OMNOVA Solutions Inc. Annual Report 2006

Plain-text annual report

2 0 0 6 A n n u a l R e p o r t a n d 1 0 K A B E T T E R P L A C E A B E T T E R P L A C E Products and services Performance Chemicals Decorative Products from OMNOVA Solutions mers and process chemicals that impart distinct product like scratch- and stain-resistant coatings, to create products This segment produces highly engineered emulsion poly- This segment combines design with functional attributes, touch people’s lives every day. OMNOVA helps make the world a better place with innovations from its two business segments. performance characteristics – such as strength, dimensional that are value-added and on-trend. The major product lines stability, opacity and printability. The Performance Chemi- – commercial wallcovering, laminates, coated upholstery cals business serves the paper and carpet markets, as well fabrics and ﬁ lms – serve numerous commercial, residential, as a variety of specialty applications, including nonwovens, transportation and marine applications. Interior products ﬂ oor care, tape and adhesives, construction, industrial coat- are predominantly used in commercial settings such as ho- ings, tire cord and textiles. tels, ofﬁ ces, restaurants, hospitals and retail outlets. Applications depicted on the cover and cityscape in- clude chemicals used in: paper, carpet, ﬂ oor polish, tapes Applications depicted on the cover and cityscape include: wallcovering, automotive and marine upholstery, and adhesive labels, disposable diapers, oil/gas drilling, ofﬁ ce and restaurant furniture upholstery, vehicle soft tops, body soaps, apparel, heavy truck hoods, serving tray sur- demountable wall surfaces, furniture and store ﬁ xture 3-D faces, auto ﬁ ltration, tires, rooﬁ ng mat, wallboard, running and ﬂ at laminates, recreational vehicle 3-D work surface tracks, components for athletic shoes and caps. laminates, awnings and tents, and digital wall murals. 1 | OMNOVA SOLUTIONS INC. To Our Shareholders: For the third consecutive year, OMNOVA Solutions achieved signiﬁ cant performance In September 2006, improvement, reaching key operating milestones on our journey to become a company that OMNOVA Solutions sold its consistently delivers value to our investors. We successfully leveraged leadership positions to gain GenFlex Building Products share in our core markets, expanded our presence in new, adjacent markets and increased our single-ply commercial global footprint. At the same time, we continue to streamline and standardize operations and attain rooﬁ ng business to new levels of productivity. As a result, we achieved a solid improvement in earnings and dramatically Firestone Building Products improved our balance sheet. Company, a division of BFS While we made substantial progress in improving the performance of our core businesses Diversiﬁ ed Products, LLC. – growing our position and improving our margins – we also took a hard look at our portfolio and Where applicable, ﬁ nancial decided to exit the non-strategic Building Products business. We completed the transaction in the information in this annual fourth quarter on terms very favorable to our shareholders. report, including the letter During the year, the commercial construction and refurbishment markets strengthened after a to shareholders, is presented prolonged recession, and more and more customers enthusiastically embraced the many OMNOVA pro forma for OMNOVA’s products and services that help make the world a better place. Although we continued to face tough continuing businesses. challenges, particularly another year of new record high raw material costs and weakening residential housing, the actions we have taken enabled us to address these issues, seize opportunities and create a stronger company. We made solid progress on our number one priority in 2006 – to improve proﬁ tability. This effort was led by the continuing turnaround of the Decorative Products business segment, which took advantage of improving commercial markets to increase sales by over 6%. (Sales were up 7.5% on a pro forma basis, excluding the sales from a divested product line in the ﬁ rst quarter of 2005.) Operating proﬁ t in Decorative Products improved by $11.8 million for the year and has increased $15.8 million since 2004. After posting much-improved results in 2005, the Performance Chemicals business segment opened 2006 