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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED MARCH 31, 2002. COMMISSION FILE NUMBER 1-16091.
POLYONE CORPORATION
(Exact name of Registrant as specified in its charter)
Ohio 34-1730488
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
Suite 36-5000, 200 Public Square, Cleveland, Ohio 44114-2304
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 589-4000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
As of April 30, 2002, there were 91,175,759 common shares outstanding.
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PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS
POLYONE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
Three Months Ended
March 31,
----------------------------
2002 2001
------ ------
Sales $613.2 $709.7
Operating costs and expenses:
Cost of sales 503.9 598.4
Selling and administrative 81.1 81.9
Depreciation and amortization 18.3 26.4
Employee separation and plant phase-out .9 8.9
Merger and integration costs - 5.3
Loss from equity affiliates and minority interest 2.5 12.1
------ ------
Operating income (loss) 6.5 (23.3)
Interest expense (8.8) (12.9)
Interest income .2 .2
Other expense, net (3.7) (2.3)
------ ------
Loss before income taxes and cumulative effect
of change in accounting method (5.8) (38.3)
Income tax benefit 2.2 16.9
------ ------
Loss before cumulative effect of a change in accounting (3.6) (21.4)
Cumulative effect of a change in goodwill accounting,
net of income tax benefit of $1.0 million (53.7) -
------ ------
Net loss $(57.3) $(21.4)
====== ======
Loss per common share:
Basic loss per share before effect of change in accounting $ (.04) $ (.24)
Cumulative effect of a change in accounting (.60) -
------ ------
Basic loss per share $ (.64) $ (.24)
====== ======
Diluted loss per share before effect of change in accounting $ (.04) $ (.24)
Cumulative effect of a change in accounting (.60) -
------ ------
Diluted loss per share $ (.64) $ (.24)
====== ======
Weighted average shares used to compute earnings per share:
Basic 90.0 89.7
Diluted 90.0 89.7
Dividends paid per share of common stock $.0625 $.0625
See Accompanying Notes to the Unaudited Condensed Consolidated
Financial Statements
1
POLYONE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN MILLIONS)
March 31, December 31,
2002 2001
-------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 22.5 18.2
Trade accounts receivable, net 205.2 135.6
Other receivables 8.0 11.4
Inventories 271.7 255.3
Deferred income tax assets 48.5 48.6
Other current assets 17.8 16.5
-------- --------
Total current assets 573.7 485.6
Property, net 673.4 683.6
Investment in equity affiliates 283.1 287.9
Goodwill and other intangible assets, net 481.5 537.3
Other non-current assets 46.8 66.8
-------- --------
Total assets $2,058.5 $2,061.2
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term bank debt $ 64.2 $ 14.7
Accounts payable 333.2 311.4
Accrued expenses 164.3 169.4
Current portion of long-term debt 4.1 4.6
-------- --------
Total current liabilities 565.8 500.1
Long-term debt 424.4 426.8
Deferred income tax liabilities 58.5 64.5
Post-retirement benefits other than pensions 125.2 126.2
Other non-current liabilities, including pensions 215.3 214.5
Minority interest in consolidated subsidiaries 15.9 15.7
-------- --------
Total liabilities 1,405.1 1,347.8
Shareholders' equity:
Preferred stock, 40.0 shares authorized, no shares issued - -
Common stock, $.01 par, 400.0 shares authorized, 122.2 shares issued
at March 31, 2002 and December 31, 2001 1.2 1.2
Other shareholders' equity 652.2 712.2
-------- --------
Total shareholders' equity 653.4 713.4
-------- --------
Total liabilities and shareholders' equity $2,058.5 $2,061.2
======== ========
See Accompanying Notes to the Unaudited Condensed Consolidated
Financial Statements
2
POLYONE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN MILLIONS)
Three Months Ended
March 31,
--------------------
2002 2001
------ ------
OPERATING ACTIVITIES
Net loss $(57.3) $(21.4)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Employee separation and plant phase-out charges 0.9 8.9
Cash payments on employee separation and plant phase-out (4.0) (1.2)
Cumulative effect of a change in accounting 53.7 -
Depreciation and amortization 18.3 26.4
Investment write-down, loss on sale of equity affiliate 1.5 -
Companies carried at equity:
Loss 2.5 12.1
Dividends received - 1.0
Change in assets and liabilities:
Operating working capital:
Accounts receivable (70.3) 40.7
Inventories (16.5) 14.2
Accounts payable 22.8 30.6
Accrued expenses and other 16.4 (33.0)
------ ------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (32.0) 78.3
INVESTING ACTIVITIES
Capital expenditures (10.7) (19.3)
Return of cash from equity affiliates 1.3 2.2
Other 0.8 (3.1)
------ ------
NET CASH PROVIDED (USED) BY OPERATING AND INVESTING ACTIVITIES (40.6) 58.1
FINANCING ACTIVITIES
Change in short-term debt 49.2 (59.4)
Change in long-term debt (0.6) 1.9
Net proceeds from the exercise of stock options 2.7 -
Dividends (5.8) (5.6)
------ ------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 45.5 (63.1)
Effect of exchange rate changes on cash (0.6) (0.8)
------ ------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4.3 (5.8)
Cash and cash equivalents at beginning of year 18.2 37.9
------ ------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 22.5 $ 32.1
====== ======
See Accompanying Notes to the Unaudited Condensed Consolidated
Financial Statements
3
POLYONE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
(IN MILLIONS, SHARES IN THOUSANDS)
Accumulated
Common Common Other
Shares Additional Stock Share Non-Owner
Common Held in Common Paid-In Retained Held in Ownership Equity
Shares Treasury Total Stock Capital Earnings Treasury Trust Changes
------- -------- ------ ------ ---------- -------- -------- --------- -----------
BALANCE JANUARY 1, 2001 122,192 28,315 $827.6 $1.2 $1,057.6 $169.3 $(321.9) $(25.5) $ (53.1)
Non-owner equity changes:
Net loss (21.4) (21.4)
Translation adjustment (10.4) (10.4)
------
Total non-owner equity changes (31.8)
Stock-based compensation and
exercise of options 16 1.1 4.5 (3.4)
Adjustment to market value - 12.4 (12.4)
Cash dividends (5.6) (5.6)
------- ------ ------ ---- -------- ------ ------- ------ -------
BALANCE MARCH 31, 2001 122,192 28,331 $791.3 $1.2 $1,070.0 $142.3 $(321.9) $(33.4) $ (66.9)
======= ====== ====== ==== ======== ====== ======= ====== =======
BALANCE JANUARY 1, 2002 122,192 31,175 $713.4 $1.2 $1,072.7 $100.3 $(350.1) $ (5.3) $(105.4)
Non-owner equity changes:
Net loss (57.3) (57.3)
Translation adjustment (0.3) (0.3)
------
Total non-owner equity changes (57.6)
Stock based compensation and
benefits and exercise of (175) 3.4 (1.1) 2.6 1.6 0.3
options
Adjustment to market value - 2.3 (2.3)
Cash dividends (5.8) (5.8)
------- ------ ------ ---- -------- ------ ------- ------ -------
BALANCE MARCH 31, 2002 122,192 31,000 $653.4 $1.2 $1,073.9 $ 37.2 $(347.5) $ (6.0) $(105.4)
======= ====== ====== ==== ======== ====== ======= ====== =======
See Accompanying Notes to the Unaudited Condensed Consolidated
Financial Statements
4
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with Form 10-Q instructions and in the opinion of
management contain all adjustments (consisting of normal recurring accruals)
necessary to present fairly the financial position, results of operations and
cash flows for the periods presented. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. These interim statements should be read in
conjunction with the financial statements and notes thereto included in the
Annual Report on Form 10-K for the year ended December 31, 2001 of PolyOne
Corporation.
