ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our Business
We are a premier provider of specialized polymer materials, services and solutions with operations in specialty engineered materials, color and additive systems and polymer distribution. We are also a highly specialized developer and manufacturer of performance enhancing additives, liquid colorants, fluoropolymer and silicone colorants. Headquartered in Avon Lake, Ohio, we have employees at manufacturing sites and distribution facilities in North America, South America, Europe, Asia and Africa. We provide value to our customers through our ability to link our knowledge of polymers and formulation technology with our manufacturing and supply chain capabilities to provide value added solutions to designers, assemblers and processors of plastics (our customers). When used in this quarterly report on Form 10-Q, the terms “we,” “us,” “our”, "PolyOne" and the “Company” mean PolyOne Corporation and its consolidated subsidiaries.
Highlights and Executive Summary
A summary of PolyOne’s sales, operating income, net income and net income attributable to PolyOne common shareholders follows:
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Three Months Ended June 30,
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Six Months Ended June 30,
|
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2017
|
|
2016
|
|
2017
|
|
2016
|
(In millions)
|
Sales
|
$
|
814.1
|
|
|
$
|
758.2
|
|
|
$
|
1,610.8
|
|
|
$
|
1,497.1
|
|
|
|
|
|
|
|
|
|
Operating income
|
$
|
80.0
|
|
|
$
|
81.8
|
|
|
$
|
164.0
|
|
|
$
|
152.2
|
|
|
|
|
|
|
|
|
|
Net income from continuing operations
|
$
|
49.6
|
|
|
$
|
50.1
|
|
|
$
|
97.9
|
|
|
$
|
88.3
|
|
(Loss) income from discontinued operations, net of income taxes
|
(231.0
|
)
|
|
(0.1
|
)
|
|
(232.4
|
)
|
|
0.7
|
|
Net (loss) income
|
$
|
(181.4
|
)
|
|
$
|
50.0
|
|
|
$
|
(134.5
|
)
|
|
$
|
89.0
|
|
|
|
|
|
|
|
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|
Net (loss) income attributable to PolyOne common shareholders
|
$
|
(181.4
|
)
|
|
$
|
50.0
|
|
|
$
|
(134.5
|
)
|
|
$
|
89.1
|
|
Recent Developments
On July 19, 2017, PolyOne divested its Designed Structures and Solutions segment (DSS) to an affiliate of Arsenal Capital Partners for
$115.0 million
cash, subject to a working capital adjustment. Previously, DSS was included as a separate operating segment. As a result of the sale, the DSS operating segment results are now included in net (loss) income from discontinued operations. Historical information has been retrospectively adjusted to reflect these changes.
On July 6, 2017, the Company completed the acquisition of Mesa Industries, Inc. (Mesa), a United States producer of color and additive materials and services.
On June 8, 2017, the Company completed the acquisition of Rutland Plastic Technologies, Inc. (Rutland), a leading producer of specialty inks and an innovator in textile screen printing solutions and service.
On January 3, 2017, the Company completed the acquisition of SilCoTec, Inc. (SilCoTec), a leading producer of innovative silicone colorants, dispersions and formulations.
The results of operations of these acquisitions are reported in the Color, Additives and Inks segment subsequent to their respective acquisition date. These acquisitions are expected to add approximately $85.0 million in sales on an annual basis.
