- Earnings per share improves to $0.53; $0.14 excluding special
items and tax adjustments - Third quarter revenues increase 10
percent sequentially from second quarter - Cash balance expands to
$241.0 million at quarter end - Combined operating income from
specialty businesses is the highest in PolyOne history CLEVELAND,
Nov. 4 /PRNewswire-FirstCall/ -- PolyOne Corporation (NYSE: POL)
today reported net income of $49.6 million, or $0.53 per diluted
share in the third quarter of 2009, compared with a net loss of
$5.6 million or $0.06 per diluted share in the third quarter of
2008. On a comparable basis, before special items and the tax items
noted below, PolyOne reported net income of $0.14 per share in the
third quarter of 2009, versus the $0.13 per share of income
reported for the third quarter of 2008. The Company reported 2009
third quarter revenues of $548.3 million, a 25 percent decrease
compared with revenues of $735.1 million in the third quarter of
2008, but a 10 percent increase from the second quarter of 2009.
While demand improved sequentially, it is still below the prior
year as volume fell 20 percent versus the third quarter of 2008.
"Third quarter earnings per share before special items and tax
items surpassed the third quarter of last year as gross margin
expansion offset the impact of volume declines," said Stephen D.
Newlin, chairman, president and chief executive officer. "I am
particularly pleased with the performance of our specialty platform
which reported $19.5 million of operating income for the third
quarter - the highest ever in PolyOne history." Newlin continued,
"In 2005, PolyOne derived only 2 percent of its business unit
operating income from specialty businesses. In the third quarter of
2009, specialty operating income contributed 47 percent of total
business unit operating income. This is a record for PolyOne and
very strong evidence that we are transforming PolyOne into a
specialty company." The Company's third quarter 2009 gross margin
before special items of 18.1 percent represents 630 basis points of
improvement from the third quarter of 2008 (See attachment 6). The
third quarter 2009 gross margin improvement changes from the third
quarter of 2008 and second quarter of 2009 are summarized as
follows: Q3 09 vs. Q3 08 --------------- Q3 08 Gross margin 8.9%
Special items in gross margin 2.9% --- Q3 08 Gross margin before
special items 11.8% Restructuring savings 1.5% Volume/price/mix
3.7% LIFO reserve adjustments 1.1% --- Q3 09 Gross margin before
special items 18.1% Special items in gross margin 1.5% --- Q3 09
Gross margin 19.6% Q3 09 vs. Q2 09 --------------- Q2 09 Gross
margin 17.4% Special items in gross margin 0.8% --- Q2 09 Gross
margin before special items 18.2% Volume/price/mix 0.7% LIFO
reserve adjustments -0.8% --- Q3 09 Gross margin before special
items 18.1% Special items in gross margin 1.5% --- Q3 09 Gross
margin 19.6% Included in the results for the third quarter of 2009
are pre-tax special items netting to $27.5 million ($17.7 million
after-tax). Pre-tax special items include: -- $23.9 million gain
related to cash received from our former parent company as partial
reimbursement for previously incurred environmental costs; -- $21.1
million curtailment gain associated with previously announced plans
to reduce or eliminate certain postretirement benefits; -- $12.1
million of expenses associated with previously announced
restructuring actions; and -- $5.4 million for environmental costs
associated with plants no longer owned or operated. During the
third quarter, the Company also recorded a reduction in its tax
valuation allowance and a favorable tax adjustment related to a
state tax refund. The Company initially recorded a valuation
allowance against U.S. deferred tax assets during the fourth
quarter of 2008. The chart below provides a comparison of third
quarter 2009 results with the third quarter of 2008, showing the
impact of special items and the above-mentioned tax matters: Q3 09
EPS Q3 08 EPS ----- --- ----- --- Net income $49.6 $0.53 $(5.6)
$(0.06) Special items, after-tax (17.7) (0.19) 17.7 0.19 Tax
adjustments (18.5) (0.20) - - ----- ----- ----- ----- $13.4 $0.14
$12.1 $0.13 During the third quarter of 2009, the Company generated
$82.3 million of cash flow from operations and reported $241.0
million of cash on hand as of September 30, 2009. Combined with its
undrawn and available accounts receivable facility, liquidity
increased to $344.4 million. Short term debt was reduced $20.6
million during the quarter. "Last quarter we cautioned that during
the second half of 2009 we would see lower earnings from our
SunBelt joint venture and diminished LIFO benefits," said Robert M.