Operating results for the three months ended March 31, 2002 are not necessarily
indicative of the results expected in subsequent quarters or for the year ending
December 31, 2002.
NOTE B - ACCOUNTING CHANGE
PolyOne adopted Statement of Financial Accounting Standards (SFAS) No. 142,
"Goodwill and Other Intangible Assets," effective January 1, 2002. Under SFAS
No. 142, goodwill and indefinite lived intangible assets are no longer
amortized, but must be reviewed at least annually for impairment. PolyOne does
not have any indefinite lived intangible assets. Separable intangible assets
that have finite useful lives will continue to be amortized over their useful
lives.
As part of adopting this standard as of January 1, 2002, PolyOne completed a
transitional impairment review for goodwill impairment during the first quarter
of 2002 for each of its reporting units. We determined that the carrying value
of the Engineered Films reporting unit exceeded its estimated fair value as
determined by utilizing various valuation techniques including discounted cash
flows. Given the indication of a potential impairment, we completed the
assessment of the implied fair value of goodwill for the Engineered Films
reporting unit, which resulted in an impairment loss for goodwill of $54.7
million ($53.7 million after tax). The Engineered Film reporting unit is
included in the Performance Plastics segment. This transitional impairment loss
was recognized as the cumulative effect of an accounting change. The fair value
of all other reporting units at January 1, 2002 as determined by the valuation
techniques noted above exceed their respective carrying value. The transitional
impairment loss is a one-time charge and will not impact the future cash flows
of our businesses.
5
Prior to the adoption of SFAS No. 142, amortization expense was recorded for
goodwill and other intangible assets. The following sets forth a reconciliation
of net income and earnings per share information for the three months ended
March 31, 2002 and 2001 adjusted for the non-amortization provisions of SFAS No.
142:
Three Months Ended
March 31,
-----------------------
(In millions) 2002 2001
- ------------- ------ ------
Reported net loss $(57.3) $(21.4)
Cumulative effect of change in accounting, net of tax 53.7 -
Goodwill amortization, net of tax - 3.0
Workforce amortization, net of tax - 0.6
------ ------
Adjusted net loss $ (3.6) $(17.8)
====== ======
Basic loss per share:
As reported $ (.64) $ (.24)
Cumulative effect of change in accounting, net of tax .60 -
Goodwill amortization, net of tax - .03
Workforce amortization, net of tax - .01
------ ------
Adjusted basic loss per share $ (.04) $ (.20)
====== ======
Diluted loss per share:
As reported $ (.64) $ (.24)
Cumulative effect of change in accounting, net of tax .60 -
Goodwill amortization, net of tax - .03
Workforce amortization, net of tax - .01
------ ------
Adjusted diluted loss per share $ (.04) $ (.20)
====== ======
NOTE C - ACCOUNTING PRONOUNCEMENT
In August 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," which
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets and supersedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and the
accounting and reporting provisions of Accounting Principles Board Opinion
No. 30, "Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions". PolyOne adopted SFAS No. 144
beginning on January 1, 2002. The adoption did not have any impact on our
consolidated financial position, results of operations or cash flows.
NOTE D - GOODWILL AND INTANGIBLE ASSETS
Changes in the carrying amount of goodwill for the quarter ended March 31, 2002,
by business segment, are as follows:
Elastomers &
Performance Performance
(In millions) Plastics Additives Distribution Other Total
- ------------- ----------- ------------ ------------ ----- ------
December 31, 2001 $370.1 $106.2 $ - $ - $476.3
Reclassification of workforce 13.5 8.8 1.6 1.3 25.2
Impairment (54.7) - - - (54.7)
------ ------ ---- ---- ------
March 31, 2002 $328.9 $115.0 $1.6 $1.3 $446.8
====== ====== ==== ==== ======
6
Information regarding PolyOne's other intangible assets follows:
As of March 31, 2002 As of December 31, 2001
-------------------------------------- --------------------------------------
Acquisition Accumulated Acquisition Accumulated
(In millions) Cost Amortization Net Cost Amortization Net
- ------------- ----------- ------------ ----- ----------- ------------ -----
Non-contractual customer
relationships $16.4 $(2.2) $14.2 $16.4 $ (2.0) $14.4
Sales contract 12.9 (2.8) 10.1 12.9 (2.3) 10.6
Assembled workforce - - - 30.7 (5.5) 25.2
Patents, technology and other 14.4 (4.0) 10.4 14.4 (3.6) 10.8
----- ----- ----- ----- ----- -----
Total $43.7 $(9.0) $34.7 $74.4 $(13.4) $61.0
===== ===== ===== ===== ====== =====
Amortization expense of other intangible assets was $1.1 million and $1.4
million for the three months ended March 31, 2002 and 2001, respectively.
Amortization expense for each of the five succeeding fiscal years is expected to
be approximately $5 million per year.
