PolyOne Announces Record Fourth Quarter and Full Year 2015 Results

Attachment 1

 PolyOne Corporation

Summary of Condensed Consolidated Statements of Income (Unaudited)

(In millions, except per share data)

Three Months Ended
December 31,

Year Ended
December 31,

2015

2014

2015

2014

Sales

$

775.8

$

869.3

$

3,377.6

$

3,835.5

Operating income (loss)

31.3

(14.3)

250.9

155.1

Net income (loss) from continuing operations attributable to PolyOne shareholders

3.1

(14.6)

144.6

78.0

Basic earnings (loss) per share from continuing operations attributable to PolyOne shareholders

$

0.04

$

(0.16)

$

1.65

$

0.85

Diluted earnings (loss) per share from continuing operations attributable to PolyOne shareholders

$

0.04

$

(0.16)

$

1.63

$

0.83

Senior management uses comparisons of adjusted net income from continuing operations attributable to PolyOne shareholders and diluted earnings per share (EPS) from continuing operations attributable to PolyOne shareholders, excluding special items, to assess performance and facilitate comparability of results. Below is a reconciliation of these non-GAAP financial measures to their most directly comparable measures calculated and presented in accordance with U.S. GAAP (GAAP).

Three Months Ended
2015年12月31日

Three Months Ended
2014年12月31日

Reconciliation to Condensed Consolidated Statements of Income

$

EPS

$

EPS

Net income  (loss) from continuing operations attributable to PolyOne shareholders

$

3.1

$

0.04

$

(14.6)

$

(0.16)

Special items, after tax (Attachment 3)

30.4

0.35

47.5

0.52

Adjusted net income / EPS - excluding special items

$

33.5

$

0.39

$

32.9

$

0.36

Year Ended

Year Ended

2015年12月31日

2014年12月31日

Reconciliation to Condensed Consolidated Statements of Income

$

EPS

$

EPS

Net income from continuing operations attributable to PolyOne shareholders

$

144.6

$

1.63

$

78.0

$

0.83

Special items, after tax (Attachment 3)

28.9

0.33

90.5

0.97

Adjusted net income / EPS - excluding special items

$

173.5

$

1.96

$

168.5

$

1.80

Attachment 2

PolyOne Corporation

Condensed Consolidated Statements of Income (Unaudited)

(In millions, except per share data)

Three Months Ended
December 31,

Year Ended
December 31,

2015

2014

2015

2014

Sales

$

775.8

$

869.3

$

3,377.6

$

3,835.5

Cost of sales

618.9

716.7

2,696.1

3,127.6

Gross margin

156.9

152.6

681.5

707.9

Selling and administrative expense

125.6

166.9

430.6

552.8

Operating income (loss)

31.3

(14.3)

250.9

155.1

Interest expense, net

(15.6)

(15.6)

(64.1)

(62.2)

Debt extinguishment costs

(16.4)

—

(16.4)

—

Other income (expense), net

0.3

(1.3)

(2.7)

(4.5)

(Loss) income from continuing operations, before income taxes

(0.4)

(31.2)

167.7

88.4

Income tax benefit (expense)

3.4

16.2

(23.0)

(11.2)

Net income (loss) from continuing operations

3.0

(15.0)

144.7

77.2

Income from discontinued operations, net of income taxes

—

—

—

1.2

Net income (loss)

3.0

(15.0)

144.7

78.4

 Net loss (income) attributable to noncontrolling interests

0.1

0.4

(0.1)

0.8

Net income (loss) attributable to PolyOne common shareholders

$

3.1

$

(14.6)

$

144.6

$

79.2

Earnings (loss) per common share attributable to PolyOne common shareholders - Basic:

Continuing operations

$

0.04

$

(0.16)

$

1.65

$

0.85

Discontinued operations

—

—

—

0.01

Total

$

0.04

$

(0.16)

$

1.65

$

0.86

Earnings (loss) per common share attributable to PolyOne common shareholders - Diluted:

Continuing operations

$

0.04

$

(0.16)

$

1.63

$

0.83

Discontinued operations

—

—

—

0.02

Total

$

0.04

$

(0.16)

$

1.63

$

0.85

Cash dividends declared per share of common stock

$

0.12

$

0.10

$

0.42

$

0.34

Weighted-average shares used to compute earnings per share:

Basic

85.8

90.1

87.8

92.3

Diluted

86.6

90.1

88.7

93.5

Attachment 3

PolyOne Corporation

Summary of Special Items (Unaudited)

