##### Table of Contents

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934



|                                        |  |                               
|--------------------------------------- |  | ------------------------------
|For the Quarter Ended February 28, 2006 |  | Commission File Number 1-15147



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LOGO

OMNOVA Solutions Inc.

(Exact name of registrant as specified in its charter)



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|                         |  |                                     
|------------------------ |  | ------------------------------------
|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



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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 February 28, 2006, there were 41,426,809 outstanding shares of OMNOVA Solutions Common Stock, par value $0.10.



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##### 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 Months Ended February 28, 2006 and 2005         |  | -3-     
|                                                                                              | 
|Consolidated Balance Sheets  February 28, 2006 and November 30, 2005                         |  | -4-     
|                                                                                              | 
|Consolidated Statements of Cash Flows  Three Months Ended February 28, 2006 and 2005         |  | -5-     
|                                                                                              | 
|Notes to the Unaudited Interim Consolidated Financial Statements as of February 28, 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                             |  | -22-    
|                                                                                              | 
|Item 4.
Controls and Procedures                                                               |  | -22-    
|                                                                                              | 
|Part II. Other Information                                                                    |  |         
|                                                                                              | 
|Item 1.
Legal Proceedings                                                                     |  | -22-    
|                                                                                              | 
|Item 6.
Exhibits                                                                              |  | -22-    
|                                                                                              | 
|Signatures                                                                                    |  | -23-    
|                                                                                              | 
|Index to Exhibits                                                                             |  | -24-    



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##### 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 |      
|                                          |  | February 28,2006   |       |   | February 28,2005 |  
|Net Sales                                 |  | $                  | 193.0 |   |                  | $ | 188.0 |  
|                                          |  |                   
|Costs and Expenses                        |  |                    |       |   |                  |   |       |  
|Cost of products sold                     |  |                    | 155.4 |   |                  |   | 150.7 |  
|Selling, general and administrative       |  |                    | 30.0  |   |                  |   | 32.4  |  
|Depreciation and amortization             |  |                    | 5.7   |   |                  |   | 5.7   |  
|Interest expense                          |  |                    | 5.2   |   |                  |   | 5.4   |  
|Equity (earnings) loss in affiliates, net |  |                    | (.3   | ) |                  |   | .4    |  
|Other expense, net                        |  |                    | 1.3   |   |                  |   | .5    |  
|Restructuring and severance               |  |                    |      |   |                  |   | 3.8   |  
|                                          |  |                    |       |   |                  |   |       |  
|                                          |  |                    | 197.3 |   |                  |   | 198.9 |  
|                                          |  |                    |       |   |                  |   |       |  
|Loss Before Income Taxes                  |  |                    | (4.3  | ) |                  |   | (10.9 | )
|Income tax expense                        |  |                    |      |   |                  |   |      |  
|                                          |  |                    |       |   |                  |   |       |  
|Net Loss                                  |  | $                  | (4.3  | ) |                  | $ | (10.9 | )
|                                          |  |                    |       |   |                  |   |       |  
|Basic and Diluted Loss Per Share          |  |                    |       |   |                  |   |       |  
|Net Loss Per Basic and Diluted Share      |  | $                  | (.10  | ) |                  | $ | (.27  | )
|                                          |  |                    |       |   |                  |   |       |  

See notes to the unaudited interim consolidated financial statements.



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##### Table of Contents

OMNOVA SOLUTIONS INC.

Consolidated Balance Sheets

(Dollars in Millions, Except Per Share Amounts)



