OMNOVA Solutions Inc. (OMN, Financial) filed Quarterly Report for the period ended 2011-05-31.
Omnova Solutions Inc. has a market cap of $319.83 million; its shares were traded at around $7.07 with a P/E ratio of 9.96 and P/S ratio of 0.38. Omnova Solutions Inc. had an annual average earning growth of 0.8% over the past 10 years.
Net sales in the second quarter of 2011 were $329.9 million compared to $226.4 million in the second quarter of 2010. The sales improvement was driven by $94.8 million of net sales from Eliokem while legacy net sales increased $8.7 million. Excluding the Eliokem net sales, legacy Performance Chemicals business segment revenue increased by 8.7% while the Decorative Products business segment revenue decreased 3.9%. Contributing to the legacy net sales increase in 2011 were price increases of $22.5 million and favorable foreign exchange translation of $3.0 million, partially offset by lower volume of $16.8 million.
Net sales in the first half of 2011 were $618.6 million compared to $410.3 million in the first half of 2010. Eliokems net sales were $169.5 million while legacy net sales increased $38.8 million. The Companys legacy Performance Chemicals business segment revenue increased by 14.9% and Decorative Products business segment revenue increased 0.9%. Contributing to the legacy net sales increase in 2011 were price increases of $39.1 million and favorable foreign exchange translation of $3.8 million, partially offset by lower volume of $4.1 million.
Other expense (income), net was expense of $1.2 million and $0.7 million in the second quarter and first half of 2011, respectively, compared to income of $8.7 million and $8.8 million in the second quarter and first half of 2010, respectively. Included in the second quarter and first half of 2011 is $2.8 million of losses on foreign currency derivative transactions related to certain foreign operations acquired in the Eliokem acquisition. The loss was recorded in Other Comprehensive Income in the first quarter of 2011. During the second quarter of 2011, the Company determined that it should have recognized $1.5 million of these amounts as losses ($1.0 million after tax or $0.02 per share) in the first quarter of 2011. The Company has concluded that this error was not material to the results of operations for the first and second quarters of 2011, nor to its expected results of operations for the fiscal year ending November 30, 2011. Accordingly, the Company has corrected this error and recognized this expense by increasing other expense and decreasing other comprehensive income in the second quarter of 2011. Results of operations for the first quarter of 2011 were not restated. All Eliokem foreign currency derivatives were settled in the second quarter of 2011. Also included in the second quarter of 2011 is a foreign goods tax reimbursement of $0.8 million and other foreign currency translation gains of $0.5 million. Included in the second quarter and first half of 2010 is a gain on the dissolution of a joint marketing alliance of $9.7 million, strike related costs of $0.4 million and a legal settlement of $0.3 million.
Income tax expense was $3.5 million with an effective rate of 36.1% in the second quarter of 2011 compared to $0.9 million with an effective rate of 5.6% in the second quarter of 2010. For the first half of 2011, income tax expense was $5.8 million with an effective rate of 44.6% compared to $1.6 million with an effective rate of 6.5% in 2010. Included in the first half of 2011 is a one-time charge of $1.1 million for foreign taxes related to the merger of Eliokems U.S. operations into the Companys domestic operations and a higher year-over-year effective tax rate. In the second quarter of 2010, the Company recognized income tax expense at its then current estimated tax rate; however, the impact of the Companys valuation allowance in the U.S. reduced the tax expense. Due to the improvement in the Companys earnings and outlook, the U.S. deferred tax valuation allowance was reversed in the fourth quarter of 2010. At the end of its 2010 fiscal year, the Company previously estimated its effective rate for 2011 to be 42%. However, based on more recent information, the Company now expects its estimated effective tax rate to be approximately 36.5% for the full year and 35.2% for the remaining two quarters of 2011, excluding discrete tax items. Global cash income taxes paid are expected to be minimal. OMNOVA has $118.9 million of U.S. federal net operating loss carryforwards and $109.2 million of state and local net operating loss carryforwards with expiration dates between 2021 and 2031.
The Company generated net income of $6.2 million or $0.14 per diluted share in the second quarter of 2011. Included in the second quarter of 2011 are the higher interest expense of $7.7 million, $2.6 million of higher tax expense, $0.8 million of acquisition and integration expense and $0.7 million of restructuring and severance expense. Net income in the second quarter of 2010 was $15.1 million or $0.33 per diluted share. Included in the second quarter of 2010 is a gain of $9.7 million related to the dissolution of a joint marketing alliance, an asset impairment charge of $6.2 million and acquisition expense of $0.7 million. For the first half of 2011, the Company generated net income of $7.2 million or $0.16 per diluted share. Included in the first half of 2011 are the higher interest expense of $15.2 million, $4.2 million of higher tax expense, $2.7 million of acquisition and integration expense, a $1.1 million tax charge resulting from the liquidation and merger transaction of Eliokems U.S. operations, a $1.0 million write-off of deferred financing fees as a result of refinancing actions and $1.5 million of restructuring and severance expense. Net income in the first half of 2010 was $22.9 million or $0.51 per diluted share. Included in the second quarter of 2010 is a gain of $9.7 million related to the dissolution of a joint marketing alliance, an asset impairment charge of $6.2 million, acquisition expense of $0.7 million and restructuring and severance expense of $0.3 million.
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Omnova Solutions Inc. has a market cap of $319.83 million; its shares were traded at around $7.07 with a P/E ratio of 9.96 and P/S ratio of 0.38. Omnova Solutions Inc. had an annual average earning growth of 0.8% over the past 10 years.
