Description Of Business And Summary Of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2013 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
Description Of Business And Summary Of Significant Accounting Policies | ' |
Description of Business |
We are a premier provider of specialized polymer materials, services and solutions with operations in specialty polymer formulations, color and additive systems, plastic sheet and packaging solutions, and polymer distribution. We are also a highly specialized developer and manufacturer of performance enhancing additives, liquid colorants, and fluoropolymer and silicone colorants. Headquartered in Avon Lake, Ohio, we have employees at manufacturing sites and distribution facilities in North America, South America, Europe and Asia. We provide value to our customers through our ability to link our knowledge of polymers and formulation technology with our manufacturing and supply chain to provide value added solutions to designers, assemblers and processors of plastics (our customers). When used in this Annual Report on Form 10-K, the terms “we,” “us,” “our” and the “Company” mean PolyOne Corporation and its consolidated subsidiaries. |
Our operations are located primarily in the United States, Canada, Mexico, Europe, Asia and Brazil. Our operations are reported in five reportable segments: Global Specialty Engineered Materials; Global Color, Additives and Inks; Designed Structures and Solutions; Performance Products and Solutions; and PolyOne Distribution. See Note 16, Segment Information, for more information. |
On March 13, 2013, PolyOne acquired Spartech Corporation (Spartech), a supplier of sustainable plastic sheet, color and engineered materials, and packaging solutions, based in Clayton, Missouri. The Spartech acquisition expands PolyOne's specialty portfolio with adjacent technologies in attractive end markets where we already participate, as well as new end markets such as aerospace and security. By combining Spartech's leading market positions in sheet, rigid barrier, packaging and specialty cast acrylics with PolyOne's capabilities, we believe we can better serve our customers and accelerate growth. |
On March 25, 2013, PolyOne entered into an agreement to sell its vinyl dispersion, blending and suspension resin assets (Resin Business) to Mexichem Specialty Resins Inc. (Mexichem), a wholly-owned subsidiary of Mexichem, S.A.B. de C.V., for $250.0 million cash consideration. The sale of the Resin Business occurred on May 30, 2013 which resulted in the recognition of a pre-tax gain of $223.7 million ($138.5 million, net of tax), which is reflected within the Income from discontinued operations, net of income taxes line of the Consolidated Statements of Income. |
Consolidation and Basis of Presentation |
The consolidated financial statements include the accounts of PolyOne and its subsidiaries. All majority-owned affiliates over which we have control are consolidated. Investments in affiliates and joint ventures in which our ownership is 50% or less, or in which we do not have control but have the ability to exercise significant influence over operating and financial policies, were accounted for under the equity method prior to their disposition (see Note 20, Financial Information of Previously Owned Equity Affiliates). Transactions with related parties, including joint ventures, are in the ordinary course of business. |
Reclassifications |
Certain reclassifications of the prior period amounts and presentation have been made to conform to the presentation for the current period. |
Use of Estimates |
Preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying consolidated financial statements and notes. Actual results could differ from these estimates. |
Cash and Cash Equivalents |
We consider all highly liquid investments purchased with a maturity of less than three months to be cash equivalents. Cash equivalents are stated at cost, which approximates fair value. |
Allowance for Doubtful Accounts |
We evaluate the collectability of receivables based on a combination of factors. We regularly analyze significant customer accounts and, when we become aware of a specific customer’s inability to meet its financial obligations to us, such as in the case of a bankruptcy filing or deterioration in the customer’s operating results or financial position, we record a specific allowance for bad debt to reduce the related receivable to the amount we reasonably believe is collectible. We also record bad debt allowances for all other customers based on a variety of factors including the length of time the receivables are past due, the financial health of the customer, economic conditions and historical experience. In estimating the allowances, we take into consideration the existence of credit insurance. If circumstances related to specific customers change, our estimates of the recoverability of receivables could be adjusted further. Accounts receivable balances are written off against the allowance for doubtful accounts after a final determination of uncollectability has been made. |
Inventories |