|                                                                                                                                                                                                                                                                                     |  |                  |        |   |                  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------- | ------ | - | ---------------- | - | ------ | -
|                                                                                                                                                                                                                                                                                     |  | February 28,2006 |        |   | November 30,2005 |  
|                                                                                                                                                                                                                                                                                     |  | (Unaudited)      |        |   |                  |  
|ASSETS:                                                                                                                                                                                                                                                                              |  |                  |        |   |                  |   |        |  
|Current Assets                                                                                                                                                                                                                                                                       |  |                  |        |   |                  |   |        |  
|Cash and cash equivalents                                                                                                                                                                                                                                                            |  | $                | 11.3   |   |                  | $ | 9.9    |  
|Accounts receivable, net                                                                                                                                                                                                                                                             |  |                  | 108.7  |   |                  |   | 111.9  |  
|Inventories                                                                                                                                                                                                                                                                          |  |                  | 47.8   |   |                  |   | 41.0   |  
|Deferred income taxes                                                                                                                                                                                                                                                                |  |                  | 1.3    |   |                  |   | 1.3    |  
|Prepaid expenses and other                                                                                                                                                                                                                                                           |  |                  | 4.7    |   |                  |   | 3.0    |  
|                                                                                                                                                                                                                                                                                     |  |                  |        |   |                  |   |        |  
|Total Current Assets                                                                                                                                                                                                                                                                 |  |                  | 173.8  |   |                  |   | 167.1  |  
|                                                                                                                                                                                                                                                                                     |  |                 
|Property, plant and equipment                                                                                                                                                                                                                                                        |  |                  | 452.9  |   |                  |   | 450.7  |  
|Accumulated depreciation                                                                                                                                                                                                                                                             |  |                  | (301.8 | ) |                  |   | (296.2 | )
|                                                                                                                                                                                                                                                                                     |  |                  |        |   |                  |   |        |  
|                                                                                                                                                                                                                                                                                     |  |                  | 151.1  |   |                  |   | 154.5  |  
|Trademarks and other intangible assets, net                                                                                                                                                                                                                                          |  |                  | 12.1   |   |                  |   | 12.5   |  
|Investment in affiliates                                                                                                                                                                                                                                                             |  |                  | 16.9   |   |                  |   | 16.5   |  
|Other assets                                                                                                                                                                                                                                                                         |  |                  | 6.6    |   |                  |   | 7.7    |  
|                                                                                                                                                                                                                                                                                     |  |                  |        |   |                  |   |        |  
|Total Assets                                                                                                                                                                                                                                                                         |  | $                | 360.5  |   |                  | $ | 358.3  |  
|                                                                                                                                                                                                                                                                                     |  |                  |        |   |                  |   |        |  
|LIABILITIES AND SHAREHOLDERS EQUITY:                                                                                                                                                                                                                                                |  |                  |        |   |                  |   |        |  
|Current Liabilities                                                                                                                                                                                                                                                                  |  |                  |        |   |                  |   |        |  
|Current portion of long-term debt                                                                                                                                                                                                                                                    |  | $                |       |   |                  | $ | .1     |  
|Accounts payable                                                                                                                                                                                                                                                                     |  |                  | 78.3   |   |                  |   | 80.7   |  
|Accrued payroll and personal property taxes                                                                                                                                                                                                                                          |  |                  | 11.5   |   |                  |   | 16.1   |  
|Accrued interest                                                                                                                                                                                                                                                                     |  |                  | 4.8    |   |                  |   | 9.4    |  
|Employee benefit obligations                                                                                                                                                                                                                                                         |  |                  | 6.0    |   |                  |   | 6.3    |  
|Other current liabilities                                                                                                                                                                                                                                                            |  |                  | 8.4    |   |                  |   | 8.5    |  
|                                                                                                                                                                                                                                                                                     |  |                  |        |   |                  |   |        |  
|Total Current Liabilities                                                                                                                                                                                                                                                            |  |                  | 109.0  |   |                  |   | 121.1  |  
|                                                                                                                                                                                                                                                                                     |  |                 
|Long-term debt                                                                                                                                                                                                                                                                       |  |                  | 192.2  |   |                  |   | 176.3  |  
|Postretirement benefits other than pensions                                                                                                                                                                                                                                          |  |                  | 44.9   |   |                  |   | 45.6   |  
|Pension liability                                                                                                                                                                                                                                                                    |  |                  | 8.8    |   |                  |   | 7.4    |  
|Deferred income taxes                                                                                                                                                                                                                                                                |  |                  | 1.3    |   |                  |   | 1.3    |  
|Other liabilities                                                                                                                                                                                                                                                                    |  |                  | 19.1   |   |                  |   | 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
February 28, 2006 and November 30, 2005, respectively; 41.4 million and 41.2 million shares outstanding as of February 28, 2006 and November 30, 2005, respectively |  |                  | 4.3    |   |                  |   | 4.3    |  
|Additional contributed capital                                                                                                                                                                                                                                                       |  |                  | 313.0  |   |                  |   | 312.2  |  
|Retained deficit                                                                                                                                                                                                                                                                     |  |                  | (262.3 | ) |                  |   | (257.9 | )
|Treasury stock at cost; 1.3 million and 1.4 million shares as of February 28, 2006 and November 30, 2005,
respectively                                                                                                                                                               |  |                  | (9.5   | ) |                  |   | (10.0  | )
|Accumulated other comprehensive loss                                                                                                                                                                                                                                                 |  |                  | (60.3  | ) |                  |   | (61.2  | )
|                                                                                                                                                                                                                                                                                     |  |                  |        |   |                  |   |        |  
|Total Shareholders Deficit                                                                                                                                                                                                                                                          |  |                  | (14.8  | ) |                  |   | (12.6  | )
|                                                                                                                                                                                                                                                                                     |  |                  |        |   |                  |   |        |  
|Total Liabilities and Shareholders Deficit                                                                                                                                                                                                                                          |  | $                | 360.5  |   |                  | $ | 358.3  |  
|                                                                                                                                                                                                                                                                                     |  |                  |        |   |                  |   |        |  

See notes to the unaudited interim consolidated financial statements.



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OMNOVA SOLUTIONS INC.