Results of Operations —
The
three and six
months ended
June 30, 2017
compared to
three and six
months ended
June 30, 2016
:
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|
|
|
|
|
|
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Three Months Ended June 30,
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Variances —
Favorable (Unfavorable)
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Six Months Ended June 30,
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|
Variances —
Favorable (Unfavorable)
|
(Dollars in millions, except per share data)
|
2017
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|
2016
|
|
Change
|
|
%
Change
|
|
2017
|
|
2016
|
|
Change
|
|
%
Change
|
Sales
|
$
|
814.1
|
|
|
$
|
758.2
|
|
|
$
|
55.9
|
|
|
7.4
|
%
|
|
$
|
1,610.8
|
|
|
$
|
1,497.1
|
|
|
$
|
113.7
|
|
|
7.6
|
%
|
Cost of sales
|
626.1
|
|
|
576.3
|
|
|
(49.8
|
)
|
|
(8.6
|
)%
|
|
1,240.5
|
|
|
1,138.6
|
|
|
(101.9
|
)
|
|
(8.9
|
)%
|
Gross margin
|
188.0
|
|
|
181.9
|
|
|
6.1
|
|
|
3.4
|
%
|
|
370.3
|
|
|
358.5
|
|
|
11.8
|
|
|
3.3
|
%
|
Selling and administrative expense
|
108.0
|
|
|
100.1
|
|
|
(7.9
|
)
|
|
(7.9
|
)%
|
|
206.3
|
|
|
206.3
|
|
|
—
|
|
|
—
|
%
|
Operating income
|
80.0
|
|
|
81.8
|
|
|
(1.8
|
)
|
|
(2.2
|
)%
|
|
164.0
|
|
|
152.2
|
|
|
11.8
|
|
|
7.8
|
%
|
Interest expense, net
|
(15.2
|
)
|
|
(14.6
|
)
|
|
(0.6
|
)
|
|
(4.1
|
)%
|
|
(29.8
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)
|
|
(29.2
|
)
|
|
(0.6
|
)
|
|
(2.1
|
)%
|
Debt extinguishment costs
|
—
|
|
|
(0.4
|
)
|
|
0.4
|
|
|
100.0
|
%
|
|
(0.3
|
)
|
|
(0.4
|
)
|
|
0.1
|
|
|
25.0
|
%
|
Other (expense) income, net
|
(1.4
|
)
|
|
0.1
|
|
|
(1.5
|
)
|
|
nm
|
|
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(2.5
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)
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|
0.1
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|
|
(2.6
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)
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|
nm
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|
Income from continuing operations before income taxes
|
63.4
|
|
|
66.9
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|
(3.5
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)
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|
(5.2
|
)%
|
|
131.4
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|
122.7
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|
8.7
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|
7.1
|
%
|
Income tax expense
|
(13.8
|
)
|
|
(16.8
|
)
|
|
3.0
|
|
|
17.9
|
%
|
|
(33.5
|
)
|
|
(34.4
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)
|
|
0.9
|
|
|
2.6
|
%
|
Net income from continuing operations
|
49.6
|
|
|
50.1
|
|
|
(0.5
|
)
|
|
(1.0
|
)%
|
|
97.9
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|
|
88.3
|
|
|
9.6
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|
|
10.9
|
%
|
(Loss) income from discontinued operations, net of income taxes
|
(231.0
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)
|
|
(0.1
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)
|
|
(230.9
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)
|
|
nm
|
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|
(232.4
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)
|
|
0.7
|
|
|
(233.1
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)
|
|
nm
|
|
Net (loss) income
|
(181.4
|
)
|
|
50.0
|
|
|
(231.4
|
)
|
|
nm
|
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|
(134.5
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)
|
|
89.0
|
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|
(223.5
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)
|
|
nm
|
|
Net loss attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
0.1
|
|
|
(0.1
|
)
|
|
(100.0
|
)%
|
Net (loss) income attributable to PolyOne common shareholders
|
$
|
(181.4
|
)
|
|
$
|
50.0
|
|
|
$
|
(231.4
|
)
|
|
nm
|
|
|
$
|
(134.5
|
)
|
|
$
|
89.1
|
|
|
$
|
(223.6
|
)
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share attributable to PolyOne common shareholders - Basic:
|
|
|
|
|
Continuing operations
|
$
|
0.61
|
|
|
$
|
0.59
|
|
|
|
|
|
|
$
|
1.20
|
|
|
$
|
1.05
|
|
|
|
|
|
Discontinued operations
|
(2.83
|
)
|
|
—
|
|
|
|
|
|
|
(2.84
|
)
|
|
0.01
|
|
|
|
|
|
Total
|
$
|
(2.22
|
)
|
|
$
|
0.59
|
|
|
|
|
|
|
$
|
(1.64
|
)
|
|
$
|
1.06
|
|
|
|
|
|
Earnings (loss) per common share attributable to PolyOne common shareholders - Diluted:
|
|
|
|
|
Continuing operations
|
$
|
0.60
|
|
|
$
|
0.59
|
|
|
|
|
|
|
$
|
1.19
|
|
|
$
|
1.04
|
|
|
|
|
|
Discontinued operations
|
(2.80
|
)
|
|
—
|
|
|
|
|
|
|
(2.82
|
)
|
|
0.01
|
|
|
|
|
|
Total
|
$
|
(2.20
|
)
|
|
$
|
0.59
|
|
|
|
|
|
|
$
|
(1.63
|
)
|
|
$
|
1.05
|
|
|
|
|
|
nm - not meaningful
Sales
Sales increased
$55.9 million
, or
7.4%
, in the
three months ended June 30, 2017
compared to the
three months ended June 30, 2016
. Previous commercial investments led to organic sales growth of 5.7% and acquisitions increased sales by 2.6%. Partially offsetting these increases was an unfavorable foreign exchange impact of 0.9%.