on a strong note, but was impacted by further petrochemical-based raw material cost challenges. Oil prices averaged over $65 per barrel during the year, contributing to nearly $17 million in raw material inﬂ ation. Also, the business experienced weakening conditions in some of its end-use markets, particularly carpet chemicals, due to softening residential demand. Looking ahead, many industry experts predict a residential housing recovery in the latter part of 2007, OMNOVA SOLUTIONS INC. | 2 with excellent long-term fundamentals. In addition, OMNOVA’s $28.8 million versus the 2005 year-end. Shareholders’ equity aggressive actions on productivity and pricing are helping offset improved to $48.5 million in 2006, from $(12.6) million the the negative impact from raw material inﬂ ation. prior year. The cumulative effect of our actions across the Company OMNOVA continued an excellent trend of reducing its produced positive results in 2006. OMNOVA Solutions showed leverage ratio (net debt-to-Adjusted EBITDA) over the past signiﬁ cant improvement and our best performance in six years couple of years, to 2.7 at 2006 year-end, compared to 3.4 in 2005 for both net income and diluted earnings per share. Net income and 6.9 in 2004. (Deﬁ nitions of Adjusted EBITDA and net debt, was $21.3 million versus a $1.8 million loss in 2005. Reported plus reconciliations of Adjusted EBITDA to income or loss from diluted earnings per share improved to $0.51 and diluted continuing operations and net debt to total debt are provided earnings per share for continuing operations improved to $0.08, on page 3 of this report.) Our improved balance sheet provides an increase of $0.55 and $0.14 per share, respectively, over the us with the opportunity to call our $165.0 million of 11.25% high- prior year. A Better Balance Sheet Proceeds from the Building Products sale, combined with strong cash management, enabled us to achieve another solid year of debt reduction. OMNOVA ended ﬁ scal 2006 with net debt (deﬁ ned as total debt less cash, cash equivalents and yield bonds in June 2007. This offers the potential for interest savings of about $5 million in 2007 and greater savings and ﬂ exibility in the future. Reﬂ ecting our improved ﬁ nancial position, in October of 2006 Standard & Poor’s announced an upgrade of our credit rating to B+. restricted cash) of $126.3 million versus $166.5 million at the end A Better Cost Structure of 2005. The Company had total cash balances of $38.7 million We continued to focus on improving our cost structure. at the end of the ﬁ scal year, a record high and an increase of Actions across both businesses yielded $16.5 million in cost F I N A N C I A L H I G H L I G H T S (Dollars in millions, except per share data) Net Sales Performance Chemicals Decorative Products Segment Operating Proﬁ t (Loss)(1) Performance Chemicals Decorative Products Interest expense Corporate expenses Income tax (expense) beneﬁ t Income (Loss) from continuing operations Discontinued operations(2) Net Income (Loss) Basic Income (Loss) Per Share Income (Loss) per share from continuing operations Discontinued operations Net Income (Loss) Per Share Diluted Income (Loss) Per Share Income (Loss) per share from continuing operations Discontinued operations Net Income (Loss) Per Share Other Data Capital expenditures Depreciation and amortization Number of employees at year-end Number of outstanding shares for diluted EPS (millions) Years Ended November 30, 2006 2005 2004 $ 441.6 257.5 $ 699.1 $ 29.7 9.0 $38.7 (20.3) (15.1) (.1) 3.2 18.1 $ 21.3 $ $ $ $ .08 .44 .52 .08 .43 .51 $ 13.0 $ 20.2 1,700 41.6 $ 452.8 242.2 $ 695.0 $ 372.9 257.8 $ 630.7 $ $ $ $ $ $ $ $ $ 33.8 (2.8) 31.0 (21.2) (12.8) .3 (2.7) .9 (1.8) (.06) .02 (.04) (.06) .02 (.04) 12.4 21.1 1,700 40.7 $ $ 13.5 (6.8) 6.7 (20.7) (11.7) .3 (25.4) 1.0 (24.4) $ $ $ $ $ (.64) .03 (.61) (.64) .03 (.61) $ 11.2 $ 21.6 1,900 40.2 (1) Segment operating proﬁ t for the full year of 2006, 2005 and 2004 was impacted by a number of items which are discussed in this Annual Report. These items include for 2006, trademark and asset impairment charges of $1.1 million and restructuring and severance of $1.1 million; for 2005, restructuring and severance charges of $5.8 million, asset impairment charges of $2.5 million, a gain on legal settlement of $0.9 million, a gain on the sale of a brand of $0.8 million and work stoppage charges