Consolidated Statements of Cash Flows

(Dollars in Millions)

(Unaudited)



|                                                                            |  |                                 |        |   |      |   |        |  
|--------------------------------------------------------------------------- |  | ------------------------------- | ------ | - | ---- | - | ------ | -
|                                                                            |  | Three Months Ended February 28, |       
|                                                                            |  | 2006                            |        |   | 2005 |  
|Operating Activities                                                        |  |                                 |        |   |      |   |        |  
|Net loss                                                                    |  | $                               | (4.3   | ) |      | $ | (10.9  | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                                 |        |   |      |   |        |  
|Write-off of fixed and other assets                                         |  |                                 |       |   |      |   | 2.0    |  
|Depreciation, amortization and (gain) loss on sale of fixed assets          |  |                                 | 5.7    |   |      |   | 5.6    |  
|Changes in operating assets and liabilities:                                |  |                                 |        |   |      |   |        |  
|Current assets                                                              |  |                                 | (5.0   | ) |      |   | (4.6   | )
|Current liabilities                                                         |  |                                 | (11.7  | ) |      |   | (17.4  | )
|Other non-current assets                                                    |  |                                 | (2.6   | ) |      |   | .2     |  
|Other non-current liabilities                                               |  |                                 | 4.4    |   |      |   | 1.6    |  
|                                                                            |  |                                 |        |   |      |   |        |  
|Net Cash Used In Operating Activities                                       |  |                                 | (13.5  | ) |      |   | (23.5  | )
|                                                                            |  |                                
|Investing Activities                                                        |  |                                 |        |   |      |   |        |  
|Capital expenditures                                                        |  |                                 | (1.6   | ) |      |   | (2.6   | )
|                                                                            |  |                                 |        |   |      |   |        |  
|Net Cash Used In Investing Activities                                       |  |                                 | (1.6   | ) |      |   | (2.6   | )
|                                                                            |  |                                
|Financing Activities                                                        |  |                                 |        |   |      |   |        |  
|Long-term debt incurred                                                     |  |                                 | 205.1  |   |      |   | 199.5  |  
|Long-term debt paid                                                         |  |                                 | (189.3 | ) |      |   | (176.1 | )
|Other                                                                       |  |                                 | .6     |   |      |   |       |  
|                                                                            |  |                                 |        |   |      |   |        |  
|Net Cash Provided By Financing Activities                                   |  |                                 | 16.4   |   |      |   | 23.4   |  
|Effect of exchange rate changes on cash                                     |  |                                 | .1     |   |      |   |       |  
|                                                                            |  |                                 |        |   |      |   |        |  
|Net Increase (Decrease) In Cash And Cash Equivalents                        |  |                                 | 1.4    |   |      |   | (2.7   | )
|Cash and cash equivalents at beginning of year                              |  |                                 | 9.9    |   |      |   | 15.0   |  
|                                                                            |  |                                 |        |   |      |   |        |  
|Cash And Cash Equivalents At End Of Period                                  |  | $                               | 11.3   |   |      | $ | 12.3   |  
|                                                                            |  |                                 |        |   |      |   |        |  
|Supplemental Cash Flows Information                                         |  |                                 |        |   |      |   |        |  
|Cash paid:                                                                  |  |                                 |        |   |      |   |        |  
|Interest                                                                    |  | $                               | 9.7    |   |      | $ | 10.0   |  
|Income taxes                                                                |  | $                               |       |   |      | $ |       |  

See notes to the unaudited interim consolidated financial statements.



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OMNOVA SOLUTIONS INC.

NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

AS OF FEBRUARY 28, 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 month periods ended February 28, 2006 and 2005. The results of operations for the three month period ended February 28, 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.



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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:



|                                            |  |                  |       |   |                  |   |       |  
|------------------------------------------- |  | ---------------- | ----- | - | ---------------- | - | ----- | -
|                                            |  | February 28,2006 |       |   | November 30,2005 |  
|Raw materials and supplies                  |  | $                | 20.5  |   |                  | $ | 19.7  |  
|Work-in-process                             |  |                  | 3.6   |   |                  |   | 3.6   |  
|Finished products                           |  |                  | 62.4  |   |                  |   | 56.2  |  
|                                            |  |                  |       |   |                  |   |       |  
|Approximate replacement cost of inventories |  |                  | 86.5  |   |                  |   | 79.5  |  
|LIFO reserves                               |  |                  | (27.3 | ) |                  |   | (26.9 | )
|Other reserves                              |  |                  | (11.4 | ) |                  |   | (11.6 | )
|                                            |  |                  |       |   |                  |   |       |  
|Inventories                                 |  | $                | 47.8  |   |                  | $ | 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 February 28, 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 February 28, 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 February 28, 2006. The Facilitys average borrowing rate at February 28, 2006 was 6.4%.

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 February 28, 2006.