Sales increased
$113.7 million
, or
7.6%
, in the
six months ended June 30, 2017
compared to the
six months ended June 30, 2016
. Previous commercial investments drove organic sales growth of 6.2% and acquisitions increased sales by 2.3%. Partially offsetting these increases was an unfavorable foreign exchange impact of 0.9%.
Cost of sales
As a percent of sales, cost of sales increased from 76.0% in the
three months ended June 30, 2016
to 76.9% in the
three months ended June 30, 2017
and from 76.1% in the
six months ended June 30, 2016
to 77.0% in the
six months ended June 30, 2017
, primarily as a result of raw material cost inflation.
Selling and administrative expense
Selling and administrative expenses increased
$7.9 million
during the
three months ended June 30, 2017
compared to the
three months ended June 30, 2016
driven primarily by a $3.6 million increase due to our continued investment in commercial resources, $3.0 million associated with acquired businesses and a $1.1 million increase in employee costs, including incentives.
Selling and administrative expense for the
six months ended June 30, 2017
compared to the
six months ended June 30, 2016
remained consistent primarily as a result of $5.7 million associated with acquired businesses offset by a $3.8 million reversal of certain non-income tax reserves due to the expiration of statute of limitations in 2017 and a $1.8 million decrease in employee costs, including incentives.
Interest expense, net
Interest expense, net for the three and
six months ended June 30, 2017
, as compared to the three and
six months ended June 30, 2016
increased
$0.6 million
. The increase in interest expense primarily relates to increased borrowings under our senior secured term loan.
Income taxes
During the three months ended June 30, 2017, the Company’s effective tax rate of
21.8%
differed from the three months ended June 30, 2016 rate of
25.1%
primarily due to a more favorable impact of foreign tax rate differences on foreign earnings.
During the first half of 2017, the Company’s effective tax rate of
25.5%
differed from the six months ended June 30, 2016 rate of
28.0%
primarily due to a more favorable impact of foreign tax rate differences on foreign earnings.
SEGMENT INFORMATION
Operating income is the primary measure that is reported to our chief operating decision maker for purposes of allocating resources to the segments and assessing their performance. Operating income at the segment level does not include: corporate general and administrative expenses that are not allocated to segments; intersegment sales and profit eliminations; charges related to specific strategic initiatives such as the consolidation of operations; restructuring activities, including employee separation costs resulting from personnel reduction programs, plant realignment costs; executive separation agreements; share-based compensation costs; asset impairments; environmental remediation costs and other liabilities for facilities no longer owned or closed in prior years; gains and losses on the divestiture of joint ventures and equity investments; actuarial gains and losses associated with our pension and other post-retirement benefit plans; and certain other items that are not included in the measure of segment profit or loss that is reported to and reviewed by our chief operating decision maker. These costs are included in
Corporate and eliminations
.
PolyOne has four reportable segments: (1) Color, Additives and Inks; (2) Specialty Engineered Materials; (3) Performance Products and Solutions; and (4) PolyOne Distribution. Our segments are further discussed in
Note 9,
Segment Information
, to the accompanying Consolidated Financial Statements.
