SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of
report (Date of earliest event reported): August
7, 2008
POLYONE
CORPORATION
(Exact
name of registrant as specified in charter)
|
Ohio
|
1-16091
|
34-1730488
|
||
|
(State
or other
jurisdiction
of
incorporation)
|
(Commission
File
Number)
|
(I.R.S.
Employer
Identification
No.)
|
|
PolyOne
Center, 33587 Walker Road, Avon Lake, Ohio
|
44012
|
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant's
telephone number, including area code: (440)
930-1000
|
(Former
name or former address, if changed since last
report.)
|
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing requirements of the registrant under any of the following
provisions:
¨
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13E-4(c))
Item
2.02. Results of Operations and Financial Condition.
On
August
7, 2008, the Registrant issued a press release, furnished herewith as Exhibit
99.1, announcing earnings for the second quarter of 2008. The press release
shall not be deemed to be "filed" under the Securities Exchange Act of
1934.
Item
9.01. Financial Statements and Exhibits.
(d)
Exhibits.
Exhibit
99.1 - Press release dated August 7, 2008.
SIGNATURE
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 hereunto
duly authorized.
|
POLYONE
CORPORATION
|
|
|
By:
|
/s/
Robert M. Patterson
|
|
Name:
Robert M. Patterson
|
|
|
Title:
Senior Vice President and
Chief
Financial Officer
|
|
Dated:
August 7, 2008
EXHIBIT
INDEX
|
Exhibit
|
|
|
|
No.
|
Description
|
|
|
99.1
|
Press
release dated August 7, 2008
|
NEWS
RELEASE
PolyOne
Announces Second Quarter Results
|
·
|
Net
income exceeds prior year as revenues increase 8.6% to $748.1
million
|
|
·
|
Specialty
platform operating income increases nearly 70% versus second quarter
2007
results
|
|
·
|
Company
expects full-year earnings growth versus prior
year
|
CLEVELAND,
August
7, 2008 - PolyOne Corporation (NYSE: POL),
a
premier global provider of specialized polymer materials, services and
solutions, today reported second quarter revenues of $748.1 million, an 8.6
percent increase compared with revenues of $688.8 million in the second quarter
of 2007.
Net
income was $8.8 million, or $0.09 per diluted share, for the second quarter
of
2008 compared with a loss of $5.4 million, or ($0.06) per diluted share, for
the
second quarter of 2007. Included in the results for the second quarter of 2008
and 2007 are special items equating to ($0.03) and ($0.16), respectively (see
Attachment 1).
On
a
comparable basis, before special items, PolyOne reported $0.12 earnings per
share in the second quarter of 2008 compared with $0.10 per share in the second
quarter of last year. Specialty platform operating income growth combined with
lower corporate costs largely offset a decline in the Performance Products
and
Solutions segment due to slowing demand in the North American housing and
automotive markets. PolyOne also benefited from lower interest expense in the
quarter as a result of paying off its high yield 10.625% senior notes in the
3rd
quarter
of last year.
"Our
second quarter results continue to demonstrate the success of our transformation
strategy allowing PolyOne to report earnings growth despite very challenging
economic and inflationary conditions,” said Stephen D. Newlin, chairman,
president and chief executive officer. Newlin continued, "Specialty platform
earnings increased nearly 70% compared to the second quarter of 2007 - driven
by
the addition of GLS and organic growth expansion initiatives - and now represent
45% of total operating income from all operating segments.”
Newlin
continued, “We continue to position the company to grow profitably despite
economic headwinds. Our focus on commercial and operational excellence is
evident in our performance so far this year as we have been able to close new
business and improve sales mix to drive operating margin improvements in our
Specialty and Distribution platforms. We are also benefiting from our improved
capital structure that allowed the company to report lower interest expense
in
the current period and gives us future flexibility to opportunistically pursue
acquisitions.”
PolyOne's
Segments and Platforms
On
July
1, 2008 PolyOne announced that during the second quarter of 2008, Producer
Services, formerly included in All Other, was combined with Geon Performance
Polymers to form the Performance Products and Solutions operating segment.