NOTE E - INVENTORIES
Components of inventories are as follows:
March 31, December 31,
(In millions) 2002 2001
- ------------- --------- ------------
Finished products and in-process inventories $169.9 $154.8
Raw materials and supplies 119.0 117.0
------ ------
288.9 271.8
LIFO Reserve (17.2) (16.5)
------ ------
Total Inventories $271.7 $255.3
====== ======
NOTE F - INCOME TAXES
PolyOne's reported effective tax rate was 37.9% for the three-months ended March
31, 2002 and 44.1% for the three-months ended March 31, 2001. The principal
difference in the 2001 rate is due to non-deductible goodwill amortization
resulting from purchase accounting.
7
NOTE G - INVESTMENT IN EQUITY AFFILIATE
PolyOne owns 24% of Oxy Vinyls, LP (OxyVinyls), a manufacturer and marketer of
PVC resins. OxyVinyls is a leading producer of PVC resins in North America. The
following table presents OxyVinyls' summarized results of operations for the
three-months ended March 31, 2002 and 2001, and summarized balance sheet
information as of March 31, 2002 and December 31, 2001.
Three Months Ended
March 31,
-----------------------
(In millions) 2002 2001
- ----------- ------ ------
Net sales $278.8 $439.6
Employee severance and costs associated with the
temporary idling of plant (3.1) (4.4)
Operating income (loss) 0.1 (44.8)
Partnership loss as reported by OxyVinyls (1.3) (49.4)
PolyOne's ownership of OxyVinyls 24% 24%
------ ------
PolyOne's proportionate share of OxyVinyls' loss (0.3) (11.9)
Amortization of the difference between PolyOne's
investment and its underlying share of OxyVinyls' equity 0.1 0.2
------ ------
Loss of equity affiliate recorded by PolyOne $ (0.2) $(11.7)
====== ======
March 31, December 31,
(In millions) 2002 2001
- ------------- --------- ------------
Current assets $ 267.6 $ 287.2
Non-current assets 980.1 1,006.1
-------- --------
Total assets $1,247.7 $1,293.3
======== ========
Current liabilities $ 133.9 $ 178.7
Non-current liabilities 82.1 81.6
-------- --------
Total liabilities 216.0 260.3
======== ========
Partnership capital $1,031.7 $1,033.0
======== ========
OxyVinyls loss during the first quarter of fiscal 2002 reported above includes a
special, pre-tax charge of $3.1 million, related to employee severance costs and
costs associated with the temporary idling of a plant. Our proportionate share
of this special item was $0.7 million. OxyVinyls loss during the first quarter
of fiscal 2001 reported above includes a special, pre-tax charge of $4.4
million, all of which related to involuntary severance, outplacement costs and
other employee related separation benefits. Our proportionate share of this
special item was $1.0 million.
PolyOne's Resin and Intermediates segment also includes the Sunbelt Chlor-Alkali
Partnership (owned 50%) and Welvic Australia Pty Ltd. (owned 37.4%) equity
affiliates. The Performance Plastics segment includes the DH Compounding Company
(owned 50%), Geon/Polimeros Andinos (owned 51%), SPCGeon PTE Limited (owned 50%)
and Techmer, PM, LLC (51%) equity affiliates. Combined summarized financial
information for these equity affiliates is presented below.
Three Months Ended
March 31,
------------------
(In millions) 2002 2001
- ------------ ----- -----
Net sales $95.2 $93.9
Operating income 2.4 4.9
Net income (loss) (1.7) 1.1
===== =====
8
NOTE H - LOSS PER SHARE COMPUTATION
Weighted average shares outstanding are computed as follows:
Three Months Ended
March 31,
------------------
(In millions) 2002 2001
- ------------- ---- ----
Weighted-average shares - Basic:
Weighted-average shares outstanding 90.6 90.1
Less unearned portion of restricted stock awards
included in outstanding shares (.6) (.4)
---- ----
90.0 89.7
==== ====
Weighted-average shares - Diluted:
Weighted-average shares outstanding - basic 90.0 89.7
Plus unearned portion of restricted stock awards
included in outstanding shares - -
Plus dilutive impact of stock options
and stock awards - -
---- ----
90.0 89.7
==== ====
Basic loss per common share is computed as net loss available to common
shareholders divided by weighted-average basic shares outstanding. Diluted loss
per common share is computed as net loss available to common shareholders
divided by weighted-average diluted shares outstanding.
At March 31, 2002 and March 31, 2001, PolyOne has excluded all outstanding
options from the calculation of diluted loss per share because they have an
anti-dilutive effect (0.9 million shares at March 31, 2002). There was no impact
from stock options and stock awards at March 31, 2001.
NOTE I - BUSINESS COMBINATIONS
On August 31, 2000, PolyOne was formed as a result of the consolidation of The
Geon Company (Geon) and M.A. Hanna Company (Hanna), with Geon as the acquiring
entity. As a result of the acquisition of Hanna, PolyOne incurred employee
separation and plant phase-out costs for incremental expenditures to exit and
consolidate activities at former Hanna locations, to involuntarily sever
employees and to integrate operating locations and other activities of the
newly formed PolyOne. The components of the acquisition integration
liabilities are as follows:
Employee Separation Plant Phase-Out Costs
----------------------- -------------------------
Number of Cash Asset
(In millions, except employee numbers) Employees Costs Closure Write-Downs Total
- -------------------------------------- --------- ----- ------- ----------- -----
Balance at December 31, 2001 404 $11.8 $ 6.6 $ .4 $18.8
Utilized in 2002 (39) (1.9) (1.4) (.1) (3.4)
--- ----- ----- ----- -----
Balance at March 31, 2002 365 $ 9.9 $ 5.2 $ .3 $15.4
=== ===== ===== ===== =====
9
NOTE J - EMPLOYEE SEPARATION AND PLANT PHASE-OUT
Operating income in the first quarter 2002 for the Performance Plastics segment
was reduced by charges of $0.9 million ($0.6 million after tax) for costs
associated with the consolidation of certain activities related to the
formulator operations. The costs included $0.9 million for employee separation,
which consisted of severance and other employee benefits. In 2001, PolyOne
recognized an expense for employee separation and plant phase-out totaling $36.1
million, of which $8.9 million was recognized in the first quarter of 2001.
These costs related to restructuring initiatives at plastic compounds and colors
and engineered films operations.
