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| 8-K - 8-K - OMNOVA SOLUTIONS INC | a7_11x17xinvestor8k.htm |
NYSE LISTED: “OMN”
Global Innovator of Performance-Enhancing Chemistries
and Surfaces
Investor Presentation – Second Quarter 2017
NYSE: “OMN”
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;
(5) extraordinary events such as natural disasters, political disruptions, terrorist attacks and acts of war; (6) extensive and increasing United States and international 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 concentration of certain of OMNOVA's businesses and market segments among several large customers; (14) the creditworthiness of the Company's customers; (15) the failure of a joint
venture partner to meet its commitments; (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 to 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) the decision to incur additional debt; (30) the operational and financial restrictions contained in the Company's indenture; (31) 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 ability of the Company's subsidiaries to provide cash in order to pay a debt.
OMNOVA Solutions provides greater detail regarding these risks and uncertainties in its 2016 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 May 31, 2017, were approximately $778 million. The Company has a global workforce of approximately 2,000 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.
Forward-Looking Statements
Second Quarter 2017INVESTOR PRESENTATION |2
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
~2,000
Employees
Facilities in
7 Countries
Strong
Technology
Focus
Sales in Over
90 Countries
+
Second Quarter 2017INVESTOR PRESENTATION |3
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
Second Quarter 2017INVESTOR PRESENTATION |4
NYSE: “OMN”
Long Heritage as Solutions Provider
More than a century of Transformation and Innovation
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
Second Quarter 2017INVESTOR PRESENTATION |5
NYSE: “OMN”
OMNOVA Locations
An expanding geographic footprint
A GLOBAL COMPANY WITH MANUFACTURING ON THREE CONTINENTS
● World Headquarters
● Chemicals Manufacturing
● Surfaces Manufacturing
● Sales, Technology and / or Distribution
Shanghai (Regional HQ)
and Minhang, China
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
Second Quarter 2017INVESTOR PRESENTATION |6
NYSE: “OMN”
Creating Performance Advantages
Second Quarter 2017INVESTOR PRESENTATION |7
NYSE: “OMN”
Sales by End Market
INVESTOR PRESENTATION |8
Broad and diverse end-markets with synergies
JULY 11, 2017
Refurbishment, New
Construction, Commercial &
Residential
40%
Paper & Packaging
15%
Transportation
19%
Industrial / Other
12%
Personal Hygiene
8%
Oilfield
6%
Total Company
Note: Last twelve months sales as of February 28, 2017.
NYSE: “OMN”
New Reporting Structure
GROUPINGS REFLECT DISTINCT OPERATING MODELS AND MARKET STRATEGIES
Performance Materials
Coated Fabrics │ Paper & Carpet
Chemicals │ Tire Cord │ Other
Performance Additives
Specialty Solutions
Coatings, Adhesives, Sealants,
Elastomers (C.A.S.E.) │ Laminates
and Films │ Nonwovens │ Oil & Gas
Profitable Growth Model:
Growth at >2X underlying market
Operational Excellence Model:
Margin Growth and Cash Generation
Higher Growth Markets:
Specialization is valued and more
sustainable
More Mature Markets:
OMNOVA leading positions with
established product brands
$778.5M*
IN SALES
* OMNOVA consolidated sales for six months ending December 31, 2017 on a trailing 12 month basis. .
Second Quarter 2017INVESTOR PRESENTATION |9
NYSE: “OMN”
Goals Reflect Continuing Transition To Specialty Focus
Adjusted Segment
Operating Margin*
6.9%
8.9%
Mid
Teens
* Non-GAAP adjusted values. See appendix for GAAP reconciliation.
2014 2015 Goal
Growth:
2X Underlying Specialty Markets
› Specialty Volume Growth
› High Margin New Product
Introductions
› Commercial Excellence
› Cost Reductions
› Value Based Pricing
› Mix Improvement
Market Spectrum
Small, Low Price, Local
Chemical Companies
↓
L
e
v
e
l
o
f
T
e
c
hnolog
y
Willingness to Collaborate and Customize
HighLow
High
↑
Large Global, Vertically
Integrated Chemical
Companies
Market Opportunity
OMNOVA
↓
10.6%
2016
Second Quarter 2017INVESTOR PRESENTATION |10
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
Second Quarter 2017INVESTOR PRESENTATION |11
NYSE: “OMN”
Accelerate Growth in Specialty Businesses
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
>70%
of revenue
targeted from
specialty
businesses
Second Quarter 2017INVESTOR PRESENTATION |12
NYSE: “OMN”
MARKET
SIZE:*
Specialty Growth: Targeted Markets
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
ES PC PC PC E
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
* Market data based on internal estimates and OMNOVA’s place in the value chain.
