##### Table of Contents

---

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 May 31, 2006 |  | Commission File Number 1-15147

LOGO



---

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 ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of
the Exchange Act).    Large accelerated filer ̈Accelerated filer  x    Non-accelerated filer ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    YES ̈NO   x

At May 31, 2006, there were 41,522,662 outstanding shares of OMNOVA Solutions Common Stock, par value $0.10.



---



---

##### Table of Contents

OMNOVA SOLUTIONS INC.

Table of Contents



|                              |  |         |  |                                                                                         |  |         
|----------------------------- |  | ------- |  | --------------------------------------------------------------------------------------- |  | --------
|                              |  |         |  |                                                                                         |  | Page No.
|Part I. Financial Information |  |        
|                              |  |         | 
|                              |  | Item 1. |  | Financial Statements (Unaudited)                                                        |  |         
|                              |  |         | 
|                              |  |         |  | Consolidated Statements of Operations Three and Six Months Ended May 31, 2006 and 2005 |  | - 3 -   
|                              |  |         | 
|                              |  |         |  | Consolidated Balance Sheets  May 31, 2006 and November 30, 2005                        |  | - 4 -   
|                              |  |         | 
|                              |  |         |  | Consolidated Statements of Cash Flows  Six Months Ended May 31, 2006 and 2005          |  | - 5 -   
|                              |  |         | 
|                              |  |         |  | Notes to the Unaudited Interim Consolidated Financial Statements as of May 31, 2006     |  | - 6 -   
|                              |  |         | 
|                              |  | Item 2. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations   |  | - 16 -  
|                              |  |         | 
|                              |  | Item 3. |  | Quantitative and Qualitative Disclosure About Market Risk                               |  | - 24 -  
|                              |  |         | 
|                              |  | Item 4. |  | Controls and Procedures                                                                 |  | - 24 -  
|                              | 
|Part II. Other Information    |  |        
|                              |  |         | 
|                              |  | Item 1. |  | Legal Proceedings                                                                       |  | - 24 -  
|                              |  |         | 
|                              |  | Item 4. |  | Submission of Matters to a Vote of Security Holders                                     |  | - 25 -  
|                              |  |         | 
|                              |  | Item 6. |  | Exhibits                                                                                |  | - 25 -  
|                              | 
|Signatures                    |  | - 26 - 
|                              | 
|Index to Exhibits             |  | - 27 - 



-2-



---

##### Table of Contents

Part I. Financial Information

Item 1. Financial Statements

OMNOVA SOLUTIONS INC.

Consolidated Statements of Operations

(Dollars in Millions, Except Per Share Data)

(Unaudited)



|                                              |  |                            |       |                         |      |   |       |  |   |       |   |  |   |       |  
|--------------------------------------------- |  | -------------------------- | ----- | ----------------------- | ---- | - | ----- |  | - | ----- | - |  | - | ----- | -
|                                              |  | Three Months Ended May 31, |       | Six Months EndedMay 31, |     
|                                              |  | 2006                       |       |                         | 2005 |   | 2006  |  |   | 2005  |  
|Net Sales                                     |  | $                          | 204.6 |                         |      | $ | 209.3 |  | $ | 397.7 |   |  | $ | 397.3 |  
|                                              |  |                            |       |                        
|Costs and Expenses                            |  |                            |       |                         |      |   |       |  |   |       |   |  |   |       |  
|Cost of goods sold                            |  |                            | 159.2 |                         |      |   | 163.8 |  |   | 314.6 |   |  |   | 314.6 |  
|Selling, general and administrative           |  |                            | 30.8  |                         |      |   | 29.5  |  |   | 60.8  |   |  |   | 61.8  |  
|Depreciation and amortization                 |  |                            | 5.6   |                         |      |   | 5.8   |  |   | 11.3  |   |  |   | 11.5  |  
|Interest expense                              |  |                            | 5.2   |                         |      |   | 5.4   |  |   | 10.4  |   |  |   | 10.8  |  
|Equity (earnings) loss in affiliates, net     |  |                            | (1.2  | )                       |      |   |      |  |   | (1.5  | ) |  |   | .4    |  
|Other expense (income), net                   |  |                            | (.4   | )                       |      |   | .2    |  |   | 1.0   |   |  |   | .7    |  
|Restructuring and severance                   |  |                            |      |                         |      |   | 1.0   |  |   |      |   |  |   | 4.8   |  
|                                              |  |                            |       |                         |      |   |       |  |   |       |   |  |   |       |  
|                                              |  |                            | 199.2 |                         |      |   | 205.7 |  |   | 396.6 |   |  |   | 404.6 |  
|                                              |  |                            |       |                         |      |   |       |  |   |       |   |  |   |       |  
|Income (Loss) Before Income Taxes             |  |                            | 5.4   |                         |      |   | 3.6   |  |   | 1.1   |   |  |   | (7.3  | )
|Income tax expense                            |  |                            | .1    |                         |      |   |      |  |   | .1    |   |  |   |      |  
|                                              |  |                            |       |                         |      |   |       |  |   |       |   |  |   |       |  
|Net Income (Loss)                             |  | $                          | 5.3   |                         |      | $ | 3.6   |  | $ | 1.0   |   |  | $ | (7.3  | )
|                                              |  |                            |       |                         |      |   |       |  |   |       |   |  |   |       |  
|Basic and Diluted Income (Loss) Per Share     |  |                            |       |                         |      |   |       |  |   |       |   |  |   |       |  
|Net Income (Loss) Per Basic and Diluted Share |  | $                          | .13   |                         |      | $ | .09   |  | $ | .02   |   |  | $ | (.18  | )
|                                              |  |                            |       |                         |      |   |       |  |   |       |   |  |   |       |  

See notes to the unaudited interim consolidated financial statements.



-3-



---

##### Table of Contents

OMNOVA SOLUTIONS INC.

Consolidated Balance Sheets

(Dollars in Millions, Except Per Share Amounts)



|                                                                                                                                                                                           |  |             |        |   |                  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------- | ------ | - | ---------------- | - | ------ | -
|                                                                                                                                                                                           |  | May 31,2006 |        |   | November 30,2005 |  
|                                                                                                                                                                                           |  | (Unaudited) |        |   |                  |  
|ASSETS:                                                                                                                                                                                    |  |             |        |   |                  |   |        |  
|Current Assets                                                                                                                                                                             |  |             |        |   |                  |   |        |  
|Cash and cash equivalents                                                                                                                                                                  |  | $           | 15.2   |   |                  | $ | 9.9    |  
|Accounts receivable, net                                                                                                                                                                   |  |             | 110.9  |   |                  |   | 111.9  |  
|Inventories                                                                                                                                                                                |  |             | 48.1   |   |                  |   | 41.0   |  
|Deferred income taxes                                                                                                                                                                      |  |             | 1.3    |   |                  |   | 1.3    |  
|Prepaid expenses and other                                                                                                                                                                 |  |             | 4.7    |   |                  |   | 3.0    |  
|                                                                                                                                                                                           |  |             |        |   |                  |   |        |  
|Total Current Assets                                                                                                                                                                       |  |             | 180.2  |   |                  |   | 167.1  |  
|                                                                                                                                                                                           |  |            
|Property, plant and equipment                                                                                                                                                              |  |             | 458.5  |   |                  |   | 450.7  |  
|Accumulated depreciation                                                                                                                                                                   |  |             | (309.0 | ) |                  |   | (296.2 | )
|                                                                                                                                                                                           |  |             |        |   |                  |   |        |  
|                                                                                                                                                                                           |  |             | 149.5  |   |                  |   | 154.5  |  
|Trademarks and other intangible assets, net                                                                                                                                                |  |             | 11.7   |   |                  |   | 12.5   |  
|Investment in affiliates                                                                                                                                                                   |  |             | 18.4   |   |                  |   | 16.5   |  
|Other assets                                                                                                                                                                               |  |             | 6.5    |   |                  |   | 7.7    |  
|                                                                                                                                                                                           |  |             |        |   |                  |   |        |  
|Total Assets                                                                                                                                                                               |  | $           | 366.3  |   |                  | $ | 358.3  |  
|                                                                                                                                                                                           |  |             |        |   |                  |   |        |  
|LIABILITIES AND SHAREHOLDERS DEFICIT:                                                                                                                                                     |  |             |        |   |                  |   |        |  
|Current Liabilities                                                                                                                                                                        |  |             |        |   |                  |   |        |  
|Current portion of long-term debt                                                                                                                                                          |  | $           |       |   |                  | $ | .1     |  
|Accounts payable                                                                                                                                                                           |  |             | 77.0   |   |                  |   | 80.7   |  
|Accrued payroll and personal property taxes                                                                                                                                                |  |             | 12.0   |   |                  |   | 16.1   |  
|Accrued interest                                                                                                                                                                           |  |             | 9.4    |   |                  |   | 9.4    |  
|Employee benefit obligations                                                                                                                                                               |  |             | 5.9    |   |                  |   | 6.3    |  
|Other current liabilities                                                                                                                                                                  |  |             | 8.8    |   |                  |   | 8.5    |  
|                                                                                                                                                                                           |  |             |        |   |                  |   |        |  
|Total Current Liabilities                                                                                                                                                                  |  |             | 113.1  |   |                  |   | 121.1  |  
|                                                                                                                                                                                           |  |            
|Long-term debt                                                                                                                                                                             |  |             | 185.0  |   |                  |   | 176.3  |  
|Postretirement benefits other than pensions                                                                                                                                                |  |             | 43.7   |   |                  |   | 45.6   |  
|Pension liability                                                                                                                                                                          |  |             | 10.2   |   |                  |   | 7.4    |  
|Deferred income taxes                                                                                                                                                                      |  |             | 1.3    |   |                  |   | 1.3    |  
|Other liabilities                                                                                                                                                                          |  |             | 19.4   |   |                  |   | 19.2   |  
|                                                                                                                                                                                           |  |            
|Shareholders Deficit                                                                                                                                                                      |  |             |        |   |                  |   |        |  
|Preference stock - $1.00 par value; 15 million shares authorized; none outstanding                                                                                                         |  |             |       |   |                  |   |       |  
|Common stock - $0.10 par value; 135 million shares authorized; 42.7 million and                                                                                                            |  |             |        |   |                  |   |        |  
|42.6 million shares issued as of May 31, 2006 and November 30, 2005, respectively; 41.5 million and 41.2 million
shares outstanding as of May 31, 2006 and November 30, 2005, respectively |  |             | 4.3    |   |                  |   | 4.3    |  
|Additional contributed capital                                                                                                                                                             |  |             | 313.2  |   |                  |   | 312.2  |  
|Retained deficit                                                                                                                                                                           |  |             | (256.9 | ) |                  |   | (257.9 | )
|Treasury stock at cost; 1.2 million and 1.4 million shares as of May 31, 2006 and November 30, 2005,
respectively                                                                          |  |             | (9.1   | ) |                  |   | (10.0  | )
|Accumulated other comprehensive loss                                                                                                                                                       |  |             | (57.9  | ) |                  |   | (61.2  | )
|                                                                                                                                                                                           |  |             |        |   |                  |   |        |  
|Total Shareholders Deficit                                                                                                                                                                |  |             | (6.4   | ) |                  |   | (12.6  | )
|                                                                                                                                                                                           |  |             |        |   |                  |   |        |  
|Total Liabilities and Shareholders Deficit                                                                                                                                                |  | $           | 366.3  |   |                  | $ | 358.3  |  
|                                                                                                                                                                                           |  |             |        |   |                  |   |        |  

See notes to the unaudited interim consolidated financial statements.



