UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 11-K
Annual Report Pursuant to Section 15d
of the Securities Exchange Act of 1934
For the Fiscal Period ended December 31, 2004
Commission File Numbers 1-1520 and 1-15147
A. | Full title of the plan: |
OMNOVA SOLUTIONS RETIREMENT SAVINGS PLAN
(Plan)
B. | Names of issuers of the securities held pursuant to the plan and the addresses of their principal executive offices: |
OMNOVA Solutions Inc.
175 Ghent Road
Fairlawn, OH 44333-3300
AUDITED FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULES
OMNOVA Solutions Retirement Savings Plan
December 31, 2004 and 2003 and Year ended December 31, 2004 with Report of Independent Registered Public Accounting Firm
OMNOVA Solutions Retirement Savings Plan
Audited Financial Statements and Supplemental Schedules
December 31, 2004 and 2003 and
Year ended December 31, 2004
Contents
1 | ||
Audited Financial Statements |
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2 | ||
3 | ||
4 | ||
Supplemental Schedules |
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Schedule H, Line 4iSchedule of Assets (Held at End of Year) |
10 | |
11 | ||
12 |
Report of Independent Registered Public Accounting Firm
To OMNOVA Solutions Inc. as Administrator and
Sponsor of the OMNOVA Solutions Retirement Savings Plan
We have audited the accompanying statements of net assets available for benefits of the OMNOVA Solutions Retirement Savings Plan as of December 31, 2004 and 2003, and the related statement of changes in net assets available for benefits for the year ended December 31, 2004. These financial statements are the responsibility of the Plans management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plans internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plans internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2004 and 2003 and the related statement of changes in net assets available for benefits for the year ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedules of assets (held at end of year) as of December 31, 2004 and reportable transactions for the year then ended are presented for purposes of additional analysis and are not a required part of the financial statements but are supplementary information required by the Department of Labors Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedules are the responsibility of the Plans management. The supplemental schedules have been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, are fairly stated in all material respects in relation to the financial statements taken as a whole.
/s/ Ernst & Young LLP
Akron, Ohio
June 17, 2005
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OMNOVA Solutions Retirement Savings Plan
Statements of Net Assets Available for Benefits
December 31, |
|||||||
2004 |
2003 |
||||||
Investments, at fair value |
$ | 64,296,622 | $ | 58,627,068 | |||
Pending sales (purchases) |
26,084 | (5,251 | ) | ||||
Net assets available for benefits |
$ | 64,322,706 | $ | 58,621,817 | |||
The accompanying notes to financial statements are an integral part of these statements.
2
OMNOVA Solutions Retirement Savings Plan
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2004
Additions |
|||
Investment income: |
|||
Net appreciation in fair value of investments |
$ | 4,856,412 | |
Interest and dividend income |
1,059,354 | ||
Net investment income |
5,915,766 | ||
Contributions: |
|||
Participants |
4,192,246 | ||
Employer |
1,441,699 | ||
Rollovers |
181,531 | ||
Total contributions |
5,815,476 | ||
Total |
11,731,242 | ||
Deductions |
|||
Benefits paid directly to participants |
5,956,439 | ||
Trustee and manager fees |
73,914 | ||
Total |
6,030,353 | ||
Net increase |
5,700,889 | ||
Net assets available for benefits, beginning of year |
58,621,817 | ||
Net assets available for benefits, end of year |
$ | 64,322,706 | |
The accompanying notes to financial statements are an integral part of these statements.
3
OMNOVA Solutions Retirement Savings Plan
Notes to Financial Statements
December 31, 2004 and 2003 and
Year ended December 31, 2004
A. Description of Plan
The following description of the OMNOVA Solutions Retirement Savings Plan (Plan) provides only general information. Participants should refer to the Summary Plan Description for a more complete description of the Plans provisions. If there is any discrepancy between the provisions described herein or in the Summary Plan Description, the terms of the Plan as set forth in the Plan document shall be controlling. Copies of the Summary Plan Description for the Plan are available from the Plan administrator.
General
The Plan is a defined contribution plan available to eligible salaried and certain union hourly employees, as defined in the Plan document, of OMNOVA Solutions Inc. (OMNOVA, The Company). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
Contributions
Participants may elect to make before-tax and/or after-tax contributions to the Plan ranging from 1% to 50% of their annual compensation, subject to certain limitations. Matching contributions for salaried participants are discretionary and can be suspended or terminated at any time. OMNOVA suspended matching contributions for salaried participants for all of 2003, reinstating the employer matching provisions for salaried participants effective January 1, 2004. Matching contributions for salaried participants are 50% of the first 6% of compensation contributed by a participant. Matching contributions for union hourly employees can range from 0% to 50% up to the first 6% of compensation contributed by a participant. Participants may also contribute amounts representing distributions from other qualified plans.
