M)
3.8 3.9 3.5 3.2 3.6
0.0
2.0
4.0
6.0
11/2014 11/2015 11/2016 11/2017 Q1 2017 Q1 2018
OMNOVA Net Adjusted Leverage (TTM)*
3.5
* Non-GAAP adjusted values, GAAP reconciliation in the Appendix.
(14.8)
19.7
25.3
22.7
-20.0
0.0
20.0
40.0
2014 2015 2016 2017
Cash Flow from Operations less CAPEX
3.2
3.3
1.1%
6.7%
1.0%
5.1%
16.10%
0%
5%
10%
15%
20%
Q1 2017 Q2 2017 Q3 3017 Q4 2017 Q1 2018
Specialty Sales Growth Due to Volume YOY
20
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
› As of February 28, 2018 (in millions)
Capital Structure / Liquidity / Net Leverage
$305
DEBT = $321*
Foreign Debt & Other
› Capital lease
› Letters of credit
Term Loan B
(excludes deferred financing to 5.0M)
› 2023 maturity
› L+325; refinanced March 2018
› Total Net Leverage Ratio Covenant
› Prepayment of $41M; 12/17
$16
Liquidity
Revolver $80
› Balance Drawn $0
› Letters of Credit $0
Remaining Capacity $80
Cash $36
Total Liquidity $116
Net Leverage Ratio
Total Net Debt $285
LTM EBITDA* $87
Net Leverage Ratio* 3.3x
WEIGHTED AVERAGE COST OF DEBT ̴̴ 5.7% / SUFFICIENT LIQUIDITY
21
* Non-GAAP adjusted values, GAAP reconciliation in the Appendix.
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
Goal: Become a Premier Global Innovative Specialty Solutions Provider
Specialty Growth
› Marketing, Innovation and Sales Excellence
› First to market with differentiated, high margin new products
› Key account growth
› Geographic expansion
Continued focus on operational excellence, delivered margin expansion, mix optimization and increased cash generation
Transform the business through organic growth and portfolio optimization in specialties
One OMNOVA to reduce complexity and lead as an agile, innovative specialty solutions provider
GDP+
Growth versus underlying
specialty markets
>15%
Targeted Segment
Operating Profit Margin
>80%
Specialty Markets as
a % of total revenue
22
Appendix
› SB Raw Material Costs and Performance Features
› Non-GAAP Financial Measures
› Reconciliations
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
DESPITE THE RECENT UPTICK, SB LATEX MAINTAINS AN ADVANTAGED POSITION
SB Raw Material Costs and Performance Features Contribute to Greater
Cost-in-Use Advantage
24
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
SIGNIFICANT MARGIN EXPANSION; AND STRONG CASH FLOW
Momentum for Strong Continued Earnings Growth and Cash Generation
Near-term (2016-2019) drivers
Medium to longer term (2016-2020) drivers
2010 Adj.
EBITDA
Paper & Carpet
Market Erosion
Growth in
Specialty
2014 Adj.
EBITDA
Growth
Paper/Carpet
REVERSED
TREND
Margin Expansion
Cost/Pricing
Growth in Key
Accounts
Further
Geographic
Expansion
Higher Margin from
Improved Specialty Mix
New Product
Development
M&A
25
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
Appendix – Non-GAAP Financial Measures
This presentation includes Adjusted Segment Operating Profit, Adjusted Segment EBITDA, Adjusted Income from Continuing Operations Before Income Taxes,
Adjusted Consolidated EBITDA and other financial measures which are Non-GAAP financial measures as defined by the Securities and Exchange Commission.
OMNOVA’s Adjusted Segment Operating Profit is calculated as Segment Operating Profit (Loss) less restructuring and severance expenses, asset impairments and
other items. Adjusted Segment EBITDA is calculated as Adjusted Segment Operating Profit less depreciation and amortization expense less accelerated
depreciation.
OMNOVA’s Adjusted Income from Continuing Operations Before Income Taxes is calculated as Adjusted Segment Operating Profit less corporate expenses, interest,
restructuring and severance, asset impairments and other items. OMNOVA’s Adjusted EBITDA is calculated as Adjusted Income from Continuing Operations Before
Income Taxes less interest expense less debt premium and depreciation and amortization expense less accelerated depreciation.
