CLEVELAND, Aug. 6 /PRNewswire-FirstCall/ -- -- Reports earnings per
share of $0.04; $0.13 excluding special items, tax charges -- Cash
balance of $182 million; liquidity exceeds $250 million -- Gross
margin improvement driven by restructuring actions completed ahead
of schedule and continued execution of four pillar strategy --
Working capital days improve to 35, versus 57 days a year ago
PolyOne Corporation (NYSE:POL) today reported 2009 second quarter
revenues of $496.5 million, a 34 percent decrease compared with
revenues of $748.1 million in the second quarter of 2008. The
decline in sales was principally due to continued weak global
demand as volume fell 30 percent. PolyOne reported net income of
$3.5 million, or $0.04 per diluted share in the second quarter of
2009, compared with net income of $8.8 million or $0.09 per diluted
share in the second quarter of 2008. Included in the results for
the second quarter of 2009 are special items totaling $3.1 million
of expense (after-tax) principally related to previously announced
restructuring actions and tax adjustments totaling $5.3 million.
The tax adjustments relate to a foreign tax audit assessment which
the Company intends to appeal and a valuation allowance adjustment
related to deferred tax assets. The Company began recording a
valuation allowance against U.S. deferred tax assets during the
fourth quarter of 2008. The chart below facilitates a comparison of
second quarter 2009 results with the second quarter of 2008,
showing the impact of special items and the above-mentioned tax
matters: Q2 09 EPS Q2 08 EPS ----- --- ----- --- Net income $3.5
$0.04 $8.8 $0.09 Special items, after-tax 3.1 0.03 2.5 0.03 Tax
adjustments 5.3 0.06 0.3 ---------------- ---------------- $11.9
$0.13 $11.6 $0.12 On a comparable basis, before special items and
the tax items noted above, PolyOne reported net income of $0.13 per
share in the second quarter of 2009, versus the $0.12 per share of
income reported for the second quarter of 2008. The Company's
second quarter 2009 gross margin before special items of 18.2
percent represents 600 basis points of improvement from the second
quarter of 2008 and a sequential improvement of 300 basis points
versus the 15.2 percent for the first quarter of 2009 (See
attachment 6). The gross margin improvements highlighted above can
be summarized as follows: Q2 09 vs. Q2 08 --------------- Q2 08
Gross margin 11.8% Special items in gross margin 0.4% ---- Q2 08
Gross margin before special items 12.2% Restructuring savings 1.9%
Volume/price/mix 2.2% LIFO reserve adjustments 1.9% Q2 09 Gross
margin before special items 18.2% Special items in gross margin
-0.8% ---- Q2 09 Gross margin 17.4% Q2 09 vs. Q109 --------------
Q1 09 Gross margin 12.8% Special items in gross margin 2.4% ---- Q1
09 Gross margin before special items 15.2% Restructuring savings
1.2% Volume/price/mix 2.4% LIFO reserve adjustments -0.6% Q2 09
Gross margin before special items 18.2% Special items in gross
margin -0.8% ---- Q2 09 Gross margin 17.4% "Our second quarter
gross margin expansion and earnings improvement provide further
evidence that we have radically reduced our manufacturing capacity
and cost structure," said Stephen D. Newlin, chairman, president
and chief executive officer. "I am particularly pleased with our
ability to accelerate the previously announced restructuring
actions and drive gross margin improvement, which has allowed us to
offset the negative impact of significantly lower sales volume.