At February 28, 2006, the amount borrowed and the
available balance under the Facility were $27.2 million and $60.3 million, respectively. The Company had $3.3 million of standby letters of credit outstanding as of February 28, 2006.



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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 month
periods ended February 28, 2006 and 2005 is as follows:



|                   |  |                                |      |   |      |   |      |  
|------------------ |  | ------------------------------ | ---- | - | ---- | - | ---- | -
|                   |  | Three Months EndedFebruary 28, |     
|                   |  | 2006                           |      |   | 2005 |  
|Beginning balance  |  | $                              | 13.1 |   |      | $ | 12.9 |  
|Warranty provision |  |                                | .9   |   |      |   | .8   |  
|Warranty payments  |  |                                | (.9  | ) |      |   | (.8  | )
|                   |  |                                |      |   |      |   |      |  
|Ending balance     |  | $                              | 13.1 |   |      | $ | 12.9 |  
|                   |  |                                |      |   |      |   |      |  

Note E  Loss Per Share

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



|                                                                                                       |  |                                |                      |   |      |   |       |  
|------------------------------------------------------------------------------------------------------ |  | ------------------------------ | -------------------- | - | ---- | - | ----- | -
|                                                                                                       |  | Three Months EndedFebruary 28, |                     
|                                                                                                       |  | 2006                           |                      |   | 2005 |  
|Numerator                                                                                              |  |                                |                      |   |      |   |       |  
|Net loss                                                                                               |  | $                              | (4.3                 | ) |      | $ | (10.9 | )
|                                                                                                       |  |                                |                      |   |      |   |       |  
|Denominator                                                                                            |  |                                | (Shares in millions) |  
|                                                                                                       |  |                               
|Denominator for basic earnings per share  weighted average shares outstanding                         |  |                                | 41.1                 |   |      |   | 40.5  |  
|Effect of dilutive securities                                                                          |  |                                |                     |   |      |   |      |  
|                                                                                                       |  |                                |                      |   |      |   |       |  
|Denominator for dilutive earnings per share  adjusted weighted average shares and assumed conversions |  |                                | 41.1                 |   |      |   | 40.5  |  
|                                                                                                       |  |                                |                      |   |      |   |       |  
|Basic and Diluted Loss Per Share                                                                       |  |                                |                      |   |      |   |       |  
|Net loss per basic and diluted share                                                                   |  | $                              | (.10                 | ) |      | $ | (.27  | )
|                                                                                                       |  |                                |                      |   |      |   |       |  

Options to purchase common stock and unearned restricted stock of the Company totaling
5.2 million shares and 6.2 million shares during the fiscal first quarters of 2006 and 2005, respectively, were not included in the computation of dilutive per share amounts as they would have had an anti-dilutive effect.



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Note F  Stock-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 February 28, 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 31, 2005, the Company accounted for its stock-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 stock-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 first quarter of
fiscal 2005, the Companys consolidated net loss and net loss per share would have been increased to the pro forma amounts illustrated as follows:



|                                                                                                                                   |  |                                     |       |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------- | ----- | -
|                                                                                                                                   |  | Three Months EndedFebruary 28, 2005 |      
|Net loss  as reported                                                                                                             |  | $                                   | (10.9 | )
|Add: Total stock-based employee compensation included in reported net loss, net of related tax effects                             |  |                                     | .3    |  
|Deduct: Total stock-based compensation expense determined under fair-value based method for all awards, net of related tax
effects |  |                                     | (.9   | )
|                                                                                                                                   |  |                                     |       |  
|Pro forma net loss                                                                                                                 |  | $                                   | (11.5 | )
|                                                                                                                                   |  |                                     |       |  
|Net loss per share:                                                                                                                |  |                                     |       |  
|Basic and diluted, as reported                                                                                                     |  | $                                   | (.27  | )
|                                                                                                                                   |  |                                     |       |  
|Basic and diluted, pro forma                                                                                                       |  | $                                   | (.28  | )
|                                                                                                                                   |  |                                     |       |  



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##### Table of Contents

Note F  Stock-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 first fiscal quarter 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. 123R 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 EndedFebruary 28, |  
|                                                     |  | 2006                           |   |  | 2005 |  
|Risk free interest rate                              |  | 4.37                           | % |  | 4.0  | %
|Dividend yield                                       |  |                               |   |  |     |  
|Expected volatility of market price of Company stock |  | 44.8                           |   |  | 43.1 |  
|Weighted average life of options, in years           |  | 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. 123R.