As a result of the divestiture of DSS we have removed DSS as a separate operating segment and its results are presented as a discontinued operation. Historical information has been retrospectively adjusted to reflect these changes. Discontinued operations are further discussed in
Note 3,
Discontinued Operations
, to the accompanying Consolidated Financial Statements.
Sales and Operating Income —
The
three and six
months ended
June 30, 2017
compared to the
three and six
months ended
June 30, 2016
:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Variances — Favorable
(Unfavorable)
|
|
Six Months Ended June 30,
|
|
Variances — Favorable
(Unfavorable)
|
(Dollars in millions)
|
2017
|
|
2016
|
|
Change
|
|
% Change
|
|
2017
|
|
2016
|
|
Change
|
|
% Change
|
Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Color, Additives and Inks
|
$
|
223.7
|
|
|
$
|
212.2
|
|
|
$
|
11.5
|
|
|
5.4
|
%
|
|
$
|
435.5
|
|
|
$
|
417.1
|
|
|
$
|
18.4
|
|
|
4.4
|
%
|
Specialty Engineered Materials
|
158.7
|
|
|
143.3
|
|
|
15.4
|
|
|
10.7
|
%
|
|
317.8
|
|
|
284.3
|
|
|
33.5
|
|
|
11.8
|
%
|
Performance Products and Solutions
|
184.2
|
|
|
172.8
|
|
|
11.4
|
|
|
6.6
|
%
|
|
367.9
|
|
|
339.0
|
|
|
28.9
|
|
|
8.5
|
%
|
PolyOne Distribution
|
290.8
|
|
|
272.6
|
|
|
18.2
|
|
|
6.7
|
%
|
|
576.9
|
|
|
541.4
|
|
|
35.5
|
|
|
6.6
|
%
|
Corporate and eliminations
|
(43.3
|
)
|
|
(42.7
|
)
|
|
(0.6
|
)
|
|
(1.4
|
)%
|
|
(87.3
|
)
|
|
(84.7
|
)
|
|
(2.6
|
)
|
|
(3.1
|
)%
|
Total Sales
|
$
|
814.1
|
|
|
$
|
758.2
|
|
|
$
|
55.9
|
|
|
7.4
|
%
|
|
$
|
1,610.8
|
|
|
$
|
1,497.1
|
|
|
$
|
113.7
|
|
|
7.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Color, Additives and Inks
|
$
|
38.6
|
|
|
$
|
38.2
|
|
|
$
|
0.4
|
|
|
1.0
|
%
|
|
$
|
73.7
|
|
|
$
|
73.1
|
|
|
$
|
0.6
|
|
|
0.8
|
%
|
Specialty Engineered Materials
|
20.3
|
|
|
21.4
|
|
|
(1.1
|
)
|
|
(5.1
|
)%
|
|
43.9
|
|
|
44.8
|
|
|
(0.9
|
)
|
|
(2.0
|
)%
|
Performance Products and Solutions
|
22.3
|
|
|
21.3
|
|
|
1.0
|
|
|
4.7
|
%
|
|
44.4
|
|
|
41.0
|
|
|
3.4
|
|
|
8.3
|
%
|
PolyOne Distribution
|
20.3
|
|
|
17.8
|
|
|
2.5
|
|
|
14.0
|
%
|
|
38.9
|
|
|
35.3
|
|
|
3.6
|
|
|
10.2
|
%
|
Corporate and eliminations
|
(21.5
|
)
|
|
(16.9
|
)
|
|
(4.6
|
)
|
|
(27.2
|
)%
|
|
(36.9
|
)
|
|
(42.0
|
)
|
|
5.1
|
|
|
12.1
|
%
|
Total Operating Income
|
$
|
80.0
|
|
|
$
|
81.8
|
|
|
$
|
(1.8
|
)
|
|
(2.2
|
)%
|
|
$
|
164.0
|
|
|
$
|
152.2
|
|
|
$
|
11.8
|
|
|
7.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income as a percentage of sales:
|
|
|
|
|
|
|
|
|
|
|
Color, Additives and Inks
|
17.3
|
%
|
|
18.0
|
%
|
|
(0.7
|
)
|
|
nm
|
|
|
16.9
|
%
|
|
17.5
|
%
|
|
(0.6
|
)
|
|
nm
|
|
Specialty Engineered Materials
|
12.8
|
%
|
|
14.9
|
%
|
|
(2.1
|
)
|
|
nm
|
|
|
13.8
|
%
|
|
15.8
|
%
|
|
(2.0
|
)
|
|
nm
|
|
Performance Products and Solutions
|
12.1
|
%
|
|
12.3
|
%
|
|
(0.2
|
)
|
|
nm
|
|
|
12.1
|
%
|
|
12.1
|
%
|
|
—
|
|
|
nm