Most notably, operating income from our Specialty Platform
increased $14.1 million from the first quarter to the second of
2009. This reflects not only the aforementioned restructuring
savings, but a nearly 50 percent increase in sales in Asia where
demand appears to be recovering much faster than elsewhere in the
world." During the second quarter of 2009, the Company generated
$59 million of cash flow and reported $182 million of cash on hand
as of June 30, 2009. Combined with its undrawn and available
accounts receivable facility, liquidity increased 35 percent from
$189 million on March 31, 2008, to $255 million as of June 30,
2009. Robert M. Patterson, senior vice president and chief
financial officer said, "We have made tremendous progress in
reducing working capital this year which has been the primary
driver of cash flow growth. Most notably, we have improved our
inventory turnover to 11 times--a nearly 50 percent improvement--as
a result of our lean six sigma initiatives." Outlook Update
Regarding the Company's second half outlook, Newlin made several
remarks: "We are encouraged by the accelerated activity in Asia,
and modest increases in sales in Europe and North America from the
first quarter to the second. That being said, demand levels are
still significantly below historic norms and this may continue for
some time. "With increasing levels of cash and a dramatically
reduced cost structure, we are gaining more confidence about the
future and expect to emerge from the recession a leaner, healthier
organization. As new housing starts and auto production appear to
be bottoming, we remain cautiously optimistic the worst is behind
us, but we are mindful of rapidly changing conditions. "Such
changes in the near term include our expectation that favorable
increases in chlorine prices will not be enough to offset
unfavorable caustic soda price trends and this will put pressure on
earnings from our SunBelt joint venture in the second half of 2009.
We also expect LIFO benefits to diminish as commodity costs
moderate or increase. It is unfortunate that these items may
overshadow the progress we have made improving our core earnings,
however, they are purely a function of the current economic
environment. We will continue to focus on our strategic platforms
and we remain confident our four pillar strategy of specialization,
globalization, and operating and commercial excellence are
transforming PolyOne into a specialty company." Second Quarter 2009
Earnings Conference Call PolyOne will host a conference call at 9
a.m. Eastern Time on Thursday, August 6, 2009. The conference
dial-in number is 866-543-6403 (domestic) or 617-213-8896
(international), passcode 26334516, conference topic: second
quarter 2009 PolyOne earnings conference call. The call will be
available for replay until August 20, 2009, on the Company's Web
site at http://www.polyone.com/investor or by phone at 888-286-8010
(domestic) or 617-801-6888 (international). The passcode for the
replay is 93965590. About PolyOne PolyOne Corporation, with 2008
revenues of $2.7 billion, is a premier provider of specialized
polymer materials, services and solutions. Headquartered outside of
Cleveland, Ohio USA, PolyOne has operations around the world. For
additional information on PolyOne, visit our Web site at
http://www.polyone.com/. To access PolyOne's news library online,
please visit http://www.polyone.com/news. Forward-looking
Statements In this press release, statements that are not reported
financial results or other historical information are
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements give current expectations or forecasts of future events
and are not guarantees of future performance. They are based on
management's expectations that involve a number of business risks
and uncertainties, any of which could cause actual results to
differ materially from those expressed in or implied by the
forward-looking statements. They use words such as "will,"
"anticipate," "estimate," "expect," "project," "intend," "plan,"
"believe," and other words and terms of similar meaning in
connection with any discussion of future operating or financial
performance and/or sales. Factors that could cause actual results
to differ materially from those implied by these forward-looking
statements include, but are not limited to: disruptions,
uncertainty or volatility in the credit markets that could
adversely impact the availability of credit already arranged and
the availability and cost of credit in the future; the continued