In
addition, North American Color and Additives and Specialty Inks and Polymer
Systems, both formerly included in All Other, were combined to form a new
operating segment named Specialty Color, Additives and Inks.
PolyOne
now has six reportable segments: Specialty Engineered Materials; International
Color and Engineered Materials; Specialty Color, Additives and Inks; Performance
Products and Solutions; PolyOne Distribution; and Resin and Intermediates.
The
Company frequently discusses its businesses in terms of three strategic
platforms - Specialty; Performance Products and Solutions; and PolyOne
Distribution. Performance Products and Solutions and PolyOne Distribution are
also both reportable segments. The Specialty platform comprises Specialty
Engineered Materials; International Color and Engineered Materials; and
Specialty Color, Additives and Inks.
Outlook
The
Company anticipates continued economic uncertainty as well as continued raw
material and energy cost pressure. While second half 2008 revenues are expected
to grow approximately 15% (including GLS) as compared to the second half of
2007, these aforementioned factors are expected to put downward pressure on
earnings primarily in the Performance Products and Solutions segment.
Operating
margin improvements in the Specialty and PolyOne Distribution platforms are
expected to drive operating income growth for these platforms compared to third
quarter 2007 levels. Third quarter 2008 operating income in the Performance
Products and Solutions segment is projected to increase from the second quarter
of this year but remain below the year-ago level due to raw material cost
inflation and continued weak end-market demand. Resin and Intermediates
operating income for the third quarter of 2008 is expected to approximate second
quarter levels.
"Our
specialty focus has allowed us to weather incredibly difficult market
conditions, most notably a slowdown in the U.S. housing, construction and
automotive industries along with unprecedented raw material and energy cost
inflation,” said Newlin. “We recently announced our plans to reduce capacity and
realign assets in North America as these conditions may continue for the
foreseeable future. We are also seeing signs that European demand growth may
be
slowing, but it is too early to tell what impact, if any, this will have on
our
near-term consolidated results.“
“We
anticipate the capacity reductions announced on July 28 will be fully
implemented by the second quarter of next year, and we expect they will generate
pre-tax savings of $17 million ($0.12 per share after-tax) on an annualized
basis,” said Robert M. Patterson, senior vice president and chief financial
officer. Patterson added, “These actions are part of our previously disclosed
operational excellence target of $50 million in cumulative identified supply
chain savings by 2011.”
Based
on
these projections, PolyOne expects full year 2008 earnings before special items
to exceed prior year earnings before special items.
Second
Quarter 2008 Earnings Release and Conference Call
PolyOne
will host a conference call at 9:00 a.m. Eastern time on Thursday, August 7,
2008. The conference dial-in number is 866-543-6403 (domestic) or 617-213-8896
(international), passcode 35865076, conference topic: Second quarter 2008
PolyOne Earnings Conference Call. The replay number is 888-286-8010 (domestic)
or 617-801-6888 (international). The passcode for the replay is 12202246. The
call will be broadcast live and then be available via replay until August 14,
2008, on the Company's Web site at www.polyone.com.
About
PolyOne
PolyOne
Corporation, with annual revenues of more than $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 new Web site at www.polyone.com.
Investor
Relations
Contact:
Robert
M. Patterson
Senior
Vice President & Chief Financial
Officer
PolyOne
Corp.
+1
440-930-3302
bob.patterson@polyone.com
Use
of Non-GAAP Financial Measures
This
earnings release includes and the conference call will include the use of both
GAAP (generally accepted accounting principles) and non-GAAP financial measures.
The non-GAAP financial measures include: free cash flow; special items in
operating income; operating income before special items; total diluted per
share
impact of special items; and diluted earnings per share before special items.
The most directly comparable GAAP financial measures are: net cash provided
(used) by operating activities, operating income (loss) and income (loss) per
share.