Adjusted Segment Operating Profit and Adjusted Segment and/or Consolidated EBITDA and the other financial measures (collectively, the “Non-GAAP financial
measures”) 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 appropriate measures for comparing performance relative to other companies. The Non-GAAP financial measures 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. The Non-GAAP financial measures 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 and by management
to allocate resources. Set forth in the appendices are the reconciliations of these Non-GAAP financial measures to their most directly comparable GAAP financial
measure.
All appendix results are pro forma reflecting continuing business excluding the sale of the global wallcovering business.
26
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
› Appendix 1
Reconciliation of Reported Segment Sales and Operating Profit to Net
Sales and Net Income
Three Months Ended
February 28
(In millions) 2018 2017
Net Sales:
Specialty Solutions $ 109.2 $ 93.7
Performance Materials 69.5 80.9
Total Net Sales $ 178.7 $ 174.6
Segment Operating Profit:
Specialty Solutions $ 13.6 $ 9.5
Performance Materials 2.1 4.7
Interest expense (5.1) (5.2)
Corporate expense (8.4) (7.0)
Income (Loss) Before Income Taxes 2.2 2.0
Income tax expense (benefit) (5.1) (1.6)
Income from continuing operations 7.3 3.6
Discontinued operations, net of tax — —
Net Income (Loss) $ 7.3 $ 3.6
Depreciation and amortization $ 7.2 $ 6.7
Capital expenditures $ 3.2 $ 3.7
27
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
› Appendix 2
OMNOVA Consolidated Adjusted EBITDA
Year Ended November 30, LTM*
(Dollars in millions except per share data) 2014 2015 2016 2017 2018
Sales $ 987.4 $ 838.0 $ 759.9 $ 783.1 $ 787.2
Unadjusted Segment Operating Profit $ 65.4 $ 34.8 $ 68.3 $ 47.3 $ 48.8
Segment Excluded Items
Restructuring and severance 0.9 5.8 3.5 2.3 2.5
Asset impairment, facility closure costs and other - 20.0 7.2 33.9 33.8
Accelerated depreciation on production transfer 2.2 5.8 3.0 - -
Operational improvements costs - 5.0 (0.4) - -
(Gain) loss on notes receivable (1.1) - - - -
(Gain) on assets sales - - - - -
Coated fabrics manufacturing transition costs - - - - -
Environmental costs 1.0 3.0 0.3 - (1.8)
Acquisition and integration related expense - - 1.1 (2.0) 0.4
Vacation policy change - - (2.8) - -
Subtotal for Segment Excluded Items 3.0 39.6 11.9 34.2 34.9
Adjusted Segment Operating Profit $ 68.4 $ 74.4 $ 80.2 $ 81.5 $ 83.7
Adjusted Segment Operating Profit as a % of Sales 6.9% 8.9% 10.6% 10.4% 10.6%
Corporate Expense (20.8) (27.6) (33.7) (29.9) (31.3)
Interest expense (32.9) (28.3) (24.7) (21.5) (21.4)
Corporate Excluded Items
Restructuring and severance - 0.1 4.9 2.9 3.1
Asset impairment, facility closure costs and other - 0.6 - 1.8 1.8
Operational improvements costs - 0.4 - - -
Write-off of debt issuance costs 0.8 0.6 4.9 - 0.8
Pension settlement - - - 0.4 0.4
Corporate headquarters relocation costs 0.6 - (0.2) - -
Other financing costs 2.4 1.0 - - -
Shareholder activist costs - 1.9 - - -
Acquisition and integration related expense - 0.4 0.9 0.3 0.5
Vacation accrual adjustment - - (0.6) - -
Subtotal for Management Excluded Items 3.8 5.0 9.9 5.4 6.6
28
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
› Appendix 2
OMNOVA Consolidated Adjusted EBITDA (continued)
Year Ended November 30, LTM*
(Dollars in millions except per share data) 2014 2015 2016 2017 2018
Adjusted Income from Continuing Operations before Income Taxes $ 18.5 $ 23.5 $ 31.7 $ 35.5 $ 37.6
Tax Expense ** (5.6) (7.0) (9.5) (10.7) (11.0)
Adjusted Income From Continuing Operations 12.9 $ 16.6 $ 22.2 $ 24.8 $ 26.6