of $1.7 million; and for 2004, trademark impairment charges of $3.9 million and restructuring and severance charges of $0.5 million. Management excludes certain of these items when evaluating the results of the Company’s segments. (2) Discontinued operations for ﬁ scal 2006 include the gain on the sale of the Company’s Building Products business of approximately $18.2 million. savings, which were critical given sharply increasing utility are simple and clear: to eliminate waste in all areas of our and freight costs that jumped a record $4.4 million in 2006, in Company and streamline key processes, thereby delivering addition to the raw material inﬂ ation mentioned earlier. signiﬁ cant bottom line impact. OMNOVA’s LEAN SixSigma operating approach continues Over 50% of our workforce has participated in LEAN to have a growing impact on working capital, cost reductions SixSigma Kaizens, which are focused, intensive process im- and cash ﬂ ow improvements. Our LEAN SixSigma objectives provement events that collect, evaluate and rapidly implement 3 | OMNOVA SOLUTIONS INC. Net Income Dollars in millions U p $ 4 5 . 7 M 3 . 1 2 ) 8 . 1 ( ) 4 . 4 2 ( 04 05 06 Segment Operating Profit Dollars in millions 8 % 7 U p 4 7 . 8 3 0 . 1 3 7 . 6 04 05 06 Diluted Earnings Per Share Dollars 1 . 1 . 7 U p $ U p $ 0 2 2 1 5 . 0 8 0 . 0 ) 4 0 . 0 ( ) 6 0 . 0 ( Reported Continuing Operations ) 1 6 . 0 ( ) 4 6 . 0 ( Net Year-End Debt Dollars in millions Down 24% 7 . 6 6 1 5 . 6 6 1 3 . 6 2 1 04 05 06 04 05 06 RECONCI LIATION OF INC OME (LOSS) FR OM CONTIN UING OPERATIONS TO ADJUSTED EBITDA AND TOT AL DEBT TO NET DE BT This Annual Report also includes Adjusted EBITDA and Net Debt which are non-GAAP ﬁ nancial measures as deﬁ ned by the Securities and Exchange Commission. Adjusted EBITDA is calculated in accordance with the deﬁ nition of adjusted net earnings from operations as set forth in the Company’s senior secured revolving credit facility dated May 28, 2003, as subsequently amended, and excludes charges for interest, taxes, depreciation and amortization, restructuring and severance, work stoppage, goodwill and trademark write-offs, amortization of deferred ﬁ nancing costs, net earnings of joint ventures less cash dividends, gains or losses on asset sales, and non-cash charges for the 401(k) company match. Net Debt is calculated as total debt less cash, cash equivalents and restricted cash. Adjusted EBITDA and Net Debt are not measures of ﬁ nancial performance under GAAP. Adjusted EBITDA and Net Debt 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 an appropriate measure for comparing performance relative to other companies. Adjusted EBITDA and Net Debt 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 ﬂ ows from operations or cash ﬂ ow data which are all prepared in accordance with GAAP. Adjusted EBITDA and Net Debt 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 they are commonly used as analytical indicators to evaluate performance, allocate resources and measure leverage capacity and debt service ability. Set forth below are the reconciliations of these non-GAAP ﬁ nancial measures to their most directly comparable GAAP ﬁ nancial measures. Reconciliation of income (loss) from continuing operations to Adjusted EBITDA (Dollars in millions) Income (Loss) from continuing operations Interest Taxes Depreciation and amortization Restructuring and severance Calender line restructuring Work stoppage Amortization of deferred ﬁ nancing costs Net earnings of joint ventures less cash dividends Gains or losses on asset sales Non-cash charge for 401(k) company match Goodwill and trademark write-offs Adjusted EBITDA Reconciliation of total debt to Net Debt (Dollars in millions) Total debt Cash and cash equivalents Restricted cash Net Debt Years Ended November 30, 2006 2005 2004 $ 3.2 20.3 .1 20.2 1.4 – – 1.0 (1.8) – 2.1 1.0 $ 47.5 $ (2.7) 21.2 (.3) 21.1 5.9 1.6 1.7 1.4 (.7) (1.1) 1.4 – $ 49.5 $ (25.4) 20.7 (.3) 21.6 .4 – – 1.8 – – 1.4 3.9 $ 24.1 Years Ended November 30, 2006 2005 2004 $ 165.0 (26.4) (12.3) $ 126.3 $ 176.4 (9.9) – $ 166.5 $ 181.7 (15.0) – $ 166.7 Certain information included in this Annual Report is forward-looking and, accordingly, involves estimates, assumptions, judgments and uncertainties. Forward-looking statements may generally be identiﬁ ed by the use of forward-looking terms such as “may,” “should,” “projects,” “forecasts,” “seeks,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “targets,” “likely,” “will,” “would,” “could,” or similar terms. For information regarding the risk factors that could cause actual results or outcomes to differ materially from those described in the forward-looking statements, see Item 1A Risk Factors in the Business Section of the 10K. OMNOVA SOLUTIONS INC. | 4 ideas that result in positive change. We held 125 such events efforts are supported by our deep market and application in 2006 alone, and will continue to build on their success with knowledge and expertise. a goal of 100% participation by our associates. Employee One of the best examples can be found in our largest empowerment is key, along with the disciplined leadership of market, paper chemicals. Extensive trials of our innovative new our 50 BlackBelt and 230 GreenBelt trained internal experts. GenCryl® Pt™ latex coatings led to signiﬁ cant new business We are especially pleased with the growing involvement late in the fourth quarter and early in 2007. Likewise, exciting of our customers in LEAN SixSigma, many of whom are taking performance features in OMNOVA’s advanced line of paper advantage of the training conducted by OMNOVA to master processing chemicals attracted enthusiastic customer interest the tools and techniques. This is a very special way we can resulting in increased sales volumes. Our ability to offer truly add value for our customers and, at the same time, learn differentiated products such as these drove a solid year in paper more about their challenges and opportunities so we can serve chemicals despite weakness in the industry as a whole. them better. Other examples of market share gains in chemicals include Process and customer service improvements have been key wins in tape release and saturants, and in our functional further enhanced by our successful (on-budget, on-time, in-mold coatings product line. We haven’t talked a lot about on-target) implementation of an SAP business system in the latter, but our coatings applications expertise along with Performance Chemicals. Since SAP went live in mid-2005, improved products have been instrumental in growing this the chemicals segment has realized $1.5 million in savings, capability, which saves steps in the priming/painting process established a single, integrated platform on which to continue and promotes a Class A ﬁ nish on compression-molded ﬁ ber- to drive productivity, and beneﬁ ted from having quick access glass parts. The growing number of end uses for this product to mission-critical information. In Decorative Products, a team line include molded heavy truck cabs and personal watercraft. made up primarily of OMNOVA internal experts will launch the Improving trends in commercial interiors contributed full-scale implementation of SAP in the ﬁ rst quarter of 2007. We to market share gains in Decorative Products. With the look forward to the beneﬁ ts of having the entire enterprise on a rebound in the hospitality market and steady improvement common business system platform. in ofﬁ ce construction and refurbishment, customers had a A Better Position For Growth Our strategic intent from a portfolio perspective is to focus on those businesses where we have, or can create, leading market positions that can be leveraged for proﬁ table growth, and where we can generate attractive returns. After assessing a number of strategic options, we determined that divesting the Building Products segment was the best course for the Company and our shareholders. We believe the terms of the transaction were quite favorable, including receipt of $25.9 million in cash, retention of $10.5 million in fully collected receivables, and assumption by the buyer of all warranty liabilities associated with the business. Building Products generated $0.9 million of operating proﬁ t in 2005. The Building Products sale allows us to focus on our remaining portfolio of businesses that are better positioned for growth. We believe superior execution along three complementary paths – expanding market share, moving into adjacent markets and increasing globalization – will allow us to proﬁ tably grow these businesses at above-market rates. We are making progress on all three fronts. Market Share fresh opportunity to explore the many new products we have introduced in recent years. Sales in our commercial wallcovering business received