Patterson, senior vice president and chief financial officer. "Both
of these statements proved correct during the third quarter;
however, better than expected revenues, continued gross margin
expansion, and SG&A reductions allowed us to improve earnings
per share before special items from the second quarter of this
year." Outlook Update While third quarter 2009 revenues and
earnings per share before special items improved sequentially from
the second quarter, the Company does not expect this to continue
into the fourth quarter, largely due to end-market seasonality and
an expectation of customers suspending production for extended
periods during the holidays. Further, while publicly reported
chlor-alkali prices may have bottomed during the third quarter,
SunBelt's earnings are likely to fall sequentially, as selling
prices lag the publicly reported data. "Historically, our fourth
quarter revenue is below our second and third quarters due to the
seasonality of end markets such as building and construction, and
this may be exacerbated by extended plant shutdowns toward the end
of the year," said Newlin. "That being said, and as we look beyond
this short term seasonal phenomenon, we are cautiously optimistic
about the direction of the global economy going into 2010. In
general, we expect demand will improve and combined with new
business gains, we expect that 2010 revenues will exceed 2009."
Third Quarter 2009 Earnings Release and Conference Call PolyOne
will host a conference call at 9 a.m. Eastern Time on Wednesday,
November 4, 2009. The conference dial-in number is 866-543-6403
(domestic) or 617-213-8896 (international), passcode 81765586,
conference topic: third quarter 2009 PolyOne earnings conference
call. The call will be available for replay until November 11, 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 50218746. 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) Third Quarter 2009 (In
millions, except per share data) Operating results: Three Months
Nine Months Ended Ended September 30, September 30,
---------------- --------------- 2009 2008 2009 2008 ---- --- ---
---- Sales $548.3 $735.1 $1,508.2 $2,196.9 Operating income 56.2
1.3 72.8 45.4 Net income (loss) 49.6 (5.6) 43.8 9.7 Basic earnings
(loss) per share $0.54 $(0.06) $0.47 $0.10 Diluted earnings (loss)
per share $0.53 $(0.06) $0.47 $0.10 Total basic and diluted per
share impact of special items (1) $0.19 $(0.19) $0.04 $(0.23)
Special items (1): Three Months Nine Months Ended Ended September
30, September 30, ---------------- --------------- 2009 2008 2009
2008 ---- --- --- ---- Cost of sales Employee separation and plant
phaseout costs $(10.5) $(11.5) $(23.2) $(11.9) Reimbursement of
previously incurred environmental costs 23.9 - 23.9 - Environmental
remediation costs (5.4) (10.4) (8.3) (14.3) ---- --- --- -----
Impact on cost of sales 8.0 (21.9) (7.6) (26.2) Selling and
administrative Legal - - (0.2) - Curtailment gain 21.1 - 21.1 -
Employee separation and plant phaseout costs (1.6) (0.1) (2.0)
(1.2) ---- --- --- ---- Impact on selling and administrative 19.5
(0.1) 18.9 (1.2) Write-down of certain assets of an investment in
equity affiliates - (4.7) - (4.7) Adjustment to impairment of
goodwill - - (5.0) - Impact on operating income and (loss) income
before income taxes 27.5 (26.7) 6.3 (32.1) Income tax (expense)
benefit on special items (9.8) 9.0 (2.2) 10.9 ---- --- --- ----
Impact of special items on net income (loss) $17.7 $(17.7) $4.1
$(21.2) ===== ====== ==== ====== Basic and diluted impact per