PolyOne’s
chief operating decision makers use these financial measures to monitor and
evaluate the ongoing performance of the Company and each business segment and
to
allocate resources. In addition, operating income before special items and
free
cash flow are components of various PolyOne annual and long-term employee
incentive plans.
Tables
included in this earnings release reconcile each non-GAAP financial measure
with
the most directly comparable GAAP financial measure (Attachments 5 & 6) and
provide detail about special items (Attachment 1). Also attached are certain
financial schedules and a summary of unaudited segment results.
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. You can identify these statements by the fact that
they do not relate strictly to historic or current facts. 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. In
particular, these include statements relating to future actions; prospective
changes in raw material costs, product pricing or product demand; future
performance; results of current and anticipated market conditions and market
strategies; sales efforts; expenses; the outcome of contingencies such as legal
proceedings; and financial results. Factors that could cause actual results
to
differ materially include, but are not limited to:
|
·
|
the
effect on foreign operations of currency fluctuations, tariffs,
nationalization, exchange controls, limitations on foreign investment
in
local businesses and other political, economic and regulatory risks;
|
|
·
|
changes
in polymer consumption growth rates within the U.S., Europe or Asia
or
other countries where PolyOne conducts business;
|
|
·
|
changes
in global industry capacity or in the rate at which anticipated changes
in
industry capacity come online in the polyvinyl chloride (PVC),
chlor-alkali, vinyl chloride monomer (VCM) or other industries in
which
PolyOne participates;
|
|
·
|
fluctuations
in raw material prices, quality and supply and in energy prices and
supply, in particular fluctuations outside the normal range of industry
cycles;
|
|
·
|
production
outages or material costs associated with scheduled or unscheduled
maintenance programs;
|
|
·
|
the
cost of compliance with environmental laws and regulations, including
any
increased cost of complying with new or revised laws and
regulations;
|
|
·
|
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 PolyOne’s
specialization strategy, operational excellence initiatives, 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
in
certain locations in order to avoid business disruptions;
|
|
·
|
any
change in any agreements with product suppliers to PolyOne Distribution
that prohibits PolyOne from continuing to distribute a supplier’s products
to customers;
|
|
·
|
the
possibility that the degradation in the North American residential
construction market is more severe than
anticipated;
|
|
·
|
the
timing of plant closings in connection with the recently announced
manufacturing realignment;
|
|
·
|
separation
and severance amounts that differ from original estimates because
of the
timing of employee terminations;
|
|
·
|
amounts
for non-cash charges relating to property, plant and equipment that
differ
from the original estimates because of the ultimate fair market value
of
such property, plant and equipment;
|
|
·
|
amounts
required for capital expenditures at remaining locations changing
based on
the level of expenditures required to shift production
capacity;
|
|
·
|
PolyOne’s
ability to realize anticipated savings and operational benefits from
its
realigning of assets, including those related to closure of certain
production facilities;
|
|
·
|
the
ability to successfully integrate GLS;
|
|
·
|
the
ability to successfully integrate Ngai Hing PlastChem;
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.
|
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 inaccurate 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 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 furnished to 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.
Attachment
1
Supplemental
Information
Summary
of Consolidated Operating Results (Unaudited)
Second
Quarter 2008
(In
millions, except per share data)
|
2Q08
|
2Q07
|
1Q08
|
||||||||
|
Operating
results:
|
||||||||||
|
Sales
|
$
|
748.1
|
$
|
688.8
|
$
|
713.7
|
||||
|
Operating
income
|
24.0
|
12.4
|
20.1
|
|||||||
|
Net
income (loss)
|
8.8
|
(5.4
|
)
|
6.5
|
||||||
|
Earnings
per common share:
|
||||||||||
|
Basic
and diluted earnings per share
|
$
|
0.09
|
$
|
(0.06
|
)
|
$
|
0.07
|
|||
|
Total
diluted per share impact of special items (1)
|
(0.03
|
)
|
(0.16
|
)
|
(0.01
|
)
|
||||
|
Diluted
earnings per share before special items
|
$
|
0.12
|
$
|
0.10
|
$
|
0.08
|
||||
| (1) |
“Special
items” is a non-GAAP financial measure. “Special items” includes charges
related to specific strategic initiatives such as: the consolidation
of
operations; restructuring activities, including employee separation
costs
resulting from personnel reduction programs, plant closure and phaseout
costs; executive separation agreements; asset impairments; environmental
remediation costs for facilities no longer owned or closed in prior
years;
gains and losses on the divestiture of joint ventures and equity
investments; and adjustments to reflect a tax benefit on domestic
losses.
