PolyOne Reports Second-Quarter Earnings

July 31, 2001

CLEVELAND, July 31 /PRNewswire/ -- PolyOne Corporation (NYSE: POL), a
leader in polymer services, today reported revenues of $695 million and net
income of $2.5 million, or $0.03 per share, for the second quarter ended
June 30, 2001.

Excluding one-time special items resulting in a net gain of $1.5 million
after tax, or $0.02 per share, PolyOne had net income of $1 million in the
second quarter. Special items include a gain from a litigation settlement,
which was partially offset by employee separation, closed plant facility and
merger integration costs.

"Our businesses continue to face weak demand in most North American
markets," said Thomas A. Waltermire, chairman and chief executive officer.
"Even so, we increased earnings over first-quarter 2001 as a result of two
factors: OxyVinyls and our strategic initiatives.

"We saw a significant improvement in equity income from OxyVinyls, our
vinyl resin joint venture, which benefited from higher selling prices and
lower natural gas and raw material costs," Waltermire said. "Additionally,
the strategic initiatives we put in place have generated an earnings benefit
of approximately $6 million compared with the first quarter of 2001."

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 accounting enterprise. The
comparative "Reported Results" for second-quarter 2000 in the attached
financial statements are those of the former Geon only.

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.

                Second-Quarter Reported and Pro Forma Results
                    ($ in millions, except per share data)

                                               Reported  Reported  Pro Forma
                                                  2001      2000      2000
     Sales                                       $695.4    $361.2    $833.0
     Operating income                              16.8      30.4      52.1
     Operating income before special items         18.4      34.8      56.5
     Net income                                     2.5      14.8      34.6
     Net income before special items                1.0      17.9      27.2
     Earnings per share, diluted                   0.03      0.31      0.37
     Per share effect of special items,
      expense (income)                            (0.02)     0.06     (0.08)

                 Year-to-Date Reported and Pro Forma Results
                    ($ in millions, except per share data)

                                               Reported  Reported  Pro Forma
                                                  2001      2000      2000
     Sales                                     $1,405.1    $706.7   $1,658.2
     Operating income (loss)                       (6.5)     60.1      103.2
     Operating income before special items         10.3      64.5      107.6
     Net income (loss)                            (18.9)     28.6       60.8
     Net income (loss) before special items       (10.8)     31.7       53.4
     Earnings (loss) per share, diluted           (0.21)     0.60       0.65
     Per share effect of special items,
      expense (income)                             0.09      0.06      (0.08)

Second-Quarter 2001 Business Highlights

  • As part of its program to modernize its North American Plastic Compounds
    and Colors (PCC) manufacturing network, PolyOne announced on June 21 that it
    will invest more than $12 million in new technology and manufacturing
    equipment at four engineered material compounding centers in Avon Lake, Ohio;
    Dyersburg, Tennessee; Macedonia, Ohio; and Seabrook, Texas. As the upgrade of
    these existing sites is completed through the fourth quarter of 2002, PolyOne
    will close three engineered material compounding plants in Bethlehem,
    Pennsylvania; Corona, California; and Houston, Texas. These closings are
    projected to improve pre-tax earnings by approximately $12 million beginning
    in 2003. The accrual for cash employee separation and plant phase-out costs
    totals $4.9 million, and has been included as part of the acquisition purchase
    accounting related to the formation of PolyOne.

  • As part of an ongoing review of its Elastomers and Performance Additives
    business segment, PolyOne announced on June 12 that it will close the
    Kingstree, South Carolina, plant by the end of third-quarter 2001. The
    associated closing costs, which have been included as part of the acquisition
    purchase accounting, are estimated at $5.6 million. PolyOne anticipates that
    the closing will yield annualized pre-tax savings of $3.5 million.

  • PolyOne continues its conversion to a new business information system.
    On May 1, the Company launched the conversion by upgrading the information
    system for its vinyl compound and specialty resin businesses. On July 1, the
    engineered material compounding operations were converted. Annual sales of
    these three businesses total approximately $1.3 billion. PolyOne will invest
    a total of approximately $25 million in this project during 2001. North
    American colorants and additive concentrates, Elastomers and Performance
    Additives, and most of the European operations will convert to the new system
    later this year.

  • In July, PolyOne's formulators group completed an agreement to acquire
    Dow Chemical Company's latex business in Rancho Cucamonga, California, with
    sales of approximately $2 million. The business serves customers mainly in
    California and Mexico who purchase products for glove dipping, molding
    compounds and foam-to-foam adhesives. PolyOne will transition the latex
    production to its facility in Commerce, California, over the next eight weeks.