common share $0.19 $(0.19) $0.04 $(0.23) Weighted average shares
used to compute earnings per share: Basic 92.4 92.9 92.4 92.9
Diluted 93.9 92.9 93.0 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 Nine Months Ended Ended September 30, September
30, ---------------- --------------- 2009 2008 2009 2008 ---- ----
---- ---- Sales $548.3 $735.1 $1,508.2 $2,196.9 Cost of sales 441.0
669.9 1,255.4 1,958.3 Gross margin 107.3 65.2 252.8 238.6 Selling
and administrative 56.3 69.7 203.6 217.6 Adjustment to impairment
of goodwill - - 5.0 - Income from equity affiliates 5.2 5.8 28.6
24.4 --- --- ---- ---- Operating income 56.2 1.3 72.8 45.4 Interest
expense, net (8.5) (9.7) (26.1) (27.9) Other expense, net (1.2) -
(8.5) (2.7) ---- ---- ---- ---- Income (loss) before income taxes
46.5 (8.4) 38.2 14.8 Income tax benefit (expense) 3.1 2.8 5.6 (5.1)
--- --- --- ---- Net income (loss) $49.6 $(5.6) $43.8 $9.7 =====
===== ===== ==== Basic earnings (loss) per common share $0.54
$(0.06) $0.47 $0.10 Diluted earnings (loss) per common share $0.53
$(0.06) $0.47 $0.10 Weighted-average shares used to compute
earnings per share: Basic 92.4 92.9 92.4 92.9 Diluted 93.9 92.9
93.0 93.5 Equity affiliates earnings recorded by PolyOne: SunBelt
$4.8 $10.2 $26.6 $26.8 Other equity affiliates 0.4 (4.4) 2.0 (2.4)
--- ---- --- ---- Income from equity affiliates $5.2 $5.8 $28.6
$24.4 ==== ==== ===== ===== Attachment 3 PolyOne Corporation and
Subsidiaries Condensed Consolidated Balance Sheets (In millions)
(Unaudited) September 30, December 31, 2009 2008 ---- ---- Assets
Current assets: Cash and cash equivalents $241.0 $44.3 Accounts
receivable, net 297.2 262.1 Inventories 158.2 197.8 Deferred income
tax assets 0.5 1.0 Other current assets 15.6 19.9 ---- ---- Total
current assets 712.5 525.1 Property, net 395.6 432.0 Investment in
equity affiliates and nonconsolidated subsidiary 21.4 20.5 Goodwill
159.0 163.9 Other intangible assets, net 66.7 69.1 Deferred income
tax assets - 0.5 Other non-current assets 66.9 66.6 ---- ---- Total
assets $1,422.1 $1,277.7 ======== ======== Liabilities and
Shareholders' Equity Current liabilities: Current portion of
long-term debt $39.9 $19.8 Short-term debt 0.6 6.2 Accounts payable
260.1 160.0 Accrued expenses and other liabilities 116.7 118.2
----- ----- Total current liabilities 417.3 304.2 Long-term debt
389.0 408.3 Postretirement benefits other than pensions 24.1 80.9
Pension benefits 206.8 225.0 Deferred income tax liabilities 4.3 -
Other non-current liabilities 94.8 83.4 Shareholders' equity 285.8
175.9 ----- ----- Total liabilities and shareholders' equity
$1,422.1 $1,277.7 ======== ======== Attachment 4 PolyOne
Corporation and Subsidiaries Consolidated Statements of Cash Flows
(Unaudited) (In millions) Three Months Nine Months Ended Ended
September 30, September 30, 2009 2008 2009 2008 ---- ---- ---- ----
Operating Activities Net income $49.6 $(5.6) $43.8 $9.7 Adjustments
to reconcile net income to net cash provided by operating
activities: Depreciation and amortization 15.8 20.1 49.8 51.8
Deferred income tax provision (benefit) 0.6 (5.5) 9.4 (5.1)
Provision for doubtful accounts 1.5 2.5 3.0 5.3 Stock compensation
expense 0.8 0.7 2.2 2.2 Adjustment to impairment of goodwill - -
5.0 - Asset write-downs and impairment charges 6.3 0.5 7.7 0.5
Companies carried at equity: Income from equity affiliates (5.2)
(5.8) (28.6) (24.4) Dividends and distributions received 13.4 12.5
27.6 20.8 Change in assets and liabilities, net of acquisition:
(Increase) decrease in accounts receivable (10.8) 5.5 (20.2) (74.4)
(Increase) decrease in inventories (7.1) (1.6) 39.9 (34.9) Increase
(decrease) in accounts payable 23.1 (42.2) 97.8 36.1 (Decrease)
increase in sale of accounts receivable - 12.0 (14.2) 25.8
(Decrease) increase in accrued expenses and other (5.7) 24.2 (6.3)
3.6 ---- ---- ---- --- Net cash provided by operating activities
82.3 17.3 216.9 17.0 Investing Activities Capital expenditures
(3.7) (9.7) (15.9) (29.6) Investment in affiliated company - (1.1)
- (1.1) Business acquisitions, net of cash acquired - (0.2) -
(150.2) ---- ---- ---- ------- Net cash used by investing
activities (3.7) (11.0) (15.9) (180.9) Financing Activities Change
in short-term debt (20.6) (9.2) (5.5) 73.4 Purchase of common stock
for treasury - (8.0) - (8.0) Issuance of long-term debt, net of
debt issuance cost - - - 77.8 Repayment of long-term debt - (10.8)
- (22.2) Proceeds from exercise of stock options - 1.1 - 1.1 ----
--- ---- --- Net cash (used) provided by financing activities
(20.6) (26.9) (5.5) 122.1 Effect of exchange rate changes on cash
0.7 (2.2) 1.2 0.6 --- ---- --- --- Increase (decrease) in cash and
cash equivalents 58.7 (22.8) 196.7 (42.4) Cash and cash equivalents
at beginning of period 182.3 59.8 44.3 79.4 ----- ---- ---- ----
Cash and cash equivalents at end of period $241.0 $37.0 $241.0
$37.0 ====== ===== ====== ===== 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 Nine Months Ended Ended September 30,
September 30, ------------- ------------- 2009 2008 2009 2008 ----
---- ---- ---- Sales: International Color and Engineered Materials
$124.4 $153.7 $333.5 $491.0 Specialty Engineered Materials 53.6
66.1 155.1 197.9 Specialty Color, Additives and Inks 52.2 60.1
146.2 179.3 ---- ---- ----- ----- Specialty Platform 230.2 279.9
634.8 868.2 Performance Products and Solutions 180.9 274.4 510.0
807.4 PolyOne Distribution 163.1 214.7 435.1 624.0 Corporate and
eliminations (25.9) (33.9) (71.7) (102.7) ----- ----- ----- ------
Sales $548.3 $735.1 $1,508.2 $2,196.9 ====== ====== ========
======== Gross margin: International Color and Engineered Materials
$27.8 $23.3 $69.9 $82.8 Specialty Engineered Materials 14.9 12.8
36.9 36.1 Specialty Color, Additives and Inks 14.3 13.4 35.2 37.0
---- ---- ---- ---- Specialty Platform 57.0 49.5 142.0 155.9
Performance Products and Solutions 25.5 17.1 73.7 57.1 PolyOne
Distribution 16.6 22.2 43.7 57.5 Corporate and eliminations 8.2
(23.6) (6.6) (31.9) --- ----- ---- ----- Gross margin $107.3 $65.2
$252.8 $238.6 ====== ===== ====== ====== Operating (loss) income:
International Color and Engineered Materials $8.4 $4.6 $13.9 $22.8
Specialty Engineered Materials 5.9 5.0 11.0 11.1 Specialty Color,
Additives and Inks 5.2 4.7 9.7 11.0 --- --- --- ---- Specialty
Platform 19.5 14.3 34.6 44.9 Performance Products and Solutions
12.0 5.3 35.4 18.9 PolyOne Distribution 6.5 9.4 15.3 21.9 Resin and
Intermediates 3.8 9.6 23.5 24.2 Corporate and eliminations 14.4
(37.3) (36.0) (64.5) ---- ----- ----- ----- Operating income $56.2
$1.3 $72.8 $45.4 ===== ==== ===== ===== Specialty Platform consists
of our three specialty businesses: International Color and
Engineered Materials; Specialty Engineered Materials; and Specialty
Color, Additives and Inks. We present Specialty Platform sales,
gross margin, and operating income because management believes that
this is useful information to investors in highlighting our
collective progress in advancing our specialization strategy.