-4-



---

##### Table of Contents

OMNOVA SOLUTIONS INC.

Consolidated Statements of Cash Flows

(Dollars in Millions)

(Unaudited)



|                                                                                     |  |                          |        |   |      |   |        |  
|------------------------------------------------------------------------------------ |  | ------------------------ | ------ | - | ---- | - | ------ | -
|                                                                                     |  | Six Months Ended May 31, |       
|                                                                                     |  | 2006                     |        |   | 2005 |  
|Operating Activities                                                                 |  |                          |        |   |      |   |        |  
|Net income (loss)                                                                    |  | $                        | 1.0    |   |      | $ | (7.3   | )
|Adjustments to reconcile net income (loss) to net cash used in operating activities: |  |                          |        |   |      |   |        |  
|Depreciation, amortization and loss on sale of fixed assets                          |  |                          | 11.3   |   |      |   | 11.0   |  
|Undistributed earnings of affiliates                                                 |  |                          | (1.5   | ) |      |   | .4     |  
|Other                                                                                |  |                          | .3     |   |      |   | 2.0    |  
|Changes in operating assets and liabilities:                                         |  |                          |        |   |      |   |        |  
|Current assets                                                                       |  |                          | (6.9   | ) |      |   | (10.5  | )
|Current liabilities                                                                  |  |                          | (7.5   | ) |      |   | (9.0   | )
|Other non-current assets                                                             |  |                          | (2.5   | ) |      |   | 1.5    |  
|Other non-current liabilities                                                        |  |                          | 3.2    |   |      |   | .4     |  
|                                                                                     |  |                          |        |   |      |   |        |  
|Net Cash Used In Operating Activities                                                |  |                          | (2.6   | ) |      |   | (11.5  | )
|                                                                                     |  |                         
|Investing Activities                                                                 |  |                          |        |   |      |   |        |  
|Capital expenditures                                                                 |  |                          | (4.2   | ) |      |   | (5.4   | )
|                                                                                     |  |                          |        |   |      |   |        |  
|Net Cash Used In Investing Activities                                                |  |                          | (4.2   | ) |      |   | (5.4   | )
|                                                                                     |  |                         
|Financing Activities                                                                 |  |                          |        |   |      |   |        |  
|Long-term debt incurred                                                              |  |                          | 391.6  |   |      |   | 388.7  |  
|Long-term debt paid                                                                  |  |                          | (383.0 | ) |      |   | (371.7 | )
|Other                                                                                |  |                          | .7     |   |      |   |       |  
|                                                                                     |  |                          |        |   |      |   |        |  
|Net Cash Provided By Financing Activities                                            |  |                          | 9.3    |   |      |   | 17.0   |  
|Effect of exchange rate changes on cash                                              |  |                          | 2.8    |   |      |   | (.3    | )
|                                                                                     |  |                          |        |   |      |   |        |  
|Net Increase (Decrease) In Cash And Cash Equivalents                                 |  |                          | 5.3    |   |      |   | (.2    | )
|Cash and cash equivalents at beginning of year                                       |  |                          | 9.9    |   |      |   | 15.0   |  
|                                                                                     |  |                          |        |   |      |   |        |  
|Cash And Cash Equivalents At End Of Period                                           |  | $                        | 15.2   |   |      | $ | 14.8   |  
|                                                                                     |  |                          |        |   |      |   |        |  
|Supplemental Cash Flows Information                                                  |  |                          |        |   |      |   |        |  
|Cash paid:                                                                           |  |                          |        |   |      |   |        |  
|Interest                                                                             |  | $                        | 10.3   |   |      | $ | 10.7   |  
|Income taxes                                                                         |  | $                        |       |   |      | $ |       |  

See notes to the unaudited interim consolidated financial statements.



-5-



---

##### Table of Contents

OMNOVA SOLUTIONS INC.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF MAY 31, 2006

(In Millions of
Dollars, Except Per Share Data)

Note A  Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles
for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete
financial statements. These interim statements should be read in conjunction with the financial statements and notes thereto included in the OMNOVA Solutions Inc. (OMNOVA Solutions or the Company) Annual Report on Form 10-K for the fiscal year ended
November 30, 2005, previously filed with the Securities and Exchange Commission.

The balance sheet at November 30, 2005 has
been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.

In the opinion of management, these interim consolidated financial statements contain all the normal recurring accruals and adjustments considered
necessary for a fair presentation of the unaudited results for the three and six month periods ended May 31, 2006 and 2005. The results of operations for the three and six month periods ended May 31, 2006 are not necessarily indicative, if
annualized, of those to be expected for the full fiscal year.

The preparation of the financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

A detailed description of the Companys significant accounting policies and management judgments is located in the audited financial statements for
the fiscal year ended November 30, 2005, included in the Companys Form 10-K filed with the Securities and Exchange Commission.

Segment operating profit represents net sales less applicable costs, expenses and provisions for restructuring, severance, asset write-offs and work stoppage costs relating to operations. Segment operating profit excludes unallocated
corporate headquarters expenses, provisions for corporate headquarters restructuring and severance, interest expense and income taxes. Corporate headquarters expense includes the cost of providing and maintaining the corporate headquarters
functions, including salaries, rent, travel and entertainment expenses, depreciation, utility costs, outside services and amortization of deferred financing costs.

Certain reclassifications have been made to conform prior period information to the current presentation.



-6-



---

##### Table of Contents

Note B  Inventories

Inventories are stated at the lower of cost or market value. A portion of the inventories is priced by use of the last-in, first-out (LIFO) method using various dollar value pools. Interim LIFO determinations involve
managements judgments of expected year-end inventory levels, and costs are subject to year-end LIFO inventory calculations. The remaining portion of inventories are stated using the first-in, first-out (FIFO) method. Components of inventory
are as follows:



|                                            |  |             |       |   |                  |   |       |  
|------------------------------------------- |  | ----------- | ----- | - | ---------------- | - | ----- | -
|                                            |  | May 31,2006 |       |   | November 30,2005 |  
|Raw materials and supplies                  |  | $           | 23.2  |   |                  | $ | 19.7  |  
|Work-in-process                             |  |             | 3.2   |   |                  |   | 3.6   |  
|Finished products                           |  |             | 60.0  |   |                  |   | 56.2  |  
|                                            |  |             |       |   |                  |   |       |  
|Approximate replacement cost of inventories |  |             | 86.4  |   |                  |   | 79.5  |  
|LIFO reserves                               |  |             | (27.1 | ) |                  |   | (26.9 | )
|Other reserves                              |  |             | (11.2 | ) |                  |   | (11.6 | )
|                                            |  |             |       |   |                  |   |       |  
|Inventories                                 |  | $           | 48.1  |   |                  | $ | 41.0  |  
|                                            |  |             |       |   |                  |   |       |  

Note C  Long-Term Debt and Credit Lines

On May 28, 2003, the Company issued $165 million of 11.25% Senior Secured Notes (Notes) due June 1, 2010. The Notes are secured by all real
property and equipment relating to the Companys ten principal domestic manufacturing facilities. The Company has the option to redeem the Notes after May 31, 2007 at a premium. Interest on the Notes is paid semi-annually on June 1st
and December 1st. The Company used the proceeds from this offering to repay outstanding amounts under its then existing revolving credit facility, to terminate its receivables sale program and to pay related fees and expenses.

In addition, on May 28, 2003, the Company entered into a $100 million, senior secured revolving credit facility (Facility). The Facility includes a
$15 million sublimit for the issuance of commercial and standby letters of credit and a $10 million sublimit for swingline loans. Borrowings under the Facility are limited to a borrowing base using customary advance rates for eligible accounts
receivable and inventory. Borrowings under the Facility are secured by domestic accounts receivable, inventory and intangible assets. The Facility requires the Company to meet financial covenants relating to minimum excess availability. During 2005,
the terms of the Facility were extended to November 30, 2009. Under the Facility, the Company must maintain an average excess availability of $20 million and at May 31, 2006, the Company was in compliance with this requirement.

Advances under the Facility bear interest, at the Companys option, at either an alternate base rate or a eurodollar rate, in each case plus an
applicable margin. The alternate base interest rate is a fluctuating rate equal to the higher of the Prime Rate or the sum of the Federal Funds Effective Rate plus 50 basis points. The applicable margin for the alternate base rate will vary from
0.0% to 1.0% depending on the Companys fixed charge coverage ratio and the margin was 0.25% at May 31, 2006. The eurodollar rate is a periodic fixed rate equal to LIBOR. The applicable margin for the eurodollar rate will vary from 1.5% to
2.5% depending on the Companys fixed charge coverage ratio and the margin was 1.75% at May 31, 2006. The Facilitys average borrowing rate at May 31, 2006 was 6.8%.

The Facility requires a commitment fee based on the unused portion of the Facility. The commitment fee will vary from 0.25% to 0.5% based on the
Companys fixed charge coverage ratio and was 0.25% at May 31, 2006.

At May 31, 2006, the amount borrowed and the
available balance under the Facility were $20.0 million and $68.7 million, respectively. The Company had $3.4 million of standby letters of credit outstanding as of May 31, 2006.



-7-



---

##### Table of Contents

Note D  Product Warranties

The Company provides product warranties on its roofing products. The Companys policy for product warranties is to review the warranty reserve on an ongoing basis for specifically identified or new matters and to
perform a detailed study of the reserve on a semi-annual basis to adjust for estimated future costs associated with any open warranty year. The reserve is a highly sensitive estimate based on historical warranty costs and failure rates. A change in
these factors could result in a significant change in the reserve balance.

