PolyOne Reports Third-Quarter Earnings
October 30, 2001
CLEVELAND, Oct 30, 2001 /PRNewswire via COMTEX/ --
* Focus on costs, operating excellence achieves modest income improvements * Major strategic initiatives expected to yield significant benefits in 2002 * Company increases value capture initiatives to $200 million by 2003
PolyOne Corporation (NYSE:
POL), a leader in polymer compounding and related services, today reported
revenues of $660 million and net income of $2.9 million, or $0.03 per diluted
share, for the third quarter ended September 30, 2001.
Special items during the third quarter consisted primarily of PolyOne's portion
of a restructuring and impairment charge for Australian Vinyls Corporation, an
equity joint venture. Special items reduced reported income by $3.2 million, or
$0.04 per share. Excluding the special items, net income was $6.1 million after
tax. Included in net income for the quarter is a favorable pre-tax depreciation
reduction of $3 million, or $0.02 per share.
"The third quarter is typically one of our strongest quarters of the year," said
Thomas A. Waltermire, PolyOne chairman and chief executive officer. "This year,
however, the third quarter ranks as our worst quarter for sales because of
reduced demand in the automotive, electronic and construction markets.
"Our modest income improvement over the second quarter, on lower revenues, is
attributable almost entirely to our team's focus on base cost reductions and
operating excellence as we strengthen our foundation for sustainable profit
growth," Waltermire added. "Our third- quarter costs were approximately $29
million lower than the average for 2000, reflecting structural improvements from
strategic initiatives and short-term cost controls."
PolyOne was formed on August 31, 2000, from the consolidation of The Geon
Company and M.A. Hanna Company. The consolidation has been accounted for as a
purchase business combination, with Geon as the acquiring enterprise. The
comparative "Reported Results" for 2000 in the attached financial statements and
below are those of the former Geon only for the first eight months and of
PolyOne for the month of September.
Because of the significant impact of the merger on comparative data, PolyOne is
providing "Pro Forma 2000 Results" as if the Company had been formed prior to
the periods presented. These results are provided for illustrative purposes
only. A list of assumptions used to calculate pro forma results appears at the
end of this release.
Third-Quarter Reported and Pro Forma Results ($ in millions, except per share data) Reported Reported Pro Forma 2001 2000 2000 Sales $659.6 $478.3 $778.7 Operating income 15.5 11.1 16.1 Operating income before special items * 20.7 20.1 24.6 Net income 2.9 0.5 2.9 Net income before special items* 6.1 6.1 7.9 Earnings per share, diluted 0.03 0.01 0.04 Per share effect of special items, expense 0.04 0.09 0.05 Year-to-Date Reported and Pro Forma Results ($ in millions, except per share data) Reported Reported Pro Forma 2001 2000 2000 Sales $2,064.7 $1,185.0 $2,436.9 Operating income 9.0 71.2 119.3 Operating income before special items* 31.0 84.6 132.2 Net income (loss) (16.0) 29.1 63.7 Net income (loss) before special items* (4.7) 37.8 61.3 Earnings (loss) per share, diluted (0.18) 0.55 0.69 Per share effect of special items, expense (income) 0.13 0.17 (0.03)
* A summary of all special items for 2000 and 2001 can be found in the
Supplemental Information report issued today. The report is posted in the
Investor Relations section of the Company's Web site: www.polyone.com .
Third-Quarter 2001 Business Highlights
* PolyOne has identified more than $200 million in annual cost-saving
opportunities with value that it expects to capture in earnings by 2003. This
figure represents a fourfold increase over management's estimate at the time the
Company was formed. The revised figure also represents a significant increase
over the more than $150 million in cost-saving opportunities that PolyOne
outlined in April 2001 to reach its stated goal of $2.00 per share in net
earnings by 2003. This goal is driven partly by the value that PolyOne expects
to capture with cost-saving initiatives and partly by assumptions that business
conditions and revenues will approximate 2000 levels.
