Cover Page
Cover Page | 6 Months Ended |
Jun. 30, 2019shares | |
Cover page. | |
Document Type | 10-Q |
Document Quarterly Report | true |
Document Period End Date | Jun. 30, 2019 |
Document Transition Report | false |
Entity File Number | 1-16091 |
Entity Registrant Name | POLYONE CORP |
Entity Incorporation, State or Country Code | OH |
Entity Tax Identification Number | 34-1730488 |
Entity Address, Address Line One | 33587 Walker Road, |
Entity Address, City or Town | Avon Lake, |
Entity Address, State or Province | OH |
Entity Address, Postal Zip Code | 44012 |
City Area Code | 440 |
Local Phone Number | 930-1000 |
Title of 12(b) Security | Common Shares, par value $.01 per share |
Trading Symbol | POL |
Security Exchange Name | NYSE |
Entity Current Reporting Status | Yes |
Entity Interactive Data Current | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Small Business | false |
Entity Emerging Growth Company | false |
Entity Shell Company | false |
Entity Common Shares, Shares Outstanding | 76,870,558 |
Amendment Flag | false |
Entity Central Index Key | 0001122976 |
Document Fiscal Year Focus | 2019 |
Document Fiscal Period Focus | Q2 |
Current Fiscal Year End Date | --12-31 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income (Unaudited) - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Statement [Abstract] | ||||
Sales | $ 903.8 | $ 914.8 | $ 1,803.7 | $ 1,816.4 |
Cost of sales | 698.3 | 718.3 | 1,401.9 | 1,421.4 |
Gross margin | 205.5 | 196.5 | 401.8 | 395 |
Selling and administrative expense | 133.9 | 119.1 | 261.9 | 238.8 |
Operating income | 71.6 | 77.4 | 139.9 | 156.2 |
Interest expense, net | (16.2) | (16.1) | (32.1) | (31.6) |
Debt extinguishment costs | 0 | (0.1) | 0 | (0.1) |
Other income, net | 0.8 | 0.4 | 1 | 1.5 |
Income from continuing operations before income taxes | 56.2 | 61.6 | 108.8 | 126 |
Income tax expense | (14.1) | (10.1) | (28.4) | (26.8) |
Net income from continuing operations | 42.1 | 51.5 | 80.4 | 99.2 |
Loss from discontinued operations, net of income taxes | 0 | (0.3) | 0 | (1.1) |
Net income | 42.1 | 51.2 | 80.4 | 98.1 |
Net loss (income) attributable to noncontrolling interests | 0 | 0.1 | (0.1) | 0.1 |
Net income attributable to PolyOne common shareholders | $ 42.1 | $ 51.3 | $ 80.3 | $ 98.2 |
Earnings (loss) per common share attributable to PolyOne common shareholders - Basic: | ||||
Earnings (loss) from continuing operations per common share attributable to PolyOne common shareholders - Basic (in USD per share) | $ 0.54 | $ 0.65 | $ 1.04 | $ 1.24 |
Earnings (loss) from discontinued operations per common share attributable to PolyOne common shareholders - Basic (in USD per share) | 0 | (0.01) | 0 | (0.02) |
Earnings (loss) per common share attributable to PolyOne common shareholders - Basic (in USD per share) | 0.54 | 0.64 | 1.04 | 1.22 |
Earnings (loss) per common share attributable to PolyOne common shareholders - Diluted: | ||||
Earnings (loss) from continuing operations per common share attributable to PolyOne common shareholders - Diluted (in USD per share) | 0.54 | 0.64 | 1.03 | 1.23 |
Earnings (loss) from discontinued operations per common share attributable to PolyOne common shareholders - Diluted (in USD per share) | 0 | (0.01) | 0 | (0.02) |
Earnings (loss) per common share attributable to PolyOne common shareholders - Diluted (in USD per share) | $ 0.54 | $ 0.63 | $ 1.03 | $ 1.21 |
Weighted-average shares used to compute earnings per common share: | ||||
Basic (in shares) | 77.3 | 79.9 | 77.5 | 80.2 |
Plus dilutive impact of share-based compensation (in shares) | 0.4 | 0.9 | 0.5 | 0.8 |
Diluted (in shares) | 77.7 | 80.8 | 78 | 81 |