The reconciliation of the warranty reserve for the three and
six month periods ended May 31, 2006 and 2005 is as follows:



|                   |  |                            |      |   |                          |   |      |      |  |   |      |   |  |   |      |  
|------------------ |  | -------------------------- | ---- | - | ------------------------ | - | ---- | ---- |  | - | ---- | - |  | - | ---- | -
|                   |  | Three Months Ended May 31, |      |   | Six Months Ended May 31, |  
|                   |  | 2006                       |      |   | 2005                     |   |      | 2006 |  |   | 2005 |  
|Beginning balance  |  | $                          | 13.1 |   |                          | $ | 12.9 |      |  | $ | 13.1 |   |  | $ | 12.9 |  
|Warranty provision |  |                            | .6   |   |                          |   | .9   |      |  |   | 1.5  |   |  |   | 1.7  |  
|Warranty payments  |  |                            | (.1  | ) |                          |   | (.6  | )    |  |   | (1.0 | ) |  |   | (1.4 | )
|                   |  |                            |      |   |                          |   |      |      |  |   |      |   |  |   |      |  
|Ending balance     |  | $                          | 13.6 |   |                          | $ | 13.2 |      |  | $ | 13.6 |   |  | $ | 13.2 |  
|                   |  |                            |      |   |                          |   |      |      |  |   |      |   |  |   |      |  

Note E  Income (Loss) Per Share

The following table sets forth a reconciliation of the numerator and denominator used in the basic and diluted income (loss) per share and the computation
of basic and diluted income (loss) per share:



|                                                                                                       |  |                            |      |                          |   |      |  |      |      |  |   |      |  
|------------------------------------------------------------------------------------------------------ |  | -------------------------- | ---- | ------------------------ | - | ---- |  | ---- | ---- |  | - | ---- | -
|                                                                                                       |  | Three Months Ended May 31, |      | Six Months Ended May 31, |  
|                                                                                                       |  | 2006                       |      | 2005                     |   | 2006 |  | 2005 |     
|Numerator                                                                                              |  |                            |      |                          |   |      |  |      |      |  |   |      |  
|Net income (loss)                                                                                      |  | $                          | 5.3  |                          | $ | 3.6  |  | $    | 1.0  |  | $ | (7.3 | )
|                                                                                                       |  |                            |      |                          |   |      |  |      |      |  |   |      |  
|                                                                                                       |  | (Shares in millions)       |     
|Denominator                                                                                            |  |                            |      |                          |   |      |  |      |      |  |   |      |  
|Denominator for basic earnings per share  weighted average shares outstanding                         |  |                            | 41.3 |                          |   | 40.6 |  |      | 41.2 |  |   | 40.6 |  
|Effect of dilutive securities                                                                          |  |                            | .4   |                          |   | .1   |  |      | .3   |  |   |     |  
|                                                                                                       |  |                            |      |                          |   |      |  |      |      |  |   |      |  
|Denominator for dilutive earnings per share  adjusted weighted average shares and assumed conversions |  |                            | 41.7 |                          |   | 40.7 |  |      | 41.5 |  |   | 40.6 |  
|                                                                                                       |  |                            |      |                          |   |      |  |      |      |  |   |      |  
|Basic and Diluted Income (Loss) Per Share                                                              |  |                            |      |                          |   |      |  |      |      |  |   |      |  
|Net income (loss) per basic and diluted share                                                          |  | $                          | .13  |                          | $ | .09  |  | $    | .02  |  | $ | (.18 | )
|                                                                                                       |  |                            |      |                          |   |      |  |      |      |  |   |      |  

Options to purchase common stock and unearned restricted stock of the Company totaling
3.9 million shares and 5.2 million shares during the fiscal second quarters of 2006 and 2005, respectively, and 4.0 million and 6.1 million during the first half of fiscal 2006 and 2005, respectively, were not included in the
computation of dilutive per share amounts as they would have had an anti-dilutive effect.



-8-



---

##### Table of Contents

Note F  Share-Based Employee Compensation

The OMNOVA Solutions Amended and Restated 1999 Equity and Performance Incentive Plan (the 1999 Plan) permits the Company to grant to officers, key
employees and non-employee directors of the Company, incentives directly linked to the price of OMNOVA Solutions common stock. Subject to certain sublimits specified in the Plan, the 1999 Plan authorizes up to 4.1 million shares of
Company stock for awards of options to purchase shares of OMNOVA Solutions common stock, performance stock and performance units, restricted stock, deferred stock or appreciation rights. Shares used may be either newly issued shares or
treasury shares or both. All options granted under the 1999 Plan have been granted at exercise prices equal to the market value of the Companys common stock on the date of grant. Additionally, the 1999 Plan provides that the term of any stock
option granted under the Plan may not exceed 10 years. As of May 31, 2006, approximately 0.5 million shares of Company common stock remained available for grants under the 1999 Plan.

Stock options granted under the GenCorp 1993 and 1997 Stock Option Plans (GenCorp Options) to OMNOVA Solutions employees and GenCorp employees prior to
the spin-off were partially converted into OMNOVA Solutions options and partially into GenCorp options with adjustments to preserve their value. The OMNOVA Solutions options, which were issued pursuant to the conversion process, were granted under
the OMNOVA Solutions Inc. Option Adjustment Plan (the Adjustment Plan). The Adjustment Plan authorized up to 4.0 million shares of Company common stock solely for the purpose of accomplishing the conversion described above. Shares used may be
either newly issued shares or treasury shares or both. No further options may be granted under the Adjustment Plan.

Prior to
December 1, 2005, the Company accounted for its share-based compensation under the recognition and measurement principles of Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees (APB 25)
and related interpretations, the disclosure only provisions of Statement of Financial Accounting Standards (SFAS) No. 123 Accounting for Stock-Based Compensation and the disclosures required by SFAS No. 148 Accounting for
Stock-Based Compensation  Transition and Disclosure in accounting for its employee stock options. Under APB 25, because the exercise price of the stock options equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized. The reported share-based compensation expense, net of related tax effects, in the table below represents the amortization of restricted stock grants.

Had the Company used the fair value based accounting method for stock compensation expense prescribed by SFAS Nos. 123 and 148 for the second quarter and
first half of fiscal 2005, the Companys consolidated net income (loss) and net income (loss) per share would have been the pro forma amounts illustrated as follows:



|                                                                                                                                   |  |                                |     |   |                             |   |      |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | --- | - | --------------------------- | - | ---- | -
|                                                                                                                                   |  | Three Months EndedMay 31, 2005 |     |   | Six Months EndedMay 31,2005 |  
|Net income (loss)  as reported                                                                                                    |  | $                              | 3.6 |   |                             | $ | (7.3 | )
|Add: Total share-based employee compensation included in reported net income (loss), net of related tax effects                    |  |                                | .2  |   |                             |   | .6   |  
|Deduct: Total share-based compensation expense determined under fair-value based method for all awards, net of related tax
effects |  |                                | (.6 | ) |                             |   | (1.5 | )
|                                                                                                                                   |  |                                |     |   |                             |   |      |  
|Pro forma net income (loss)                                                                                                        |  | $                              | 3.2 |   |                             | $ | (8.2 | )
|                                                                                                                                   |  |                                |     |   |                             |   |      |  
|Net income (loss) per share:                                                                                                       |  |                                |     |   |                             |   |      |  
|Basic and diluted, as reported                                                                                                     |  | $                              | .09 |   |                             | $ | (.18 | )
|Basic and diluted, pro forma                                                                                                       |  | $                              | .08 |   |                             | $ | (.20 | )



-9-



---

##### Table of Contents

Note F  Share-Based Employee Compensation (Continued)

Effective December 1, 2005, the Company adopted the fair value recognition provisions of SFAS No. 123R using the modified prospective method.
Under this method, compensation cost in the second fiscal quarter and first half of 2006 includes the portion of awards vested in the period for (1) all share-based payments granted prior to, but not vested as of December 1, 2005, based on
the grant date fair value estimated in accordance with the original provisions of SFAS No. 123 and (2) all share-based payments granted subsequent to December 1, 2005, based on the grant date fair value estimated using a Black-Scholes
based option valuation model, consistent with the provisions of SFAS No. 123 (Revised) and Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 107, Share-Based Payment, using the weighted average assumptions
in the table below.

The fair value was estimated at the date of grant with the following weighted average assumptions:



|                                                     |  |                            |   |  |                          |   |  |      |   |  |      |  
|---------------------------------------------------- |  | -------------------------- | - |  | ------------------------ | - |  | ---- | - |  | ---- | -
|                                                     |  | Three Months Ended May 31, |   |  | Six Months Ended May 31, |  
|                                                     |  | 2006                       |   |  | 2005                     |   |  | 2006 |   |  | 2005 |  
|Risk free interest rate                              |  | 4.8                        | % |  | 4.4                      | % |  | 4.7  | % |  | 4.4  | %
|Dividend yield                                       |  |                           |   |  |                         |   |  |     |   |  |     |  
|Expected volatility of market price of Company stock |  | 45.8                       |   |  | 43.5                     |   |  | 45.4 |   |  | 43.5 |  
|Weighted average life of options, in years           |  | 5.8                        |   |  | 7.0                      |   |  | 5.8  |   |  | 7.0  |  

The fair value of each option award is estimated, with the assistance of an outside consulting
service. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the option. The expected volatility is based on a blend of the Companys peer group in the industry
in which it does business and the Companys historical volatility. The expected term of options granted is estimated considering the vesting periods and historical trends within the Companys equity plans and represents the period of time
that options granted are expected to be outstanding. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive equity awards, and subsequent events are not indicative of the
reasonableness of the original estimates of fair value made by the Company under SFAS No. 123 (Revised).

A summary of the
Companys stock option activity and related information for the three and six months ended May 31, 2006 is as follows:



|                                   |  |                                |   |                              |                               |      |        |           |   |                               |   |     
|---------------------------------- |  | ------------------------------ | - | ---------------------------- | ----------------------------- | ---- | ------ | --------- | - | ----------------------------- | - | ----
|                                   |  | Three Months EndedMay 31, 2006 |   | Six Months EndedMay 31, 2006
|                                   |  | Shares                         |   |                              | Weighted-AverageExercisePrice |      | Shares |           |   | Weighted-AverageExercisePrice
|Outstanding at beginning of period |  | 5,022,321                      |   |                              | $                             | 7.78 |        | 5,193,635 |   |                               | $ | 7.70
|Granted                            |  | 4,000                          |   |                              | $                             | 5.88 |        | 6,000     |   |                               | $ | 5.51
|Forfeited or expired               |  | (98,383                        | ) |                              | $                             | 8.74 |        | (145,072  | ) |                               | $ | 8.39
|Exercised                          |  | (17,250                        | ) |                              | $                             | 4.13 |        | (143,875  | ) |                               | $ | 4.62
|                                   |  |                                |   |                              |                               |      |        |           |   |                               |   |     
|Outstanding at May 31, 2006        |  | 4,910,688                      |   |                              | $                             | 7.77 |        | 4,910,688 |   |                               | $ | 7.77
|                                   |  |                                |   |                              |                               |      |        |           |   |                               |   |     

The weighted average grant date fair values of options granted during the second fiscal quarters
of 2006 and 2005 were $2.94 and $2.43, respectively. The weighted average grant date fair values of options granted during the first halves of fiscal 2006 and 2005 were $2.73 and $2.45, respectively.