Following is a list of “Special items”.
|
|
Special
items (in
millions, except per share data)
|
2Q08
|
2Q07
|
1Q08
|
|||||||
|
Employee
separation and plant phaseout costs (a)
|
$
|
(1.5
|
)
|
$
|
(0.7
|
)
|
$
|
─
|
||
|
Impairment
of former investment in OxyVinyls (b)
|
−
|
(15.9
|
)
|
−
|
||||||
|
Environmental
remediation costs (c)
|
(2.3
|
)
|
(0.9
|
)
|
(1.6
|
)
|
||||
|
Impact
on operating income
|
(3.8
|
)
|
(17.5
|
)
|
(1.6
|
)
|
||||
|
Deferred
note issuance cost write-off
|
−
|
(1.1
|
)
|
−
|
||||||
|
Premium
on early extinguishment of debt
|
−
|
(5.3
|
)
|
−
|
||||||
|
Impact
on income before income taxes
|
(3.8
|
)
|
(23.9
|
)
|
(1.6
|
)
|
||||
|
Income
tax benefit on above items
|
1.3
|
8.6
|
0.6
|
|||||||
|
Impact
on net income
|
$
|
(2.5
|
)
|
$
|
(15.3
|
)
|
$
|
(1.0
|
)
|
|
|
Total
diluted per share impact of special items
|
$
|
(0.03
|
)
|
$
|
(0.16
|
)
|
$
|
(0.01
|
)
|
|
|
a.
|
Severance,
employee outplacement, external outplacement consulting, lease
termination, facility closing costs and the write-down of the carrying
value of plant and equipment resulting from restructuring initiatives
and
executive separation agreements.
|
| b. |
Non-cash
impairment charge to adjust the carrying value of our former equity
investment in OxyVinyls to fair market value.
|
| c. |
Environmental
remediation costs for facilities either no longer owned or closed
in prior
years.
|
Attachment
2
PolyOne
Corporation and Subsidiaries
Consolidated
Statements of Operations (Unaudited)
(In
millions, except per share data)
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
|
2008
|
2007
|
2008
|
2007
|
||||||||||
|
Sales
|
$
|
748.1
|
$
|
688.8
|
$
|
1,461.8
|
$
|
1,346.6
|
|||||
|
Cost
of sales
|
659.6
|
606.3
|
1,288.4
|
1,180.0
|
|||||||||
|
Gross
margin
|
88.5
|
82.5
|
173.4
|
166.6
|
|||||||||
|
Selling
and administrative
|
75.0
|
68.5
|
147.9
|
132.6
|
|||||||||
|
Income
(loss) from equity affiliates and minority interest
|
10.5
|
(1.6
|
)
|
18.6
|
4.9
|
||||||||
|
Operating
income
|
24.0
|
12.4
|
44.1
|
38.9
|
|||||||||
|
Interest
expense
|
(10.7
|
)
|
(16.0
|
)
|
(19.9
|
)
|
(31.3
|
)
|
|||||
|
Interest
income
|
0.9
|
0.9
|
1.7
|
1.8
|
|||||||||
|
Premium
on early extinguishment of long-term debt
|
−
|
(5.3
|
)
|
−
|
(5.3
|
)
|
|||||||
|
Other
expense, net
|
(0.7
|
)
|
(1.8
|
)
|
(2.7
|
)
|
(2.7
|
)
|
|||||
|
Income
(loss) before income taxes
|
13.5
|
(9.8
|
)
|
23.2
|
1.4
|
||||||||
|
Income
tax (expense) benefit
|
(4.7
|
)
|
4.4
|
(7.9
|
)
|
0.6
|
|||||||
|
Net
income (loss)
|
$
|
8.8
|
$
|
(5.4
|
)
|
$
|
15.3
|
$
|
2.0
|
||||
|
Basic