|
|
PolyOne Distribution
|
7.0
|
%
|
|
6.5
|
%
|
|
0.5
|
|
|
nm
|
|
|
6.7
|
%
|
|
6.5
|
%
|
|
0.2
|
|
|
nm
|
|
Total
|
9.8
|
%
|
|
10.8
|
%
|
|
(1.0
|
)
|
|
nm
|
|
|
10.2
|
%
|
|
10.2
|
%
|
|
—
|
|
|
nm
|
|
nm - not meaningful
Color, Additives and Inks
Sales increased
$11.5 million
, or
5.4%
, in the
three months ended June 30, 2017
compared to the
three months ended June 30, 2016
. Acquisitions increased sales by 4.7%, while organic sales increased 2.2% driven largely by increases in the packaging and textile markets. Slightly offsetting these increases was unfavorable foreign exchange impacts of 1.5%.
Sales increased
$18.4 million
, or
4.4%
, in the
six months ended June 30, 2017
compared to the
six months ended June 30, 2016
. Acquisitions increased sales by 3.7%, while organic sales increased 2.2% driven largely by increases in the packaging and textile markets. Slightly offsetting these increases was unfavorable foreign exchange impacts of 1.5%.
Operating income increased
$0.4 million
in the
three months ended June 30, 2017
as compared to the
three months ended June 30, 2016
and
$0.6 million
in the
six months ended June 30, 2017
as compared to the
six months ended June 30, 2016
as the benefit from higher sales was largely offset by the impacts of unfavorable foreign exchange rates and raw material cost inflation.
Specialty Engineered Materials
Sales increased
$15.4 million
, or
10.7%
, in the
three months ended June 30, 2017
compared to the
three months ended June 30, 2016
. The increases from acquisitions of 6.9% and organic growth of 5.2% were partially offset by unfavorable foreign exchange of 1.4%.
Sales increased
$33.5 million
, or
11.8%
, in the
six months ended June 30, 2017
compared to the
six months ended June 30, 2016
. The increases from acquisitions of 6.9% and organic growth of 6.5% were partially offset by unfavorable foreign exchange of 1.6%.
Operating income decreased
$1.1 million
in the
three months ended June 30, 2017
as compared to the
three months ended June 30, 2016
and
$0.9 million
in the
six months ended June 30, 2017
as compared to the
six months ended June 30, 2016
as the benefit of increased sales was more than offset by raw material cost inflation.
Performance Products and Solutions
Sales increased
$11.4 million
, or
6.6%
, in the
three months ended June 30, 2017
as compared to the
three months ended June 30, 2016
and
$28.9 million
, or
8.5%
, in the
six months ended June 30, 2017
as compared to the
six months ended June 30, 2016
primarily due to volume growth in the electrical and industrial markets.
Operating income increased
$1.0 million
in the
three months ended June 30, 2017
as compared to the
three months ended June 30, 2016
and
$3.4 million
in the
six months ended June 30, 2017
as compared to the
six months ended June 30, 2016
. The benefit of increased sales was partially offset by raw material cost inflation.