The following table summarizes the provisions, payments and remaining reserves
associated with these initiatives:
Employee Separation Plant Phase-Out Costs
----------------------- -------------------------
Number of Cash Asset
(In millions, except employee numbers) Employees Costs Closure Write-Downs Total
- -------------------------------------- --------- ----- ------- ----------- -----
Balance at December 31, 2001 300 $17.0 $1.9 $- $18.9
2002 Charges 21 .9 - - .9
Utilized in 2002 (30) (.4) (.3) - (.7)
--- ----- ---- -- -----
Balance at March 31, 2002 291 $17.5 $1.6 - $19.1
=== ===== ==== == =====
NOTE K - FINANCING ARRANGEMENTS
On March 28, 2002, PolyOne amended and restated the $150 million credit
agreement governing the revolving credit facility. The amended and restated
credit agreement revised the 2002 borrowed debt-to-EBITDA compliance ratios and
requires that we secure any obligations under the revolving credit facility upon
the issuance of $200 million unsecured senior notes discussed below.
Additionally, obligations under the revolving credit facility became guaranteed
by some of our domestic subsidiaries upon issuance of the unsecured senior
notes. Security on the revolving credit facility will terminate when the
borrowed debt-to-EBITDA ratio is less than 3.5:1 for any two consecutive fiscal
quarters. The borrowed debt-to-EBITDA ratio was waived for the first quarter of
2002. As of the first quarter 2002, certain restrictions under the revolving
credit facility exist relating to the increased payment of dividends, capital
expenditures and new acquisition investments.
During April 2002, PolyOne announced and completed a private placement of $200
million of 8.875% senior notes to certain institutional investors in an
offering exempt from the registration requirements of the Securities Act of
1933. We used the proceeds from the offering to repay amounts outstanding under
our revolving bank credit facility; to repay a loan held by one of our German
subsidiaries; to reduce a portion of the amount sold under our receivables sale
facility; to repay borrowings under our short-term lines of credit and to pay
related fees and expenses. The senior notes rank equally with all of PolyOne's
other senior unsecured indebtedness.
NOTE L - SALE OF ACCOUNTS RECEIVABLE
PolyOne participates in a receivables sale program to provide liquidity through
the sale of accounts receivable at an attractive cost similar to commercial
paper. As of March 31, 2002, $193.6 million of this facility was available and
being utilized.
In April 2002, we amended and restated our receivables sale agreement, through
which we sold an undivided interest in certain trade accounts receivable. Under
the terms of the amended and restated agreement, the undivided interest in
certain trade accounts receivable is sold by PolyOne to PolyOne Funding
Corporation, a wholly owned, bankruptcy remote subsidiary of PolyOne, which then
sells these receivables without recourse to a commercial paper conduit. PolyOne
Funding Corporation has been structured to isolate its assets from the creditors
of PolyOne Corporation. We remain responsible for servicing the underlying
accounts receivable and receive an annual servicing fee, approximating 1/4 of 1%
of the outstanding balance, from PolyOne Funding Corporation. When PolyOne
collects payments from the accounts receivables that have been sold, PolyOne
Funding Corporation reinvests the collected payments less a discount, which is
initially 3%, in new accounts receivables for the buyers and transfers to the
buyers a yield that is based on defined short-term market rates. The discount
from our sales of receivable is expected to approximate the servicing fee
charged to PolyOne Funding Corporation. Had the newly revised structure of the
receivables sale program been in effect in 2001 and/or the first quarter of
2002, there would have been no material impact on our consolidated financial
statements or available capital resources.
10
NOTE M - SEGMENT INFORMATION
PolyOne operates primarily in four business segments: the Performance Plastics
segment, the Elastomers and Performance Additives (E&A) segment, the
Distribution segment, and the Resin and Intermediates (R&I) segment.
Inter-segment sales are accounted for at prices generally approximating those
for similar transactions with unaffiliated customers and the elimination of
inter-segment sales revenue is included in the "Other" segment. Certain other
corporate expenses and eliminations are included in the "Other" segment.
Business segment assets consist primarily of customer receivables, inventories,
net property and goodwill. Cash, accounts receivable sold to a third party and
certain other assets not identified with a specific segment are included in the
"Other" segment.
ELASTOMERS &
(In millions) PERFORMANCE PERFORMANCE RESIN &
THREE MONTHS ENDED MARCH 31, 2002 TOTAL PLASTICS ADDITIVES DISTRIBUTION INTERMEDIATES OTHER
- ---------------------------------- -------- ----------- ------------ ------------ ------------- -------
Sales $ 613.2 $ 403.0 $ 91.6 $118.6 $ - $ -
Inter-segment revenues - 20.2 0.1 1.8 - (22.1)
-------- -------- ------ ------ ------ ------
Net sales 613.2 423.2 91.7 120.4 - (22.1)
======== ======== ====== ====== ====== ======
Operating income (loss) 6.5 12.4 2.3 1.6 (6.0) (3.8)
Employee separation and plant phase-out costs 0.9 0.9 - - - -
Period plant phase-out costs incurred 0.1 0.1 - - - -
Plant phase-out accelerated depreciation 0.5 0.5 - - - -
Equity investment employee severance and costs
associated with the temporary idling of a plant 0.7 - - - 0.7 -
-------- -------- ------ ------ ------ ------
Operating income (loss) before employee separation,
plant phase-out and closed facilities costs 8.7 13.9 2.3 1.6 (5.3) (3.8)
Depreciation and amortization 17.8 13.9 3.2 0.5 - 0.2
-------- -------- ------ ------ ------ ------
Operating income (loss) before employee
separation, plant phase-out and closed facilities
costs and depreciation and amortization $ 26.5 $ 27.8 $ 5.5 $ 2.1 $ (5.3) $ (3.6)
======== ======== ====== ====== ====== ======
Total assets $2,058.5 $1,450.6 $286.4 $142.9 $236.8 $(58.2)
Capital expenditures $ 10.7 $ 6.1 $ 1.4 $ 0.1 $ - $ 3.1
ELASTOMERS &
(In millions) PERFORMANCE PERFORMANCE RESINS &
THREE MONTHS ENDED MARCH 31, 2001 TOTAL PLASTICS ADDITIVES DISTRIBUTION INTERMEDIATES OTHER
- ---------------------------------- --------- ----------- ------------ ------------ ------------- -----
Sales $ 709.7 $ 481.3 $109.6 $118.8 $ - -
Inter-segment revenues - 7.5 0.1 2.3 $ - $(9.9)
-------- -------- ------ ------ ------ -----
Net sales $ 709.7 $ 488.8 $109.7 $121.1 $ - (9.9)
======== ======== ====== ====== ====== =====
Operating income (loss) (23.3) (1.9) 2.7 1.1 (15.4) (9.8)
Employee separation and plant phase-out costs 8.9 8.9 - - - -
Equity investment employee severance costs 1.0 - - - 1.0 -
Merger and integration costs 0.5 - - - - 0.5
Executives separation costs 4.8 - - - - 4.8
-------- -------- ------ ------ ------ -----
Operating income (loss) before employee separation,
plant phase-out, and merger and integration costs (8.1) 7.0 2.7 1.1 (14.4) (4.5)
Depreciation and amortization 26.4 20.4 4.6 0.8 - 0.6
-------- -------- ------ ------ ------ -----
Operating income (loss) before employee
separation, plant phase-out, merger and integration
costs and depreciation and amortization $ 18.3 $ 27.4 $ 7.3 $ 1.9 $(14.4) $(3.9)
======== ======== ====== ====== ====== =====
Total assets $2,351.9 $1,563.5 $321.9 $175.6 $247.0 $43.9
Capital expenditures $ 19.3 $ 6.0 $ 4.5 $ 0.3 $ - $ 8.5
11
NOTE N - COMMITMENTS AND CONTINGENCIES
There are pending or threatened against PolyOne or our subsidiaries various
claims, lawsuits and administrative proceedings, all arising from the ordinary
course of business with respect to employment, commercial, product liability and
environmental matters, which seek damages or other remedies. We believe that any
liability that may finally be determined will not have a material adverse effect
on our consolidated financial position.