and diluted earnings (loss) per common share
|
$
|
0.09
|
$
|
(0.06
|
)
|
$
|
0.16
|
$
|
0.02
|
||||
|
Weighted
average shares used to compute earnings per share:
|
|||||||||||||
|
Basic
|
93.0
|
92.8
|
93.0
|
92.7
|
|||||||||
|
Diluted
|
93.8
|
92.8
|
93.5
|
93.0
|
|||||||||
|
Dividends
declared per share of common stock
|
$
|
–
|
$
|
–
|
$
|
–
|
$
|
–
|
|||||
|
Equity
earnings (loss) recorded by PolyOne:
|
|||||||||||||
|
SunBelt
|
$
|
9.4
|
$
|
11.0
|
$
|
16.6
|
$
|
18.0
|
|||||
|
OxyVinyls
|
–
|
2.2
|
–
|
0.9
|
|||||||||
|
Impairment
of investment in OxyVinyls
|
–
|
(15.9
|
)
|
–
|
(15.9
|
)
|
|||||||
|
Other
equity affiliates
|
1.1
|
1.2
|
2.0
|
2.0
|
|||||||||
|
Minority
interest
|
–
|
(0.1
|
)
|
–
|
(0.1
|
)
|
|||||||
|
Income
(loss) from equity affiliates and minority interest
|
$
|
10.5
|
$
|
(1.6
|
)
|
$
|
18.6
|
$
|
4.9
|
Attachment
3
PolyOne
Corporation and Subsidiaries
Condensed
Consolidated Balance Sheets (Unaudited)
(In
millions)
|
June
30,
|
December
31,
|
||||||
|
2008
|
2007
|
||||||
|
Assets
|
|||||||
|
Current
assets:
|
|||||||
|
Cash
and cash equivalents
|
$
|
59.8
|
$
|
79.4
|
|||
|
Accounts
receivable, net
|
423.2
|
340.8
|
|||||
|
Inventories
|
277.4
|
223.4
|
|||||
|
Deferred
income tax assets
|
20.4
|
20.4
|
|||||
|
Other
current assets
|
22.8
|
19.8
|
|||||
|
Total
current assets
|
803.6
|
683.8
|
|||||
|
Property,
net
|
467.5
|
449.7
|
|||||
|
Investment
in equity affiliates
|
30.1
|
19.9
|
|||||
|
Goodwill
|
333.0
|
288.8
|
|||||
|
Other
intangible assets, net
|
71.3
|
6.7
|
|||||
|
Deferred
income tax assets
|
67.6
|
69.9
|
|||||
|
Other
non-current assets
|
66.1
|
64.2
|
|||||
|
Total
assets
|
$
|
1,839.2
|
$
|
1,583.0
|
|||
|
Liabilities
and Shareholders’ Equity
|
|||||||
|
Current
liabilities:
|
|||||||
|
Short-term
bank debt
|
$
|
89.8
|
$
|
6.1
|
|||
|
Accounts
payable
|
339.9
|
250.5
|
|||||
|
Accrued
expenses
|
99.7
|
94.4
|
|||||
|
Current
portion of long-term debt
|
12.9
|
22.6
|
|||||
|
Total
current liabilities
|
542.3
|
373.6
|
|||||
|
Long-term
debt
|
388.4
|
308.0
|
|||||
|
Post-retirement
benefits other than pensions
|
79.3
|
81.6
|
|||||
|
Pension
benefits
|
67.5
|
82.6
|
|||||
|
Other
non-current liabilities
|
85.8
|
87.8
|
|||||
|
Total
liabilities
|
1,163.3
|
933.6
|
|||||
|
Shareholders’
equity
|
675.9
|
649.4
|
|||||
|
Total
liabilities and shareholders’ equity
|
$
|
1,839.2
|
$
|
1,583.0
|
|||
Attachment
4
PolyOne
Corporation and Subsidiaries
Consolidated
Statements of Cash Flows (Unaudited)
(In
millions)
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
|
June
30,
|
June
30,
|
||||||||||||
|
2008
|
2007
|