Adjusted Diluted Earnings Per Share from Adjusted
Income from Continuing Operations *** $ 0.28 $ 0.36 $ 0.50 $ 0.56 $ 0.59
Adjusted Income from Continuing Operations before Income Taxes $ 18.5 $ 23.5 $ 31.7 $ 35.5 $ 37.6
Unallocated corporate interest (excluding debt premium) 30.9 27.3 22.7 21.5 21.4
Adjusted Consolidated EBIT 49.4 50.8 54.4 57.0 59.0
Depreciation and amortization (excluding accelerated depreciation) 32.5 28.2 27.6 27.9 28.4
Adjusted Consolidated EBITDA $ 81.9 $ 79.0 $ 82.0 $ 84.9 $ 87.4
Adjusted Consolidated EBITDA as a % of Sales 8.3% 9.4% 10.8% 10.8% 11.1%
Consolidated Capital Expenditures $ 29.8 $ 24.0 $ 25.6 $ 25.1 $ 24.6
Net Leverage
Total Short and Long Term Debt**** 412.0 356.7 366.0 361.8 320.8
Less Cash and Restricted Cash (99.5) (44.9) (72.0) (88.0) (36.1)
Net Debt 312.5 311.8 294.0 273.8 284.7
Net Leverage Ratio***** 3.8 X 3.9 X 3.6 X 3.2 X 3.3 X
* Last 12 months
**Tax rate is based on the Company's estimated normalized annual effective tax rate
*** Adjusted EPS is calculated using Diluted Shares Outstanding at the end of the period
**** LTM excludes OID and deferred financing fees of $6.7M for Q1 2018
***** The above calculation is not intended to be used for purposes of calculating debt covenant compliance
29
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
OMNOVA Trailing Twelve Months Ended February 28, 2018
30
› Appendix 3
(In millions except per share data)
Specialty
Solutions
Performance
Materials
Combined
Segments Corporate Consolidated
Net Sales $ 456.9 $ 330.3 $ 787.2 $ — $ 787.2
Segment Operating Profit / Corporate Expense $ 64.0 $ (15.2) $ 48.8 $ (31.3) $ 17.5
Interest expense — — — (21.4) (21.4)
Income (Loss) Before Income Taxes $ 64.0 $ (15.2) $ 48.8 $ (52.7) $ (3.9)
Management Excluded Items
Restructuring and severance 1.1 1.4 2.5 3.1 5.6
Asset impairment, facility closure costs and other .3 33.5 33.8 1.8 35.6
Environmental costs — (1.8) (1.8) — (1.8)
Write-off of debt issuance costs — — — .8 .8
Pension curtailment — — — .4 .4
Acquisition and integration related expense .4 — .4 .5 .9
Subtotal for management excluded items 1.8 33.1 34.9 6.6 41.5
Adjusted Segment Operating Profit / Corporate Expense
Before Income Taxes $ 65.8 $ 17.9 $ 83.7 $ (46.1) $ 37.6
Tax expense (11.0)
Adjusted Income $ 26.6
Adjusted Diluted Earnings Per Share From Adjusted Income $ 0.59
Adjusted Segment Operating Profit as a % Of Sales 14.4 % 5.4 % 10.6 %
Segment / Corporate Capital Expenditures $ 13.7 $ 10.2 $ 23.9 $ .7 $ 24.6
Adjusted Segment Operating Profit / Corporate Expense
Before Income Taxes $ 65.8 $ 17.9 $ 83.7 $ (46.1) $ 37.6
Unallocated corporate interest — — — 21.4 21.4
Segment / Consolidated Adjusted EBIT 65.8 17.9 83.7 (24.7) 59.0
Depreciation and amortization 15.2 11.5 26.7 1.7 28.4
Segment / Consolidated Adjusted EBITDA $ 81.0 $ 29.4 $ 110.4 $ (23) $ 87.4
Adjusted EBITDA as a % of sales 17.7 % 8.9 % 14.0 % 11.1 %
INVESTOR PRESENTATION | First Quarter 2018 NYSE OMN
› Appendix 4
OMNOVA Volume Impact on Sales
1Q17 2Q17 3Q17 4Q17 1Q18
Specialty Solutions 1.1% 6.3% 1.0% 5.1% 16.1%
Performance Materials -9.3% -13.3% -16.8% -16.9% -11.0%
China Coated Fabrics (CCF) Effect -1.9% -3.3% -4.8% -7.9% -7.1%
Performance Materials Excluding CCF -7.4% -11.5% -12.0% -9.0% -18.1%
31
Investor Relations Contacts
Paul DeSantis, Senior Vice President, Chief Financial Officer & Treasurer
Frank Esposito, Corporate Secretary and Investor Relations
(216) 682-7003
[email protected]
World Headquarters
25435 Harvard Road
Beachwood, OH 44122
(216) 682-7000
www.omnova.com
INVESTOR PRESENTATION
|
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