PolyOne has accrued for environmental liabilities based upon estimates prepared
by our environmental engineers and consultants to cover probable future
environmental expenditures related to previously contaminated sites. The
accrual, totaling approximately $52.5 million at March 31, 2002, represents our
best estimate for the remaining remediation costs based upon information and
technology currently available. Depending upon the results of future testing and
the ultimate remediation alternatives to be undertaken at these sites, it is
possible that the ultimate costs to be incurred could be in excess of the
accrual recorded at March 31, 2002. Our estimate of the liability may be revised
as new regulations and technologies are developed or additional information is
obtained. Additional information related to our environmental liabilities is
included in Note N to the consolidated financial statements included in our
Annual Report on Form 10-K for the year ended December 31, 2001.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
PolyOne is a leading global polymer services company, which was formed on August
31, 2000 from the consolidation of The Geon Company and M.A. Hanna Company.
Senior management uses (1) operating income before special items and/or (2)
operating income before special items and depreciation and amortization (similar
to EBITDA, which is used by stock market analysts) to assess performance and
allocate resources to business segments. Special items include gains and losses
associated with specific strategic initiatives such as restructuring or
consolidation of operations, gains or losses attributable to acquisitions or
formation of joint ventures, and certain other one-time items. In addition,
management uses net income before special items as a measure of our overall
earnings performance. Operating income before special items and net income
before special items are non-GAAP measures and may not be comparable to
financial performance measures presented by other companies.
Below is a summary of consolidated operating results for the quarters ended
March 31, 2002 and 2001. Also summarized are the special items included in these
periods.
Summary of consolidated operating results
(In millions, except per share data)
Three Months Ended
March 31,
-----------------------
2002 2001
------ ------
Sales $613.2 $709.7
Operating income (loss) 6.5 (23.3)
Operating income (loss) before special items 8.7 (8.1)
Operating income before special items, depreciation and
amortization 26.5 18.3
Net loss $(57.3) $(21.4)
Cumulative effect of a change in accounting 53.7 -
------ ------
Net loss before cumulative effect of a change in
accounting (3.6) (21.4)
Special items - after-tax 2.3 9.6
------ ------
Net loss before cumulative effect of a change in
accounting and special items $ (1.3) $(11.8)
====== ======
Loss per share, diluted $(0.64) $(0.24)
Per share effect of change in accounting 0.60 -
------ ------
Loss per share before cumulative effect of a change in
accounting $(0.04) $(0.24)
====== ======
Effect per share of excluding special items, increase $ 0.03 $ 0.11
====== ======
13
Summary of Special Items
(In millions)
Three Month Ended
March 31,
---------------------
2002 2001
------ -------
Employee separation and plant phase-out costs $ (0.9) $ (8.9)
Period plant phase-out costs incurred (0.1) -
Plant phase-out accelerated depreciation (0.5) -
Equity affiliate - employee severance and costs
associated with the temporary idling of a plant (0.7) (1.0)
Merger and integration costs - (0.5)
Executives separation costs - (4.8)
------ ------
Subtotal - operating loss (2.2) (15.2)
Investment write-down and loss on sale (1.5) (0.6)
------ ------
Total pre-tax expense (3.7) (15.8)
Income tax benefit 1.4 6.2
------ ------
Total after-tax expense $ (2.3) $ (9.6)
====== ======
TOTAL COMPANY
Total first quarter 2002 sales of $613.2 million were the first sequential
quarter-to-quarter sales increase following three consecutive quarters of
declines. First quarter 2002 sales were $96.5 million lower than first quarter
2001 sales. First quarter 2002 sales were significantly below first quarter 2001
across most business segments. The decline reflects weak year-over-year demand
in the underlying markets and the U.S. economy, in particular automotive,
industrial, electronics and telecommunications. North American automotive
production in the first quarter 2002 was roughly equivalent with the first
quarter of 2001, although industry automotive sales were lower by 3%. Industrial
production was below first quarter 2001 levels by 2.5% on an annualized rate.
Industrial capacity utilization in the U.S. remained at 75% for the first
quarter of 2002, averaging four percentage points lower than the first quarter
of 2001.
Operating income of $6.5 million was reported in the first quarter 2002 as
compared to an operating loss of $23.3 million in the first quarter 2001.
Operating income before special items, depreciation and amortization (OIBSIDA)
was $26.5 million in the first quarter of 2002, which was $8.2 million above the
first quarter 2001. The OIBSIDA improvement was driven by restructuring
initiative savings ($9 million), economic driven cost savings programs ($4
million), combination of lower raw material costs, pricing and favorable product
mix ($10 million) and improvement in the results in the Resin & Intermediates
equity earnings ($9 million). The earnings improvement factors were partially
offset by lower sales volumes ($27 million).