2008
|
2007
|
||||||||||
|
Operating
Activities
|
|||||||||||||
|
Net
income (loss)
|
$
|
8.8
|
$
|
(5.4
|
)
|
$
|
15.3
|
$
|
2.0
|
||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||||||||
|
Depreciation
and amortization
|
15.9
|
14.5
|
31.7
|
28.6
|
|||||||||
|
Charges
for environmental remediation
|
2.3
|
0.9
|
3.9
|
1.9
|
|||||||||
|
Cash
payments for environmental remediation
|
(2.5
|
)
|
(1.4
|
)
|
(4.8
|
)
|
(2.9
|
)
|
|||||
|
Deferred
income tax provision (benefit)
|
1.0
|
(6.5
|
)
|
0.4
|
(5.4
|
)
|
|||||||
|
Premium
on early extinguishment of long term debt
|
–
|
5.3
|
–
|
5.3
|
|||||||||
|
Stock
compensation expense
|
0.7
|
2.4
|
1.5
|
2.6
|
|||||||||
|
Companies
carried at equity and minority interest:
|
|||||||||||||
|
Impairment
of investment in equity affiliate
|
–
|
15.9
|
–
|
15.9
|
|||||||||
|
Income
from equity affiliates and minority interest
|
(10.5
|
)
|
(14.3
|
)
|
(18.6
|
)
|
(20.8
|
)
|
|||||
|
Dividends
and distributions received
|
7.4
|
9.6
|
8.3
|
9.8
|
|||||||||
|
Contributions
to pensions and other post-retirement plans
|
(13.3
|
)
|
(10.9
|
)
|
(20.0
|
)
|
(13.7
|
)
|
|||||
|
Change
in assets and liabilities:
|
|||||||||||||
|
Accounts
receivable
|
(27.5
|
)
|
(12.6
|
)
|
(77.1
|
)
|
(70.8
|
)
|
|||||
|
Inventories
|
(4.8
|
)
|
(12.1
|
)
|
(33.3
|
)
|
(17.0
|
)
|
|||||
|
Accounts
payable
|
32.7
|
35.7
|
78.3
|
79.8
|
|||||||||
|
Increase
(decrease) in sale of accounts receivable
|
(72.8
|
)
|
89.2
|
13.8
|
89.2
|
||||||||
|
Accrued
expenses and other
|
5.2
|
(13.5
|
)
|
0.3
|
(3.9
|
)
|
|||||||
|
Net
cash (used) provided by operating activities
|
(57.4
|
)
|
96.8
|
(0.3
|
)
|
100.6
|
|||||||
|
Investing
Activities
|
|||||||||||||
|
Capital
expenditures
|
(11.5
|
)
|
(14.4
|
)
|
(19.9
|
)
|
(21.9
|
)
|
|||||
|
Business
acquisitions, net of cash received
|
–
|
–
|
(150.0
|
)
|
–
|
||||||||
|
Proceeds
from sale of assets
|
–
|
1.2
|
–
|
5.2
|
|||||||||
|
Net
cash used by investing activities
|
(11.5
|
)
|
(13.2
|
)
|
(169.9
|
)
|
(16.7
|
)
|
|||||
|
Financing
Activities
|
|||||||||||||
|
Change
in short-term debt
|
0.7
|
17.4
|
82.6
|
17.5
|
|||||||||
|
Issuance
of long-term debt, net of debt issuance cost
|
77.8
|
–
|
77.8
|
–
|
|||||||||
|
Repayment
of long-term debt
|
(10.7
|
)
|
(120.7
|
)
|
(11.4
|
)
|
(121.4
|
)
|
|||||
|
Premium
on early extinguishment of long-term debt
|
–
|
(5.3
|
)
|
–
|
(5.3
|
)
|
|||||||
|
Proceeds
from exercise of stock options
|
–
|
0.4
|
–
|
0.7
|
|||||||||
|
Net
cash provided (used) by financing activities
|
67.8
|
(108.2
|
)
|
149.0
|
(108.5
|
)
|
|||||||
|
Effect
of exchange rate changes on cash
