OMNOVA SOLUTIONS INC - FORM 8-K - EX-99.1

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8-K - 8-K - OMNOVA SOLUTIONS INC	d270131d8k.htm

Exhibit 99.1

OMNOVA SOLUTIONS INC.

Unaudited Pro Forma Statements of Operations

For the Nine Months Ended August 31, 2011

(Dollars in millions, except per share data)


	As Reported		Adjustments to Reclassify Discontinued Operations			Pro Forma
Net Sales	$	949.7	$	(19.8	)	$	929.9
Cost of products sold		773.0		(19.2	)		753.8

Gross profit		176.7		(.6	)		176.1

Selling, general and administrative		98.9		(2.8	)		96.1
Depreciation and amortization		25.9		(.6	)		25.3
Fixed asset impairment		2.4		—			2.4
Restructuring and severance		1.7		—			1.7
Interest expense		28.4		—			28.4
Acquisition and integration expense		2.3		—			2.3
Deferred financing fees write-off		1.0		—			1.0
Other expense (income), net		1.0		(.1	)		.9

		161.6		(3.5	)		158.1

Income (loss) from continuing operations before income taxes		15.1		2.9			18.0
Income tax expense (benefit)		7.5		1.1			8.6

Income (loss) from continuing operations		7.6		1.8			9.4

Discontinued Operations, Net of Tax:
Income (loss) from operations		—		(1.8	)		(1.8	)


Net income	$	7.6	$	—		$	7.6


Basic and Diluted Income (Loss) Per Share
Income (loss) from continuing operations	$	.17	$	.04		$	.21
Income (loss) from discontinued operations		—		(.04	)		(.04	)

Net income (loss) per share	$	.17	$	—		$	.17

See notes to unaudited pro forma financial statements.

OMNOVA SOLUTIONS INC.

Unaudited Pro Forma Statements of Operations

For the Year Ended November 30, 2010

(Dollars in millions, except per share data)


	As Reported			Adjustments to Reclassify Discontinued Operations			Pro Forma
Net Sales	$	846.2		$	(23.6	)	$	822.6
Cost of products sold		684.8			(26.2	)		658.6

Gross profit		161.4			2.6			164.0

Selling, general and administrative		99.6			(4.5	)		95.1
Depreciation and amortization		20.6			(1.2	)		19.4
Fixed asset impairment		6.2			(3.5	)		2.7
Restructuring and severance		.6			—			.6
Interest expense		8.7			—			8.7
Acquisition and integration expense		5.5			—			5.5
Other expense (income), net		1.7			(1.6	)		.1

		142.9			(10.8	)		132.1

Income (loss) from continuing operations before income taxes		18.5			13.4			31.9
Income tax (benefit) expense		(89.4	)		5.2			(84.2	)

Income (loss) from continuing operations		107.9			8.2			116.1

Discontinued Operations, Net of Tax:
Income (loss) from operations		—			(8.2	)		(8.2	)


Net income	$	107.9		$	—		$	107.9


Basic Income (Loss) Per Share
Income (loss) from continuing operations	$	2.42		$	.19		$	2.61
Income (loss) from discontinued operations		—			(.19	)		(.19	)

Net income (loss) per share	$	2.42		$	—		$	2.42


Diluted Income (Loss) Per Share
Income (loss) from continuing operations	$	2.40		$	.18		$	2.58
Income (loss) from discontinued operations		—			(.18	)		(.18	)

Net income (loss) per share	$	2.40		$	—		$	2.40

See notes to unaudited pro forma financial statements.

OMNOVA SOLUTIONS INC.

Unaudited Pro Forma Statements of Operations

For the Year Ended November 30, 2009

(Dollars in millions, except per share data)


	As Reported			Adjustments to Reclassify Discontinued Operations			Pro Forma
Net Sales	$	696.4		$	(30.9	)	$	665.5
Cost of products sold		536.7			(24.7	)		512.0

Gross profit		159.7			(6.2	)		153.5

Selling, general and administrative		99.9			(5.6	)		94.3
Depreciation and amortization		22.9			(1.8	)		21.1
Fixed asset impairment		1.1			—			1.1
Restructuring and severance		2.1			—			2.1
Interest expense		8.1			—			8.1
Other expense (income), net		(2.3	)		.4			(1.9	)

		131.8			(7.0	)		124.8

Income (loss) from continuing operations before income taxes		27.9			.8			28.7
Income tax expense (benefit)		1.7			—			1.7

Income (loss) from continuing operations		26.2			.8			27.0

Discontinued Operations, Net of Tax:
Income (loss) from operations		—			(.8	)		(.8	)


Net income	$	26.2		$	—		$	26.2


Basic and Diluted Income (Loss) Per Share
Income (loss) from continuing operations	$	.59		$	.02		$	.61
Income (loss) from discontinued operations		—			(.02	)		(.02	)

Net income (loss) per share	$	.59		$	—		$	.59

See notes to unaudited pro forma financial statements.