(In millions, except per share data)

Special items ⁽¹⁾

Three Months Ended
December 31,

Year Ended
December 31,

2015

2014

2015

2014

Cost of sales:

Restructuring costs

$

(8.1)

$

(13.1)

$

(32.9)

$

(54.0)

  Environmental remediation costs

(1.5)

(2.6)

(9.3)

(10.3)

  Reimbursement of previously incurred environmental costs

0.9

2.1

3.5

3.7

  Pension & other post-retirement benefits - mark-to-market adjustment

(1.0)

(2.0)

(1.0)

(2.0)

  Acquisition related costs

—

(0.2)

—

(0.2)

     Impact on cost of sales

(9.7)

(15.8)

(39.7)

(62.8)

Selling and administrative expense:

  Employee separation and restructuring costs

(7.5)

(10.9)

(14.2)

(49.6)

  Pension & other post-retirement benefits - mark-to-market adjustment

(10.6)

(54.5)

(10.6)

(54.5)

  Legal related and other

(2.4)

3.5

(3.3)

5.6

  Acquisition/divestiture related costs

(1.2)

(2.5)

(3.5)

(3.6)

     Impact on selling and administrative expense

(21.7)

(64.4)

(31.6)

(102.1)

     Impact on operating income (loss)

(31.4)

(80.2)

(71.3)

(164.9)

  Debt extinguishment costs

(16.4)

—

(16.4)

—

  Other income, net

—

0.1

0.1

0.7

Impact on income (loss) from continuing operations before income taxes

(47.8)

(80.1)

(87.6)

(164.2)

Income tax benefit on above special items

17.6

29.0

31.3

63.2

Tax adjustments ⁽²⁾

(0.2)

3.6

27.4

10.5

Impact of special items on net income (loss) attributable to PolyOne Shareholders

$

(30.4)

$

(47.5)

$

(28.9)

$

(90.5)

Diluted adjusted earnings per common share impact

$

(0.35)

$

(0.52)

$

(0.33)

$

(0.97)

Weighted average shares used to compute adjusted earnings per share:

  Diluted

86.6

91.3

88.7

93.5

⁽¹⁾

Special items are a non-GAAP financial measure and are used to determine adjusted earnings. Special items include charges related to specific strategic initiatives or financial restructuring such as: consolidation of operations; debt extinguishment costs; costs incurred directly in relation to acquisitions or divestitures; employee separation costs resulting from personnel reduction programs, plant phase-in costs, executive separation agreements; asset impairments; mark-to-market adjustments associated with actuarial gains and losses on pension and other post-retirement benefit plans; environmental remediation costs, fines, penalties and related insurance recoveries related to facilities no longer owned or closed in prior years; gains and losses on the divestiture of operating businesses, joint ventures and equity investments; gains and losses on facility or property sales or disposals; results of litigation, fines or penalties, where such litigation (or action relating to the fines or penalties) arose prior to the commencement of the performance period; one-time, non-recurring items; and the effect of changes in accounting principles or other such laws or provisions affecting reported results.

⁽²⁾

Tax adjustments include the net tax expense/benefit from one-time income tax items, the set-up or reversal of uncertain tax position reserves and deferred income tax valuation allowance adjustments.

Attachment 4

PolyOne Corporation

Condensed Consolidated Balance Sheets

(In millions)

Year Ended
December 31,
2015

Year Ended
December 31,
2014

Assets

Current assets:

Cash and cash equivalents

$

279.8

$

238.6

Accounts receivable, net

347.0

396.8

Inventories, net

287.0

309.0

Other current assets

47.0

54.0

Total current assets

960.8

998.4

Property, net

583.5

596.7

Goodwill

597.7

590.6

Intangible assets, net

344.6

362.7

Other non-current assets

108.5

117.9

Total assets

$

2,595.1

$

2,666.3

Liabilities and Shareholders' Equity

Current liabilities:

Short-term and current portion of long-term debt

$

18.6

$

61.7

Accounts payable

351.6

365.9

Accrued expenses and other liabilities

127.9

172.9

Total current liabilities

498.1

600.5

Non-current liabilities:

Long-term debt

1,128.0

948.9

Pension and other post-retirement benefits

77.5

103.7

Other non-current liabilities

186.3

236.0

Total non-current liabilities

1,391.8

1,288.6

Shareholders' equity:

PolyOne shareholders' equity

704.2

776.3

Noncontrolling interests

1.0

0.9

Total equity

705.2

777.2

Total liabilities and shareholders' equity

$

2,595.1

$

2,666.3

Attachment 5

PolyOne Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)

Year Ended
December 31,

2015

2014

Operating activities

Net income

$

144.7

$

78.4

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

98.1

100.8

Accelerated depreciation and fixed asset charges associated with restructuring activities

17.6

33.0

Debt extinguishment costs

16.4

—

Share-based compensation expense

9.1

14.2

Gain on sale of business

—

(1.2)

Changes in assets and liabilities, net of the effect of acquisitions and divestitures:

Decrease in accounts receivable

42.6

24.4

Decrease in inventories

21.4

28.4

Decrease in accounts payable

(8.3)

(15.2)

(Decrease) increase in pension and other post-retirement benefits

(24.6)

30.0

Decrease in accrued expenses and other assets and liabilities - net

(89.8)

(84.4)

Net cash provided by operating activities

227.2

208.4

Investing activities

Capital expenditures

(91.2)

(92.8)

Business acquisitions, net of cash acquired

(18.3)

(47.2)

Proceeds from sale of businesses and other assets

3.0

28.2

Net cash used by investing activities

(106.5)

(111.8)

Financing activities

Repayment of long-term debt

(365.3)

(8.0)

Premium on early extinguishment of long-term debt

(13.4)

—

Net proceeds from long-term debt

547.3

—

Debt financing costs

(6.0)

—

Borrowing under credit facilities

891.3

168.6

Repayment under credit facilities

(936.8)

(122.8)

Purchase of common shares for treasury

(156.1)

(233.2)

Exercise of stock awards

4.3

6.9

Cash dividends paid

(35.7)

(29.9)

Net cash used by financing activities

(70.4)

(218.4)

Effect of exchange rate changes on cash

(9.1)

(4.8)

Increase (decrease) in cash and cash equivalents

41.2

(126.6)

Cash and cash equivalents at beginning of year

238.6

365.2

Cash and cash equivalents at end of year

$

279.8

$

238.6

Attachment 6

PolyOne Corporation

Segment Results (Unaudited)

(In millions)

Operating income at the segment level does not include: special items as defined on Attachment 3; corporate general and administration costs that are not allocated to segments; intersegment sales and profit eliminations; share-based compensation costs; and certain other items that are not included in the measure of segment profit and loss that is reported to and reviewed by the chief operating decision maker. These costs are included in Corporate and eliminations.

Three Months Ended
December 31,

Year Ended
December 31,

2015

2014

2015

2014

Sales:

  Color, Additives and Inks

$

184.9

$

190.5

$

810.7

$

850.8

  特种工程材料

125.2

137.3

542.8

598.3

  Designed Structures and Solutions

110.4

127.6

453.5

617.5

     Specialty Platform

420.5

455.4

1,807.0

2,066.6

  Performance Products and Solutions

152.7

184.8

694.1

816.6

  PolyOne Distribution

242.1

262.8

1,034.1

1,114.4

  Corporate and eliminations

(39.5)

(33.7)

(157.6)

(162.1)

     Sales

$

775.8

$

869.3

$

3,377.6

$

3,835.5

Gross margin:

  Color, Additives and Inks

$

67.0

$

65.1

$

293.8

$

293.5

  特种工程材料

37.3

37.4

161.0

163.2

  Designed Structures and Solutions

12.2

19.3

55.4

97.5

     Specialty Platform

116.5

121.8

510.2

554.2

  Performance Products and Solutions

24.8

22.8

101.9

109.0

  PolyOne Distribution

27.2

26.1

114.6

114.0

  Corporate and eliminations

(11.6)

(18.1)

(45.2)

(69.3)

     Gross margin

$

156.9

$

152.6

$

681.5

$

707.9

Selling and administrative expense:

  Color, Additives and Inks

$

39.5

$

38.4

$

158.4

$

168.6

  特种工程材料

20.9

20.6

81.4

90.8

  Designed Structures and Solutions

10.4

11.4

41.6

52.4

     Specialty Platform

70.8

70.4

281.4

311.8

  Performance Products and Solutions

11.3

11.1

44.5

45.9

  PolyOne Distribution

11.6

11.1

46.6

45.8

  Corporate and eliminations

31.9

74.3

58.1

149.3

     Selling and administrative expense

$

125.6

$

166.9

$

430.6

$

552.8

Operating income:

  Color, Additives and Inks

$

27.5

$

26.7

$

135.4

$

124.9

  特种工程材料

16.4

16.8

79.6

72.4

  Designed Structures and Solutions

1.8

7.9

13.8

45.1

     Specialty Platform

45.7

51.4

228.8

242.4

  Performance Products and Solutions

13.5

11.7

57.4

63.1

  PolyOne Distribution

15.6

15.0

68.0

68.2

  Corporate and eliminations

(43.5)

(92.4)

(103.3)

(218.6)

     Operating income (loss)

$

31.3

$

(14.3)

$

250.9

$

155.1

The Specialty Platform consists of our three specialty segments: Color, Additives and Inks; Specialty Engineered Materials; and Designed Structures and Solutions. We present Specialty Platform sales, gross margin, selling and administrative expense, and operating income because management believes that this is useful information to investors by highlighting our collective progress in advancing our specialization strategy.

Attachment 7

PolyOne Corporation

Reconciliation of Non-GAAP Financial Measures (Unaudited)

(In millions, except per share data)

Senior management uses gross margin before special items and operating income before special items to assess performance and allocate resources because senior management believes that these measures are useful in understanding current profitability levels and that current levels may serve as a basis for future performance. In addition, operating income before the effect of special items is a component of PolyOne annual and long-term employee incentive plans and is used in debt covenant computations. Below is a reconciliation of non-GAAP financial measures to the most directly comparable measures calculated and presented in accordance with GAAP. See Attachment 3 for a definition of special items.

Three Months Ended
December 31,

Year Ended
December 31,

Reconciliation to Consolidated Statements of Income

2015

2014

2015

2014

Sales

$

775.8

$

869.3

$

3,377.6

$

3,835.5

Gross margin before special items

166.6

168.4

721.2

770.7

Special items in gross margin (Attachment 3)

(9.7)

(15.8)

(39.7)

(62.8)

  Gross margin - GAAP

$

156.9

$

152.6

$

681.5

$

707.9

Gross margin, before special items, as a percent of sales

21.5

%

19.4

%

21.4

%

20.1

%

Operating income adjusted

62.7

65.9

322.2

320.0

Special items in operating income (Attachment 3)

(31.4)

(80.2)

(71.3)

(164.9)

  Operating income (loss) - GAAP

$

31.3

$

(14.3)

$

250.9

$

155.1

Operating income, before special items, as a percent of sales

8.1

%

7.6

%

9.5

%

8.3

%

The tables below reconcile pre-special income tax expense and the pre-special effective tax rate to their most comparable US GAAP figures.

Three Months Ended

Three Months Ended

2015年12月31日

2014年12月31日

GAAP
结果

Special
Items

Pre-
special
结果

GAAP
结果

Special
Items

Pre-
special
结果

(Loss) income from continuing operations, before income taxes

$

(0.4)

$

47.8

$

47.4

$

(31.2)

$

80.1

$

48.9

Income tax benefit - GAAP

3.4

—

3.4

16.2

—

16.2

Income tax impact of special items (Attachment 3)

—

(17.6)

(17.6)

—

(29.0)

(29.0)

Tax adjustments (Attachment 3)

—

0.2

0.2

—

(3.6)

(3.6)

Income tax benefit (expense)

$

3.4

$

(17.4)

$

(14.0)

$

16.2

$

(32.6)

$

(16.4)

Effective Tax Rate

nm

29.5

%

51.9

%

33.5

%

nm - not meaningful

Year Ended

Year Ended

2015年12月31日

2014年12月31日

GAAP
结果

Special
Items

Pre-
special
结果

GAAP
结果

Special
Items

Pre-
special
结果

Income from continuing operations, before income taxes

$

167.7

$

87.6

$

255.3

$

88.4

$

164.2

$

252.6

Income tax expense - GAAP

(23.0)

—

(23.0)

(11.2)

—

(11.2)

Income tax impact of special items (Attachment 3)

—

(31.3)

(31.3)

—

(63.2)

(63.2)

Tax adjustments (Attachment 3)

—

(27.4)

(27.4)

—

(10.5)

(10.5)

Income tax expense

$

(23.0)

$

(58.7)

$

(81.7)

$

(11.2)

$

(73.7)

$

(84.9)

Effective Tax Rate

13.7

%

32.0

%

12.7

%

33.6

%

Liquidity is calculated as follows:

 (In millions)

As of 2015年12月31日

 Cash and cash equivalents

$

279.8

 Revolving credit availability

341.9

 Liquidity

$

621.7