A summary of the Companys stock
option activity and related information for the quarter ended February 28, 2006 is as follows:



|                                 |  |           |   |  |                       |     
|-------------------------------- |  | --------- | - |  | --------------------- | ----
|                                 |  | Shares    |   |  | Weighted-AveragePrice
|Outstanding at November 30, 2005 |  | 5,193,635 |   |  | $                     | 7.70
|Granted                          |  | 2,000     |   |  | $                     | 4.77
|Forfeited or expired             |  | (46,689   | ) |  | $                     | 7.67
|Exercised                        |  | (126,625  | ) |  | $                     | 4.69
|                                 |  |           |   |  |                       |     
|Outstanding at February 28, 2006 |  | 5,022,321 |   |  | $                     | 7.78
|                                 |  |           |   |  |                       |     

The weighted average grant date fair values of options granted during the first fiscal quarters of
2006 and 2005 were $2.31 and $2.60, respectively.



10



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##### Table of Contents

Note F  Stock-Based Employee Compensation (Continued)

The following table summarizes the range of exercise prices and weighted average exercise prices for options outstanding and exercisable at
February 28, 2006 under the Companys stock option plans:



|               |  |                     |  |                              |       |                                               |     |        |           |                              |   |      
|-------------- |  | ------------------- |  | ---------------------------- | ----- | --------------------------------------------- | --- | ------ | --------- | ---------------------------- | - | -----
|               |  | Outstanding Options |  | Exercisable Options         
|               |  | Number              |  | WeightedAverageExercisePrice |       | WeightedAverageRemainingContractualLife (yrs) |     | Number |           | WeightedAverageExercisePrice
|$3.09  $4.99  |  | 766,000             |  | $                            | 4.14  |                                               | 6.9 |        | 739,500   |                              | $ | 4.13 
|$5.00  $5.99  |  | 490,550             |  | $                            | 5.25  |                                               | 5.3 |        | 450,800   |                              | $ | 5.22 
|$6.00  $6.99  |  | 483,950             |  | $                            | 6.53  |                                               | 4.1 |        | 479,700   |                              | $ | 6.53 
|$7.00  $7.99  |  | 789,187             |  | $                            | 7.56  |                                               | 3.2 |        | 789,187   |                              | $ | 7.56 
|$8.00  $8.99  |  | 1,920,780           |  | $                            | 8.49  |                                               | 3.7 |        | 1,920,780 |                              | $ | 8.49 
|$9.00  $14.37 |  | 571,854             |  | $                            | 13.82 |                                               | 2.0 |        | 571,854   |                              | $ | 13.82
|               |  |                     |  |                              |       |                                               |     |        |           |                              |   |      
|Total          |  | 5,022,321           |  | $                            | 7.78  |                                               | 4.1 |        | 4,951,821 |                              | $ | 7.82 
|               |  |                     |  |                              |       |                                               |     |        |           |                              |   |      

Restricted stock grants consist of the Companys common stock. The Board set a two 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 quarter ended
February 28, 2006 is as follows:



|                              |  |         |   |  |                                  |     
|----------------------------- |  | ------- | - |  | -------------------------------- | ----
|                              |  | Shares  |   |  | Weighted-Average GrantDate Value
|Unvested at November 30, 2005 |  | 261,225 |   |  | $                                | 5.42
|Granted                       |  |        |   |  |                                  |    
|Vested                        |  | (76,675 | ) |  | $                                | 5.21
|Forfeited                     |  | (1,850  | ) |  | $                                | 5.16
|                              |  |         |   |  |                                  |     
|Unvested at February 28, 2006 |  | 182,700 |   |  | $                                | 5.51
|                              |  |         |   |  |                                  |     

The adoption of SFAS No. 123R did not have a material effect on the Companys first
fiscal quarter 2006 reported operating loss, net loss and basic and diluted net 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 and $0.3 million
during the first fiscal quarters of 2006 and 2005, respectively.

As of February 28, 2006, there was $0.5 million of total
unrecognized compensation cost related to unvested share-based compensation arrangements.

During the first fiscal quarter of 2006, cash
received from options exercised was $0.6 million.



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##### Table of Contents

Note G  Comprehensive Loss

The components of comprehensive loss were as follows:



|                                                    |  |                                |      |   |      |   |       |  
|--------------------------------------------------- |  | ------------------------------ | ---- | - | ---- | - | ----- | -
|                                                    |  | Three Months EndedFebruary 28, |     
|                                                    |  | 2006                           |      |   | 2005 |  
|Net loss                                            |  | $                              | (4.3 | ) |      | $ | (10.9 | )
|Foreign currency translation adjustment, net of tax |  |                                | (.9  | ) |      |   | .7    |  
|                                                    |  |                                |      |   |      |   |       |  
|Comprehensive loss                                  |  | $                              | (5.2 | ) |      | $ | (10.2 | )
|                                                    |  |                                |      |   |      |   |       |  

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 February 28, 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 | ) |                  |   | (3.9 | )    |  |   |     |   |  |   |    |  
|Amortization of prior service costs           |  |               | .3   |   |                  |   | .2   |      |  |   | (.6  | ) |  |   | (.3 | )
|                                              |  |               |      |   |                  |   |      |      |  |   |      |   |  |   |     |  
|Net periodic cost                             |  | $             | 1.4  |   |                  | $ | .1   |      |  | $ | (.2  | ) |  | $ | .4  |  
|                                              |  |               |      |   |                  |   |      |      |  |   |      |   |  |   |     |  

Based on current pension asset performance, interest rate and discount rate assumptions, the
Company does not anticipate making cash contributions to the pension fund during fiscal 2006.