-10-



---

##### Table of Contents

Note F  Share-Based Employee Compensation (Continued)

The following table summarizes the range of exercise prices and weighted average exercise prices for options outstanding and exercisable at May 31,
2006 under the Companys stock option plans:



|               |  |                     |  |                              |       |                                               |     |        |           |                              |   |      
|-------------- |  | ------------------- |  | ---------------------------- | ----- | --------------------------------------------- | --- | ------ | --------- | ---------------------------- | - | -----
|               |  | Outstanding Options |  | Exercisable Options         
|               |  | Number              |  | WeightedAverageExercisePrice |       | WeightedAverageRemainingContractualLife (yrs) |     | Number |           | WeightedAverageExercisePrice
|$3.09  $4.99  |  | 750,000             |  | $                            | 4.14  |                                               | 6.6 |        | 729,625   |                              | $ | 4.14 
|$5.00  $5.99  |  | 490,550             |  | $                            | 5.25  |                                               | 5.1 |        | 453,800   |                              | $ | 5.21 
|$6.00  $6.99  |  | 482,450             |  | $                            | 6.53  |                                               | 3.9 |        | 476,200   |                              | $ | 6.53 
|$7.00  $7.99  |  | 769,187             |  | $                            | 7.56  |                                               | 3.0 |        | 769,187   |                              | $ | 7.56 
|$8.00  $8.99  |  | 1,857,559           |  | $                            | 8.49  |                                               | 3.4 |        | 1,857,559 |                              | $ | 8.49 
|$9.00  $14.37 |  | 560,942             |  | $                            | 13.81 |                                               | 1.8 |        | 560,942   |                              | $ | 13.81
|               |  |                     |  |                              |       |                                               |     |        |           |                              |   |      
|Total          |  | 4,910,688           |  | $                            | 7.77  |                                               | 3.9 |        | 4,847,313 |                              | $ | 7.80 
|               |  |                     |  |                              |       |                                               |     |        |           |                              |   |      

Restricted stock grants consist of the Companys common stock. The Board set a two or three
year vesting period for most of the issued restricted shares. The fair value of each restricted share grant is equal to the market price of the Companys common stock at the date of grant. Expense relating to restricted shares is amortized
ratably over the vesting period.

A summary of the Companys restricted stock activity and related information for the three and six
months ended May 31, 2006 is as follows:



|                                |  |                                 |   |                               |                                       |      |        |         |   |                                        |   |     
|------------------------------- |  | ------------------------------- | - | ----------------------------- | ------------------------------------- | ---- | ------ | ------- | - | -------------------------------------- | - | ----
|                                |  | Three Months Ended May 31, 2006 |   | Six Months Ended May 31, 2006
|                                |  | Shares                          |   |                               | Weighted-Average GrantDate Fair Value |      | Shares |         |   | Weighted- Average GrantDate Fair Value
|Unvested at beginning of period |  | 182,700                         |   |                               | $                                     | 5.51 |        | 261,225 |   |                                        | $ | 5.42
|Granted                         |  | 15,374                          |   |                               | $                                     | 5.92 |        | 15,374  |   |                                        | $ | 5.92
|Vested                          |  | (500                            | ) |                               | $                                     | 5.09 |        | (77,175 | ) |                                        | $ | 5.21
|Forfeited                       |  | (13,145                         | ) |                               | $                                     | 5.60 |        | (14,995 | ) |                                        | $ | 5.55
|                                |  |                                 |   |                               |                                       |      |        |         |   |                                        |   |     
|Unvested at May 31, 2006        |  | 184,429                         |   |                               | $                                     | 5.54 |        | 184,429 |   |                                        | $ | 5.54
|                                |  |                                 |   |                               |                                       |      |        |         |   |                                        |   |     

The adoption of SFAS No. 123 (Revised) did not have a material effect on the Companys
second fiscal quarter and first half 2006 reported operating income (loss), net income (loss) and basic and diluted net income (loss) per share. No tax effects are recognized currently for the granting of share-based compensation arrangements as the
Company currently cannot estimate the realizability of related tax benefits as the Company is in a net operating tax loss position with tax NOL carryforwards as described in the Companys Annual Report on Form 10-K, for the fiscal year ended
November 30, 2005 as filed with the SEC.

Compensation expense for all share-based payments, included in general and
administrative expense, was $0.2 million during each of the second fiscal quarters of 2006 and 2005 and $0.4 million and $0.6 million during the first half of fiscal 2006 and 2005, respectively.

As of May 31, 2006, there was $0.5 million of total unrecognized compensation cost related to unvested share-based compensation arrangements.

During the first six months of 2006, cash received from options exercised was $0.7 million.



-11-



---

##### Table of Contents

Note G  Comprehensive Income (Loss)

The components of comprehensive income (loss) were as follows:



|                                                    |  |                            |     |      |                          |      |      |  |      |     |  |   |      |  
|--------------------------------------------------- |  | -------------------------- | --- | ---- | ------------------------ | ---- | ---- |  | ---- | --- |  | - | ---- | -
|                                                    |  | Three Months Ended May 31, |     |      | Six Months Ended May 31, |     
|                                                    |  | 2006                       |     | 2005 |                          |      | 2006 |  | 2005 |    
|Net income (loss)                                   |  | $                          | 5.3 |      | $                        | 3.6  |      |  | $    | 1.0 |  | $ | (7.3 | )
|Foreign currency translation adjustment, net of tax |  |                            | 2.4 |      |                          | (2.7 | )    |  |      | 3.3 |  |   | (2.0 | )
|                                                    |  |                            |     |      |                          |      |      |  |      |     |  |   |      |  
|Comprehensive income (loss)                         |  | $                          | 7.7 |      | $                        | .9   |      |  | $    | 4.3 |  | $ | (9.3 | )
|                                                    |  |                            |     |      |                          |      |      |  |      |     |  |   |      |  

Note H  Employee Benefit Plans

The following table sets forth a reconciliation of the components of net periodic benefit costs for the Companys retirement programs:



|                                         |  |               |      |   |                  |   |      |      |  |   |      |   |  |   |     |  
|---------------------------------------- |  | ------------- | ---- | - | ---------------- | - | ---- | ---- |  | - | ---- | - |  | - | --- | -
|                                         |  | Pension Plans |      |   | Health CarePlans |  
|Three months ended May 31, 2006 and 2005 |  | 2006          |      |   | 2005             |   |      | 2006 |  |   | 2005 |  
|Service costs                            |  | $             | 1.2  |   |                  | $ | .9   |      |  | $ | .1   |   |  | $ | .1  |  
|Interest costs                           |  |               | 2.8  |   |                  |   | 2.9  |      |  |   | .3   |   |  |   | .6  |  
|Expected return on assets                |  |               | (2.9 | ) |                  |   | (4.2 | )    |  |   |     |   |  |   |    |  
|Amortization of prior service costs      |  |               | .3   |   |                  |   | .5   |      |  |   | (.7  | ) |  |   | (.3 | )
|                                         |  |               |      |   |                  |   |      |      |  |   |      |   |  |   |     |  
|Net periodic cost                        |  | $             | 1.4  |   |                  | $ | .1   |      |  | $ | (.3  | ) |  | $ | .4  |  
|                                         |  |               |      |   |                  |   |      |      |  |   |      |   |  |   |     |  
|                                         |  |              
|                                         |  | Pension Plans |      |   | Health CarePlans |  
|Six months ended May 31, 2006 and 2005   |  | 2006          |      |   | 2005             |   |      | 2006 |  |   | 2005 |  
|Service costs                            |  | $             | 2.3  |   |                  | $ | 1.8  |      |  | $ | .2   |   |  | $ | .2  |  
|Interest costs                           |  |               | 5.7  |   |                  |   | 5.7  |      |  |   | .6   |   |  |   | 1.3 |  
|Expected return on assets                |  |               | (5.8 | ) |                  |   | (8.4 | )    |  |   |     |   |  |   |    |  
|Amortization of prior service costs      |  |               | .6   |   |                  |   | 1.1  |      |  |   | (1.3 | ) |  |   | (.6 | )
|                                         |  |               |      |   |                  |   |      |      |  |   |      |   |  |   |     |  
|Net periodic cost                        |  | $             | 2.8  |   |                  | $ | .2   |      |  | $ | (.5  | ) |  | $ | .9  |  
|                                         |  |               |      |   |                  |   |      |      |  |   |      |   |  |   |     |  

Based on current pension asset performance, interest rate and discount rate assumptions, the
Company does not anticipate making cash contributions to the pension fund until 2010.

The Company also sponsors a defined contribution
pension plan. Participation in this plan is available to substantially all U.S. based salaried employees and to certain groups of hourly employees. Contributions to this plan are based on either a percentage of employee contributions or on a
specified amount per hour based on the provisions of the applicable collective bargaining agreement. The cost of this plan was approximately $0.4 million and $0.3 million for the three months ended May 31, 2006 and 2005, respectively, and
approximately $0.9 million and $0.7 million for the six months ended May 31, 2006 and 2005, respectively.

The Company also
contributes to a defined contribution plan for its U.K. employees. The Company contributes a percentage of the employees wages depending upon the age of the employee. The cost of this plan for the three months ended May 31, 2006 and 2005
was approximately $0.1 million each quarter and $0.3 million for each of the six months ended May 31, 2006 and 2005.



-12-



---

##### Table of Contents

Note I  Restructuring and Severance

In connection with the appointment of a new distributor for its Genon and Muraspec brands of commercial wallcoverings during the first fiscal quarter of
2005, the Company substantially completed the exit of its wallcovering distribution business known as Muraspec North America. In the first fiscal quarter of 2005, the Company incurred disposal costs of $3.7 million for inventories, sample books,
other assets and related fixed assets not transferred to the new distributor or redeployed within the Company and $1.2 million for severance costs covering 65 employees, offset by $1.2 million resulting from the settlement of certain debt
obligations relating to this business and the sale of the Guard brand of commercial wallcovering to a third party. Of the total $3.7 million charge for this restructuring effort, $0.5 million of inventory related write-downs were classified as cost
of goods sold, with the balance classified as restructuring and severance in the Companys Consolidated Statements of Operations.

Also during the first quarter of fiscal 2005, the Decorative Products segment recorded an additional $0.3 million of severance related to other workforce reduction initiatives. The Performance Chemicals segment recorded $0.3 million of
severance resulting primarily from the consolidation of job positions. Both restructurings were designed to consolidate operations and reduce costs. As a result of these restructurings, the Company terminated 10 employees. These workforce reduction
programs were complete as of February 28, 2005.

During the second quarter of fiscal 2005, in connection with ongoing efforts to
reduce costs, the Company implemented a reduction in force affecting approximately 30 employees across the Company and recorded a charge of approximately $1.0 million for severance and related costs.