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.
Reconciliation to Consolidated Statements of Operations Three
Months Ended Nine Months Ended September 30, September 30,
------------- ------------- 2009 2008 2009 2008 ---- ---- ---- ----
Sales $548.3 $735.1 $1,508.2 $2,196.9 Gross margin before special
items $99.3 $87.1 $260.4 $264.8 Special items in gross margin 8.0
(21.9) (7.6) (26.2) --- ----- ---- ----- Gross margin $107.3 $65.2
$252.8 $238.6 ====== ===== ====== ====== Gross margin before
special items as a percent of sales 18.1% 11.8% 17.3% 12.1%
Operating income before special items $28.7 $28.0 $66.5 $77.5
Special items in operating income 27.5 (26.7) 6.3 (32.1) ---- -----
--- ----- Operating income $56.2 $1.3 $72.8 $45.4 ===== ==== =====
===== 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. Reconciliation to Consolidated Statements of
Operations Three Months Ended Three Months Ended September 30, 2009
September 30, 2008 ------------------ ------------------ $ EPS $
EPS ---- --- --- --- Net income $49.6 $0.53 $(5.6) $(0.06) Special
items, after-tax (attachment 1) (17.7) (0.19) 17.7 0.19 Tax (a)
(18.5) (0.20) - - ----- ----- ---- ---- $13.4 $0.14 $12.1 $0.13
===== ===== ===== ===== Reconciliation to Consolidated Statements
of Operations Nine Months Ended Nine Months Ended September 30,
2009 September 30, 2008 ------------------ ------------------ $ EPS
$ EPS --- --- --- --- Net (loss) income $43.8 $0.47 $9.7 $0.10
Special items, after-tax (attachment 1) (4.1) (0.04) 21.2 0.23 Tax
(a) (17.8) (0.19) 0.3 - ----- ----- ----- ----- $21.9 $0.24 $31.2
$0.33 ===== ===== ===== ===== (a) Net tax (benefit) loss from
one-time foreign and domestic income tax items and deferred income
tax valuation allowance adjustments 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 Nine Months Ended
September 30, September 30, ------------- -------------
Reconciliation to Consolidated Statements of Cash Flows 2009 2008
2009 2008 ------------------------------ ---- ---- ---- ---- Net
cash provided by operating activities $82.3 $17.3 $216.9 $17.0 Net
cash used by investing activities (3.7) (11.0) (15.9) (180.9)
(Increase) decrease in sale of accounts receivable - (12.0) 14.2
(25.8) ---- ----- ---- ----- Free cash flow $78.6 $(5.7) $215.2
$(189.7) ===== ===== ====== ======== DATASOURCE: PolyOne
Corporation CONTACT: Investor Relations Contact: Robert M.
Patterson, Senior Vice President & Chief Financial Officer,
PolyOne Corporation, +1-440-930-3302; Media Contact: Amanda Marko,
Director, Corporate Communications, PolyOne Corporation,
+1-440-930-3162, Web Site: http://www.polyone.com/
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