SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended February 28, 2003
Commission File Number 1-15147
OMNOVA Solutions Inc.
(Exact name of registrant as specified in its charter)
| Ohio |
34-1897652 | |
| (State of Incorporation) |
(I.R.S. Employer Identification No.) |
| 175 Ghent Road Fairlawn, Ohio |
44333-3300 | |
| (Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code (330) 869-4200
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨
At March 31, 2003, there were 39,931,827 outstanding shares of OMNOVA Solutions’ Common Stock, par value $0.10.
OMNOVA SOLUTIONS INC.
| Page No. | ||
| Part I. Financial Information |
||
| Item 1. Financial Statements (Unaudited) |
||
| Condensed Consolidated Statements of Operations—Three Months Ended February 28, 2003 and 2002 |
3 | |
| Condensed Consolidated Balance Sheets—February 28, 2003 and November 30, 2002 |
4 | |
| Condensed Consolidated Statements of Cash Flows—Three Months Ended February 28, 2003 and 2002 |
5 | |
| Notes to the Unaudited Interim Condensed Consolidated Financial Statements as of February 28, 2003 |
6 | |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
12 | |
| Item 3. Quantitative and Qualitative Disclosure About Market Risk |
16 | |
| Item 4. Controls and Procedures |
17 | |
| Part II. Other Information |
||
| Item 1. Legal Proceedings |
17 | |
| 17 | ||
| Item 6. Exhibits and Reports on Form 8-K |
17 | |
| 18 | ||
| 19 |
-2-
Part I. Financial Information
Item 1. Financial Statements
OMNOVA SOLUTIONS INC.
Condensed Consolidated Statements of Operations
(Dollars in Millions, Except Per-Share Data)
(Unaudited)
| Three Months Ended February 28, |
||||||||
| 2003 |
2002 |
|||||||
| Net Sales |
$ |
153.4 |
|
$ |
156.3 |
| ||
| Costs and Expenses |
||||||||
| Cost of products sold |
|
115.4 |
|
|
110.7 |
| ||
| Selling, general and administrative |
|
34.1 |
|
|
34.6 |
| ||
| Depreciation and amortization |
|
6.8 |
|
|
7.2 |
| ||
| Interest expense |
|
2.0 |
|
|
2.3 |
| ||
| Other expense (income), net |
|
1.1 |
|
|
.7 |
| ||
| Unusual and nonrecurring items |
|
1.1 |
|
|
— |
| ||
|
|
160.5 |
|
|
155.5 |
| |||
| (Loss) Income Before Income Taxes |
|
(7.1 |
) |
|
.8 |
| ||
| Income tax (benefit) expense |
|
(.2 |
) |
|
.3 |
| ||
| (Loss) Income Before Cumulative Effect of Accounting Change |
$ |
(6.9 |
) |
$ |
.5 |
| ||
| Cumulative Effect of Accounting Change |
|
— |
|
|
(142.5 |
) | ||
| Net Loss |
$ |
(6.9 |
) |
$ |
(142.0 |
) | ||
| Basic Earnings (Loss) Per Share |
||||||||
| (Loss) Earnings before cumulative effect of accounting change |
$ |
(.17 |
) |
$ |
.01 |
| ||
| Cumulative effect of accounting change |
|
— |
|
|
(3.60 |
) | ||
| Net Loss Per Basic Share |
$ |
(.17 |
) |
$ |
(3.59 |
) | ||
| Diluted Earnings (Loss) Per Share |
||||||||
| (Loss) Earnings before cumulative effect of accounting change |
$ |
(.17 |
) |
$ |
.01 |
| ||
| Cumulative effect of accounting change |
|
— |
|
|
(3.60 |
) | ||
| Net Loss Per Diluted Share |
$ |
(.17 |
) |
$ |
(3.59 |
) | ||
See notes to the unaudited interim condensed consolidated financial statements.
-3-
OMNOVA SOLUTIONS INC.