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 $0.5 million and $0.4 million for the three months ended February 28, 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 month periods ended February 28, 2006 and 2005 was approximately $0.1 million and $0.2 million, respectively.

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.



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##### Table of Contents

Note I  Restructuring and Severance (Continued)

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.

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



|                      |  |                  |    |                                     |   |                   |  |   |    |  |   |   
|--------------------- |  | ---------------- | -- | ----------------------------------- | - | ----------------- |  | - | -- |  | - | --
|                      |  | November 30,2005 |    | Three Months EndedFebruary 28, 2006 |   | February 28, 2006
|                      |  | Provision        |    | Payments                            |  
|Performance Chemicals |  | $                | .2 |                                     | $ |                  |  | $ | .1 |  | $ | .1
|Decorative Products   |  |                  | .5 |                                     |   |                  |  |   | .4 |  |   | .1
|Building Products     |  |                  |   |                                     |   |                  |  |   |   |  |   |  
|Corporate             |  |                  |   |                                     |   |                  |  |   |   |  |   |  
|                      |  |                  |    |                                     |   |                   |  |   |    |  |   |   
|Total                 |  | $                | .7 |                                     | $ |                  |  | $ | .5 |  | $ | .2
|                      |  |                  |    |                                     |   |                   |  |   |    |  |   |   

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.

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.



13



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##### Table of Contents

Note K  Business Segment Information (Continued)

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 first fiscal quarter of 2005 was impacted by certain items which management excludes when evaluating the
results of the Companys segments. These items include work stoppage costs of $1.7 million and restructuring and severance costs of $4.3 million.

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.



14



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##### Table of Contents

Note K  Business Segment Information (Continued)

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



|                                      |  |                                |       |   |      |   |       |  
|------------------------------------- |  | ------------------------------ | ----- | - | ---- | - | ----- | -
|                                      |  | Three Months EndedFebruary 28, |      
|                                      |  | 2006                           |       |   | 2005 |  
|Net Sales                             |  |                                |       |   |      |   |       |  
|Performance Chemicals                 |  |                                |       |   |      |   |       |  
|Paper and Carpet Chemicals            |  | $                              | 72.1  |   |      | $ | 69.0  |  
|Specialty Chemicals                   |  |                                | 37.2  |   |      |   | 33.1  |  
|                                      |  |                                |       |   |      |   |       |  
|Total Performance Chemicals           |  | $                              | 109.3 |   |      | $ | 102.1 |  
|                                      |  |                                |       |   |      |   |       |  
|Decorative Products                   |  |                                |       |   |      |   |       |  
|Commercial Wallcoverings              |  | $                              | 25.4  |   |      | $ | 25.8  |  
|Coated Fabrics                        |  |                                | 18.7  |   |      |   | 21.3  |  
|Laminates                             |  |                                | 16.4  |   |      |   | 13.3  |  
|                                      |  |                                |       |   |      |   |       |  
|Total Decorative Products             |  | $                              | 60.5  |   |      | $ | 60.4  |  
|                                      |  |                                |       |   |      |   |       |  
|Building Products                     |  | $                              | 23.2  |   |      | $ | 25.5  |  
|                                      |  |                                |       |   |      |   |       |  
|Total Net Sales                       |  | $                              | 193.0 |   |      | $ | 188.0 |  
|                                      |  |                                |       |   |      |   |       |  
|Segment Operating Profit (Loss)       |  |                                |       |   |      |   |       |  
|Performance Chemicals                 |  | $                              | 5.2   |   |      | $ | 3.5   |  
|Decorative Products                   |  |                                | 1.2   |   |      |   | (6.5  | )
|Building Products                     |  |                                | (.7   | ) |      |   | (.3   | )
|                                      |  |                                |       |   |      |   |       |  
|Total Segment Operating Profit (Loss) |  | $                              | 5.7   |   |      | $ | (3.3  | )
|Interest expense                      |  |                                | (5.2  | ) |      |   | (5.4  | )
|Corporate expense                     |  |                                | (4.8  | ) |      |   | (2.2  | )
|                                      |  |                                |       |   |      |   |       |  
|Loss Before Income Taxes              |  | $                              | (4.3  | ) |      | $ | (10.9 | )
|                                      |  |                                |       |   |      |   |       |  



15



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##### Table of Contents

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.

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, housing and commercial building 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.