Inventories are stated at the lower of cost or market using the first-in, first-out (FIFO) method. |
Long-lived Assets |
Property, plant and equipment is carried at cost, net of depreciation and amortization that is computed using the straight-line method over the estimated useful lives of the assets, which ranges from 3 to 15 years for machinery and equipment and up to 40 years for buildings. Computer software is amortized over periods not exceeding 10 years. Property, plant and equipment is generally depreciated on accelerated methods for income tax purposes. We expense repair and maintenance costs as incurred. We capitalize replacements and betterments that increase the estimated useful life of an asset. |
We retain fully depreciated assets in property and accumulated depreciation accounts until we remove them from service. In the case of sale, retirement or disposal, the asset cost and related accumulated depreciation balance is removed from the respective account, and the resulting net amount, less any proceeds, is included as a component of income from continuing operations in the accompanying Consolidated Statements of Income. |
We account for operating leases under the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 840, Leases. |
Finite-lived intangible assets, which consist primarily of customer relationships, sales contracts, patents and technology are amortized over their estimated useful lives. The remaining useful lives range up to 23 years. |
We assess the recoverability of long-lived assets when events or changes in circumstances indicate that we may not be able to recover the assets’ carrying amount. We measure the recoverability of assets to be held and used by a comparison of the carrying amount of the asset to the expected future undiscounted cash flows associated with the asset. We measure the amount of impairment of long-lived assets as the amount by which the carrying value of the asset exceeds the fair value of the asset, which is generally determined based on projected discounted future cash flows or appraised values. |
Goodwill and Indefinite Lived Intangible Assets |
Goodwill is the excess of the purchase price paid over the fair value of the net assets of the acquired business. Goodwill is tested for impairment at the reporting unit level. Our reporting units have been identified at the operating segment level, or in some cases, one level below the operating segment level. Goodwill is allocated to the reporting units based on the estimated fair value at the date of acquisition. |
Our annual measurement date for testing impairment of goodwill and other indefinite-lived intangibles is October 1st. We completed our testing of impairment as of October 1, noting no impairment in 2013, 2012 or 2011. The future occurrence of a potential indicator of impairment would require an interim assessment for some or all of the reporting units prior to the next required annual assessment on October 1, 2014. Refer to Note 19, Fair Value, for further discussion of our approach for assessing the fair value of goodwill. |
Litigation Reserves |
FASB ASC Topic 450, Contingencies, requires that we accrue for loss contingencies associated with outstanding litigation, claims and assessments for which management has determined it is probable that a loss contingency exists and the amount of loss can be reasonably estimated. We record expense associated with professional fees related to litigation claims and assessments as incurred. Refer to Note 13, Commitments and Contingencies information. |
Derivative Financial Instruments |
FASB ASC Topic 815, Derivative and Hedging, requires that all derivative financial instruments, such as foreign exchange contracts, be recognized in the financial statements and measured at fair value, regardless of the purpose or intent in holding them. |
We are exposed to foreign currency changes in the normal course of business. We have established policies and procedures that manage this exposure through the use of financial instruments. By policy, we do not enter into these instruments for trading purposes or speculation. These instruments are not designated as hedges and, as a result, are adjusted to fair value, with the resulting gains and losses recognized in the accompanying Consolidated Statements of Income immediately. |
Pension and Other Post-retirement Plans |
We account for our pensions and other post-retirement benefits in accordance with FASB ASC Topic 715, Compensation — Retirement Benefits. This standard requires us to (1) recognize the funded status of the benefit plans in our Consolidated Balance Sheet, (2) recognize, as a component of other comprehensive income or net periodic benefit cost, the gains or losses and prior service costs or credits that arise during the period and (3) measure defined benefit plan assets and obligations as of December 31. We immediately recognize actuarial gains and losses, after consideration of inventory capitalization, in our operating results in the year in which the gains or losses occur. Refer to Note 12, Employee Benefit Plans, for more information. |
Accumulated Other Comprehensive Loss |