degradation in the North American residential construction market;
the financial condition of our customers, including the ability of
customers (especially those that may be highly leveraged and those
with inadequate liquidity) to maintain their credit availability;
the effect on foreign operations of currency fluctuations, tariffs,
and other political, economic and regulatory risks; changes in
polymer consumption growth rates in the markets where PolyOne
conducts business; changes in global industry capacity or in the
rate at which anticipated changes in industry capacity come online;
fluctuations in raw material prices, quality and supply and in
energy prices and supply; production outages or material costs
associated with scheduled or unscheduled maintenance programs;
unanticipated developments that could occur with respect to
contingencies such as litigation and environmental matters; an
inability to achieve or delays in achieving or achievement of less
than the anticipated financial benefit from initiatives related to
working capital reductions, cost reductions and employee
productivity goals; an inability to raise or sustain prices for
products or services; an inability to maintain appropriate
relations with unions and employees; and other factors affecting
our business beyond our control, including, without limitation,
changes in the general economy, changes in interest rates and
changes in the rate of inflation. The above list of factors is not
exhaustive. We undertake no obligation to publicly update
forward-looking statements, whether as a result of new information,
future events or otherwise. You are advised to consult any further
disclosures we make on related subjects in our reports on Form
10-Q, 8-K and 10-K that we provide to the Securities and Exchange
Commission. Attachment 1 Supplemental Information
------------------------ Summary of Consolidated Operating Results
(Unaudited) Second Quarter 2009 (In millions, except per share
data) Operating results: Three Months Ended Six Months Ended June
30, June 30, ------------ ---------- 2009 2008 2009 2008 ---- ----
---- ---- Sales $496.5 $748.1 $959.9 $1,461.8 Operating income 19.3
24.0 16.6 44.1 Net income (loss) 3.5 8.8 (5.8) 15.3 Earnings per
common share: Basic earnings (loss) per share $0.04 $0.09 $(0.06)
$0.16 Diluted earnings (loss) per share $0.04 $0.09 $(0.06) $0.16
Total basic per share impact of special items (1) $(0.03) $(0.03)
$(0.15) $(0.04) Total diluted per share impact of special items (1)
$(0.03) $(0.03) $(0.15) $(0.04) Special items (1): Three Months
Ended Six Months Ended June 30, June 30, ------------ ----------
2009 2008 2009 2008 ---- ---- ---- ---- Cost of sales Employee
separation and plant phaseout costs $(2.9) $(0.4) $(12.7) $(0.4)
Environmental remediation costs (1.4) (2.3) (2.9) (3.9) ---- ----
----- ---- Impact on cost of sales (4.3) (2.7) (15.6) (4.3) Selling
and administrative Legal (0.2) - (0.2) - Employee separation and
plant phaseout costs (0.1) (1.1) (0.4) (1.1) ---- ---- ---- ----
Impact on selling and administrative (0.3) (1.1) (0.6) (1.1)
Adjustment to impairment of goodwill - - (5.0) - Impact on
operating income and (loss) income before income taxes (4.6) (3.8)
(21.2) (5.4) Income tax benefit on special items 1.5 1.3 7.6 1.9
--- --- --- --- Impact of special items on net income (loss) $(3.1)
$(2.5) $(13.6) $(3.5) ===== ===== ====== ===== Basic and diluted
impact per common share $(0.03) $(0.03) $(0.15) $(0.04) Weighted
average diluted shares used to compute earnings per share: 93.5
93.8 92.3 93.5 (1) Special items is a non-GAAP financial measure.
Special items include charges related to specific strategic
initiatives or financial restructurings such as: consolidation of
operations; employee separation costs resulting from personnel
reduction programs, plant phaseout costs, executive separation
agreements; asset impairments; environmental remediation costs,
fines or penalties for facilities no longer owned or closed in
prior years; gains and losses on the divestiture of operating
businesses, joint ventures and equity investments; gains and losses
on facility or property sales or disposals; results of litigation,
fines or penalties, where such litigation (or action relating to
the fines or penalties) arose prior to the commencement of the
performance period; and the effect of changes in tax law,
accounting principles or other such laws or provisions affecting
reported results or the effect of adverse determinations by
regulatory agencies relating to accounting principles or treatment.