** Estimated market growth rate.
C.A.S.E
GROWTH
RATE:**
Second Quarter 2017INVESTOR PRESENTATION |13
NYSE: “OMN”
Diversifying Chemistries & Geographies
Increased access to specialty markets
Other
Chemistries
SB Latex
Diversifying Chemistries
and Markets
Total OMNOVA
Global Expansion
Total Company Total Company
80%
20%
27%
73%
Pre-2010 2016
87%
11%
2%
23%
11%
87%
17%
60%
2016Pre-2010
Asia
N. America
Europe
Second Quarter 2017INVESTOR PRESENTATION |14
NYSE: “OMN”
Market & Customer Driven Innovation Portfolio
Transforming the portfolio to be a leading provider of Sustainable, Greener, SMARTer innovative solutions
TARGETING VITALITY INDEX >25% AT SPECIALTY MARGINS
Voice of the
customer
Sustainable
Solutions
SMART
technologies
Disruptive
innovation
Coming soon!2016 Launches
› Polymer for Garage Floor
Coatings
› Coating Resin for Direct
Application to Metal,
Ceramic, PVC and more
› Zero VOC Coating Resin
for Direct to Metal
› PLIOTEC –Water Proofing
Membrane Resin
› Release Coating for Paper
and Film
› Hydrophobic Release
Coating for Paper, Film and
Foil
› Hydrophobic product for
interior and exterior caulks
› Next Gen Fluid Loss Control
Additive
› New Line of Cement Additives
› All-Acrylic Low-Exudation Binder
› New Binder Resins for Exterior
Wood Applications
› Water-borne Intumescent Coating
Resin
› Next Generation Products for
Nonwovens for Personal Hygiene
› GENFLO – Binders for Specialty
Paper and Carpet Applications
› New Surface Treatment Products
for Non-woven Wipes and Health
Care
Second Quarter 2017INVESTOR PRESENTATION |15
NYSE: “OMN”
Expand Margins, Increase Cash 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
Second Quarter 2017INVESTOR PRESENTATION |16
NYSE: “OMN”
Performance Materials Manufacturing Realignment and SG&A Restructuring
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
WORK SUBSTANTIALLY COMPLETED AS OF 1Q 2017 – SAVINGS ON TRACK
N. America SB capacity
utilization (previously 62%)
in expected annual operating
savings by year end 2017
N. America SB capacity
reduction~300M lbs
>90%
$17-$20M
Second Quarter 2017INVESTOR PRESENTATION |17
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
Second Quarter 2017INVESTOR PRESENTATION |18
NYSE: “OMN”
Strategic Alliances and M&A to Accelerate Specialty Growth
M&A
Emulsion Polymers
◆N.A. SB consolidation
◆ Specialty acrylics
◆ 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
New Polymers Selected Additives
TARGET MARKETS
C.A.S.E., Nonwovens, Oil & Gas
TechnologyTech ol gy
Technology
Operations &
Supply Chain
TechnologyCommercial
STRATEGIC ALLIANCES
Close-In
Adjacencies
Second Quarter 2017INVESTOR PRESENTATION |19
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
Second Quarter 2017INVESTOR PRESENTATION |20
NYSE: “OMN”
Adjusted Segment Operating Profit and Adjusted Earnings Per Share (EPS)
STRATEGIC ACTIONS DRIVING IMPROVEMENT IN PROFITABILITY, EARNINGS, AND CASH FLOW
$68.4
$74.4
$80.3
2014 2015 2016
$0.28
$0.36
$0.50
2014 2015 2016
OPM
8.9%
OPM
13.6%
Adjusted Segment Operating Profit Adjusted EPS
OPM
10.6%
Second Quarter 2017INVESTOR PRESENTATION |21
OPM
6.9%
* Non-GAAP adjusted values. See appendix for GAAP reconciliation.
NYSE: “OMN”
Record of Cash Generation and De-Leveraging
Refinancing completed in Q3 2016
Reduced gross debt by ~$90M since 2011
Disciplined balance sheet management
› Redeemed $50M of bonds in November 2014 and
November 2015, respectively, with excess cash
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 3.5
3.7
3.3
3.4
3.5
3.6
3.7
3.8
3.9
4.0
Nov 2014 Nov 2015 Nov 2016 May 2016 May 2017
OMNOVA Net Adjusted Leverage*
* See Appendix 2
(14.8)
19.7
25.1
-20.0
-10.0
0.0
10.0
20.0
30.0
2014 2015 2016
Cash Flow from Operations less CAPEX
Second Quarter 2017INVESTOR PRESENTATION |22
NYSE: “OMN”
Capital Structure / Liquidity / Net Leverage
WEIGHTED AVERAGE COST OF DEBT ~ 5.2% / SUFFICIENT LIQUIDITY
Liquidity
Revolver $71
• Balance Drawn $0
• Letters of Credit $0
Remaining Capacity $71
Cash $69
Total Liquidity $140
Net Leverage Ratio
Total Net Debt $295
LTM EBITDA $80
Net Leverage Ratio* 3.7x
DEBT = $364*
Foreign Debt & Other
• Capital lease
• Letters of credit
Term Loan B
(excluding OID 3.2M)
• 2023 maturity
• L+425; floor 1.00%
• Total Net Leverage Ratio Covenant
* Non-GAAP adjusted values, See Appendix for GAAP reconciliation.