Condensed Consolidated Balance Sheets
(Unaudited)
| February 28, 2003 |
November 30, 2002 |
|||||||
| (Dollars in millions) |
||||||||
| ASSETS: |
||||||||
| Current Assets |
||||||||
| Cash and cash equivalents |
$ |
7.7 |
|
$ |
8.4 |
| ||
| Accounts receivable, net |
|
49.9 |
|
|
42.8 |
| ||
| Inventories |
|
56.8 |
|
|
48.3 |
| ||
| Deferred income taxes |
|
11.8 |
|
|
11.8 |
| ||
| Prepaid expenses and other |
|
5.4 |
|
|
4.8 |
| ||
| Total Current Assets |
|
131.6 |
|
|
116.1 |
| ||
| Property, plant and equipment, net |
|
189.4 |
|
|
193.0 |
| ||
| Goodwill, net |
|
41.2 |
|
|
41.1 |
| ||
| Trademarks and other intangible assets, net |
|
35.2 |
|
|
35.6 |
| ||
| Prepaid pension |
|
55.9 |
|
|
55.4 |
| ||
| Other assets |
|
25.3 |
|
|
24.9 |
| ||
| Total Assets |
$ |
478.6 |
|
$ |
466.1 |
| ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY: |
||||||||
| Current Liabilities |
||||||||
| Current portion of long-term debt |
$ |
6.0 |
|
$ |
6.0 |
| ||
| Accounts payable |
|
79.7 |
|
|
83.7 |
| ||
| Accrued payroll and personal property taxes |
|
11.0 |
|
|
14.0 |
| ||
| Other current liabilities |
|
12.0 |
|
|
11.6 |
| ||
| Total Current Liabilities |
|
108.7 |
|
|
115.3 |
| ||
| Long-term debt |
|
151.5 |
|
|
126.5 |
| ||
| Postretirement benefits other than pensions |
|
51.4 |
|
|
51.4 |
| ||
| Deferred income taxes |
|
11.8 |
|
|
11.8 |
| ||
| Other liabilities |
|
13.6 |
|
|
13.9 |
| ||
| Shareholders’ Equity |
||||||||
| Preference stock—$1.00 par value; 15.0 million shares authorized; none outstanding |
|
— |
|
|
— |
| ||
| Common stock—$0.10 par value; 135.0 million shares authorized; 41.8 million shares outstanding |
|
4.2 |
|
|
4.2 |
| ||
| Additional contributed capital |
|
309.3 |
|
|
309.3 |
| ||
| Retained deficit |
|
(154.9 |
) |
|
(148.0 |
) | ||
| Treasury stock at cost; 2.0 million shares and 2.1 million shares |
|
(13.0 |
) |
|
(13.3 |
) | ||
| Accumulated other comprehensive loss |
|
(4.0 |
) |
|
(5.0 |
) | ||
| Total Shareholders’ Equity |
|
141.6 |
|
|
147.2 |
| ||
| Total Liabilities and Shareholders’ Equity |
$ |
478.6 |
|
$ |
466.1 |
| ||
See notes to the unaudited interim condensed consolidated financial statements.
-4-
OMNOVA SOLUTIONS INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Three Months Ended February 28, |
||||||||
| 2003 |
2002 |
|||||||
| (Dollars in millions) |
||||||||
| Operating Activities |
||||||||
| Net loss |
$ |
(6.9 |
) |
$ |
(142.0 |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Cumulative effect of change in accounting principle |
|
— |
|
|
142.5 |
| ||
| Depreciation, amortization and (gain)/loss on sale of fixed assets |
|
7.0 |
|
|
7.3 |
| ||
| Deferred income taxes |
|
— |
|
|
(3.0 |
) | ||
| Changes in operating assets and liabilities net of effects of acquisitions and |
||||||||
| dispositions of businesses: |
||||||||
| Current assets |
|
(16.0 |
) |
|
9.0 |
| ||
| Current liabilities |
|
(6.3 |
) |
|
(17.8 |
) | ||
| Other noncurrent assets |
|
(1.4 |
) |
|
(3.2 |
) | ||
| Other noncurrent liabilities |
|
.3 |
|
|
.5 |
| ||
| Net Cash Used In Operating Activities |
|
(23.3 |
) |
|
(6.7 |
) | ||
| Investing Activities |
||||||||
| Capital expenditures |
|
(2.4 |
) |
|
(2.1 |
) | ||
| Net Cash Used In Investing Activities |
|
(2.4 |
) |
|
(2.1 |
) | ||
| Financing Activities |
||||||||
| Long-term debt incurred |
|
55.0 |
|
|
34.9 |
| ||
| Long-term debt paid |
|
(30.0 |
) |
|
(30.0 |
) | ||
| Net short-term debt incurred |
|
— |
|
|
1.9 |
| ||
| Net Cash Provided By Financing Activities |
|
25.0 |
|
|
6.8 |
| ||
| Effect of exchange rate changes on cash |
|
|||||||