Upon enrollment, a participant may direct employee contributions in whole percentage increments to any of the Plans fund options. In addition, participants may appoint an investment professional and establish a self-directed investment account for the purpose of investing their contributions in investment options outside of the funds offered by the Plan, subject to limitations provided in the Plan document. Participants may change their investment options each payroll period. Employer contributions are made to the OMNOVA Stock Fund.
4
OMNOVA Solutions Retirement Savings Plan
Notes to Financial Statements (continued)
A. Description of Plan (continued)
Participant Accounts
Each participants account is credited with the participants contributions and allocations of (a) OMNOVAs contributions and, as the case may be, (b) Plan earnings (losses), and is charged with an allocation of certain administrative expenses (see Plan Expenses below). Allocations are based on participant earnings (losses) or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participants account.
Vesting
Participants are immediately vested in their contributions plus actual earnings thereon. A participants interest in the matching contributions made for his or her benefit is at all times vested and not subject to forfeiture, except such forfeitures as may be required or permitted in order to meet the non-discrimination provisions of the Internal Revenue Code (Code) or other applicable provisions of law.
Participant Loans
Participants may borrow from their fund accounts up to 50% of their account balance but not more than $50,000. OMNOVA matching contributions are not available for loans, but are included in computing the amount available for loans. Loan terms range from 1 - 5 years or up to 10 years for the purchase of a primary residence. The loans are secured by the balance in the participants accounts and bear interest at a rate at least equivalent to the prevailing interest rate charged by persons in the business of lending money for loans which would be made under similar circumstances. Principal and interest is paid ratably through payroll deductions.
Payment of Benefits
Distribution of the account balance to a participant who terminates or elects a voluntary withdrawal is made in accordance with the terms of the Plan.
Plan Expenses
A proportionate share of fees and expenses of National City Bank (the Trustee), investment managers, and other service providers (including OMNOVA, if applicable) is charged to each plan participants account. All fees are deducted quarterly from participants accounts. Expenses incurred in connection with the purchase or sale of securities are paid from trust assets. All other administrative costs of the Plan are paid by OMNOVA.
5
OMNOVA Solutions Retirement Savings Plan
Notes to Financial Statements (continued)
B. Summary of Accounting Policies
Basis of Presentation
The Plans financial statements have been prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles.
Investment Valuation and Income Recognition
Investments in common stock are valued at the quoted market price of the common stock on the last trading day of the Plans fiscal year. Investments in marketable equity and debt securities are valued at market as determined on the last business day of the Plans fiscal year based on quoted market prices. Common trust funds are valued based on the quoted redemption value of units owned by the Plan at year-end. Participant loans are valued at their outstanding balances, which approximate fair value.
Use of Estimates
The preparation of these financial statements in conformity with U.S. generally accepted accounting principles requires the Plans management, investment managers and Trustee, who are fiduciaries of the Plan, to make estimates, assumptions and valuations that affect the amounts reported in the financial statements and accompanying footnotes. Actual results could differ from those estimates.
C. Non- Participant Directed Investments
The OMNOVA Solutions Inc. common stock fund contains participant account balances that are both participant directed and non-participant directed. Because the fund contains balances that are non-participant directed, the entire fund is considered nonparticipant-directed for disclosure purposes.
6
OMNOVA Solutions Retirement Savings Plan
Notes to Financial Statements (continued)
C. Non-Participant-Directed Investments (continued)
Information about the net assets and the significant components of the changes in net assets relating to the nonparticipant-directed investments are as follows:
December 31, |
|||||||
2004 |
2003 |
||||||
Net assets: |
|||||||
Armada Money Market Fund |
$ | 319,833 | $ | 113,593 | |||
OMNOVA Solutions Inc. common stock |
11,980,058 | 10,436,175 | |||||
Pending sales (purchases) |
26,084 | (5,251 | ) | ||||
Total |
$ | 12,325,975 | $ | 10,544,517 | |||
Year ended December 31, 2004 |
||||
Changes in net assets: |
||||
Company contributions |
$ | 1,441,699 | ||
Participant contributions |
321,970 | |||
Interest income |
1,802 | |||
Net appreciation in fair value of common stock |
1,795,191 | |||
Distributions to participants |
(1,313,575 | ) | ||
Net transfers to participant-directed investments |
(457,144 | ) | ||
Administrative expenses |
(8,485 | ) | ||
Net increase |
1,781,458 | |||
Net assets, beginning of year |
10,544,517 | |||
Net assets, end of year |
$ | 12,325,975 | ||
7
OMNOVA Solutions Retirement Savings Plan
Notes to Financial Statements (continued)
Investments
During the year ended December 31, 2004, the Plans investments (including investments purchased, sold, as well as held during the year) appreciated in fair value as follows:
Net Realized and Unrealized Appreciation in Fair Value of Investments | |||
Self-directed brokerage account |
$ | 11,289 | |
Common stock |
1,795,191 | ||
Shares of registered investment companies |
3,049,932 | ||
$ | 4,856,412 | ||
Investments that represent 5% or more of fair value of the Plans net assets are as follows:
December 31, | ||||||
2004 |
2003 | |||||
S&P 500 Flagship Fund |
$ | 17,259,054 | $ | 16,570,479 | ||
National City Capital Preservation Fund |
12,444,871 | 13,097,512 | ||||
OMNOVA Solutions Inc. Common Stock * |
11,980,058 | 10,436,175 | ||||
American Balanced Fund |
4,875,036 | | ||||
PIMCO Total Return Fund |
3,664,811 | 3,800,828 | ||||
MFS Total Return Fund |
| 4,255,161 |
* | Investment is non-participant directed |
E. Plan Termination
Although it has not expressed any intent to do so, OMNOVA has the right under the Plan to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants would continue to be 100 percent vested in their accounts.