PolyOne Distribution
Sales increased
$18.2 million
, or
6.7%
, in the
three months ended June 30, 2017
as compared to the
three months ended June 30, 2016
and
$35.5 million
, or
6.6%
, in the
six months ended June 30, 2017
as compared to the
six months ended June 30, 2016
as a result of increased volume and higher overall average selling prices associated with raw material cost inflation.
Operating income increased
$2.5 million
in the
three months ended June 30, 2017
as compared to the
three months ended June 30, 2016
and
$3.6 million
in the
six months ended June 30, 2017
as compared to the
six months ended June 30, 2016
primarily as a result of increased sales and favorable mix, which was partially offset by increased selling and administrative costs related to our continued investment in commercial resources.
Corporate and Eliminations
Corporate and eliminations increased
$4.6 million
in the
three months ended June 30, 2017
as compared to the
three months ended June 30, 2016
primarily as a result of increased employee costs, including incentives, and a reduction of reimbursements from previously incurred environmental costs.
Corporate and eliminations decreased
$5.1 million
in the
six months ended June 30, 2017
as compared to the
three months ended June 30, 2016
. This improvement was primarily a result of a $3.8 million reversal of certain non-income tax reserves in 2017 due to the expiration of statute of limitations and a $4.3 million legal settlement received in the first quarter of 2017. These improvements were partially offset by a reduction of reimbursements from previously incurred environmental costs.
Liquidity and Capital Resources
Our objective is to finance our business through operating cash flow and an appropriate mix of debt and equity. By laddering the maturity structure, we avoid concentrations of debt maturities, reducing liquidity risk. We may from time to time seek to retire or purchase our outstanding debt with cash and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. We may also seek to repurchase our outstanding common shares. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved have been and may continue to be material.
The following table summarizes our liquidity as of
June 30, 2017
and
December 31, 2016
:
|
|
|
|
|
|
|
|
|
(In millions)
|
June 30, 2017
|
|
December 31, 2016
|
Cash and cash equivalents
|
$
|
191.1
|
|
|
$
|
225.5
|
|
Revolving credit availability
|
294.7
|
|
|
386.2
|
|
Liquidity
|
$
|
485.8
|
|
|
$
|
611.7
|
|
As of
June 30, 2017
, approximately 90% of the Company’s cash and cash equivalents resided outside the United States. Repatriation of these funds could result in potential foreign and domestic taxes. To the extent foreign earnings previously treated as permanently reinvested were to be repatriated, the potential U.S. tax liability may be reduced by any foreign income taxes paid on these earnings. However, based on the Company’s policy of permanent reinvestment, it is not
practicable to determine the U.S. federal income tax liability, if any. Determination of the amount of unrecognized deferred tax liabilities and related foreign withholding taxes is not practicable due to the complexities associated with this hypothetical calculation and the Company’s permanent reinvestment policy.
Cash Flows
The following describes the material components of cash flows from operating, investing and financing activities for the
six
months ended
June 30, 2017
and
2016
.
Operating Activities —
In the
six
months ended
June 30, 2017
, net cash provided by operating activities was
$43.7 million
as compared to net cash provided by operating activities of $
54.6 million
for the
six
months ended
June 30, 2016
. The decrease in net cash provided by operating activities of
$10.9 million
is primarily a result of an increase in working capital in support of higher revenues.
Working capital as a percentage of sales, which we define as the average accounts receivable, plus average inventory, less average accounts payable, divided by sales, for the first half of 2017 increased to 10.1% compared to 10.0% for the first half of 2016. This increase is primarily due to the impact of recent acquisitions.
Investing Activities —
Net cash used by investing activities during the
six
months ended
June 30, 2017
of $
162.2 million
reflects
$137.9 million
of acquisitions and
$34.1 million
of capital expenditures, partially offset by the sale of assets of
$9.8 million
.
Net cash used by investing activities during the
six
months ended
June 30, 2016
of
$103.4 million
reflects the acquisition of certain businesses for
$72.8 million
and
$39.6 million
of capital expenditures, partially offset by the sale of assets of
$9.0 million
.