|
1.7
|
1.5
|
1.6
|
2.4
|
|||||||||
|
Increase
(decrease) in cash and cash equivalents
|
0.6
|
(23.1
|
)
|
(19.6
|
)
|
(22.2
|
)
|
||||||
|
Cash
and cash equivalents at beginning of period
|
59.2
|
67.1
|
79.4
|
66.2
|
|||||||||
|
Cash
and cash equivalents at end of period
|
$
|
59.8
|
$
|
44.0
|
$
|
59.8
|
$
|
44.0
|
|||||
Attachment
5
Business
Segment and Platform Operations (Unaudited)
(In
millions)
Operating
income at the segment level does not include: corporate general and
administration costs that are not allocated to segments; intersegment sales
and
profit eliminations; charges related to specific initiatives, such as the
consolidation of operations; restructuring activities, including employee
separation costs resulting from personnel reduction programs, plant closure
and
phaseout costs; executive separation agreements; share-based compensation costs;
asset impairments; environmental remediation costs for facilities no longer
owned or closed in prior years; gains and losses on the divestiture of joint
ventures and equity investments; 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.”
|
2Q08
|
1Q08
|
4Q07
|
3Q07
|
2Q07
|
||||||||||||
|
Sales:
|
||||||||||||||||
|
International
Color and Engineered Materials
|
$
|
172.1
|
$
|
165.2
|
$
|
146.9
|
$
|
147.4
|
$
|
150.3
|
||||||
|
Specialty
Engineered Materials
|
67.3
|
64.5
|
28.7
|
31.8
|
31.4
|
|||||||||||
|
Specialty
Color, Additives and Inks
|
60.8
|
58.4
|
53.0
|
58.7
|
60.5
|
|||||||||||
|
Specialty
Platform
|
300.2
|
288.1
|
228.6
|
237.9
|
242.2
|
|||||||||||
|
Performance
Products and Solutions
|
273.7
|
259.3
|
246.1
|
274.5
|
293.0
|
|||||||||||
|
PolyOne
Distribution
|
208.2
|
201.1
|
184.0
|
185.8
|
190.1
|
|||||||||||
|
Corporate
and eliminations
|
(34.0
|
)
|
(34.8
|
)
|
(27.4
|
)
|
(33.4
|
)
|
(36.5
|
)
|
||||||
|
Sales
|
$
|
748.1
|
$
|
713.7
|
$
|
631.3
|
$
|
664.8
|
$
|
688.8
|
||||||
|
Gross
margin:
|
||||||||||||||||
|
International
Color and Engineered Materials
|
$
|
30.7
|
$
|
28.8
|
$
|
23.0
|
$
|
23.9
|
$
|
25.8
|
||||||
|
Specialty
Engineered Materials
|
12.5
|
11.6
|
2.9
|
3.4
|
3.1
|
|||||||||||
|
Specialty
Color, Additives and Inks
|
12.4
|
11.2
|
9.5
|
11.2
|
11.3
|
|||||||||||
|
Specialty
Platform
|
55.6
|
51.6
|
35.4
|
38.5
|
40.2
|
|||||||||||
|
Performance
Products and Solutions
|
19.0
|
21.0
|
15.6
|
23.9
|
30.9
|
|||||||||||
|
PolyOne
Distribution
|
18.1
|
17.2
|
15.4
|
14.8
|
15.8
|
|||||||||||
|
Resin
and Intermediates
|
−
|
−
|
−
|
−
|
(0.2
|
)
|
||||||||||
|
Corporate
and eliminations
|
(4.2
|
)
|
(4.9
|
)
|
(2.0
|
)
|
(47.2
|
)
|
(4.2
|