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##### Table of Contents

Key operating measures utilized by the business segments include orders, sales, working capital turnover,
inventory, productivity, 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 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 Months Ended February 28, 2006 and 2005

The Companys net sales for the three months ended February 28, 2006 were $193.0 million compared to $188.0 million for the three months ended February 28, 2005. The Companys Performance Chemicals
business segment experienced a 7.1% revenue increase, while the Decorative Products segments revenues were slightly higher by 0.2% and the Building Products segments revenue decreased by 9.0%. Included in Decorative Products net sales
for fiscal 2005 were $2.5 million of net sales relating to the Companys former wallcovering distribution facility, which the Company exited in the first quarter of fiscal 2005. Excluding these sales, net sales for the Decorative Products
segment increased 4.5%.

The Company generated a segment operating profit of $5.7 million in the first quarter of fiscal 2006 compared to a
segment operating loss of $3.3 million in the first quarter of fiscal 2005. Operating margins in the first quarter of fiscal 2006 were 3.0% compared to (1.8)% in the same period of fiscal 2005. The increase in segment operating profit was primarily
due to pricing actions of $6.6 million, and a reduction in manufacturing and SG&A costs of $6.5 million due to manufacturing efficiencies, a reduction in employees and improved cost control, partially offset by higher raw material costs of $7.1
million, higher non-cash pension expense of $1.3 million and higher utility and transportation costs of $1.7 million. Segment operating profit also includes items which management excludes when evaluating the results of the Companys segments.
Those items for the first quarter of fiscal 2005 included work stoppage costs of $1.7 million, and restructuring and severance charges of $4.3 million primarily relating to the closure of the Companys wallcovering distribution facility in
Massachusetts.

The Company had a net loss of $4.3 million in the first quarter of fiscal 2006, or a net loss of $0.10 per diluted share,
compared to a net loss of $10.9 million in the first quarter of fiscal 2005, or a net loss of $0.27 per diluted share.

Performance Chemicals

Performance Chemicals net sales increased 7.1% to $109.3 million during the first quarter of fiscal 2006 compared to $102.1
million during the first quarter of fiscal 2005, driven by product pricing actions of $6.5 million and volume increases of $0.7 million. Net sales for the Paper and Carpet chemicals product line increased 4.5% to $72.1 million during the first
quarter of fiscal 2006 compared to $69.0 million during the first quarter of fiscal 2005 primarily as a result of pricing actions of $3.5 million, partially offset by volume declines of $0.4 million. Net sales for the Specialty Chemicals product
line increased 12.4% to $37.2 million during the first quarter of fiscal 2006 compared to $33.1 million during the first quarter of fiscal 2005, primarily due to pricing actions of $3.0 million and volume increases of $1.1 million.



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This segment generated an operating profit of $5.2 million for the first quarter of fiscal 2006 compared
to $3.5 million in the first quarter of fiscal 2005. The increase in segment operating profit resulted primarily from sales price increases of $6.5 million and manufacturing and SG&A cost reductions of $0.9 million, partially offset by higher
raw material costs of $4.7 million, higher utility costs of $1.0 million and higher non-cash pension expense of $0.3 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 quarter of fiscal 2005 include restructuring and severance charges of $0.3 million resulting primarily from workforce reductions.

Decorative Products

Decorative Products net sales increased to $60.5 million for the first
quarter of fiscal 2006 as compared to $60.4 million in the first quarter of fiscal 2005. Included in net sales for the first quarter of fiscal 2005 were $2.5 million of net sales reported as Commercial Wallcovering net sales, relating to the
Companys former wallcovering distribution facility. Excluding the net sales of the former wallcovering distribution facility, Commercial Wallcoverings first quarter fiscal 2006 net sales were $2.1 million, or 9.0%, higher than the first
quarter of fiscal 2005 primarily due to higher volumes, partially offset by $1.0 million of unfavorable foreign exchange rates from the British Pound Sterling and the Euro. Net sales for the Coated Fabrics product line decreased $2.6 million to
$18.7 million in the first quarter of fiscal 2006 compared to the first quarter of fiscal 2005 at $21.3 million, primarily as a result of lower demand in residential upholstery and pool liner, offset by increases in marine and auto aftermarket
products. Net sales for the Laminates product line increased 23.3% to $16.4 million in the first quarter of fiscal 2006 compared to $13.3 million in the first quarter of fiscal 2005, primarily due to higher volumes in kitchen and bath, partially
offset by lower volumes in consumer electronics and ready-to-assemble furniture.