Financing Activities —
Net cash provided by financing activities for the
six
months ended
June 30, 2017
of
$80.2 million
reflects the net borrowings of $144.6 million under our senior secured revolving credit facility, principally to finance our acquisition of Rutland, primarily offset by
$34.3 million
of repurchases of our outstanding common shares and
$22.2 million
of dividends paid.
Net cash used by financing activities for the
six
months ended
June 30, 2016
of
$68.3 million
is primarily related to $39.6 million of repurchases of our outstanding common shares and $20.7 million of dividends paid.
Debt
As of
June 30, 2017
, the principal amount of debt totaled
$1,415.2 million
. Aggregate maturities of the principal amount of debt for the current year, next five years and thereafter, are as follows:
|
|
|
|
|
|
(In millions)
|
|
|
2017
|
|
$
|
14.5
|
|
2018
|
|
20.9
|
|
2019
|
|
6.6
|
|
2020
|
|
6.6
|
|
2021
|
|
6.6
|
|
2022
|
|
757.1
|
|
Thereafter
|
|
602.9
|
|
Aggregate maturities
|
|
$
|
1,415.2
|
|
As of
June 30, 2017
, we were in compliance with all customary financial and restrictive covenants pertaining to our debt. For additional information regarding our debt please see
Note 8,
Financing Arrangements.
Contractual Obligations
We have future obligations under various contracts relating to debt and interest payments, operating leases, pension and post-retirement benefit plans and purchase obligations. During the
six
months ended
June 30, 2017
, there were no
material changes to these obligations as reported in our annual report on Form 10-K for the year ended
December 31, 2016
.
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS
In this quarterly report on Form 10-Q, 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. You can identify these statements by the fact that they do not relate strictly to historic or current facts. They use words such as “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. In particular, these include statements relating to future actions; prospective changes in raw material costs, product pricing or product demand; future performance; estimated capital expenditures; results of current and anticipated market conditions and market strategies; sales efforts; expenses; the outcome of contingencies such as legal proceedings and environmental liabilities; and financial results. Factors that could cause actual results to differ materially from those implied by these forward-looking statements include, but are not limited to:
|
|
•
|
effects on foreign operations due to currency fluctuations, tariffs and other political, economic and regulatory risks;
|
|
|
•
|
changes in polymer consumption growth rates and laws and regulations regarding the disposal of plastic materials where we conduct business;
|
|
|
•
|
changes in global industry capacity or in the rate at which anticipated changes in industry capacity come online in the industries in which we participate;
|
|
|
•
|
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, including any developments that would require any increase in our costs and/or reserves for such contingencies;
|
|
|
•
|
an inability to achieve or delays in achieving or achievement of less than the anticipated financial benefit from initiatives related to acquisition and integration, working capital reductions, cost reductions and employee productivity goals;
|
|
|
•
|
an inability to maintain appropriate relations with unions and employees;
|
|
|
•
|
the strength and timing of economic recoveries;
|
|
|
•
|
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;
|
|
|
•
|
disruptions, uncertainty or volatility in the credit markets that may limit our access to capital;
|
|
|
•
|
the amount and timing of repurchases, if any, of PolyOne common shares;
|
|
|
•
|
our ability to pay regular quarterly cash dividends and the amounts and timing of any future dividends;
|
|
|
•
|
our ability to realize anticipated savings and operational benefits from the realignment of assets, including the closure of manufacturing facilities; the timing of closings and shifts of production to new facilities related to asset realignments and any unforeseen loss of customers and/or disruptions of service or quality caused by such closings and/or production shifts; separation and severance amounts that differ from original estimates, amounts for non-cash charges related to asset write-offs and accelerated depreciation realignments of property, plant and equipment, that differ from original estimates;
|
|
|
•
|
information systems failures and cyberattacks; and
|
|
|
•
|
other factors described in our annual report on Form 10-K for the year ended
December 31, 2016
under Item 1A, “Risk Factors.”
|
We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties and assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. Investors should bear this in mind as they consider
forward-looking statements. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law. You are advised, however, to consult any further disclosures we make on related subjects in our reports on Forms 10-Q, 8-K and 10-K filed with the SEC. You should understand that it is not possible to predict or identify all risk factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.