The following table summarizes the Companys accruals related to restructuring and severance activities:



|                      |  |                  |           |                              |          |             |  |   |    |  |   |  
|--------------------- |  | ---------------- | --------- | ---------------------------- | -------- | ----------- |  | - | -- |  | - | -
|                      |  | November 30,2005 |           | Six Months EndedMay 31, 2006 |          | May 31,2006
|                      |  |                  | Provision |                              | Payments |            
|Performance Chemicals |  | $                | .2        |                              | $        |            |  | $ | .2 |  | $ | 
|Decorative Products   |  |                  | .5        |                              |          |            |  |   | .5 |  |   | 
|Building Products     |  |                  |          |                              |          |            |  |   |   |  |   | 
|Corporate             |  |                  |          |                              |          |            |  |   |   |  |   | 
|                      |  |                  |           |                              |          |             |  |   |    |  |   |  
|Total                 |  | $                | .7        |                              | $        |            |  | $ | .7 |  | $ | 
|                      |  |                  |           |                              |          |             |  |   |    |  |   |  

Note J  Contingencies

From time to time, the Company is subject to various claims, lawsuits and proceedings related to product liability, product warranty, contract, employment, environmental and other matters arising out of the
Companys business. The ultimate resolution of any litigation is inherently unpredictable. As a result, the Companys estimates of liability, if any, are subject to change and actual results may materially differ from the Companys
estimates. Based on information that is currently available, the Company does not expect that the ultimate resolution of pending claims, lawsuits and proceedings will materially affect the consolidated financial condition of the Company. The effect
that the ultimate resolution of these matters may have on results of operations cannot be predicted because any such effect depends on both future results of operations and the amount and timing of the resolution of these matters.

Note K  Business Segment Information

Segment
information has been prepared in accordance with SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information. The Companys three reportable segments were determined based on products and services provided
by each operating segment. Accounting policies of the segments are the same as those described in Note A  Basis of Presentation.



-13-



---

##### Table of Contents

Note K  Business Segment Information (Continued)

The Companys three reportable business segments are: Performance Chemicals, Decorative Products and Building Products. The Companys reportable
segments are strategic business units that offer different products and services. They are managed separately based on fundamental differences in their operations. Management reviews the performance of the business segments excluding restructuring,
severance, asset write-offs and work stoppage costs in assessing the performance of and making decisions regarding the allocation of resources to the business segments. Management believes that providing this information in this manner is essential
to providing the Companys shareholders with an understanding of the Companys businesses and operating performance.

The
Performance Chemicals segment produces a broad range of emulsion polymers and specialty chemicals based primarily on styrene butadiene, styrene butadiene acrylonitrile, vinyl acetate, acrylic, styrene acrylic, vinyl acrylic, glyoxal, and
fluorochemical chemistries. The segments custom-formulated products include coatings, binders and adhesives, which are used in paper, carpet, nonwovens, textiles, construction, floor care, masking tape, tires, plastic parts and various other
applications. Its products provide a variety of functional properties to enhance the Companys customers products, including greater strength, adhesion, dimensional stability, water resistance, flow and leveling, improved processibility
and enhanced appearance.

The Performance Chemicals segment consists of two product lines. The Paper and Carpet Chemicals product line
encompasses products that have applications in the paper and carpet industries. Paper coatings are used in magazines, catalogs, direct mail advertising, brochures, printed reports, food cartons, household and other consumer and industrial packaging.
Carpet binders are used to secure carpet fibers to carpet backing and meet the stringent manufacturing, environmental, odor, flammability and flexible installation requirements. The Specialty Chemicals product line encompasses products that have
applications for nonwovens (such as diapers, engine filters, resilient flooring, roofing mat and household scrub pads), construction, adhesives, masking tape, tire cord, floor polish, textiles, graphic arts and plastic part coatings.

The Decorative Products segment develops, designs, produces and markets a broad line of decorative and functional surfacing products, including
commercial wallcoverings, coated and performance fabrics, vinyl and paper laminates and industrial films. These products are used in numerous applications, including commercial building refurbishment, remodeling and new construction, residential
cabinets, flooring and furnishings, transportation markets including school busses, marine and automotive, industrial films and manufactured housing.

The Decorative Products segment consists of three product lines. The Commercial Wallcoverings product line applications include refurbishment and new construction for the commercial office, hospitality, health care,
retail, education and restaurant markets. The Coated Fabrics product line applications include residential furniture, commercial furniture, marine and transportation seating, interior construction and soft top covers. The Laminates product line
applications include manufactured housing, recreational vehicle interiors, kitchen and bath cabinets, residential furniture, office furniture, consumer electronics, interior partitions, retail display and floor and ceiling tile.

The Building Products segment provides single-ply roofing systems for the replacement and new commercial roofing markets. The roofing systems are used
for various structures including office complexes, health care facilities, shopping malls, stadiums, schools, manufacturing and warehouse facilities and government buildings.

The Companys operations are located primarily in the United States and Europe. No one customer accounted for 10% or more of consolidated sales.

Segment operating profit for the second fiscal quarter and first half of 2005 was impacted by certain items which management excludes when
evaluating the results of the Companys segments. These items include restructuring and severance costs of $0.9 million in the second quarter of 2005 and work stoppage costs of $1.7 million and restructuring and severance costs of $5.2
million during the first half of 2005.



-14-



---

##### Table of Contents

Note K  Business Segment Information (Continued)

Segment operating profit represents net sales less applicable costs, expenses and provisions for restructuring and severance costs, asset write-offs and
work stoppage costs relating to operations. Segment operating profit excludes unallocated corporate headquarters expenses, provisions for corporate headquarters restructuring and severance, interest expense and income taxes. Corporate headquarters
expense includes the cost of providing and maintaining the corporate headquarters functions, including salaries, rent, travel and entertainment expenses, depreciation, utility costs, outside services and amortization of deferred financing costs.

The following table sets forth a summary of operations by segment and a reconciliation of segment sales to consolidated sales and segment
operating profit to consolidated income (loss) before income taxes.



|                                                                                                                            |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|--------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ----- | - | ------------------------ | - | ----- | ---- |  | - | ----- | - |  | - | ----- | -
|                                                                                                                            |  | Three Months Ended May 31, |       |   | Six Months Ended May 31, |  
|                                                                                                                            |  | 2006                       |       |   | 2005                     |   |       | 2006 |  |   | 2005  |  
|Net Sales                                                                                                                   |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|Performance Chemicals                                                                                                       |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|Paper and Carpet Chemicals                                                                                                  |  | $                          | 72.9  |   |                          | $ | 78.2  |      |  | $ | 145.0 |   |  | $ | 147.2 |  
|Specialty Chemicals                                                                                                         |  |                            | 38.5  |   |                          |   | 39.9  |      |  |   | 75.8  |   |  |   | 73.0  |  
|                                                                                                                            |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|Total Performance Chemicals                                                                                                 |  | $                          | 111.4 |   |                          | $ | 118.1 |      |  | $ | 220.8 |   |  | $ | 220.2 |  
|                                                                                                                            |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|Decorative Products                                                                                                         |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|Commercial Wallcoverings                                                                                                    |  | $                          | 25.1  |   |                          | $ | 22.8  |      |  | $ | 50.4  |   |  | $ | 48.6  |  
|Coated Fabrics                                                                                                              |  |                            | 21.4  |   |                          |   | 23.9  |      |  |   | 40.1  |   |  |   | 45.2  |  
|Laminates                                                                                                                   |  |                            | 19.9  |   |                          |   | 15.3  |      |  |   | 36.3  |   |  |   | 28.6  |  
|                                                                                                                            |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|Total Decorative Products                                                                                                   |  | $                          | 66.4  |   |                          | $ | 62.0  |      |  | $ | 126.8 |   |  | $ | 122.4 |  
|                                                                                                                            |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|Building Products                                                                                                           |  | $                          | 26.8  |   |                          | $ | 29.2  |      |  | $ | 50.1  |   |  | $ | 54.7  |  
|                                                                                                                            |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|Total Net Sales                                                                                                             |  | $                          | 204.6 |   |                          | $ | 209.3 |      |  | $ | 397.7 |   |  | $ | 397.3 |  
|                                                                                                                            |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|Segment Operating Profit                                                                                                    |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|Performance Chemicals                                                                                                       |  | $                          | 8.9   |   |                          | $ | 11.0  |      |  | $ | 14.1  |   |  | $ | 14.5  |  
|Decorative Products                                                                                                         |  |                            | 4.7   |   |                          |   | .6    |      |  |   | 5.9   |   |  |   | (5.9  | )
|Building Products                                                                                                           |  |                            | .2    |   |                          |   | .3    |      |  |   | (.5   | ) |  |   |      |  
|                                                                                                                            |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|Total Segment Operating Profit                                                                                              |  | $                          | 13.8  |   |                          | $ | 11.9  |      |  | $ | 19.5  |   |  | $ | 8.6   |  
|Interest expense                                                                                                            |  |                            | (5.2  | ) |                          |   | (5.4  | )    |  |   | (10.4 | ) |  |   | (10.8 | )
|Corporate expense                                                                                                           |  |                            | (3.2  | ) |                          |   | (2.9  | )    |  |   | (8.0  | ) |  |   | (5.1  | )
|                                                                                                                            |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|Income (Loss) Before Income Taxes                                                                                           |  | $                          | 5.4   |   |                          | $ | 3.6   |      |  | $ | 1.1   |   |  | $ | (7.3  | )
|                                                                                                                            |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|                                                                                                                           
|The following table sets forth certain financial information relating to the Companys unconsolidated Asian joint ventures: | 
|                                                                                                                            |  |                            |       |  
|CPPC - Decorative Products Co., Ltd.                                                                                        |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|Net sales                                                                                                                   |  | $                          | 9.6   |   |                          | $ | 10.7  |      |  | $ | 18.9  |   |  | $ | 22.0  |  
|Gross profit                                                                                                                |  | $                          | .6    |   |                          | $ | 1.9   |      |  | $ | 2.2   |   |  | $ | 3.0   |  
|Operating income (loss)                                                                                                     |  | $                          | .3    |   |                          | $ | (.5   | )    |  | $ | .1    |   |  | $ | (1.4  | )
|Net income (loss)                                                                                                           |  | $                          | .3    |   |                          | $ | (.5   | )    |  | $ | .1    |   |  | $ | (1.4  | )
|                                                                                                                            |  |                            |       |  
|CG - OMNOVA Decorative Products (Shanghai) Co., Ltd.                                                                        |  |                            |       |   |                          |   |       |      |  |   |       |   |  |   |       |  
|Net sales                                                                                                                   |  | $                          | 13.7  |   |                          | $ | 8.9   |      |  | $ | 24.1  |   |  | $ | 17.4  |  
|Gross profit                                                                                                                |  | $                          | 3.0   |   |                          | $ | 1.2   |      |  | $ | 4.8   |   |  | $ | 2.3   |  
|Operating income                                                                                                            |  | $                          | 2.3   |   |                          | $ | .6    |      |  | $ | 3.3   |   |  | $ | .9    |  
|Net income                                                                                                                  |  | $                          | 2.1   |   |                          | $ | .5    |      |  | $ | 2.9   |   |  | $ | .8    |  



-15-



---

##### Table of Contents

Note L  Income Taxes

The Company recorded a tax expense of $0.1 million during the first six months of fiscal 2006 relating to foreign income taxes, and did not record any amount during the first six months of fiscal 2005. The
Companys estimated effective income tax rate of 9% is substantially less than its federal statutory rate of 35% primarily due to the utilization of a portion of the Companys net operating loss carryforwards that were previously offset by
a valuation allowance.