  • PolyOne's equity income from OxyVinyls was $5.3 million for the second
    quarter of 2001, an improvement of $16 million over first-quarter 2001. As
    volumes were essentially the same for both quarters, the improvement in
    performance was driven primarily by higher polyvinyl chloride resin prices and
    lower ethylene and natural gas costs.

  • The Company substantially reduced its commercial working capital
    (accounts receivable before sales, plus FIFO inventories less accounts
    payable). Overall commercial working capital decreased $76.8 million from
    March 31, 2001, to June 30, 2001. Annualized commercial working capital was
    13.6 percent of sales in June 2001, a reduction of two percentage points from
    the March 2001 level.

Business Outlook

"Our customers have significantly reduced their inventories in the past
12 months," said Waltermire. "However, most markets are now forecasting weak
third-quarter demand, and we do not expect our total sales to grow compared
with the quarter we just completed.

"We continue to focus on initiatives that will improve our operations and
cost base by more than $150 million by the end of 2002," Waltermire added.
"In the second quarter of 2001, we reduced our base cost by an estimated
$18 million compared with the average 2000 quarterly level."

PolyOne expects operating earnings to improve minimally in the third
quarter. Previously announced strategic initiatives, such as the PCC
modernization, are timed to begin producing benefits during 2002; therefore,
these initiatives will not significantly reduce base cost for third-quarter
2001 compared with second-quarter 2001.

In addition, the North American economic climate remains stagnant and
Europe is expected to slow because of some slackening in demand and the
traditional August holiday season. Finally, OxyVinyls' equity contribution is
projected to remain substantially unchanged. With vinyl industry capacity
utilization rates at roughly 85 percent, vinyl resin prices are expected to be
under pressure, offsetting any benefit realized from projected lower costs for
natural gas and ethylene.

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, and may not necessarily indicate operating results that would
    have occurred or future results of PolyOne.

  • 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 a preliminary purchase price allocation.

Conference Call on the Web

PolyOne will host an analyst conference call at 9 a.m. Eastern Time on
Wednesday, August 1, 2001. The call will be broadcast live on the Company's
Web site: www.polyone.com .

Supplemental Information

Investors interested in more detailed information on PolyOne's results,
the performance of its business segments or a summary of all special items for
2001 and 2000, 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 .

About PolyOne

PolyOne Corporation, with revenues of approximately $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 9,000 employees
at 80 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 .

Forward-Looking Statements

This 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 the
consolidation and restructuring programs; (3) unanticipated delays in
achieving or inability to achieve cost reduction and employee productivity
goals; (4) 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, 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 the OxyVinyls partnership; (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

                     PolyOne Corporation and Subsidiaries
            Condensed Consolidated Statements of Income (Unaudited)
                  (dollars in millions except per share data)

                                           Three Months      Six Months
                                              Ended            Ended
                                             June 30,         June 30,
                                           2001    2000     2001     2000

    Sales                                 $695.4  $361.2  $1,405.1  $706.7

    Operating costs and expenses:
      Cost of sales                        568.1   316.5   1,166.5   617.3
      Selling and administrative            88.3    20.2     170.2    44.5
      Depreciation and amortization         25.9     9.4      52.3    18.9
    Employee separation and plant phase-
     out                                     0.9     2.8       9.8     2.8
    Merger and integration costs             0.5       -       5.8       -
    (Income) loss from equity affiliates
     and minority interest                  (5.1)  (18.1)      7.0   (36.9)
    Operating income                        16.8    30.4      (6.5)   60.1

    Interest expense                       (10.9)   (7.2)    (23.8)  (14.2)
    Interest income                          1.2     0.4       1.4     0.9
    Other expense, net                       1.4    (0.6)     (0.9)   (1.2)
    Income (loss) before income taxes        8.5    23.0     (29.8)   45.6

    Income tax (expense) benefit            (6.0)   (8.2)     10.9   (17.0)

    Net income (loss)                       $2.5   $14.8    $(18.9)  $28.6

    Earnings (Loss) per Share of Common
        Basic                               $.03    $.31     $(.21)   $.61
        Diluted                             $.03    $.31     $(.21)   $.60

    Weighted average shares used to
     compute earnings per share:
        Basic                               89.8    47.0      89.8    47.0
        Diluted                             90.5    47.8      90.3    48.2