As of May 31, 2017 – (in millions)
$348
$17
$347
$17
Second Quarter 2017INVESTOR PRESENTATION |23
NYSE: “OMN”
Momentum for Strong Continued Earnings Growth and Cash Generation
SIGNIFICANT MARGIN EXPANSION AND STRONG CASH FLOW
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
Second Quarter 2017INVESTOR PRESENTATION |24
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
2X
Growth versus
underlying specialty
markets
>15%
Targeted Operating
Profit Margin
>70%
Specialty Markets
as a % of total revenue
Second Quarter 2017INVESTOR PRESENTATION |25
NYSE: “OMN”
Process Drivers of Sustainable Value Creation
Leadership Position – typically #1 and #2 in key
specialty applications
Supplier of Performance-critical chemistries or
components representing small fraction of total
product cost
Deep and Broad Technical Expertise
Product development and scale-up capabilities
on three (3) continents
Multiple foundation chemistries
Continued focus on portfolio optimization, operational excellence and organic growth
CUSTOMIZED SPECIALTY APPLICATIONS SERVED ON A GLOBAL BASIS
Customized Product Solutions – deep knowledge of
customers, markets and applications
Global Capability and Expansion
Global manufacturing, R&D, customer service
Consistent quality for global customers
Strengthened emerging market capabilities
Cost Effective / Flexible Manufacturing
Manufacturing diverse materials and chemistries
Process optimization through LEAN Six Sigma
Large and small scale manufacturing
Second Quarter 2017INVESTOR PRESENTATION |26
NYSE: “OMN”
Why OMNOVA Solutions?
› Exciting opportunities to grow higher margin Specialty businesses
› Strengthened innovation and commercial excellence process
› Positive momentum in margin expansion, earnings growth and cash generation
› Significantly lowered cost base and reconfigured manufacturing footprint through operational excellence
› Diverse technologies and global footprint enhance Specialty businesses
› 'One OMNOVA' implementation to drive efficiencies
› Engaged team focused on growth
On track to achieve our future state
OMNOVA VALUES: SAFETY . INTEGRITY . AGILITY . ACCOUNTABILITY
Second Quarter 2017INVESTOR PRESENTATION |27
Appendix
SB Raw Material Costs and Performance Features
Non-GAAP Financial Measures
Reconciliations
Second Quarter 2017INVESTOR PRESENTATION |28
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
0
25
50
75
100
125
150
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
C
e
n
ts
p
e
r
lb
.
Comparison of N.A. Raw Material in Emulsion Polymer Systems 2000-2017
100% Acrylic Styrene-Acrylic Styrene-Butadiene Vinyl-Acrylic Vinyl-Acetate-Ethylene
Second Quarter 2017INVESTOR PRESENTATION |29
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.