As of November 30, 2005, the Company had approximately $113.8 million of domestic federal net operating losses
(NOLs) and $216 million of state and local NOLs with carryforward periods of 20 years and 5 to 20 years, respectively. The majority of the federal and state and local NOLs expire in the years 2020 through 2025. Due to the
Companys recent history of cumulative losses, the Company has provided a valuation allowance of approximately $112.2 million against its net deferred tax assets due to the uncertainty of recovery of such assets.

Note M  Subsequent Event

In June 2006, the
Company settled and received a reimbursement of $1.2 million relating to a supplier payment dispute which had been previously recorded as an expense in the first quarter of 2006. The reimbursement will be recorded in other (income) expense, net in
the third quarter of 2006.

Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

Overview

The Company is an innovator of emulsion polymers and specialty chemicals, decorative and functional surfaces and single-ply roofing
systems for a variety of commercial, industrial and residential end uses. The Company operates in three reportable business segments: Performance Chemicals, Decorative Products and Building Products. The Performance Chemicals segment produces a
broad range of emulsion polymers and specialty chemicals based primarily on styrene butadiene, styrene butadiene acrylonitrile, vinyl acetate, acrylic, styrene acrylic, vinyl acrylic, glyoxal and fluorochemical chemistries. Performance
Chemicals custom-formulated products include coatings, binders and adhesives, which are used in paper, carpet, nonwovens, textiles, construction, floor care, masking tape, tires, plastic parts and various other applications. The Decorative
Products segment develops, designs, produces and markets a broad line of decorative and functional surfacing products, including commercial wallcoverings, coated and performance fabrics, vinyl and paper laminates and industrial films. These products
are used in numerous applications, including commercial building refurbishment, remodeling and new construction, residential cabinets, flooring and furnishings, transportation markets including school busses, marine and automotive, industrial films
and manufactured housing. The Building Products segment provides single-ply roofing systems for the replacement and new commercial roofing markets. The roofing systems are used for various structures including office complexes, health care
facilities, shopping malls, stadiums, schools, manufacturing and warehouse facilities and government buildings.

The Companys
products are sold to manufacturers, independent distributors and end-users through internal marketing and sales forces and agents.

The
Company has strategically located manufacturing facilities in the U.S. and U.K. along with its joint venture manufacturing facilities in China and Thailand.

The Company has historically experienced stronger sales and income in its second, third and fourth fiscal quarters, comprised of the three-month periods ending May 31, August 31 and November 30.
The Companys performance in the first fiscal quarter (December through February) has historically been weaker due to generally lower levels of construction and industrial activity over the holidays and cold weather months.



-16-



---

##### Table of Contents

Management discusses the Companys operating performance by reportable business segment. Segment
information has been prepared in accordance with the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 131 Disclosures About Segments of an Enterprise and Related Information. The
Companys three reportable segments were determined based on products and services provided by each operating segment. Accounting policies of the segments are the same as those described in Note A  Basis of Presentation. For a
reconciliation of the Companys segment operating performance information, please refer to Note K of the Companys Consolidated Financial Statements.

Key Indicators

Key economic measures relevant to the Company include coated paper production, print advertising spending,
U.S. commercial real estate and hotel occupancy rates, U.S. office furniture sales, manufactured housing shipments, housing starts and sales of existing homes and forecasts of raw material pricing for certain petrochemical feed stocks. Key OEM
industries which provide a general indication of demand drivers to the Company include paper, commercial building, housing and construction, furniture manufacturing and flooring manufacturing. Although these measures provide key information on
trends relevant to the Company, the Company does not have available a more direct correlation of leading indicators, especially in commercial refurbishment, which can provide a forward-looking view of demand levels in the markets which ultimately
use the Companys products.

Key operating measures utilized by the business segments include orders, sales, working capital turnover,
inventory, productivity, cash flow and fill-rates which provide key indicators of business trends. These measures are reported on various cycles including daily, weekly and monthly depending on the needs established by operating management.

Key financial measures utilized by the Companys management and business segments in order to evaluate the results of its business
and in understanding key variables impacting the current and future results of the Company include: sales, gross profit, selling, general and administrative expenses, operating profit before excluded items, adjusted earnings before interest, taxes,
depreciation and amortization, as set forth in the Companys senior secured revolving credit facility (Adjusted EBITDA), working capital, operating cash flows, financial leverage and capital expenditures, including applicable ratios such as
inventory turnover, average working capital and return on sales. These measures, as well as objectives established by the Board of Directors of the Company, are reviewed at monthly, quarterly and annual intervals and compared with historical
periods.

Results of Operations for the Three and Six Months Ended May 31, 2006 and 2005

The Companys net sales for the three months ended May 31, 2006 were $204.6 million compared to $209.3 million for the three months ended
May 31, 2005. The Decorative Products segment experienced a revenue increase of 7.1%, while the Performance Chemicals and Building Products segments experienced decreases of 5.7% and 8.2%, respectively.

Net sales for the six months ended May 31, 2006 were $397.7 million compared to $397.3 million for the six months ended May 31, 2005. Included
in Decorative Products net sales for the first half of 2005 were $2.7 million of net sales relating to the Companys former wallcovering distribution facility, which the Company exited in the first quarter of fiscal 2005.

The Company had a segment operating profit of $13.8 million in the second quarter of fiscal 2006 compared to a segment operating profit of $11.9 million
in the same period in fiscal 2005. Operating margins in the second quarter of fiscal 2006 were 6.7% compared to 5.7% in the same period of fiscal 2005. The increase in segment operating profit was primarily due to improved profitability at the
Decorative Products segment and cost reductions which offset higher non-cash pension, transportation and utilities expenses. Segment operating profit also includes items which management excludes when evaluating the results of the Companys
segments. Those items for the second quarter of fiscal 2005 included restructuring and severance charges of $0.9 million resulting primarily from previously announced workforce reductions.



-17-



---

##### Table of Contents

The Company had a segment operating profit of $19.5 million in the first half of fiscal 2006 compared to
a segment operating profit of $8.6 million in the first half of fiscal 2005. The increase in segment operating profit was primarily due to improved profitability at the Decorative Products segment, pricing actions and cost reductions which offset
higher raw materials costs and higher non-cash pension, transportation and utilities expenses. Segment operating profit also includes items which management excludes when evaluating the results of the Companys segments. Those items for the
first half of fiscal 2005 included $1.7 million for a work stoppage and restructuring and severance charges of $5.2 million resulting primarily from the exit of the Companys wallcovering distribution business and other workforce reduction
initiatives.

Performance Chemicals

Performance Chemicals net sales decreased 5.7% to $111.4 million during the second quarter of fiscal 2006 compared to $118.1 million during the second quarter of fiscal 2005, driven by lower volume of $9.8 million due to the timing of
several customer transitions, partially offset by product pricing actions of $3.1 million. Net sales for the Paper and Carpet chemicals product line decreased to $72.9 million during the second quarter of fiscal 2006 compared to $78.2 million during
the second quarter of fiscal 2005, primarily as a result of lower volume of $5.7 million partially offset by pricing actions of $0.3 million. Net sales for the Specialty Chemicals product line decreased to $38.5 million during the second quarter of
fiscal 2006 compared to $39.9 million during the second quarter of fiscal 2005, primarily due to lower volume of $4.1 million, partially offset by pricing actions of $2.8 million.

This segment generated an operating profit of $8.9 million for the second quarter of fiscal 2006 compared to $11.0 million in the second quarter of
fiscal 2005. The decrease in segment operating profit was due to lower sales volume of $2.9 million, higher raw material costs of $2.4 million, higher utilities cost of $0.5 million and higher non-cash pension expense of $0.3 million, partially
offset by pricing actions of $3.1 million and cost reductions of $0.5 million. The segment operating profit also includes items which management excludes when evaluating the results of the Companys segments. Those items for the second quarter
of fiscal 2005 include restructuring and severance charges of $0.4 million resulting primarily from workforce reductions.

Performance
Chemicals net sales increased slightly to $220.8 million during the first half of fiscal 2006 compared to $220.2 million during the first half of fiscal 2005, driven by product pricing actions of $9.6 million partially offset by lower volume
of $9.1 million. Net sales for the Paper and Carpet chemicals product line decreased 1.5% to $145.0 million during the first half of fiscal 2006 compared to $147.2 million during the first half of fiscal 2005 primarily as a result of lower volumes
due to the timing of several customer transitions partially offset by pricing actions of $3.8 million. Net sales for the Specialty Chemicals product line increased 3.8% to $75.8 million during the first half of fiscal 2006 compared to $73.0
million during the first half of fiscal 2005, primarily due to pricing actions of $5.8 million partially offset by lower volume of $3.0 million.

This segment generated an operating profit of $14.1 million for the first half of fiscal 2006 compared to $14.5 million in the first half of fiscal 2005. The lower segment operating profit was due to higher raw material costs of $7.1
million, lower volumes of $2.7 million, higher utility and transportation costs of $1.9 million and higher non-cash pension expense of $0.7 million partially offset by pricing actions of $9.6 million and cost reductions of $1.7 million. The segment
operating profit also includes items which management excludes when evaluating the results of the Companys segments. Those items for the first half of 2005 were restructuring and severance charges of $0.7 million resulting primarily from
workforce reductions.



-18-



---

##### Table of Contents

Decorative Products

Decorative Products net sales increased by 7.1% to $66.4 million in the second quarter of fiscal 2006 from $62.0 million in the second quarter of fiscal 2005. Commercial Wallcovering net sales of $25.1 million during
the second quarter of fiscal 2006 were 10.1%, or $2.3 million higher than the second quarter of fiscal 2005, primarily as a result of higher volume in the domestic wallcovering market, partially offset by $0.8 million due to the unfavorable foreign
currency translation from the British Pound Sterling and the Euro during the second quarter of fiscal 2006. Net sales for the Coated Fabrics product line decreased 10.5% to $21.4 million during the second quarter of fiscal 2006 compared to
$23.9 million during the second quarter of fiscal 2005, primarily as a result of lower volume in residential furniture and pool liners, which was partially offset by increases in transportation, kitchen and bath and manufactured housing. Net sales
for the Laminates product line increased 30.1% to $19.9 million during the second quarter of fiscal 2006 compared to $15.3 million during the second quarter of fiscal 2005 primarily due to higher volumes.