8
OMNOVA Solutions Retirement Savings Plan
Notes to Financial Statements (continued)
F. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service dated September 3, 2002, stating that the Plan is qualified under Section 401(a) of the Code and, therefore, the related trust is exempt from taxation. Subsequent to this determination by the Internal Revenue Service, the Plan was amended. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The plan administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan, as amended, is qualified and the related trust is tax exempt.
G. Party-in-Interest Transactions
Party-in-interest transactions include the investments in the proprietary funds of the Trustee and in the common stock of the Company and the payment of certain administrative expenses by the Company.
At December 31, 2004 the Plan held 2,131,683 shares of OMNOVA Solutions Inc. common stock with a fair value of $11,980,058. At December 31, 2003 the Plan held 2,174,203 shares of OMNOVA Solutions Inc. common stock with a fair value of $10,436,175.
H. Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants account balances and the amounts reported in the statements of net assets available for benefits.
9
OMNOVA Solutions Retirement Savings Plan
EIN: 34-1897652 Plan Number: 013
Schedule H, Line 4iSchedule of Assets
(Held at End of Year)
December 31, 2004
Identity of Issue, Borrower, Lessor or Similar Party |
Description of Investment, Including Maturity Date, Rate of Interest, Collateral, Par or Maturity Value |
Cost** |
Current Value | |||||
S&P 500 Flagship Fund |
840,143 shares | $ | 17,259,054 | |||||
National City Capital Preservation Fund* |
12,444,871 units | 12,444,871 | ||||||
OMNOVA Solutions Inc. Common Stock* |
2,131,683 shares | $ | 13,100,391 | 11,980,058 | ||||
American Balanced Fund |
271,590 shares | 4,875,036 | ||||||
PIMCO Total Return Fund |
343,469 shares | 3,664,811 | ||||||
Templeton Foreign Fund |
241,710 shares | 2,973,045 | ||||||
Growth Fund of America |
105,760 shares | 2,895,711 | ||||||
DFA US 6-10 Small Company Portfolio |
110,815 shares | 2,169,749 | ||||||
PIMCO Renaissance Fund |
67,787 shares | 1,820,085 | ||||||
Selected American Fund |
45,962 shares | 1,694,635 | ||||||
Calamos Growth Fund |
11,644 shares | 616,880 | ||||||
Armada Money Market Fund* |
319,833 shares | 319,833 | 319,833 | |||||
Julius Baer International Fund |
7,717 shares | 243,936 | ||||||
Self-Directed Brokerage Accounts |
192,230 | |||||||
Participant loans* |
At interest rates ranging | 1,146,688 | ||||||
from 5.0% to 10.5% | ||||||||
$ | 64,296,622 | |||||||
* | Indicates party-in-interest to the Plan. |
** | Cost presented for nonparticipant-directed investments. |
10
OMNOVA Solutions Retirement Savings Plan
EIN: 34-1897652 Plan Number: 013
Schedule H, Line 4jSchedule of Reportable Transactions
Year ended December 31, 2004
Identity of Party Involved |
Description of Investment |
Purchase Price |
Selling Price |
Cost |
Current Value of Asset on Transaction Date |
Net Gain or (Loss) | |||||||||||
Category (iii)Series of transactions in excess of 5% of plan assets | |||||||||||||||||
National City Bank | Armada Money Market Fund |
$ | 3,957,184 | $ | 3,957,184 | $ | 3,957,184 | ||||||||||
$ | 3,750,945 | 3,750,945 | 3,750,945 | $ | |
There were no category (i), (ii), or (iv) reportable transactions for the year ended December 31, 2004.
11
Pursuant to the requirements of the Securities Exchange Act of 1934, OMNOVA Solutions Inc., as Plan Administrator, has duly caused this Annual Report to be signed on its behalf by the undersigned thereunto duly authorized.
OMNOVA SOLUTIONS | ||
RETIREMENT SAVINGS PLAN | ||
By | /s/ Michael E. Hicks | |
Michael E. Hicks | ||
Senior Vice President and Chief | ||
Financial Officer; Treasurer |
Date: June 27, 2005
12