Changes in accumulated other comprehensive loss in 2013, 2012 and 2011 were as follows: |
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(In millions) | | Cumulative Translation Adjustment | | Pension and other post-retirement benefits | | Unrealized gain in available-for-sale securities | | Total |
Balance at January 1, 2011 | | $ | (8.6 | ) | | $ | 26.9 | | | $ | 0.2 | | | $ | 18.5 | |
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Translation adjustments | | (9.0 | ) | | — | | | — | | | (9.0 | ) |
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Prior service credits recognized during the year, net of tax of $6.5 | | — | | | (10.8 | ) | | — | | | (10.8 | ) |
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Balance at December 31, 2011 | | (17.6 | ) | | 16.1 | | | 0.2 | | | (1.3 | ) |
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Translation adjustments | | 1.1 | | | — | | | — | | | 1.1 | |
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Prior service credits recognized during the year, net of tax of $6.5 | | — | | | (10.9 | ) | | — | | | (10.9 | ) |
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Balance at December 31, 2012 | | (16.5 | ) | | 5.2 | | | 0.2 | | | (11.1 | ) |
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Translation adjustments | | (3.7 | ) | | — | | | — | | | (3.7 | ) |
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Balance at December 31, 2013 | | $ | (20.2 | ) | | $ | 5.2 | | | $ | 0.2 | | | $ | (14.8 | ) |
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Fair Value of Financial Instruments |
FASB ASC Topic 820, Fair Value Measurements and Disclosures, requires disclosures of the fair value of financial instruments. The estimated fair values of financial instruments were principally based on market prices where such prices were available and, where unavailable, fair values were estimated based on market prices of similar instruments. See Note 19, Fair Value, for further discussion. |
Foreign Currency Translation |
Revenues and expenses are translated at average currency exchange rates during the related period. Assets and liabilities of foreign subsidiaries are translated using the exchange rate at the end of the period. The resulting translation adjustments are recorded as accumulated other comprehensive income or loss. Gains and losses resulting from foreign currency transactions, including intercompany transactions that are not considered permanent investments, are included in Other (expense) income, net in the accompanying Consolidated Statements of Income. |
Revenue Recognition |
We recognize revenue when the revenue is realized or realizable and has been earned. We recognize revenue when a firm sales agreement is in place, shipment has occurred and collectability is reasonably assured. |
Shipping and Handling Costs |
Shipping and handling costs are included in cost of sales. |
Research and Development Expense |
Research and development costs from continuing operations, which were $52.6 million in 2013, $41.3 million in 2012 and $36.4 million in 2011, are charged to expense as incurred. |
Environmental Costs |
We expense costs that are associated with managing hazardous substances and pollution in ongoing operations on a current basis. Costs associated with environmental contamination are accrued when it becomes probable that a liability has been incurred and our proportionate share of the cost can be reasonably estimated. Any such provision is recognized using the Company's best estimate of the amount of loss incurred, or at the lower end of an estimated range, when a single best estimate is not determinable. In some cases, the Company may be able to recover a portion of the costs relating to these obligations from insurers or other third parties; however, the Company records such amounts only when it is probable that they will be collected. |
Equity Affiliates |
We account for our investments in equity affiliates under FASB ASC Topic 323, Investments — Equity Method and Joint Ventures. We recognize our proportionate share of the income of equity affiliates. |
Share-Based Compensation |
We account for share-based compensation under the provisions of FASB ASC Topic 718, Compensation — Stock Compensation, which requires us to estimate the fair value of share-based awards on the date of grant. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the accompanying Consolidated Statements of Income. As of December 31, 2013, we had one active share-based employee compensation plan, which is described more fully in Note 15, Share-Based Compensation. |
Income Taxes |
Deferred income tax liabilities and assets are determined based upon the differences between the financial reporting and tax basis of assets and liabilities and are measured using the tax rate and laws currently in effect. In accordance with FASB ASC Topic 740, Income Taxes, we evaluate our deferred income taxes to determine whether a valuation allowance should be established against the deferred tax assets or whether the valuation allowance should be reduced based on consideration of all available evidence, both positive and negative, using a “more likely than not” standard. |