This segment incurred an operating profit of $4.7 million during the second quarter of fiscal 2006 compared to an operating profit of $0.6 million during
the second quarter of fiscal 2005. The increase in profit for the second quarter of fiscal 2006 as compared to the second quarter of fiscal 2005 was due to higher volume of $1.9 million, income from the Companys joint ventures of $1.2
million, pricing actions of $1.0 million, and operating cost reductions of $1.4 million, partially offset by higher non-cash pension expense of $0.8 million and higher raw material costs of $1.1 million. The segment operating profit also includes
items which management excludes when evaluating the results of the Companys segments. Those items for the second fiscal quarter of 2005 are restructuring and severance charges of $0.5 million resulting primarily from workforce reductions.

Decorative Products net sales increased by 3.6% to $126.8 million in the first half of fiscal 2006 from $122.4 million in the first half
of fiscal 2005. Included in 2005 are $2.7 million of net sales reported as Commercial Wallcovering net sales, relating to the Companys former wallcovering distribution business mentioned previously. Commercial Wallcovering net sales of $50.4
million during the first half of fiscal 2006 were $4.5 million higher than the first half of fiscal 2005, excluding the former wallcovering distribution business net sales, primarily as a result of higher volume, partially offset by $1.8 million due
to the unfavorable foreign currency translation from the British Pound Sterling and the Euro during the first half of fiscal 2006. Net sales for the Coated Fabrics product line decreased 11.3% to $40.1 million during the first half of fiscal
2006 compared to $45.2 million during the first half of fiscal 2005, primarily as a result of lower volume in residential furniture and pool liners, which was partially offset by increases in transportation, kitchen and bath and manufactured
housing. Net sales for the Laminates product line increased 26.9% to $36.3 million during the first half of fiscal 2006 compared to $28.6 million during the first half of fiscal 2005.

This segment incurred an operating profit of $5.9 million during the first half of fiscal 2006 compared to an operating loss of $5.9 million during the
first half of fiscal 2005. The improvement for the first half of fiscal 2006, as compared to the first half of fiscal 2005 is primarily due to cost reductions of $5.9 million, higher volume of $2.9 million, income from the Companys joint
ventures of $1.5 million and product pricing actions of $1.2 million, partially offset by higher raw material costs of $3.5 million and higher non-cash pension costs of $1.5 million and higher transportation and utilities costs of $0.8 million. The
segment operating profit also includes items which management excludes when evaluating the results of the Companys segments. Those items for the first half of fiscal 2006 were charges of $1.7 million for a work stoppage at the Companys
manufacturing facility in Jeannette, Pennsylvania and restructuring and severance charges of $4.5 million resulting primarily from the exit of the Companys wallcovering distribution business and workforce reduction initiatives.



-19-



---

##### Table of Contents

Building Products

Building Products net sales decreased 8.2% to $26.8 million during the second quarter of fiscal 2006 from $29.2 million in the second quarter of fiscal 2005. This decrease is due to lower volume of $3.6 million,
partially offset by pricing actions of $1.2 million. Interruptions to distribution and adverse weather in some regions contributed to the lower volume. Segment operating profit was $0.2 million during the second quarter of fiscal 2006 compared to an
operating profit of $0.3 million during the second quarter of fiscal 2005. This decrease is primarily due to higher raw material and purchased product costs of $0.7 million partially offset by lower warranty costs of $0.4 million and pricing actions
of $0.2 million.

Building Products net sales decreased 8.4% to $50.1 million during the first half of fiscal 2006 from
$54.7 million in the first half of fiscal 2005. This decrease is primarily due to lower volumes partially offset by pricing actions of $3.4 million. Segment operating loss was $0.5 million during the first half of fiscal 2006 compared to a
breakeven position during the first half of fiscal 2005. This decrease is primarily due to higher raw material and purchased product costs of $3.5 million, partially offset by pricing actions of $1.5 million, cost reductions of
$0.6 million and lower warranty costs of $0.2 million.

Corporate

Interest expense for the second quarter and first six months of fiscal 2006 was $5.2 million and $10.4 million, respectively, compared to $5.4 million and $10.8 million for the second quarter and first six months of
fiscal 2005, respectively. The decrease is primarily due to lower average debt and applicable interest rate spreads, partially offset by higher interest rates as a result of Federal Reserve actions.

Corporate expenses were $3.2 million and $8.0 million during the second quarter and first six months of fiscal 2006, respectively, compared to $2.9
million and $5.1 million during the second quarter and first six months of fiscal 2005, respectively. For the quarter, the increase was primarily due to higher incentive and deferred compensation plan expense compared to prior year. For the first
six months, the increase was primarily due to higher incentive and deferred compensation plan expense as noted above and costs related to a supplier dispute.

The Company recorded a tax expense of $0.1 million during the first six months of fiscal 2006 relating to foreign income taxes, and did not record any amount during the first six months of fiscal 2005. The
Companys estimated effective income tax rate of 9% is substantially less than its federal statutory rate of 35% primarily due to the utilization of a portion of the Companys net operating loss carryforwards that were previously offset by
a valuation allowance.

As discussed in Footnote L - Income Taxes, as of November 30, 2005, the Company had approximately $113.8
million of domestic federal net operating losses with a carryforward period of approximately 20 years.

In June 2006, the Company settled
and received a reimbursement of $1.2 million relating to a supplier payment dispute which had been previously recorded as an expense in the first quarter of 2006. The reimbursement will be recorded in other (income) expense, net in the third quarter
of 2006.

Financial Resources and Capital Spending

The following table reflects key cash flow measures:



|                                                 |      |                          |      |      |  |   |        |   |  |   |      |  
|------------------------------------------------ | ---- | ------------------------ | ---- | ---- |  | - | ------ | - |  | - | ---- | -
|(Dollars in millions)                            |      | Six Months Ended May 31, |     
|                                                 | 2006 |                          |      | 2005 |  |   | Change |  
|Cash used in operating activities                |      | $                        | (2.6 | )    |  | $ | (11.5  | ) |  | $ | 8.9  |  
|Cash used in investing activities                |      | $                        | (4.2 | )    |  | $ | (5.4   | ) |  | $ | 1.2  |  
|Cash provided by financing activities            |      | $                        | 9.3  |      |  | $ | 17.0   |   |  | $ | (7.7 | )
|Increase (decrease) in cash and cash equivalents |      | $                        | 5.3  |      |  | $ | (.2    | ) |  | $ | 5.5  |  



-20-



---

##### Table of Contents

Cash used by operating activities was $2.6 million in the first half of fiscal 2006, compared to $11.5
million in the first half of fiscal 2005. Cash used by operations declined in fiscal 2006 primarily due to the improvement in operating income.

In the first half of fiscal 2006, $4.2 million was used for investing activities, as compared to $5.4 million in the first half of fiscal 2005, both of which primarily consisted of capital expenditures. Capital expenditures were made and
are planned principally for asset replacement, new product capability, cost reduction, safety and productivity improvements and environmental protection. The Company anticipates capital expenditures in fiscal 2006 to be approximately $15 million.
The Company plans to fund substantially all of its capital expenditures from cash flow generated from operations. If necessary, a portion of capital expenditures will be funded through borrowings under its current credit facility.

Cash provided by financing activities in the first half of fiscal 2006 and 2005 of $9.3 million and $17.0 million, respectively, were primarily
related to borrowings under the revolving credit facility. Total debt was $185.0 million as of May 31, 2006, compared to $176.4 million as of November 30, 2005 and $197.8 million as of May 31, 2005.

Long-Term Debt

As described in Note C to the
Unaudited Interim Consolidated Financial Statements, the Company issued $165 million of 11.25% Senior Secured Notes (Notes) due June 1, 2010. Interest on the Notes is paid semi-annually on June 1st and December 1st. The Company used
the proceeds from this offering to repay outstanding amounts under its then existing revolving credit facility, to terminate its receivables sale program and to pay related fees and expenses.

In addition, on May 28, 2003, the Company entered into a $100 million, senior secured revolving credit facility (Facility). The Facility includes a
$15 million sublimit for the issuance of commercial and standby letters of credit and a $10 million sublimit for swingline loans. Borrowings under the Facility are limited to a borrowing base using customary advance rates for eligible accounts
receivable and inventory. Borrowings under the Facility are secured by domestic accounts receivable, inventory and intangible assets. The Facility requires the Company to meet financial covenants relating to minimum excess availability. During 2005,
terms of the Facility were extended to November 30, 2009. Under the Facility, the Company must maintain an average excess availability of $20 million and at May 31, 2006, the Company was in compliance with this requirement.

Advances under the Facility bear interest, at the Companys option, at either an alternate base rate or a eurodollar rate, in each
case plus an applicable margin. The alternate base interest rate is a fluctuating rate equal to the higher of the Prime Rate or the sum of the Federal Funds Effective Rate plus 50 basis points. The applicable margin for the alternate base rate will
vary from 0.0% to 1.0% depending on the Companys fixed charge coverage ratio and the margin was 0.25% at May 31, 2006. The eurodollar rate is a periodic fixed rate equal to LIBOR. The applicable margin for the eurodollar rate will vary
from 1.5% to 2.5% depending on the Companys fixed charge coverage ratio and the margin was 1.75% at May 31, 2006. The Facilitys average borrowing rate at May 31, 2006 was 6.8%.

The Facility requires a commitment fee based on the unused portion of the Facility. The commitment fee will vary from 0.25% to 0.5% based on the
Companys fixed charge coverage ratio and was 0.25% at May 31, 2006.

At May 31, 2006, the amount borrowed and the
available balance under the Facility were $20.0 million and $68.7 million, respectively. The Company had $3.4 million of standby letters of credit outstanding as of May 31, 2006. At May 31, 2006, the Companys total debt
outstanding was $185.0 million.



-21-



---

##### Table of Contents

Based upon current and anticipated levels of operations, the Company believes that its cash flows from
operations, combined with borrowings that will be available under the Facility, will be sufficient to enable the Company to meet its current and anticipated cash operating requirements, including scheduled interest and principal payments, capital
expenditures and working capital needs, for the next twelve months. Currently, a portion of the Companys long-term debt bears interest at variable rates; therefore, the Companys liquidity and financial condition will continue to be
affected by changes in prevailing interest rates.

Significant Accounting Policies and Management Judgments

The Companys discussion and analysis of its results of operations, financial condition and liquidity are based upon the Companys consolidated
financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires the Company to make estimates and judgments that affect the amounts of assets and
liabilities, revenues and expenses and disclosure of contingent assets and liabilities as of the date of the financial statements. Periodically, the Company reviews its estimates and judgments including those related to product returns, accounts
receivable, inventories, warranty obligations, litigation and environmental reserves, pensions and income taxes. The Company bases its estimates and judgments on historical experience and on various assumptions that it believes to be reasonable
under the circumstances. Actual results may materially differ from these estimates and judgments under different assumptions.