an additional boost with the completion of a multi-year brand and distributor realignment. We are now focused on four major brands with the strongest and most aggressive national and regional distributors, and we can also boast a best-in-class custom wallcovering capability. At the end of the year, we combined management responsibilities for our commercial upholstery product line with wallcovering to take advantage of market speciﬁ cation and distribution synergies. Laminates made the most impressive market share gains in Decorative Products. The substantial new business OMNOVA won at the end of 2005 with one of America’s largest and fastest growing kitchen and bath cabinet makers had a major impact in 2006, despite the slowdown in residential housing that reduced cabinet industry volumes. This and other new laminate opportunities are the result of product innovations and new business we were able to capture during a period of consolidation across many decorative products markets. Prolonged weakness in the commercial markets took its toll on other suppliers who did To achieve expansion of share in markets we have not have the depth and scale of OMNOVA Solutions. We were historically served, we are focused on building upon our well-positioned to weather the downturn and respond quickly leading positions with exciting new products and services that to these opportunities. This included the acquisition in late are designed to deliver greater value to our customers. These summer of certain manufacturing assets from a competitor that 5 | OMNOVA SOLUTIONS INC. “Our strategic intent…is to focus on those businesses where we have, or can create, leading market positions that can be leveraged for proﬁ table growth, and where we can generate attractive returns.” Kevin M. McMullen Chairman and CEO exited the business. These assets will enable OMNOVA to serve an attractive niche for thin extruded-ﬁ lm laminates, further broadening our full line of laminate products. Rounding out an excellent year for laminates were signiﬁ cant account wins in the recreational vehicle and store ﬁ xtures markets. Customers chose our popular surf(x)® laminates because of the design ﬂ exibility they offer for three-dimensional applications. Adjacent Markets Decorative Products has led our expansion into new adjacent markets – the second element of our organic growth strategy – where our current or related products and expertise may be applied in areas we have not traditionally served. An excellent example is OMNOVA’s upholstery and trim for the marine market. The American Boatbuilders Association, a large buying consortium of boat manufacturers, renewed our supplier-of-choice status in 2006. In addition, we have secured several new accounts in the marine industry. During the year, OMNOVA reached an important milestone for another adjacent market opportunity: automotive OEM seating upholstery. Our Shanghai, China, joint venture manufacturing facility achieved the TS16949 certiﬁ cation, a rigorous quality speciﬁ cation required of automotive suppliers in the region. OMNOVA’s digital wall mural business, featuring our expansive viewnique® product offering and turn- key installation service, doubled sales over the prior year. Franchisers, such as the Yum/KFC and Hurricane Wings restaurants, ﬁ nd custom wall murals to be a creative, durable and cost effective way to convey a unique brand image consistently across their facilities. Other adjacent market successes include a signiﬁ cant new account in interior wall systems, also known as demountable walls, where OMNOVA has developed a new custom wall surface product for a leading manufacturer. In chemicals, our unique OMNOVA SOLUTIONS INC. | 6 product for oil and natural gas drilling had another big year as a A Better Place result of the increased urgency globally for energy exploration. As you can see, OMNOVA Solutions is in a much better Additionally, our new OMNAPEL™ polymer system – featuring place as a result of actions taken to focus our portfolio, signiﬁ cant water repellent properties – is gaining sales in streamline operations, improve our balance sheet, develop chemicals for exterior applications such as boat covers, awnings differentiated products and services, and deliver above- and high-end rooﬁ ng underlay. Globalization The third element in our organic growth strategy is globalization. We are taking advantage