    Dividends paid per share of common
     stock                                $.0625  $.0625    $.0625  $.0625

                       PolyOne Corporation and Subsidiaries
                 Condensed Consolidated Balance Sheet (Unaudited)
                              (Dollars in millions)

                                                   June 30,     December 31,
    Assets                                            2001           2000
    Current assets:
      Cash and cash equivalents                      $36.2             $37.9
      Trade accounts receivable, net                 198.9             330.4
      Other receivables                               12.8              17.1
      Inventories                                    271.5             337.1
      Deferred taxes                                  53.9              53.9
      Other current assets                            14.9              20.1
        Total current assets                         588.2             796.5
    Property, net                                    674.1             703.8
    Investment in equity affiliates                  303.5             311.6
    Goodwill and other intangible assets,
     net                                             546.0             540.3
    Other non-current assets                         109.7             108.5
      Total assets                                $2,221.5          $2,460.7

    Liabilities and Shareholders' Equity
    Current liabilities:
      Short-term bank debt                           $15.5            $237.2
      Accounts payable                               360.8             319.4
      Accrued expenses                               162.2             175.7
      Current portion of long-term debt                1.5               2.6
        Total current liabilities                    540.0             734.9
    Long-term debt                                   439.1             442.4
    Deferred taxes                                   122.3             132.8
    Post-retirement benefits other than
     pensions                                        129.4             129.9
    Other non-current liabilities,
     including pensions                              181.5             179.1
    Minority interest in consolidated
     subsidiaries                                     17.7              14.0
        Total liabilities                          1,430.0           1,633.1
    Shareholders' equity:
      Preferred stock                                    -                 -
      Common stock                                     1.2               1.2
      Other shareholders' equity                     790.3             826.4
        Total shareholders' equity                   791.5             827.6
        Total liabilities and shareholders'
          equity                                  $2,221.5          $2,460.7

                     PolyOne Corporation and Subsidiaries
          Condensed Consolidated Statements of Cash Flows (Unaudited)
                             (Dollars in millions)

                                             Three Months     Six Months
                                                 Ended          Ended
                                               June 30,        June 30,
                                             2001    2000    2001     2000
    Operating Activities
      Net income (loss)                      $2.5   $13.8   $(18.9)  $28.6
      Adjustments to reconcile net income
       to net cash used by operating
          Employee separation and plant
           phase-out                          0.9       -      9.8     2.8
          Depreciation and amortization      25.9     9.5     52.3    18.9
          Companies carried at equity:
             (Income) loss                   (5.1)  (18.7)     7.0   (36.9)
             Dividends received                 -     8.2      1.0    19.7
          Provision (benefit) for
           deferred income taxes              5.1     8.5     (4.0)   16.0
          Change in assets and
              Operating working capital:
                  Accounts receivable        87.6   (36.6)   128.3   (33.3)
                  Inventories                47.1    (1.4)    61.3     3.7
                  Accounts payable           15.8    (7.8)    46.4    (1.0)
              Accrued expenses and other      0.5   (13.3)   (24.6)  (19.4)
    Net cash provided (used) by operating
     activities                             180.3   (37.8)   258.6    (0.9)

    Investing Activities
      Capital expenditures                  (16.7)   (6.3)   (36.0)  (13.9)
      Return of cash from equity
       affiliates                            (1.7)    1.8      0.5     2.4
      Proceeds from sale of assets            2.8       -      2.8       -
      Other                                   6.6       -      3.5       -
    Net cash provided (used) by operating
     and investing activities               171.3   (42.3)   229.4   (12.4)

    Financing Activities
      Change in short-term debt            (162.8)   34.1   (222.2)   13.0
      Net issuance of long-term debt          1.2       -      3.1       -
      Net proceeds from issuance of
       common stock                             -     0.5        -     0.6
      Dividends                              (5.7)   (3.1)   (11.3)   (6.2)
    Net cash provided (used) by financing
     activities                            (167.3)   31.5   (230.4)    7.4

    Effect of exchange rate changes on
     cash                                     0.1       -     (0.7)    0.7

    Decrease in cash and cash equivalents     4.1   (10.8)    (1.7)   (4.3)

    Cash and cash equivalents at
     beginning of year                       32.1    51.2     37.9    51.2

    Cash and cash equivalents at end of
     period                                 $36.2   $40.4    $36.2   $46.9

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SOURCE PolyOne Corporation

CONTACT: Dennis Cocco, Chief Investor & Communications Officer of
PolyOne, +1-216-589-4018/

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