Attachment 2 PolyOne Corporation and Subsidiaries Consolidated
Statements of Operations (Unaudited) (In millions, except per share
data) Three Months Ended Six Months Ended June 30, June 30,
------------ ---------- 2009 2008 2009 2008 ----- ----- -----
------- Sales $496.5 $748.1 $959.9 $1,461.8 Cost of sales 410.2
659.6 814.4 1,288.4 ----- ----- ----- ------- Gross margin 86.3
88.5 145.5 173.4 Selling And administrative 77.1 75.0 147.3 147.9
Adjustment to impairment of goodwill - - 5.0 - Income from equity
affiliates 10.1 10.5 23.4 18.6 ----- ----- ----- ------- Operating
income 19.3 24.0 16.6 44.1 Interest expense, net (8.8) (9.8) (17.6)
(18.2) Other expense, net (0.7) (0.7) (7.3) (2.7) ----- ----- -----
------- Income (loss) before income taxes 9.8 13.5 (8.3) 23.2
Income Tax (expense) benefit (6.3) (4.7) 2.5 (7.9) ----- -----
----- ------- Net income (loss) $3.5 $8.8 $(5.8) $15.3 ===== =====
===== ======= Earnings (loss) per common share: Basic earnings
(loss) $0.04 $0.09 $(0.06) $0.16 Diluted earnings (loss) $0.04
$0.09 $(0.06) $0.16 Weighted average shares used to compute
earnings per share: Basic 92.4 93.0 92.3 93.0 Diluted 93.5 93.8
92.3 93.5 Equity affiliates earnings recorded by PolyOne: SunBelt
$9.0 $9.4 $21.8 $16.6 Other equity affiliates 1.1 1.1 1.6 2.0 -----
----- ----- ------- Income from equity affiliates $10.1 $10.5 $23.4
$18.6 ===== ===== ===== ======= Attachment 3 PolyOne Corporation
and Subsidiaries Condensed Consolidated Balance Sheets (In
millions) (Unaudited) June 30, December 31, 2009 2008 --------
-------- Assets Current assets: Cash and cash equivalents $182.3
$44.3 Accounts receivable, net 285.6 262.1 Inventories 149.5 197.8
Deferred income tax assets 0.6 1.0 Other current assets 18.6 19.9
-------- -------- Total current assets 636.6 525.1 Property, net
408.8 432.0 Investment in equity affiliates and nonconsolidated
subsidiary 29.5 20.5 Goodwill 159.0 163.9 Other intangible assets,
net 67.5 69.1 Deferred income tax assets - 0.5 Other non-current
assets 61.4 66.6 -------- -------- Total assets $1,362.8 $1,277.7
======== ======== Liabilities and Shareholders' Equity Current
liabilities: Current portion of long-term debt $39.7 $19.8
Short-term debt 22.1 6.2 Accounts payable 234.9 160.0 Accrued
expenses 97.1 118.2 -------- -------- Total current liabilities
393.8 304.2 Long-term debt 388.9 408.3 Post-retirement benefits
other than pensions 81.9 80.9 Pension benefits 208.7 225.0 Deferred
income tax liabilities 3.4 - Other non-current liabilities 91.0
83.4 Shareholders' equity 195.1 175.9 -------- -------- Total
liabilities and shareholders' equity $1,362.8 $1,277.7 ========
======== Attachment 4 PolyOne Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited) (In millions)
Three Months Ended Six Months Ended June 30, June 30, --------
-------- 2009 2008 2009 2008 ---- ---- ---- ---- Operating
Activities Net income (loss) $3.5 $8.8 $(5.8) $15.3 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization 14.0 15.9 34.0 31.7 Deferred income
tax expense 9.4 1.0 8.8 0.4 Provision for doubtful accounts 0.5 0.7
1.5 2.8 Stock compensation expense 0.8 0.7 1.4 1.5 Adjustment to
impairment of goodwill - - 5.0 - Asset write-downs and impairment
charges 0.2 - 1.4 - Companies carried at equity and minority
interest: Income from equity affiliates and minority interest
(10.1) (10.5) (23.4) (18.6) Dividends and distributions received
12.8 7.4 14.2 8.3 Change in assets and liabilities: Increase in
accounts receivable (25.4) (28.2) (9.4) (79.9) Decrease (increase)
in inventories 11.2 (4.8) 47.0 (33.3) Increase in accounts payable
49.0 32.7 74.7 78.3 Increase (decrease) in sale of accounts
receivable - (72.8) (14.2) 13.8 Decrease in accrued expenses and
other (1.7) (8.3) (0.6) (20.6) ------ ----- ---- ------ Net cash