Information
with respect to the Companys significant accounting policies and management judgments which the Company believes could have the most significant effect on the Companys reported results and require subjective or complex judgments by
management is contained in Managements Discussion and Analysis of Financial Condition and Results of Operations, of the Companys Annual Report on Form 10-K for the fiscal year ended November 30, 2005 as filed with the SEC. Other
than the adoption of SFAS No. 123 (Revised) Share-Based Payment, the Company has not made any changes in estimates or judgments that have had a significant effect on the reported amounts.

Share-Based Employee Compensation

Prior to
December 1, 2005, the Company accounted for its share-based compensation under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and
related interpretations, the disclosures only provisions of SFAS No. 123 Accounting for Stock-Based Compensation and the disclosures required by SFAS No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure in accounting for its employee stock options. Under APB 25, because the exercise price of the stock options equals the market price of the underlying stock on the date of grant, no compensation expense was recognized.

Effective December 1, 2005, the Company adopted the fair value recognition provisions of SFAS No. 123 (Revised), Share-Based
Payment using the modified prospective method. Under this method, compensation cost after December 1, 2005 includes the portion vested in the period for (1) all share-based payments granted prior to, but not vested as of
December 1, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123 and (2) all share-based payments granted subsequent to December 1, 2005, based on the grant date fair value
estimated using a Black-Scholes based option valuation model, consistent with the provisions of SFAS No. 123 (Revised) and Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 104, Share-Based Payment. The
Company recognizes share-based compensation net of an estimated forfeiture rate and only recognizes compensation expense for those shares expected to vest. Compensation expense is recognized over the requisite service periods of the awards, which
are generally the vesting periods.

The assumptions used in calculating the fair value of share-based payment awards represent
managements best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, its share-based compensation expense could be
materially different in the future. See Note F to the Consolidated Financial Statements for a further discussion on share-based compensation.



-22-



---

##### Table of Contents

Environmental Matters

The Companys policy is to conduct its businesses with due regard for the preservation and protection of the environment. The Company devotes significant resources and management attention to compliance with
environmental laws and regulations. The Companys Consolidated Balance Sheet as of May 31, 2006 reflects an accrual for environmental remediation of $0.7 million. The Companys estimates are subject to change and actual results may
materially differ from the Companys estimates. Management believes, on the basis of presently available information, that resolution of known environmental matters will not materially affect liquidity, capital resources or the consolidated
financial condition of the Company. The effect that the ultimate resolution of these matters may have on results of operations cannot be predicted because any such effect depends on both future results of operations and the amount and timing of the
resolution of such matters.

Employee Matters

The Company employs approximately 1,800 employees at offices, plants and other facilities located principally throughout the United States and the United Kingdom. The Company would generally describe its relationship with employees as good.
Approximately 30%, or approximately 530, of the Companys employees are covered by collective bargaining agreements.

Forward-Looking Statements

This quarterly report on Form 10-Q includes forward-looking statements, as defined by federal securities laws, with respect
to the Companys financial condition, results of operations and business, among other things, and include statements based on the Companys current expectations, estimates, forecasts and projections. Words such as, but not limited to,
may, should, projects, forecasts, seeks, believes, expects, anticipates, estimates, intends, plans,
targets, likely, will, would, could, and similar expressions or phrases identify forward-looking statements.

All forward-looking statements involve risks and uncertainties. Many risks and uncertainties are inherent in the end-use markets in which the Company operates. Others are more specific to the Companys
operations. Actual results depend on many factors, some or all of which are not predictable or within the Companys control and may differ materially from expected results.

Factors that may cause actual results to differ materially from expected results include, among others:



| |  |  | General economic trends affecting the Companys end-use markets;
| | - |  | ----------------------------------------------------------------



| |  |  | Prices and availability of raw materials including styrene, butadiene, polyvinyl chloride, acrylics and textiles;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | Ability to increase pricing to offset raw material cost increases;
| | - |  | ------------------------------------------------------------------



| |  |  | Adverse litigation judgment and absence of or inadequacy of insurance coverage for such judgment;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | Prolonged work stoppage resulting from labor disputes with unionized workforce;
| | - |  | -------------------------------------------------------------------------------



| |  |  | Acts of war or terrorism, natural disasters or other acts of God;
| | - |  | -----------------------------------------------------------------



| |  |  | Ability to successfully develop and commercialize new products;
| | - |  | ---------------------------------------------------------------



| |  |  | Customer and/or competitor consolidation;
| | - |  | -----------------------------------------



| |  |  | Customer ability to compete against increased foreign competition;
| | - |  | ------------------------------------------------------------------



| |  |  | Operational issues at the Companys facilities;
| | - |  | -----------------------------------------------



| |  |  | Availability of financing to fund operations at anticipated rates and terms;
| | - |  | ----------------------------------------------------------------------------



| |  |  | Ability to successfully implement productivity enhancement and cost reduction initiatives;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | Governmental and regulatory policies;
| | - |  | -------------------------------------



| |  |  | Rapid inflation in health care costs and assumptions used in determining health care cost estimates;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | Risks associated with foreign operations including fluctuations in exchange rates of foreign currencies;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | The Companys strategic alliance and acquisition activities;
| | - |  | ------------------------------------------------------------



-23-



---

##### Table of Contents

| |  |  | Assumptions used in determining pension plan expense and funding, such as return on assets and discount rates and changes in pension funding regulations;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Compliance with extensive environmental, health and safety laws and regulations; and
| | - |  | ------------------------------------------------------------------------------------



| |  |  | Substantial debt and leverage and the ability to service that debt.
| | - |  | -------------------------------------------------------------------

All future written and verbal forward-looking statements attributable to the Company or any person acting on the Companys behalf are expressly qualified in their entirety by the cautionary statements contained
or referred to above. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation, and specifically declines any obligation, other than that imposed by law, to publicly update or
revise any forward-looking statements whether as a result of new information, future events or otherwise.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

Quantitative and Qualitative Disclosure About Market
Risk

The Company is exposed to market risk from changes in interest rates on certain long-term debt obligations. Currently, the Company
does not use derivative financial instruments to manage its interest rate risk. As described in Note C to the Unaudited Interim Consolidated Financial Statements, a portion of the Companys debt, $20.0 million at May 31, 2006, which is the
debt under the senior secured revolving credit facility, matures in the year 2009 and is variable. The average variable interest rate applicable to this debt was 6.8% as of May 31, 2006. Based on the debt levels as of May 31, 2006, an
increase of 100 basis points in the interest rate applicable to this debt would impact interest expense by approximately $0.2 million annually. The senior secured revolving credit facility bears interest at variable rates and, therefore, its
carrying value approximates fair value.

The Company is subject to foreign currency exchange risk primarily due to the European
wallcovering business. The Company has experienced an accumulated gain of $2.7 million as of May 31, 2006, primarily due to the favorable currency translation of the British Pound Sterling. To date, the Company has not entered into any
significant foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates, but will continue to evaluate the future use of these financial
instruments.

Item 4. Controls and Procedures

Controls and Procedures

Management of the Company, including the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the Companys
disclosure controls and procedures (as defined in Rules 13a15(e) under the Securities Exchange Act of 1934) as of May 31, 2006, and, based on this evaluation, has determined that the Companys disclosure controls and procedures are
effective as of such date. Further, during the quarter ended May 31, 2006, there were no significant changes in the Companys internal control over financial reporting that have materially affected, or are reasonably likely to materially
affect, the Companys internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

From time to time, the Company is subject to various claims, lawsuits and
proceedings related to product liability, product warranty, contract, employment, environmental and other matters arising out of the Companys business. The ultimate resolution of any litigation is inherently unpredictable. As a result, the
Companys estimates of liability, if any, are subject to change and actual results may materially differ from the Companys estimates. Based on information that is currently available, the Company does not expect that the ultimate
resolution of pending claims, lawsuits and proceedings will materially affect the consolidated financial condition of the Company. The effect that the ultimate resolution of these matters may have on results of operations cannot be predicted because
any such effect depends on both future results of operations and the amount and timing of the resolution of these matters.



-24-



---

##### Table of Contents

Item 4. Submission of Matters to a Vote of Security Holders

At the Companys Annual Meeting of
Shareholders held on March 23, 2006, holders of OMNOVA Solutions Common Stock elected Kevin M. McMullen and R. Byron Pipes as directors to serve three-year terms expiring in 2009.

Shareholders also ratified the appointment of Ernst & Young LLP as the Companys Independent Registered Public Accounting Firm for fiscal
2006.

Following are the final results of the votes cast:

a) Election of Directors:



|                  |  |            |  |          |  |                 
|----------------- |  | ---------- |  | -------- |  | ----------------
|                  |  | For        |  | Withheld |  | Broker Non-votes
|Kevin M. McMullen |  | 39,119,736 |  | 420,970  |  | -0-             
|R. Byron Pipes    |  | 39,135,494 |  | 405,212  |  | -0-             

Ratification of the appointment of Ernst & Young LLP as Independent Registered Public
Accounting Firm:



|                |  |                  |  |                 |  |                      
|--------------- |  | ---------------- |  | --------------- |  | ---------------------
|For: 39,338,333 |  | Against: 166,281 |  | Abstain: 36,092 |  | Broker Non-votes: -0-

Item 6. Exhibits

a) Exhibits



|     |  |                                                                                                                        
|---- |  | -----------------------------------------------------------------------------------------------------------------------
|12.1 |  | Computation of Ratio of Earnings to Fixed Charges.                                                                     
|     | 
|31.1 |  | Principal Executive Officers Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                
|     | 
|31.2 |  | Principal Financial Officers Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                
|     | 
|32.1 |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



-25-



---

##### Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                    |  |                       |  |                                                   
|------------------- |  | --------------------- |  | --------------------------------------------------
|                    |  | OMNOVA SOLUTIONS INC.
|                    |  |                      
|Date: June 27, 2006 |  | By                    |  | /s/ Michael E. Hicks                              
|                    |  |                       |  | Michael E. Hicks                                  
|                    |  |                       |  | Senior Vice President and Chief Financial Officer;
|                    |  |                       |  | Treasurer (Principal Financial Officer and        
|                    |  |                       |  | Principal Accounting Officer)                     
|                    |  |                      
|Date: June 27, 2006 |  | By                    |  | /s/ James C. LeMay                                
|                    |  |                       |  | James C. LeMay                                    
|                    |  |                       |  | Senior Vice President, Business Development;      
|                    |  |                       |  | General Counsel (Duly Authorized Officer)         



-26-



---

##### Table of Contents

INDEX TO EXHIBITS



|              |  |                                                                                                                        
|------------- |  | -----------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                            
|12.1          |  | Computation of Ratio of Earnings to Fixed Charges.                                                                     
|              | 
|31.1          |  | Principal Executive Officers Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                
|              | 
|31.2          |  | Principal Financial Officers Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                
|              | 
|32.1          |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



-27-