OMNOVA SOLUTIONS INC.

Unaudited Pro Forma Statements of Operations

For the Year Ended November 30, 2008

(Dollars in millions, except per share data)


	As Reported			Adjustment to Reclassify Discontinued Operations			Pro Forma
Net Sales	$	869.4		$	(46.6	)	$	822.8
Cost of products sold		731.4			(36.4	)		695.0

Gross profit		138.0			(10.2	)		127.8

Selling, general and administrative		104.8			(7.1	)		97.7
Depreciation and amortization		23.9			(1.9	)		22.0
Restructuring and severance		.6			—			.6
Interest expense		13.0			—			13.0
Equity (earnings) loss in affiliates, net		(.2	)		—			(.2	)
Other expense (income), net		(2.1	)		.5			(1.6	)

		140.0			(8.5	)		131.5

Income (loss) from continuing operations before income taxes		(2.0	)		(1.7	)		(3.7	)
Income tax expense (benefit)		.2			—			.2

Income (loss) from continuing operations		(2.2	)		(1.7	)		(3.9	)

Discontinued Operations, Net of Tax:
Income (loss) from operations		—			(1.7	)		(1.7	)


Net income (loss)	$	(2.2	)	$	—		$	(2.2	)


Basic and Diluted Income (Loss) Per Share
Income (loss) from continuing operations	$	(.05	)	$	(.04	)	$	(.09	)
Income (loss) from discontinued operations		—			.04			.04

Net income (loss) per share	$	(.05	)	$	—		$	(.05	)

See notes to unaudited pro forma financial statements.

OMNOVA SOLUTIONS INC.

Unaudited Pro Forma Balance Sheets

As of August 31, 2011

(Dollars in millions, except share data)


	As Reported			Adjustment to Reclassify Discontinued Operations			Pro Forma
ASSETS:
Current Assets
Cash and cash equivalents	$	95.1		$	—		$	95.1
Accounts receivable, net		175.1			(3.4	)		171.7
Inventories		106.8			(5.9	)		100.9
Deferred income taxes - current		6.9			—			6.9
Prepaid expenses		6.0			(.1	)		5.9

Total Current Assets		389.9			(9.4	)		380.5

Property, plant and equipment, net		239.4			(2.6	)		236.8
Trademarks and other intangible assets, net		91.5			—			91.5
Goodwill		84.8			—			84.8
Deferred financing fees		14.1			—			14.1
Deferred income taxes – non-current		66.3			—			66.3
Other assets		10.9			—			10.9
Discontinued operations		—			8.7			8.7

Total Assets	$	896.9		$	(3.3	)	$	893.6


LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current Liabilities
Amounts due banks	$	12.5		$	—		$	12.5
Accounts payable		126.9			(1.5	)		125.4
Accrued payroll and personal property taxes		15.8			(1.3	)		14.5
Employee benefit obligations		2.4			—			2.4
Deferred income taxes - current		.3			—			.3
Other current liabilities		19.3			(.5	)		18.8

Total Current Liabilities		177.2			(3.3	)		173.9

Long-term debt		444.7			—			444.7
Postretirement benefits other than pensions		7.3			—			7.3
Pension liability		77.8			—			77.8
Deferred income taxes – non-current		27.4			—			27.4
Other liabilities		16.7			—			16.7
Discontinued operations		—			—			—

Total liabilities		751.1			(3.3	)		747.8

Shareholders’ Equity
Common stock		4.6			—			4.6
Additional contributed capital		323.7			—			323.7
Retained deficit		(104.4	)		—			(104.4	)
Treasury stock at cost		(2.7	)		—			(2.7	)
Accumulated other comprehensive loss		(75.4	)		—			(75.4	)

Total Shareholders’ Equity		145.8			—			145.8

Total Liabilities and Shareholders’ Equity	$	896.9		$	(3.3	)	$	893.6

See notes to unaudited pro forma financial statements.

