Omnova Solutions announced that its net income increased by 85%, to $7.2 million, or $0.16 per diluted share, for the second quarter ended May 31, 2016.
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This compares with net income of $3.9 million or $0.09 per diluted share in the second quarter of 2015.
Net sales decreased $18.2 million, or 8.3%, to $202.0 million, compared with $220.2 million for the comparable quarter last year. The largest contributor to the sales decline was $8.4 million, or 3.8%, from the divestiture of the non-strategic, break-even operation in India in February.
Excluding this divestiture, sales would have been down $9.8 million, or 4.5%.
Gross profit in the second quarter of 2016 was up 490 basis points to $58.4 million, or 28.9% of net sales, compared to $52.9 million, or 24.0% of net sales, in last year's second quarter.
SG&A in the second quarter of 2016 increased to $33.4 million from $32 million in the second quarter of 2015.
Interest expense in the second quarter of 2016 was $5.7 million, down $1.1 million from the comparable quarter last year, reflecting the Company's prepayment of $50 million of debt in the fourth quarter of fiscal 2015.
Other expense (income), net, was expense of $0.6 million for the second quarter of 2016 versus expense of $1.4 million in the comparable quarter last year. Included in the second quarter of 2016 and 2015 were expenses of $1.1 million and $1.5 million, respectively, related to the Company's operational and key process improvement initiatives.
Income tax was an expense of $3.2 million in the second quarter of 2016, compared to an expense of $0.6 million in the second quarter of 2015. The tax expense in the second quarter of 2016 was due primarily to the increased income in the period.
Cash tax payments in the 2016 second quarter amounted to $1.3 million. Cash tax payments in the U.S. over the next few years are expected to be minimal as the Company has approximately $107.4 million of U.S. federal net operating loss carryforwards and $112.4 million of state and local tax net operating loss carryforwards with expiration dates between 2021 and 2034.
Cash From Operations at the end of the quarter improved by $3.2 million, to $21.1 million in 2016, compared to $17.9 million last year, primarily reflecting improved earnings and lower working capital days.
Working capital improved by 7.2 days at quarter-end, to 60.8, compared with 68.0 days at the end of the 2015 second quarter.
As a result of increased earnings and cash generation, net leverage improved to 3.5x Adjusted EBITDA from 4.2x at the end of last year's second quarter. ■