of opportunities to grow internationally by leveraging our leadership positions in key domestic markets with winning products, technologies and market growth. We have come a long way in just a few years in improving the operating performance of our Company despite challenging external headwinds. However, we recognize that our shareholders have not enjoyed a corresponding increase in value. We are clearly not pleased or satisﬁ ed with that and continue to be focused on taking all actions within our control services. Both OMNOVA business segments are making critical to increase shareholder value. inroads around the globe. Our Decorative Products joint ventures in China and Thailand continue to grow. We do not consolidate sales from our majority-owned JVs, but revenue growth of 15% to $93 million in 2006, along with improvements in manufacturing costs and integration with our domestic operations, delivered a 140% increase in operating proﬁ t contribution to OMNOVA. Our Asian manufacturing capability has been instrumental in securing contracts in marine upholstery, automotive OEM and aftermarket upholstery, plus coated fabrics for OEM and aftermarket vehicle soft-top applications. OMNOVA gained a sole source relationship with a major vehicle soft-top customer in 2006, based largely on our ability to manufacture both in North America and Asia. In fact, our decorative product manufacturing capability extends to three continents. We streamlined our European operations late in 2006 to reﬂ ect the current realities in the commercial interiors sector there, and have introduced unique products to the market, including Solaris Flare, a new wallcovering which features color-changing inks. Our Performance Chemicals business in Europe and in other parts of the world continues to be very strong with signiﬁ cant potential for future growth. Sales of chemicals into Europe were up 19% in 2006, and increased 33% in other international markets, such as Asia. The Shanghai sales ofﬁ ce we opened in 2005 continues to aggressively pursue attractive growth opportunities in the region with recent contract wins in nonwovens, tape, tire cord and textiles. Given the extraordinary growth potential of the Asia- Paciﬁ c chemicals market, OMNOVA spent the year conducting an extensive evaluation of possible expansion options in the region. We plan to move forward aggressively on Asian growth opportunities in 2007. As we drive for proﬁ table growth and operating margin improvement in our businesses, two other key beneﬁ ts will help drive value creation in 2007 and beyond. OMNOVA has $114.2 million of net operating loss carry-forwards which will eliminate federal tax liabilities for the next several years. Also, our 11.25% high-yield bonds which are callable in June 2007 present the opportunity for a signiﬁ cant reduction in interest charges. These two beneﬁ ts should create substantial leverage to net income and earnings per share for our shareholders. Should new, unforeseen challenges arise and old nemeses such as raw material inﬂ ation persist, we are in a better position today to overcome adversity than at any time in OMNOVA’s history. This view is shared by OMNOVA Solutions’ independent Board of Directors and by our talented, hard-working associates who come to work every day focused on delighting customers with products and services that make the world a better place. They can be proud of their role in the progress we have made and our potential for greater future performance. Make no mistake, we clearly have not yet reached our ﬁ nal destination, but we draw energy from each new milestone on our journey of performance improvement. We are better, stronger, and well-positioned to increase our value to shareholders, customers, employees and the communities in which we operate. With another solid year of progress behind us, we are eager to show what we can accomplish in 2007 and beyond. Thank you for your continued support. Kevin M. McMullen Chairman and CEO D I R E C T O R S & O F F I C E R S Board of Directors Edward P. Campbell 2 Chairman and Chief Executive Officer, Nordson Corporation David A. Daberko 2,3 Chairman and Chief Executive Officer, National City Corporation David J. D’Antoni 1 Retired Senior Vice President Diane E. McGarry 1 Retired Chief Marketing Officer, Xerox Corporation Kevin M. McMullen 3 Chairman, Chief Executive Officer and President, OMNOVA