OMNOVA SOLUTIONS INC.

Unaudited Pro Forma Balance Sheets

As of November 30, 2010

(Dollars in millions, except share data)


	As Reported			Adjustment to Reclassify Discontinued Operations			Pro Forma
ASSETS:
Current Assets
Cash and cash equivalents	$	75.6		$	—		$	75.6
Restricted cash		253.1			—			253.1
Accounts receivable, net		106.8			(3.0	)		103.8
Inventories		45.8			(5.3	)		40.5
Deferred income taxes - current		6.0			—			6.0
Prepaid expenses		3.5			—			3.5

Total Current Assets		490.8			(8.3	)		482.5

Property, plant and equipment, net		131.5			(2.8	)		128.7
Trademarks and other intangible assets, net		5.8			—			5.8
Deferred financing fees		10.5			—			10.5
Deferred income taxes – non-current		86.2			—			86.2
Other assets		1.2			—			1.2
Discontinued operations		—			7.5			7.5

Total Assets	$	726.0		$	(3.6	)	$	722.4


LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current Liabilities
Amounts due banks	$	4.8		$	—		$	4.8
Accounts payable		88.6			(1.5	)		87.1
Accrued payroll and personal property taxes		17.3			(1.7	)		15.6
Employee benefit obligations		2.4			—			2.4
Other current liabilities		9.8			(.4	)		9.4

Total Current Liabilities		122.9			(3.6	)		119.3

Long-term debt		389.4			—			389.4
Postretirement benefits other than pensions		7.6			—			7.6
Pension liability		73.3			—			73.3
Deferred income taxes – non-current		1.7			—			1.7
Other liabilities		7.7			—			7.7
Discontinued operations		—			—			—

Total liabilities		602.6			(3.6	)		599.0

Shareholders’ Equity
Common stock		4.5			—			4.5
Additional contributed capital		318.0			—			318.0
Retained deficit		(112.0	)		—			(112.0	)
Treasury stock at cost		(1.3	)		—			(1.3	)
Accumulated other comprehensive loss		(85.8	)		—			(85.8	)

Total Shareholders’ Equity		123.4			—			123.4

Total Liabilities and Shareholders’ Equity	$	726.0		$	(3.6	)	$	722.4

See notes to unaudited pro forma financial statements.

OMNOVA Solutions Inc.

Notes to the Unaudited Pro Forma Financial Statements

1.	Basis of Pro Forma Presentation

The unaudited pro forma financial statements are derived from the historical consolidated financial statements of OMNOVA Solutions Inc. (“OMNOVA” or the “Company”) and give effect to the reclassification of the results of operations and financial position of OMNOVA’s North American commercial wallcovering business to discontinued operations on the statements of operations and balance sheets. On December 12, 2011, OMNOVA completed the sale of certain assets related to its North American commercial wallcovering business to J. Josephson, Inc., a private commercial wallcovering producer based in New Jersey, for $10.0 million in cash and up to three years of royalty payments based on the future sales of OMNOVA commercial wallcovering patterns. The sale includes print cylinders, certain equipment, trademarks, contracts and other assets associated with OMNOVA’s domestically-produced commercial wallcovering. OMNOVA will retain approximately $7.0 million in net working capital, the Columbus, Mississippi manufacturing facility and certain production assets which are used by its other businesses.

The pro forma adjustments to our historical financial statements are made to reflect the disposition of this business. The Company allocated the book value of certain shared manufacturing assets, as well as the associated shared manufacturing and selling costs between the wallcovering business and the coated fabrics business produced in the Columbus, Mississippi facility based on production volumes. Income tax expenses (benefits) were allocated to the reclassified business on the basis of it being a stand-alone business using the Company’s statutory tax rate of 39%.

Under the terms of the sale, OMNOVA will provide manufacturing and support services to J. Josephson for a period of approximately 12 to 15 months after the date of the sale under a transition services agreement, whereby OMNOVA will manufacture commercial wallcovering in the U.S. exclusively for J. Josephson as part of an orderly transition of production. OMNOVA has agreed not to compete in the manufacture or sale of commercial wallcoverings in North America.

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