* PolyOne continued its phased conversion of nearly all its operating units
worldwide to a single business information system. During the third quarter,
PolyOne completed the conversion of its North American engineered materials
operations, which represent approximately $265 million in annual revenues. Some
2,500 customers and five manufacturing sites were included in this conversion to
the new system.
In September, PolyOne brought its North American color compounding and additives
business and the majority of its European color compounding group onto the new
system. This conversion involved 17 manufacturing sites, 8,600 customers and
more than 40,000 products.
The last major conversion at the end of 2001 will involve the Elastomers and
Performance Additives group. When this conversion is completed, 70 percent of
PolyOne's operating units will be on a single information system.
* On August 3, as part of its strategy to restructure and modernize its Plastic
Compounds and Colors operations, PolyOne announced plans to invest $18 million
in new equipment and production lines at eight existing colorant manufacturing
plants. Concurrently, the Company announced the closing of four colorant plants.
These actions are expected to improve annual pre-tax earnings by approximately
$16 million, beginning in 2003.
* On August 31, PolyOne announced a consolidation within its Elastomers and
Performance Additives operations. The Company plans to sell its non- strategic
silicone compounding business in Dyersburg, Tennessee; close its Tillsonburg,
Ontario, Canada, plant; and close its Chicago plant and transfer production to
its DeForest, Wisconsin, facility. In addition, approximately 30 positions will
be eliminated within the Performance Additives unit by the end of the second
quarter of 2002. When completed early next year, the elastomer restructuring is
expected to yield projected annual pre-tax savings of approximately $2.5
* During the quarter, PolyOne recorded a special pre-tax charge of $5.1 million
for the restructuring of Australian Vinyls Corporation (AVC), a manufacturer of
vinyl resins and compounds. PolyOne is a 37.4 percent partner in AVC with Orica
Limited. Shareholders are reviewing alternatives associated with the divesting
* As anticipated, equity income from Oxy Vinyls, LP, PolyOne's vinyl resin joint
venture, was essentially flat with second-quarter 2001. Polyvinyl chloride resin
industry average selling prices fell approximately $0.04 per pound during the
third quarter compared with the average price during the second quarter.
Declining industry selling prices were partially offset by lower raw material
costs, resulting in reduced operating margins (selling prices less raw material
costs) of approximately $0.01 per pound for the third quarter versus the second
quarter. These reduced margins were in turn offset largely by lower energy
costs, which bolstered chlor-alkali profitability.
"Our progress in targeting $200 million in cost-saving opportunities by 2003
reflects the inherent strength and focus of PolyOne," said Waltermire. "Only a
company with creative cost reduction initiatives, a sound integration strategy
and a dedication to teamwork could come this far this fast. With these
capabilities, we are shaping a solid foundation for future success."
Waltermire added, "By the end of 2001, we anticipate our cost base will be an
estimated $70 million lower compared with the 2000 cost structure."
PolyOne expects operating earnings to decrease in fourth-quarter 2001 compared
with the prior quarter as a result of further demand erosion across most market
segments. Consequently, the Company anticipates reporting a loss for the
Most benefits from the next increment of the Company's previously announced
strategic initiatives are targeted for 2002 implementation; therefore, little
benefit is anticipated in the fourth quarter of 2001. Moreover, PolyOne's equity
investments are projected to return lower income in fourth-quarter 2001 compared
with the third quarter because of further margin erosion resulting from
continuing low industry operating rates.
PolyOne expects roughly 10 percent lower revenue for fourth-quarter 2001
compared with fourth-quarter 2000, but the Company anticipates reporting an
operating income improvement, reflecting the substantial progress already being
realized from strategic restructuring and value capture initiatives.
Pro Forma Assumptions
* The 2000 pro forma operating results assume that the consolidation to form
PolyOne and the sale of M.A. Hanna's Cadillac Plastic business occurred prior to
2000. It should be noted that this presentation is not GAAP reporting, and may
not reflect either how operating results would have occurred or future results
* Pro forma results include no future integration cost or profit improvement
assumptions from the consolidation of Geon and M.A. Hanna.
