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.
"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 .
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 .
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
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 Stock: 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 activities: 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 liabilities: 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 MAKE YOUR OPINION COUNT - Click Here http://tbutton.prnewswire.com/prn/11690X23315747
SOURCE PolyOne Corporation
CONTACT: Dennis Cocco, Chief Investor & Communications Officer of