)
|
||||||
|
Gross
margin
|
$
|
88.5
|
$
|
84.9
|
$
|
64.4
|
$
|
30.0
|
$
|
82.5
|
||||||
|
Operating
income (loss):
|
||||||||||||||||
|
International
Color and Engineered Materials
|
$
|
10.4
|
$
|
7.8
|
$
|
4.8
|
$
|
6.5
|
$
|
7.8
|
||||||
|
Specialty
Engineered Materials
|
3.2
|
2.9
|
(1.0
|
)
|
−
|
(0.3
|
)
|
|||||||||
|
Specialty
Color, Additives and Inks
|
3.5
|
2.8
|
1.3
|
3.2
|
2.6
|
|||||||||||
|
Specialty
Platform
|
17.1
|
13.5
|
5.1
|
9.7
|
10.1
|
|||||||||||
|
Performance
Products and Solutions
|
5.3
|
8.3
|
4.3
|
12.6
|
18.6
|
|||||||||||
|
PolyOne
Distribution
|
7.0
|
5.5
|
5.7
|
5.3
|
6.5
|
|||||||||||
|
Resin
and Intermediates
|
8.7
|
5.9
|
7.3
|
11.2
|
12.0
|
|||||||||||
|
Corporate
and eliminations
|
(14.1
|
)
|
(13.1
|
)
|
(3.8
|
)
|
(62.4
|
)
|
(34.8
|
)
|
||||||
|
Operating
income (loss)
|
$
|
24.0
|
$
|
20.1
|
$
|
18.6
|
$
|
(23.6
|
)
|
$
|
12.4
|
|||||
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)
Senior
management uses operating income before the effect of “special items” to assess
performance and allocate resources because senior management believes that
this
measure is 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.
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 list of “Special items”.
|
2Q08
|
2Q07
|
1Q08
|
||||||||
|
Operating
income before special items
|
$
|
27.8
|
$
|
29.9
|
$
|
21.7
|
||||
|
Special
items in operating income
|
(3.8
|
)
|
(17.5
|
)
|
(1.6
|
)
|
||||
|
Operating
income
|
$
|
24.0
|
$
|
12.4
|
$
|
20.1
|
||||
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
|
Reconciliation to Condensed Consolidated Statement of Cash Flows
|
2008
|
2007
|
2008
|
2007
|
|||||||||
|
Net
cash (used) provided by operating activities
|
$
|
(57.4
|
)
|
$
|
96.8
|
$
|
(0.3
|
)
|
$
|
100.6
|
|||
|
Net
cash used by investing activities
|
(11.5
|
)
|
(13.2
|
)
|
(169.9
|
)
|
(16.7
|
)
|
|||||
|
Decrease
(increase) in sale of accounts receivable
|
72.8
|
(89.2
|
)
|
(13.8
|
)
|
(89.2
|
)
|
||||||
|
Premium
on early extinguishment of long-term debt
|
–
|
(5.3
|
)
|
–
|
(5.3
|
)
|
|||||||
|
Other
financing activities
|
(1.8
|
)
|
(1.2
|
)
|
(3.2
|
)
|
(1.0
|
)
|
|||||
|
Effect
of exchange rate changes on cash
|
1.7
|
1.5
|
1.6
|
2.4
|
|||||||||
|
Decrease
(increase) in borrowed debt less cash and cash equivalents
|
3.8
|
(10.6
|
)
|
(185.6
|
)
|
(9.2
|
)
|
||||||
|
Plus
business acquisitions, net of cash received
|
–
|
–
|
150.0
|
–
|
|||||||||
|
Less
proceeds from exercise of stock options
|
–
|
(0.4
|
)
|
–
|
(0.7
|
)
|
|||||||
|
Free
cash flow
|
$
|
3.8
|
$
|
(11.0
|
)
|
$
|
(35.6
|
)
|
$
|
(9.9
|
)
|
||