Effective January 1, 2002, PolyOne adopted SFAS No. 142, "Goodwill and Other
Intangible Assets" (SFAS 142). In accordance with this statement, we ceased
amortization of all goodwill and indefinite lived intangible assets. During the
first quarter 2002, we also completed the transitional review for goodwill
impairments required under SFAS 142. The review indicated that goodwill related
to the 1999 acquisition of our Engineered Films operation was impaired as of
January 1, 2002. Accordingly, we measured and recognized a pre-tax charge of
$54.7 million ($53.7 million after-tax) as a cumulative effect of a change in
accounting principle. The first quarter of 2001 included pre-tax goodwill
amortization of $4.4 million ($3.6 million after-tax).
The first quarter 2002 net loss before cumulative effect of a change in
accounting was $3.6 million, which was $17.8 million better than the same
quarter in 2001. Before special items, the loss was $1.3 million, compared to a
loss of $11.8 million in the first quarter 2001. The 2002 special items relate
primarily to restructuring initiatives and the sale of the Australian PVC resin
operations, see table above. The effective income tax rate in the first quarter
2002
14
was 37.9% compared to 44.1% in the first quarter of 2001. The lower
effective income tax rate principally reflects the effect of permanent
differences, such as non-deductible goodwill amortization in 2001.
BUSINESS SEGMENT INFORMATION
Below is a summary of business segment information for the quarters ended March
31, 2002 and 2001.
Three Months Ended
March 31,
-------------------------
2002 2001
------ ------
Sales:
Performance Plastics $423.2 $488.8
Elastomers & Performance Additives 91.7 109.7
Distribution 120.4 121.1
Resin & Intermediates - -
Other (22.1) (9.9)
------ ------
$613.2 $709.7
====== ======
Operating income before special items, depreciation and amortization:
Performance Plastics $ 27.8 $ 27.4
Elastomers & Performance Additives 5.5 7.3
Distribution 2.1 1.9
Resin & Intermediates (5.3) (14.4)
Other (3.6) (3.9)
------ ------
$ 26.5 $ 18.3
====== ======
Operating income before special items:
Performance Plastics $ 13.9 $ 7.0
Elastomers & Performance Additives 2.3 2.7
Distribution 1.6 1.1
Resin & Intermediates (5.3) (14.4)
Other (3.8) (4.5)
------ ------
$ 8.7 $ (8.1)
====== ======
BUSINESS SEGMENT OPERATING RESULTS
PERFORMANCE PLASTICS had first quarter 2002 sales of $423.2 million, which were
13% below the first quarter 2001. A breakdown of the 2002 first quarter segment
sales, by primary product group, is as follows:
% Change in % Change in
% of 2002 Sales 2002 Lbs.
Sales vs. 2001 vs. 2001
----- ----------- -----------
North American Plastics Compounds and Colors
(PC&C) 54 -19 -12
International PC&C 22 -10 -8
Specialty Resin & Formulators 15 -2 1
Engineered Films 9 -6 -15
--- --- ---
Performance Plastic 100 -13 -10
The year-over-year lower sales in the quarter were primarily driven by lower
sales volumes in almost all markets and product lines. In addition,
International PC&C sales were unfavorably impacted by an Euro exchange impact of
approximately 5% as compared to the first quarter 2001.
OIBSIDA was $27.8 million in the first quarter of 2002, compared with $27.4
million in the first quarter of 2001. The ability to maintain earnings in the
first quarter 2002 versus first quarter 2001, while sales have decreased
15
approximately 13%, is a direct reflection of the impact being realized from the
restructuring initiatives and lower raw material costs. During the first quarter
of 2002, one manufacturing plant was closed.
ELASTOMERS & PERFORMANCE ADDITIVES sales were $91.7 million in the first quarter
of 2002, 16% below the first quarter of 2001. The first quarter 2002 sales
shortfall from the same quarter a year ago was primarily driven by a volume
decline related to lower industrial production, customers taking in-house
compound production due to low utilization of their internal compound operations
(4% of the 16% change) and reduced tire and tolling (4% of the 16% change). In
addition, we have lost some of the market share we had in Canada, as a result of
our closure of our Canadian operations in the fourth quarter of 2001 (1% of the
16% change).
OIBSIDA in the first quarter of 2002 was $5.5 million compared to $7.3 million
in the first quarter of 2001. Compared to the first quarter of 2001, continuing
"lean" manufacturing costs initiatives and plant shutdowns have resulted in
lower manufacturing costs versus last year, but have not been enough to offset
the adverse earnings impact from the sales volume declines.
DISTRIBUTION sales in the first quarter of 2002 were $120.4 million, compared to
$121.1 in the first quarter of 2001. The first quarter 2002 sales decline versus
first quarter 2001 was driven by lower selling prices as sales volumes were up
approximately 6% between the periods. During the first quarter of 2002, this
business began selling some vinyl products of North American PC&C, which
accounted for 4% of the volume growth. Without this sales volume, the
quarter-to-quarter sales comparison would have been down 5%. The selling price
declines followed the trend of lower material costs.
OIBSIDA in the first quarter of 2002 was $2.1 million, $0.2 million above the
first quarter of 2001, largely driven by cost improvement initiatives.
RESIN & INTERMEDIATES (R&I) operating loss before special items, consisting of
equity income from joint ventures, allocated overhead support cost and cost
associated with past operations was $5.3 million for the first quarter of 2002.
Equity income before special items from PolyOne's 24% interest in OxyVinyls
improved by $11.3 million between the first quarter 2001 and the first quarter
of 2002, primarily due to substantially lower natural gas prices. Lower natural
gas costs improved PolyOne's first quarter 2002 equity earnings by approximately
$10 million versus the first quarter of 2001. Average industry PVC resin selling
prices were lower year-to-year by approximately $0.07/lb, but this decline was
largely offset by lower ethylene costs. Year-to-year quarterly results were also
negatively impacted by the Sunbelt chlor-alkali joint venture by $2.3 million
largely driven by lower industry caustic selling prices.