This segment generated an operating profit of $1.2
million during the first quarter of fiscal 2006 compared to an operating loss of $6.5 million during the first quarter of fiscal 2005. The improvement in the segment operating loss was primarily due to a reduction in SG&A and legal expenses of
$2.5 million, manufacturing cost and productivity improvements of $2.0 million, volume increases of $1.0 million and product pricing increases of $0.2 million, partially offset by higher raw material costs of $2.4 million, higher non-cash pension
expense of $0.8 million and higher utility costs of $0.5 million. The segment operating profit also includes items which management excludes when evaluating results of the Companys segments. Those items for the first quarter of fiscal
2005 include restructuring and severance charges of $4.0 million and work stoppage costs of $1.7 million related to a work stoppage at its Jeannette, Pennsylvania facility. The restructuring and severance charges were due to the closure of the
Companys wallcovering distribution facility.

Building Products

Building Products net sales decreased 9.0% to $23.2 million during the first quarter of fiscal 2006 from $25.5 million in the first quarter of fiscal 2005. Pricing actions of $2.2 million were offset by lower
volume of $4.5 million. Weaker volumes of polyvinyl chloride (PVC) membrane systems and polyisocyanurate (ISO) insulation were partially offset by growth in thermoplastic polyolefin (TPO) membrane systems primarily distributed through private
label customers.

Segment operating loss was $0.7 million during the first quarter of fiscal 2006 compared to an operating loss of $0.3
million during the first quarter of fiscal 2005. The increase in segment operating loss was due primarily to higher raw material costs of $0.8 million and higher warranty and other costs of $0.2 million, partially offset by lower manufacturing
costs of $0.6 million.

Corporate

Interest expense for the first quarter of fiscal 2006 of $5.2 million was $0.2 million lower than the first quarter of fiscal 2005 primarily due to lower applicable interest rate spreads, partially offset by higher average interest rates as
a result of Federal Reserve actions.



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Corporate expenses were $4.8 million during the first quarter of fiscal 2006 as compared to $2.2 million
during the first quarter of fiscal 2005 primarily due to higher incentive and deferred compensation plan expense related to a 29% increase in the Companys stock price during the quarter and costs related to a supplier payment dispute which is
to be arbitrated.

Financial Resources and Capital Spending

The following table reflects key cash flow measures:



|                                                 |  |                                    |       |   |      |   |       |        |  |   |      |  
|------------------------------------------------ |  | ---------------------------------- | ----- | - | ---- | - | ----- | ------ |  | - | ---- | -
|                                                 |  | Fiscal Quarters EndingFebruary 28, |      
|(Dollars in millions)                            |  | 2006                               |       |   | 2005 |   |       | Change | 
|Cash used in operating activities                |  | $                                  | (13.5 | ) |      | $ | (23.5 | )      |  | $ | 10.0 |  
|Cash used in investing activities                |  | $                                  | (1.6  | ) |      | $ | (2.6  | )      |  | $ | 1.0  |  
|Cash provided by financing activities            |  | $                                  | 16.4  |   |      | $ | 23.4  |        |  | $ | (7.0 | )
|Increase (decrease) in cash and cash equivalents |  | $                                  | 1.4   |   |      | $ | (2.7  | )      |  | $ | 4.1  |  

Cash used by operating activities was $13.5 million in the first quarter of fiscal 2006, compared
to $23.5 million in the first quarter of fiscal 2005. Cash used by operations improved in fiscal 2006 primarily due to the improvement in operating income.

In the first quarter of fiscal 2006, $1.6 million was used for investing activities, as compared to $2.6 million in the first quarter 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 $18 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 quarters of fiscal 2006 and 2005 of $16.4 million and $23.4 million,
respectively, were primarily related to borrowings under the revolving credit facility. Total debt was $192.2 million as of February 28, 2006, compared to $176.4 million as of November 30, 2005 and $204.2 million as of February 28,
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 February 28, 2006, the Company was in compliance with this requirement.



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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 February 28, 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 February 28, 2006. The Facilitys average borrowing rate at February 28, 2006 was 6.4%.

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 February 28, 2006.

At February 28, 2006, the amount borrowed
and the available balance under the Facility were $27.2 million and $60.3 million, respectively. The Company had $3.3 million of standby letters of credit outstanding as of February 28, 2006. At February 28, 2006, the Companys total
debt outstanding was $192.2 million.

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. The
Company has not made any changes in estimates or judgments that have had a significant effect on the reported amounts.

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 February 28, 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.



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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 550, 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;
| | - |  | ------------------------------------------------------------



| |  |  | 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.



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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, $27.2 million at February 28, 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 6.4% as of February 28, 2006. Based on debt levels as of February 28,
2006, an increase of 100 basis points in the interest rate applicable to this debt would impact interest expense by approximately $0.3 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 $0.3 million as of February 28, 2006, primarily due to the favorable currency conversion 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 February 28, 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 February 28, 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.

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.



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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: April 6, 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: April 6, 2006 |  | By                    |  | /s/ James C. LeMay                                
|                    |  |                       |  | James C. LeMay                                    
|                    |  |                       |  | Senior Vice President, Business Development;      
|                    |  |                       |  | General Counsel (Duly Authorized Officer)         



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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.



24