Second Quarter 2017INVESTOR PRESENTATION |30
NYSE: “OMN”
Appendix 1
Reconciliation of Reported Segment Sales and Operating Profit to Net Sales and Net (Loss) Income
Second Quarter 2017INVESTOR PRESENTATION |31
Three Months Ended Six Months Ended
May 31 May 31
(In millions) 2017 2016 2017 2016
Net Sales
Specialty Solutions $ 121.5 $ 106.2 $ 215.2 $ 195.8
Performance Materials 99.8 95.8 180.7 181.5
Total Net Sales $ 221.3 $ 202.0 $ 395.9 $ 377.3
Segment Operating Profit
Specialty Solutions $ 18.0 $ 19.4 $ 27.8 $ 30.7
Performance Materials (8.0) 5.2 (3.6) 4.3
Interest expense (5.3) (5.7) (10.5) (11.5)
Corporate expense (8.6) (8.6) (15.6) (14.3)
Operational, administrative, and other improvement costs — .1 — .4
Income (Loss) Before Income Taxes (3.9) 10.4 (1.9) 9.6
Income tax expense 2.4 3.2 .9 3.5
Net Income (Loss) $ (6.3) $ 7.2 $ (2.8) $ 6.1
Depreciation and amortization $ 6.9 $ 7.1 $ 13.6 $ 16.7
Capital expenditures $ 6.2 $ 4.6 $ 9.9 $ 10.7
NYSE: “OMN”
Consolidated Adjusted EBITDA
INVESTOR PRESENTATION |32
Appendix 2
Second Quarter 2017
Year Ended November 30,
(Dollars in millions except per share data) 2013 2014 2015 2016 *LTM
Sales $ 1,018.1 $ 987.4 $ 838.0 $ 759.9 $ 778.5
Segment Operating Profit $ 79.7 $ 65.4 $ 34.8 $ 68.3 $ 57.5
Segment Excluded Items
Restructuring and severance 5.1 0.9 5.8 3.5 2.9
Asset impairment, facility closure costs and other 2.8 - 20.0 8.3 20.0
Accelerated depreciation on production transfer 1.0 2.2 5.8 3.0 -
Operational Improvements costs - - 5.0 (0.4) -
(Gain) Loss on Notes Receivable 0.9 (1.1) - - -
(Gain) on Assets Sales (5.4) - - - -
Coated Fabrics Manufacturing Transition Costs 0.7 - - - -
Enviornmental Costs - 1.0 3.0 0.3 (2.2)
Vacation accrual adjustment - - - (2.7) (1.2)
Subtotal for Segment Excluded Items 5.1 3.0 39.6 12.0 19.5
Adjusted Segment Operating Profit $ 84.8 $ 68.4 $ 74.4 $ 80.3 $ 77.0
Adjusted Segment Operating Profit as a % of Sales 8.3% 6.9% 8.9% 10.6% 9.9%
Corporate Expense (21.3) (20.8) (27.6) (33.7) (35.4)
Interest Expense (31.9) (32.9) (28.3) (24.7) (23.7)
Corporate Excluded Items
Restructuring and severance - - 0.1 4.9 7.3
Asset impairment, facility closure costs and other - - 0.6 - 0.2
Operational Improvements costs - - 0.4 - -
Deferred Financing Fees Written-Off and additional interest 1.5 0.8 0.6 4.9 4.9
Corporate Headquarters Relocation Costs 0.1 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 0.9
Vacation accrual adjustment - - - (0.7) (0.3)
Subtotal for Management Excluded Items 1.6 3.8 5.0 9.8 13.0
NYSE: “OMN”
Consolidated Adjusted EBITDA (continued)
INVESTOR PRESENTATION |33
Appendix 2
Second Quarter 2017
Adjusted Income from Continuing Operations before Income Taxes $ 33.2 $ 18.5 $ 23.5 $ 31.7 $ 30.9
Tax Expense (30% rate)** (10.0) (5.6) (7.0) (9.5) (9.2)
Adjusted Income From Continuing Operations 23.2 $ 12.9 $ 16.5 $ 22.2 $ 21.7
Adjusted Diluted Earnings Per Share from Adjusted
Income from Continuing Operations *** $ 0.50 $ 0.28 $ 0.36 $ 0.50 $ 0.49
Adjusted Income from Continuing Operations before Income Taxes $ 33.2 $ 18.5 $ 23.5 $ 31.7 $ 30.9
Interest Expense (Excluding Debt Premium) 31.9 30.9 27.3 22.7 21.7
Adjusted Consolidated EBIT 65.1 49.4 50.8 54.4 52.6
Depreciation and Amortization excluding accelerated depreciation 32.6 32.5 28.2 27.6 27.5
Adjusted Consolidated EBITDA $ 97.7 $ 81.9 $ 79.0 $ 82.0 $ 80.1
Adjusted Consolidated EBITDA as a % of Sales 9.6% 8.3% 9.4% 10.8% 10.3%
Consolidated Capital Expenditures $ 29.2 $ 29.8 $ 24.0 $ 25.6 $ 24.8
Net Leverage
Total Short and Long Term Debt**** 448.6 412.0 356.7 366.0 363.9
Less Cash and Restricted Cash (164.9) (99.5) (44.9) (78.0) (68.6)
Net Debt 283.7 312.5 311.8 288.0 295.3
Net Leverage Ratio***** 2.9 X 3.8 X 3.9 X 3.5 X 3.7 X
**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 $8.8M
***** The above calculation is not intended to be used for purposes of calculating debt covenant compliance
Investor Relations Contacts
Paul DeSantis, Senior Vice President & Chief Financial Officer
(216) 682-7003
IR@omnova.com
World Headquarters
25435 Harvard Road
Beachwood, OH 44122
(216) 682-7000
www.omnova.com
Second Quarter 2017INVESTOR PRESENTATION |34