provided (used) by operating activities 64.2 (57.4) 134.6 (0.3)
Investing Activities Capital expenditures (5.5) (11.5) (12.2)
(19.9) Business acquisitions, net of cash received - - - (150.0)
------ ----- ---- ------ Net cash used by investing activities
(5.5) (11.5) (12.2) (169.9) Financing Activities Change in
short-term debt (0.1) 0.7 15.1 82.6 Issuance of long-term debt, net
of debt issuance cost - 77.8 - 77.8 Repayment of long-term debt -
(10.7) - (11.4) ------ ----- ------ ------ Net cash (used) provided
by financing activities (0.1) 67.8 15.1 149.0 Effect of exchange
rate changes on cash 1.2 1.7 0.5 1.6 ------ ----- ------ ------
Increase (decrease) in cash and cash equivalents 59.8 0.6 138.0
(19.6) Cash and cash equivalents at beginning of period 122.5 59.2
44.3 79.4 ------ ----- ------ ------ Cash and cash equivalents at
end of period $182.3 $59.8 $182.3 $59.8 ====== ===== ====== ======
Attachment 5 Business Segment and Platform Operations (Unaudited)
(In millions) Operating income at the segment level does not
include: special items as defined on attachment 1; corporate
general and administration costs that are not allocated to
segments; intersegment sales and profit eliminations; share-based
compensation costs; and certain other items that are not included
in the measure of segment profit and loss that is reported to and
reviewed by the chief operating decision maker. These costs are
included in Corporate and eliminations. Three Months Ended Six
Months Ended June 30, June 30, ------------------ ----------------
2009 2008 2009 2008 ---- ---- ---- ---- Sales: International Color
and Engineered Materials $115.0 $172.1 $209.1 $337.3 Specialty
Engineered Materials 50.1 67.3 101.5 131.8 Specialty Color,
Additives and Inks 49.2 60.8 94.0 119.2 ------ ------ ------
-------- Specialty Platform 214.3 300.2 404.6 588.3 Performance
Products and Solutions 170.3 273.7 329.1 533.0 PolyOne Distribution
135.1 208.2 272.0 409.3 Corporate and eliminations (23.2) (34.0)
(45.8) (68.8) ------ ------ ------ -------- Sales $496.5 $748.1
$959.9 $1,461.8 ====== ====== ====== ======== Gross margin:
International Color and Engineered Materials $25.0 $30.7 $42.1
$59.5 Specialty Engineered Materials 13.0 12.5 22.0 23.3 Specialty
Color, Additives and Inks 12.0 12.4 20.9 23.6 ----- ----- ------
----- Specialty Platform 50.0 55.6 85.0 106.4 Performance Products
and Solutions 27.1 19.0 48.2 40.0 PolyOne Distribution 13.3 18.1
27.1 35.3 Corporate and eliminations (4.1) (4.2) (14.8) (8.3) -----
----- ------ ------ Gross margin $86.3 $88.5 $145.5 $173.4 =====
===== ====== ====== Operating (loss) income: International Color
and Engineered Materials $5.9 $10.4 $5.5 $18.2 Specialty Engineered
Materials 4.7 3.2 5.1 6.1 Specialty Color, Additives and Inks 4.0
3.5 4.5 6.3 ----- ----- ----- ----- Specialty Platform 14.6 17.1
15.1 30.6 Performance Products and Solutions 14.7 5.3 23.4 13.6
PolyOne Distribution 3.9 7.0 8.8 12.5 Resin and Intermediates 8.0
8.7 19.7 14.6 Corporate and eliminations (21.9) (14.1) (50.4)
(27.2) ----- ----- ----- ----- Operating income $19.3 $24.0 $16.6
$44.1 ===== ===== ===== ===== Specialty Platform consists of our
three specialty businesses: International Color and Engineered
Materials; Specialty Engineered Materials; and Specialty Color,
Additives and Inks. Attachment 6 Reconciliation of Non-GAAP
Financial Measures (Unaudited) (In millions, except per share data)
Senior management uses gross margin before special items and
operating income before special items to assess performance and
allocate resources because senior management believes that these
measures are useful in understanding current profitability levels
and that current levels may serve as a base for future performance.