Highlight of Business Operations:
Included in the three months ended May 31, 2010 Pro forma net income are Eliokems earning before interest and taxes of $4.8 million, as well as additional interest expense of $7.4 million and additional tax expense of $5.4 million. Included in the six months ended May 31, 2010 Pro forma net income are Eliokems earning before interest and taxes of $4.3 million, as well as additional interest expense of $14.9 million and additional tax expense of $3.1 million.Net sales in the second quarter of 2011 were $329.9 million compared to $226.4 million in the second quarter of 2010. The sales improvement was driven by $94.8 million of net sales from Eliokem while legacy net sales increased $8.7 million. Excluding the Eliokem net sales, legacy Performance Chemicals business segment revenue increased by 8.7% while the Decorative Products business segment revenue decreased 3.9%. Contributing to the legacy net sales increase in 2011 were price increases of $22.5 million and favorable foreign exchange translation of $3.0 million, partially offset by lower volume of $16.8 million.
Net sales in the first half of 2011 were $618.6 million compared to $410.3 million in the first half of 2010. Eliokems net sales were $169.5 million while legacy net sales increased $38.8 million. The Companys legacy Performance Chemicals business segment revenue increased by 14.9% and Decorative Products business segment revenue increased 0.9%. Contributing to the legacy net sales increase in 2011 were price increases of $39.1 million and favorable foreign exchange translation of $3.8 million, partially offset by lower volume of $4.1 million.
Other expense (income), net was expense of $1.2 million and $0.7 million in the second quarter and first half of 2011, respectively, compared to income of $8.7 million and $8.8 million in the second quarter and first half of 2010, respectively. Included in the second quarter and first half of 2011 is $2.8 million of losses on foreign currency derivative transactions related to certain foreign operations acquired in the Eliokem acquisition. The loss was recorded in Other Comprehensive Income in the first quarter of 2011. During the second quarter of 2011, the Company determined that it should have recognized $1.5 million of these amounts as losses ($1.0 million after tax or $0.02 per share) in the first quarter of 2011. The Company has concluded that this error was not material to the results of operations for the first and second quarters of 2011, nor to its expected results of operations for the fiscal year ending November 30, 2011. Accordingly, the Company has corrected this error and recognized this expense by increasing other expense and decreasing other comprehensive income in the second quarter of 2011. Results of operations for the first quarter of 2011 were not restated. All Eliokem foreign currency derivatives were settled in the second quarter of 2011. Also included in the second quarter of 2011 is a foreign goods tax reimbursement of $0.8 million and other foreign currency translation gains of $0.5 million. Included in the second quarter and first half of 2010 is a gain on the dissolution of a joint marketing alliance of $9.7 million, strike related costs of $0.4 million and a legal settlement of $0.3 million.
Income tax expense was $3.5 million with an effective rate of 36.1% in the second quarter of 2011 compared to $0.9 million with an effective rate of 5.6% in the second quarter of 2010. For the first half of 2011, income tax expense was $5.8 million with an effective rate of 44.6% compared to $1.6 million with an effective rate of 6.5% in 2010. Included in the first half of 2011 is a one-time charge of $1.1 million for foreign taxes related to the merger of Eliokems U.S. operations into the Companys domestic operations and a higher year-over-year effective tax rate. In the second quarter of 2010, the Company recognized income tax expense at its then current estimated tax rate; however, the impact of the Companys valuation allowance in the U.S. reduced the tax expense. Due to the improvement in the Companys earnings and outlook, the U.S. deferred tax valuation allowance was reversed in the fourth quarter of 2010. At the end of its 2010 fiscal year, the Company previously estimated its effective rate for 2011 to be 42%. However, based on more recent information, the Company now expects its estimated effective tax rate to be approximately 36.5% for the full year and 35.2% for the remaining two quarters of 2011, excluding discrete tax items. Global cash income taxes paid are expected to be minimal. OMNOVA has $118.9 million of U.S. federal net operating loss carryforwards and $109.2 million of state and local net operating loss carryforwards with expiration dates between 2021 and 2031.
The Company generated net income of $6.2 million or $0.14 per diluted share in the second quarter of 2011. Included in the second quarter of 2011 are the higher interest expense of $7.7 million, $2.6 million of higher tax expense, $0.8 million of acquisition and integration expense and $0.7 million of restructuring and severance expense. Net income in the second quarter of 2010 was $15.1 million or $0.33 per diluted share. Included in the second quarter of 2010 is a gain of $9.7 million related to the dissolution of a joint marketing alliance, an asset impairment charge of $6.2 million and acquisition expense of $0.7 million. For the first half of 2011, the Company generated net income of $7.2 million or $0.16 per diluted share. Included in the first half of 2011 are the higher interest expense of $15.2 million, $4.2 million of higher tax expense, $2.7 million of acquisition and integration expense, a $1.1 million tax charge resulting from the liquidation and merger transaction of Eliokems U.S. operations, a $1.0 million write-off of deferred financing fees as a result of refinancing actions and $1.5 million of restructuring and severance expense. Net income in the first half of 2010 was $22.9 million or $0.51 per diluted share. Included in the second quarter of 2010 is a gain of $9.7 million related to the dissolution of a joint marketing alliance, an asset impairment charge of $6.2 million, acquisition expense of $0.7 million and restructuring and severance expense of $0.3 million.
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