OTHER consists primarily of corporate governance costs that are not allocated to
business segments. These unallocated costs before special items were $3.8
million in the first quarter of 2002.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2002, PolyOne had existing facilities to access capital
resources (receivables sale facility, revolving credit agreement, uncommitted
short-term credit lines and long-term debt) totaling $857 million. At the end of
the first quarter 2002, PolyOne had utilized $686 million of these facilities,
including $429 million of long-term debt. The effective available funds under
these facilities can vary, depending on the level of qualified receivables
outstanding, ratings on public debt and debt-related financial ratios.
On March 28, 2002, PolyOne amended and restated the credit agreement governing
the revolving credit facility. The amended and restated credit agreement
provided that, among other things, PolyOne was required to issue at least $200
million of unsecured debt. This financing was to provide additional liquidity
and reduce the risk associated with refinancing approximately $128 million of
existing long-term debt that would mature in 2003. The revolving credit
agreement requires the maintenance of certain defined financial ratios with
specified levels that would require limits on certain expenditures. For a
summary of these financial ratios, see the table that follows.
Of the capital resource facilities available to PolyOne as of March 31, 2002,
only the portion of the receivables sale facility that was actually sold
provided security in connection with the transfer of ownership of these
receivables. Each indenture governing our public debt allows for a specific
level of secured debt, above which security must be provided on each such
indenture. The receivables sale facility does not constitute debt under the
public debt indentures. Security is granted under the terms of the amended and
restated revolving credit agreement; however,
16
PolyOne does not anticipate borrowings in 2002 under the revolving credit
agreement which would result in security being provided to the outstanding
public unsecured debt. Security on the revolving credit agreement and public
debt, if applicable, will terminate when the borrowed debt-to-EBITDA ratio is
less than 3.50 to 1.0 for any two consecutive fiscal quarters.
As of March 31, 2002, PolyOne had guaranteed unconsolidated equity affiliate
debt of $97.5 million for SunBelt and $42.3 million for OxyVinyls.
On April 23, 2002, PolyOne issued $200 million of 8.875% senior notes that
mature in 2012. We used the proceeds from the offering to repay all amounts
outstanding under our revolving bank credit facility; to repay a loan held by
one of our German subsidiaries; to reduce a portion of the amount sold under our
receivables sale facility; to repay borrowings under our short-term lines of
credit; and to pay related fees and expenses. The senior notes rank equally with
all of PolyOne's other senior unsecured indebtedness.
The effective available funds to PolyOne under our existing facilities can vary,
depending on the level of qualified receivables outstanding, ratings on public
debt and debt-related financial ratios. As of April 23, 2002, after giving
effect to the sale of $200 million of 8.875% notes and related use of proceeds
in April 2002, approximately $117 million of the existing capital resource
facilities were available to be drawn while remaining in compliance with the
facilities.
The following table summarizes the defined financial ratios for 2002 included in
the March 28, 2002, amendment to the revolving credit agreement.
Tangible
Borrowed Assets-to-
Interest Debt-to-EBITDA Indebtedness
Coverage Ratio Ratio Ratio
(Minimum) (Maximum) (Minimum)
-------------- -------------- ------------
Agreement compliance
First quarter of 2002 2.75 Waived 1.00
Second quarter of 2002 2.75 5.70 1.00
Third quarter of 2002 2.75 5.50 1.00
Fourth quarter of 2002 3.00 5.25 1.00
Limitations on dividends and stock
repurchases (1), capital
expenditures (2) and acquisitions (3)
Each quarter 3.99
(1) Payments for dividends and stock repurchases would be restricted to $6.0
million per quarter, excluding certain allowable stock repurchase
transactions as defined in the revolving credit agreement, as amended March
28, 2002.
(2) Capital expenditures would be restricted to $33.0 million in a quarter and
$88.0 million in a fiscal year.
(3) New acquisition investments would be limited to $25.0 million in 2002 and
$37.0 million in 2003 for specific transactions.
For the first quarter of 2002, PolyOne utilized $40.6 million of cash for
operating and investing activities. Operating activities utilized $32.0 million
of cash, driven by a $41.2 million increase in commercial working capital (trade
accounts receivable before the receivables sold, FIFO inventories and accounts
payable) related primarily to higher sales levels. March 2002 sales exceeded
December 2001 sales by approximately $57 million. In the first quarter 2002,
capital expenditures were driven by projectOne (common SAP information system
platform) and the North American PC&C manufacturing restructuring initiatives.
Capital expenditures for 2002 are projected to be between $75 million to $80
million. Nearly half of the projected capital spending is associated with the
North American PC&C manufacturing restructuring and the new business information
system. Furthermore, PolyOne projects that cash spending for restructuring
initiatives announced and accrued in 2001 in relation to employee separation and
plant phase-out costs will range between $25 million and $30 million over the
last nine months of 2002.
17
Cash provided by financing activities during the first three months of 2002 was
$45.5 million reflecting short-term debt borrowings of $49.2 million used to
fund net cash used by operating and investing activities of $40.6 million and to
pay dividends of $5.8 million. Net proceeds of $2.7 million were received from
the exercise of stock options.
Management believes that it will be able to continue to manage and control
working capital, discretionary spending and capital expenditures in order to
assure adequate levels of liquidity in 2002 and beyond to support normal
operations, to complete a 2002 acquisition and to execute the announced
restructuring initiatives that are projected to enhance PolyOne's future
profitability.
ENVIRONMENTAL MATTERS
PolyOne is subject to various laws and regulations concerning environmental
matters. We are committed to a long-term environmental protection program that
reduces releases of hazardous materials into the environment as well as to the
remediation of identified existing environmental concerns.
We have been notified by federal and state environmental agencies and by private
parties that we may be a potentially responsible party in connection with
several environmental sites. Based on current information and estimates prepared
by PolyOne's environmental engineers and consultants, PolyOne, at March 31,
2002, had accruals totaling $52.5 million to cover probable future environmental
expenditures relating to previously contaminated sites. The accrual represents
our best estimate within our range of estimated costs associated with probable
remediation, based upon information and technology currently available and our
view of the most likely remedy. Depending upon the results of future testing,
the ultimate remediation alternatives undertaken, changes in regulations, new
information and other factors, it is possible that PolyOne could incur costs in
excess of the accrual at March 31, 2002. Our estimate of the liability may be
revised as new regulations, technologies or additional information is obtained.
Certain factors that may affect these forward-looking comments are discussed
under "Cautionary Note on Forward-Looking Statements."