In addition, operating income before the effect of special items is
a component of various PolyOne annual and long-term employee
incentive plans and is used in debt covenant computations. Senior
management uses free cash flow to assess our ability to service our
debt. Below is a reconciliation of non-GAAP financial measures to
the most directly comparable measures calculated and presented in
accordance with GAAP. See attachment 1 for a definition of special
items. Three Months Ended Six Months Ended Reconciliation to
Consolidated June 30, June 30, Statements of Operations
------------------ ---------------- 2009 2008 2009 2008 ---- ----
---- ---- Sales $496.5 $748.1 $959.9 $1,461.8 Gross margin before
special items $90.6 $91.2 $161.1 $177.7 Special items in gross
margin (4.3) (2.7) (15.6) (4.3) ----- ----- ------ ------ Gross
margin $86.3 $88.5 $145.5 $173.4 ===== ===== ====== ====== Gross
margin before special items as a percent of sales 18.2% 12.2% 16.8%
12.2% Operating income before special items $23.9 $27.8 $37.8 $49.5
Special items in operating income (4.6) (3.8) (21.2) (5.4) -----
----- ----- ----- Operating income $19.3 $24.0 $16.6 $44.1 =====
===== ===== ===== Senior management uses comparisons of net (loss)
income and basic and diluted (loss) earnings per share (EPS) before
special items, tax gain and tax valuation allowance to assess
performance and facilitate comparability of results with prior
periods. Below is a reconciliation of these non-GAAP financial
measures to their most directly comparable measure calculated and
presented in accordance with GAAP. Three Months Ended Three Months
Ended Reconciliation to Consolidated June 30, 2009 June 30, 2008
Statements of Operations ------------------ ------------------ $
EPS $ EPS - --- - --- Net income $3.5 $0.04 $8.8 $0.09 Special
items, after-tax (attachment 1) 3.1 0.03 2.5 0.03 Tax (a) 5.3 0.06
0.3 - ----- ----- ----- ----- $11.9 $0.13 $11.6 $0.12 ===== =====
===== ===== Six Months Ended Six Months Ended Reconciliation to
Consolidated June 30, 2009 June 30, 2008 Statements of Operations
---------------- --------------- $ EPS $ EPS - --- - --- Net (loss)
income $(5.8) $(0.06) $15.3 $0.16 Special items, after-tax
(attachment 1) 13.6 0.15 3.5 0.04 Tax (a) 0.7 - 0.5 0.01 ---- -----
----- ---- $8.5 $0.09 $19.3 $0.21 ==== ===== ===== ===== (a) Net
tax loss associated with foreign tax audits and deferred income tax
valuation allowance on deferred tax assets Senior management uses
free cash flow to assess our ability to service our debt. Below is
a reconciliation of this non-GAAP financial measure to the most
directly comparable measure calculated and presented in accordance
with GAAP. Three Months Ended Six Months Ended June 30, June 30,
------------------ ---------------- Reconciliation to Consolidated
Statements of Cash Flows 2009 2008 2009 2008
------------------------------ ---- ---- ---- ---- Net cash
provided (used) by operating activities $64.2 $(57.4) $134.6 $(0.3)
Net cash used by investing activities (5.5) (11.5) (12.2) (169.9)
Decrease (increase) in sale of accounts receivable - 72.8 14.2
(13.8) ----- ---- ---- ----- Free cash flow $58.7 $3.9 $136.6
$(184.0) ===== ==== ====== ======== DATASOURCE: PolyOne Corporation
CONTACT: Investor Relations, Robert M. Patterson, Senior Vice
President & Chief Financial Officer, +1-440-930-3302, or Media,
Amanda Marko, Director, Corporate Communications, +1-440-930-3162,
, both of PolyOne Corporation Web Site: http://www.polyone.com/
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