Solutions Inc. Steven W. Percy 1 Former Chairman and Chief Executive Officer, and Group Operating Officer, BP America Inc. Ashland Inc. Officers Dr. R. Byron Pipes 2,3 John L. Bray Distinguished Professor of Engineering, Purdue University William R. Seelbach 2 Operating Executive, The Riverside Company Robert A. Stefanko 1 Retired Chairman and Executive Vice President – Finance and Administration, A. Schulman, Inc. COMMITTEES 1 Audit Committee Chairman: Steven W. Percy 2 Compensation and Corporate Governance Committee Chairman: David A. Daberko 3 Executive Committee Chairman: Kevin M. McMullen Kevin M. McMullen Chairman, Chief Executive Officer James C. LeMay Senior Vice President, Business James J. Hohman Vice President; President, Sandra L. Klaasse Vice President, LEAN SixSigma and President Development; General Counsel Performance Chemicals Michael E. Hicks Senior Vice President and Douglas E. Wenger Senior Vice President and Robert H. Coleman President, Decorative Products Chief Financial Officer; Treasurer Chief Information Officer Kristine C. Syrvalin Corporate Secretary and Assistant General Counsel C O R P O R A T E I N F O R M A T I O N Shareholder Information NYSE Annual CEO Certification BuyDIRECT Annual Meeting of Shareholders OMNOVA Solutions Foundation The annual CEO certification required by BuyDIRECT is a direct purchase, March 22, 2007 at 9:00 a.m. 175 Ghent Road Section 303A.12(a) of the New York Stock sale and dividend reinvestment Hilton Akron – Fairlawn Fairlawn, OH 44333-3300 Exchange Listed Company Manual was plan available to shareholders and 3180 West Market Street 330-869-4289 submitted by Kevin M. McMullen without interested first-time investors. Fairlawn, OH 44333 qualification on April 17, 2006. It offers a convenient method of Transfer Agent and Registrar The Bank of New York 1-800-524-4458 1-212-815-3700 (outside U.S.) 1-888-269-5221 (hearing impaired – TDD phone) Shareowners@bankofny.com (Email) www.stockbny.com (stock transfer website) Send shareholder inquiries to: The Bank of New York Investor Services Department P.O. Box 11258 New York, NY 10286 Send certificates for transfer and address changes to: The Bank of New York Receive and Deliver Department P.O. Box 11002 New York, NY 10286 increasing investment in the Company. Subject to terms and conditions of the plan, dividends (if any), together with optional cash investments of up to $120,000 per year, are used to buy more shares of the Company’s Common Stock. BuyDIRECT Contact: The Bank of New York Dividend Reinvestment Department P.O. Box 1958 Newark, NJ 07101-9774 1-800-524-4458 Common Stock Listing New York Stock Exchange Ticker Symbol: OMN . c n I i , s o d u t S s t s i t r A y b s n o i t a r t s u l l I i s o d u t S G R T y b y h p a r g o t o h p d e t c e e S l Independent Registered Public Accounting Firm Ernst & Young LLP Akron, OH Form 10-K Additional copies available after Communications General inquiries, contact: Corporate Communications, 330-869-4266. Financial literature requests, contact: PrecisionIR Group, 1-888-400-7789. March 1, 2007 on the internet at Internet Website www.omnova.com or by writing to: www.omnova.com OMNOVA Solutions is an equal opportunity employer. OMNOVA Solutions Inc. 175 Ghent Road Fairlawn, OH 44333-3300 Attention: Secretary Shareholder Services 1-800-735-5160 Investor Relations Contact Michael E. Hicks Senior Vice President and Chief Financial Officer; Treasurer 330-869-4411 i n o t a E & x D y b n g i s e D PAPER STOCK: The cover and inside glossy pages of this report are printed on paper coated with GenCryl® Pt™ latex. PHOTOS: Automotive upholstery photo courtesy of Distinctive Industries Inc. (cid:127) Pontoon boat/upholstery photo courtesy of Voyager Marine (cid:127) Jeep® with Sailcloth Replace-a-top® photo courtesy of Bestop, Inc HURRICANE WINGS DIGITAL MURAL: Design by Dan Mackin (danmackin.com) O M N O VA S O L U T I O N S I N C . | 1 7 5 G h e n t R o a d | F a i r l a w n , O H 4 4 3 3 3 | Te l e p h o n e : 3 3 0 - 8 6 9 - 4 2 0 0 w w w. o m n o v a . c o m GENCRYL, SURF(X) and VIEWNIQUE are registered trademarks of OMNOVA Solutions Inc. PT and OMNAPEL are trademarks of OMNOVA Solutions Inc. JEEP is a registered trademark of DaimlerChrysler SAILCLOTH REPLACE-A-TOP is a registered trademark of Bestop, Inc. © 2007 OMNOVA Solutions Inc.

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