Additional information related to our environmental liabilities is included in
Note N to the consolidated financial statements included in our Annual Report on
Form 10-K for the year ended December 31, 2001.
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS
In this Report on Form 10-Q, 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, including, for
example, statements about business outlook, assessment of market conditions,
strategies, future plans, future sales, prices for major products, inventory
levels, capital spending and tax rates. These forward-looking statements 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. Factors that could cause actual results to
differ materially include, but are not limited to: (1) an inability to achieve
or delays in achieving savings related to consolidation and restructuring
programs; (2) delays in achieving or inability to achieve our strategic value
capture initiatives, including cost reductions and employee productivity goals,
or achieving less than the anticipated financial benefit from the initiatives;
(3) 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; (4) changes in
world, regional or U.S. plastic, rubber and PVC consumption growth rates
affecting our markets; (5) 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 we participate; (6) fluctuations in
raw material prices and supply and energy prices and supply, in particular
fluctuations outside the normal range of industry cycles; (7) production outages
or material costs associated with scheduled or unscheduled maintenance programs;
(8) costs or difficulties and delays related to the operation of joint venture
entities; (9) lack of day-to-day operating control, including procurement of raw
material feedstocks, of other equity or joint venture affiliates; (10) lack of
direct control over the reliability of delivery and quality of the primary raw
materials utilized in our products; (11) partial control over investment
decisions and dividend distribution policy of the OxyVinyls partnership and
other minority equity holdings of PolyOne; (12) an inability to launch new
products and/or services that fit strategically with and add value to our
business; (13) the possibility of goodwill impairment; (14) an inability to
maintain any required licenses or permits; and (15) an inability to comply with
any environmental laws and regulations.
18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
PolyOne is exposed to market risk from changes in interest rates on debt
obligations and from changes in foreign currency exchange rates. Information
related to these risks and our management of the exposure is included in
"Management's Analysis - Consolidated Statements of Cash Flows" in the 2001
Annual Report under the caption "Market Risk Disclosures" included in our
Annual Report on Form 10-K. There have been no material changes in the market
risk faced by us from December 31, 2001 to March 31, 2002. We have updated the
disclosure concerning our financing arrangements, which is included in Note K
in this Form 10-Q.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits:
Exhibit No.
Under Reg. Form 10-Q
S-K, Item 601 Exhibit No. Description of Exhibit
- ------------- ----------- -----------------------------------------------------------------
(4) 4.1 Indenture, dated April 23, 2002, by and between PolyOne
Corporation, as issuer, and The Bank of New York, as trustee,
including the form of PolyOne's 8.875% Senior Notes due May 1,
2012 is incorporated by reference to Exhibit 4.1 to the
Registration Statement on Form S-4 as filed with the Securities
and Exchange Commission on May 2, 2002 (Reg. No. 333-87472)
(4) 4.2 Registration Rights Agreement, dated as of April 23, 2002, by and
among PolyOne Corporation and Salomon Smith Barney, Inc. and
Deutsche Bank Securities Inc., as representatives of the initial
purchasers, is incorporated by reference to Exhibit 4.2 to the
Registration Statement on Form S-4 as filed with the Securities
and Exchange Commission on May 2, 2002 (Reg. No. 333-87472)
(10) 10.1 U.S. $250 million Fifth Amended and Restated Trade Receivables
Purchase and Sale Agreement, dated April 10, 2002 among PolyOne
Funding Corporation, PolyOne Corporation , CIESCO, L.P.,
Corporate Receivables Corporation and Citicorp North America,
Inc. as Agent
(10) 10.2 U.S. $250 million Fourth Amended and Restated Parallel Purchase
Commitment date as of April 10, 2002 among PolyOne Funding
Corporation, PolyOne Corporation, the Banks Named therein and
Citicorp North America, N.A., as agent
(b) Reports on Form 8-K from January 1, 2002 through March 31, 2002:
- Form 8-K filed on January 16, 2002 announced a press release filed on
January 11, 2002, whereby PolyOne announced a divestiture of its 37.4
percent equity interest in Australian Vinyl Corporation joint venture.
- Form 8-K filed on February 8, 2002 announced a press release filed on
January 30, 2002, whereby PolyOne announced fourth quarter 2001
earnings.
- Form 8-K filed on February 14, 2002 announced a press release filed on
February 7, 2002, whereby PolyOne announced the declaration of a
dividend to be paid in March 2002.
19
SIGNATURES
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 thereunto duly authorized.
May 15, 2002 POLYONE CORPORATION
By:
/s/ W. D. Wilson
----------------------------------------------------
W. D. Wilson
Vice President and Chief Financial Officer
(Authorized Officer and Principal Financial Officer)
/s/ G. P. Smith
-----------------------------------------------------
G. P. Smith
Corporate Controller and Assistant Treasurer
(Authorized Officer and Principal Accounting Officer)
20
POLYONE CORPORATION
INDEX TO EXHIBITS
Exhibit Description
- ------- -----------------------------------------------------------------
4.1 Indenture, dated April 23, 2002, by and between PolyOne
Corporation, as issuer, and The Bank of New York, as trustee,
including the form of PolyOne's 8.875% Senior Notes due May 1,
2012 is incorporated by reference to Exhibit 4.1 to the
Registration Statement on Form S-4 as filed with the Securities
and Exchange Commission on May 2, 2002 (Reg. No. 333-87472)
4.2 Registration Rights Agreement, dated as of April 23, 2002, by and
among PolyOne Corporation and Salomon Smith Barney, Inc. and
Deutsche Bank Securities Inc., as representatives of the initial
purchasers, is incorporated by reference to Exhibit 4.2 to the
Registration Statement on Form S-4 as filed with the Securities
and Exchange Commission on May 2, 2002 (Reg. No. 333-87472)
10.1 U.S. $250 million Fifth Amended and Restated Trade Receivables
Purchase and Sale Agreement, dated April 10, 2002 among PolyOne
Funding Corporation, PolyOne Corporation , CIESCO, L.P.,
Corporate Receivables Corporation and Citicorp North America,
Inc. as Agent is filed herewith
10.2 U.S. $250 million Fourth Amended and Restated Parallel Purchase
Commitment date as of April 10, 2002 among PolyOne Funding
Corporation, PolyOne Corporation, the Banks Named therein and
Citicorp North America, N.A., as agent is filed herewith
21