* The pro forma results include the purchase price allocation.
Conference Call on the Web
PolyOne will host an analyst conference call at 9 a.m. Eastern Time on
Wednesday, October 31. The call will be broadcast live on the Company's Web
site: www.polyone.com .
Investors interested in more detailed information on PolyOne's results or the
performance of its business segments, please see the Supplemental Information
report issued today. The report is posted in the Investor Relations section of
the Company's Web site: www.polyone.com .
PolyOne Corporation, with revenues of nearly $3 billion, is an international
polymer services company with operations in thermoplastic compounds, specialty
resins, specialty polymer formulations, engineered films, color and additive
systems, elastomer compounding and thermoplastic resin distribution.
Headquartered in Cleveland, Ohio, PolyOne has employees at manufacturing sites
in North America, Europe, Asia and Australia, and joint ventures in North
America, South America, Europe, Asia and Australia. Information on the Company's
products and services can be found at www.polyone.com .
This press release contains statements concerning trends and other
forward-looking information affecting or relating to PolyOne Corporation and its
industries that are intended to qualify for the protections afforded
"forward-looking statements" under the Private Securities Litigation Reform Act
of 1995. Actual results could differ materially from such statements for a
variety of factors including, but not limited to: (1) the risk that the former
Geon and M.A. Hanna businesses will not be integrated successfully; (2) an
inability to achieve or delays in achieving savings related to consolidation and
restructuring programs; (3) unanticipated delays in achieving or inability to
achieve cost reduction and employee productivity goals; (4) unanticipated costs
related to the consolidation of Geon and M.A. Hanna; (5) 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; (6) unanticipated changes in world,
regional or U.S. plastic, rubber and PVC consumption growth rates affecting the
Company's markets; (7) unanticipated changes in global industry capacity or in
the rate at which anticipated changes in industry capacity come online in the
PVC, VCM, chlor-alkali or other industries in which the Company participates;
(8) fluctuations in raw material prices and supply and energy prices and supply,
in particular fluctuations outside the normal range of industry cycles, (9)
unanticipated production outages or material costs associated with scheduled or
unscheduled maintenance programs; (10) unanticipated costs or difficulties and
delays related to the operation of joint venture entities; (11) lack of
day-to-day operating control, including procurement of raw material feedstocks,
of other equity or joint venture relationship companies; (12) lack of direct
control over the reliability of delivery and quality of the primary raw
materials utilized in the Company's products; (13) partial control over
investment decisions and dividend distribution policy of the OxyVinyls
partnership and other minority equity holdings of the Company.
PolyOne Corporation and Subsidiaries Condensed Consolidated Statements of Income (Unaudited) (dollars in millions except per share data) Three Months Nine Months Ended Ended September 30, September 30, 2001 2000 2001 2000 Sales $659.6 $478.3 $2,064.7 $1,185.0 Operating costs and expenses: Cost of sales 548.5 384.8 1,725.7 1,002.1 Selling and administrative 73.8 66.2 233.3 110.6 Depreciation and amortization 20.6 13.6 72.9 32.5 Employee separation and plant phase- out - - 9.8 2.8 Merger and integration costs 0.1 7.8 5.9 7.8 (Income) loss from equity affiliates and minority interest 1.1 (5.2) 8.1 (42.0) Operating income 15.5 11.1 9.0 71.2 Interest expense (8.9) (8.6) (32.7) (22.8) Interest income 0.6 - 2.0 0.9 Other expense, net (2.6) (1.1) (3.5) (2.3) Income (loss) before income taxes 4.6 1.4 (25.2) 47.0 Income tax (expense) benefit (1.7) (0.9) 9.2 (17.9) Net income (loss) $2.9 $0.5 $(16.0) $29.1 Earnings (Loss) per Share of Common Stock: Basic $.03 $.01 $(.18) $.56 Diluted $.03 $.01 $(.18) $.55 Weighted average shares used to compute earnings per share: Basic 89.9 61.2 89.8 51.8 Diluted 90.9 61.7 90.4 52.5 Dividends paid per share of common stock $.0625 $.0625 $.1875 $.1875 PolyOne Corporation and Subsidiaries Condensed Consolidated Balance Sheet (Unaudited) (Dollars in millions) September 30, December 31, Assets 2001 2000 Current assets: Cash and cash equivalents $33.2 $37.9 Trade accounts receivable, net 194.3 330.4 Other receivables 22.7 17.1 Inventories 279.1 337.1 Deferred taxes 53.3 53.9 Other current assets 17.7 20.1 Total current assets 600.3 796.5 Property, net 667.5 703.8 Investment in equity affiliates 295.2 311.6 Goodwill and other intangible assets, net 554.6 540.3 Other non-current assets 112.9 108.5 Total assets $2,230.5 $2,460.7 Liabilities and Shareholders' Equity Current liabilities: Short-term bank debt $37.8 $237.2 Accounts payable 340.4 319.4 Accrued expenses 185.0 175.7 Current portion of long-term debt 1.3 2.6 Total current liabilities 564.5 734.9 Long-term debt 443.6 442.4 Deferred taxes 116.9 132.8 Post-retirement benefits other than pensions 127.8 129.9 Other non-current liabilities, including pensions 178.9 179.1 Minority interest in consolidated subsidiaries 15.0 14.0 Total liabilities 1,446.7 1,633.1 Shareholders' equity: Preferred stock - - Common stock 1.2 1.2 Other shareholders' equity 782.6 826.4 Total shareholders' equity 783.8 827.6 Total liabilities and shareholders' equity $2,230.5 $2,460.7 PolyOne Corporation and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) (Dollars in millions) Three Months Ended Nine Months Ended September 30, September 30, 2001 2000 2001 2000 Operating Activities Net income (loss) $2.9 $0.5 $(16.0) $29.1 Adjustments to reconcile net income to net cash used by operating activities: Employee separation and plant phase-out - - 9.8 2.8 Depreciation and amortization 20.6 13.6 72.9 32.5 Companies carried at equity: (Income) loss 1.1 (5.6) 8.1 (42.5) Dividends received 1.0 5.6 2.0 25.3 Provision (benefit) for deferred income taxes 1.2 (7.7) (2.8) 8.3 Change in assets and liabilities: Operating working capital: Accounts receivable 9.0 5.3 133.0 (28.0) Inventories (6.2) 5.7 55.1 9.4 Accounts payable (22.8) (17.3) 23.6 (18.3) Accrued expenses and other (12.7) (6.2) (33.0) (25.6) Net cash provided (used) by operating activities (5.9) (6.1) 252.7 (7.0) Investing Activities Cash received in connection with consolidation of M.A. Hanna Company, net of transaction costs paid - 28.1 - 28.1 Capital expenditures (11.6) (9.8) (47.6) (23.7) Return of cash from equity affiliates 1.6 2.9 2.1 5.3 Proceeds from sale of assets - 37.5 2.8 37.5 Other (3.5) 6.5 - 6.5 Net cash provided (used) by operating and investing activities (19.4) 59.1 210.0 46.7 Financing Activities Change in short-term debt 22.2 24.5 (200.0) 37.5 Change in long-term debt (4.6) (33.9) (1.5) (33.9) Net proceeds from issuance of common stock - - - 0.6 Termination of interest rate swap agreements 4.3 - 4.3 - Dividends (5.7) (3.0) (17.0) (9.2) Net cash provided (used) by financing activities 16.2 (12.4) (214.2) (5.0) Effect of exchange rate changes on cash 0.2 (2.1) (0.5) (1.4) Decrease in cash and cash equivalents (3.0) 44.6 (4.7) 40.3 Cash and cash equivalents at beginning of year 36.2 46.9 37.9 51.2 Cash and cash equivalents at end of period $33.2 $91.5 $33.2 $91.5
SOURCE PolyOne Corporation
CONTACT: Media & Investors, Dennis Cocco, Chief Investor & Communications Officer of PolyOne Corporation, +1-216-589-4018 URL: http://www.polyone.com