Anti-dilutive shares not included in diluted common shares outstanding (in shares) | 0.8 | 0 | 0.9 | 0.1 |
Cash dividends declared per share of common stock (in USD per share) | $ 0.195 | $ 0.175 | $ 0.390 | $ 0.350 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 42.1 | $ 51.2 | $ 80.4 | $ 98.1 |
Other comprehensive income, net of tax | ||||
Translation adjustments and related hedging instruments | 1.6 | (26.8) | 5.8 | (16.2) |
Cash flow hedges | (1.9) | 0 | (2.9) | 0 |
Total comprehensive income | 41.8 | 24.4 | 83.3 | 81.9 |
Comprehensive loss (income) attributable to noncontrolling interests | 0 | 0.1 | (0.1) | 0.1 |
Comprehensive income attributable to PolyOne common shareholders | $ 41.8 | $ 24.5 | $ 83.2 | $ 82 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Millions | Jun. 30, 2019 | Dec. 31, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 125.5 | $ 170.9 |
Accounts receivable, net | 473.8 | 413.4 |
Inventories, net | 353.3 | 344.7 |
Other current assets | 67.2 | 69.8 |
Total current assets | 1,019.8 | 998.8 |
Property, net | 498.5 | 495.4 |
Goodwill | 696.9 | 650.3 |
Intangible assets, net | 485.7 | 423.4 |
Operating lease assets, net | 73.7 | 0 |
Other non-current assets | 156 | 155.4 |
Total assets | 2,930.6 | 2,723.3 |
Current liabilities: | ||
Short-term and current portion of long-term debt | 18.7 | 19.4 |
Accounts payable | 398 | 399 |
Current operating lease obligations | 23.1 | 0 |
Accrued expenses and other current liabilities | 167.5 | 139.2 |
Total current liabilities | 607.3 | 557.6 |
Non-current liabilities: | ||
Long-term debt | 1,392.5 | 1,336.2 |
Pension and other post-retirement benefits | 53.8 | 54.3 |
Non-current operating lease obligations | 50.6 | 0 |
Other non-current liabilities | 255.3 | 234.6 |
Total non-current liabilities | 1,752.2 | 1,625.1 |
Equity: | ||
PolyOne shareholders’ equity | 570.4 | 540 |
Noncontrolling interests | 0.7 | 0.6 |
Total equity | 571.1 | 540.6 |
Total liabilities and equity | $ 2,930.6 | $ 2,723.3 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Operating Activities | ||
Net income | $ 80.4 | $ 98.1 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 46.9 | 45 |
Debt extinguishment costs | 0 | 0.1 |
Share-based compensation expense | 5.7 | 5.5 |
Change in assets and liabilities, net of the effect of acquisitions: | ||
Increase in accounts receivable | (46.1) | (87) |
Decrease in inventories | 9.6 | 15.5 |
(Decrease) increase in accounts payable | (8.2) | 34 |
Decrease in pension and other post-retirement benefits | (4) | (5) |
Increase in accrued expenses and other assets and liabilities, net | 15.1 | 2.7 |
Net cash provided by operating activities | 99.4 | 108.9 |
Investing Activities | ||
Capital expenditures | (26.5) | (31.5) |
Business acquisitions, net of cash acquired | (119.6) | (98.6) |
Sale of and proceeds from other assets | 3.9 | 0 |
Net cash used by investing activities | (142.2) | (130.1) |
Financing Activities | ||
Borrowings under credit facilities | 607.4 | 552.8 |
Repayments under credit facilities | (548.9) | (535.9) |
Purchase of common shares for treasury | (26.9) | (45.3) |
Cash dividends paid | (30.7) | (28.2) |
Repayment of long-term debt | (3.3) | (3.3) |
Payments of withholding tax on share awards | (1.9) | (2.4) |
Debt financing costs | (0.2) | (0.5) |
Net cash used by financing activities | (4.5) | (62.8) |
Effect of exchange rate changes on cash | 1.9 | (1) |
Decrease in cash and cash equivalents | (45.4) | (85) |
Cash and cash equivalents at beginning of period | 170.9 | 243.6 |
Cash and cash equivalents at end of period | $ 125.5 | $ 158.6 |
Consolidated Statements of Shar
Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) shares in Millions, $ in Millions | Total | Total PolyOne shareholders' equity | Common Shares | Common Shares Held in Treasury | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Non-controlling Interests |
Beginning balance at Dec. 31, 2017 | $ 599.4 | $ 598.5 | $ 1.2 | $ (898.3) | $ 1,161.5 | $ 387.1 | $ (53) | $ 0.9 |
Beginning balance (in shares) at Dec. 31, 2017 | 122.2 | |||||||
Beginning Balance, Treasury shares (in shares) at Dec. 31, 2017 | (41.3) | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | 46.9 | 46.9 | 46.9 | |||||
Other comprehensive gain (loss) | 10.6 | 10.6 | 10.6 | |||||
Cash dividends declared | (14) | (14) | (14) | |||||
Repurchase of common shares | (42.2) | (42.2) | $ (42.2) | |||||
Repurchase of common shares (in shares) | (1) | |||||||
Share-based compensation and exercise of awards | 1.4 | 1.4 | $ 1.2 | 0.2 | ||||
Share-based compensation and exercise of awards (in shares) | 0.1 | |||||||
Other | (17) | (17) | (16.6) | (0.4) | ||||
Ending balance at Mar. 31, 2018 | 585.1 | 584.2 | $ 1.2 | $ (939.3) | 1,161.7 | 403.4 | (42.8) | 0.9 |
Ending balance (in shares) at Mar. 31, 2018 | 122.2 | |||||||
Ending Balance, Treasury shares (in shares) at Mar. 31, 2018 | (42.2) | |||||||
Beginning balance at Dec. 31, 2017 | 599.4 | 598.5 | $ 1.2 | $ (898.3) | 1,161.5 | 387.1 | (53) | 0.9 |
Beginning balance (in shares) at Dec. 31, 2017 | 122.2 | |||||||
Beginning Balance, Treasury shares (in shares) at Dec. 31, 2017 | (41.3) | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | 98.1 | |||||||
Ending balance at Jun. 30, 2018 | 594.7 | 593.9 | $ 1.2 | $ (942) | 1,163.5 | 440.8 | (69.6) | 0.8 |
Ending balance (in shares) at Jun. 30, 2018 | 122.2 | |||||||
Ending Balance, Treasury shares (in shares) at Jun. 30, 2018 | (42.3) | |||||||
Beginning balance at Mar. 31, 2018 | 585.1 | 584.2 | $ 1.2 | $ (939.3) | 1,161.7 | 403.4 | (42.8) | 0.9 |
Beginning balance (in shares) at Mar. 31, 2018 | 122.2 | |||||||
Beginning Balance, Treasury shares (in shares) at Mar. 31, 2018 | (42.2) | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | 51.2 | 51.3 | 51.3 | (0.1) | ||||
Other comprehensive gain (loss) | (26.8) | (26.8) | (26.8) | |||||
Cash dividends declared | (13.9) | (13.9) | (13.9) | |||||
Repurchase of common shares | (3.1) | (3.1) | $ (3.1) | |||||
Repurchase of common shares (in shares) | (0.1) | |||||||
Share-based compensation and exercise of awards | 2.2 | 2.2 | $ 0.4 | 1.8 | ||||
Ending balance at Jun. 30, 2018 | 594.7 | 593.9 | $ 1.2 | $ (942) | 1,163.5 | 440.8 | (69.6) | 0.8 |
Ending balance (in shares) at Jun. 30, 2018 | 122.2 | |||||||
Ending Balance, Treasury shares (in shares) at Jun. 30, 2018 | (42.3) | |||||||
Beginning balance at Dec. 31, 2018 | 540.6 | 540 | $ 1.2 | $ (1,018.7) | 1,166.9 | 472.9 | (82.3) | 0.6 |
Beginning balance (in shares) at Dec. 31, 2018 | 122.2 | |||||||
Beginning Balance, Treasury shares (in shares) at Dec. 31, 2018 | (44.5) | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | 38.3 | 38.2 | 38.2 | 0.1 | ||||
Other comprehensive gain (loss) | 3.2 | 3.2 | 3.2 | |||||
Cash dividends declared | (14.8) | (14.8) | (14.8) | |||||
Repurchase of common shares | 0 | 0 | ||||||
Share-based compensation and exercise of awards | 1.6 | 1.6 | $ 1.1 | 0.5 | ||||
Share-based compensation and exercise of awards (in shares) | 0.1 | |||||||
Ending balance at Mar. 31, 2019 | 568.9 | 568.2 | $ 1.2 | $ (1,017.6) | 1,167.4 | 496.3 | (79.1) | 0.7 |
Ending balance (in shares) at Mar. 31, 2019 | 122.2 | |||||||
Ending Balance, Treasury shares (in shares) at Mar. 31, 2019 | (44.4) | |||||||
Beginning balance at Dec. 31, 2018 | 540.6 | 540 | $ 1.2 | $ (1,018.7) | 1,166.9 | 472.9 | (82.3) | 0.6 |
Beginning balance (in shares) at Dec. 31, 2018 | 122.2 | |||||||
Beginning Balance, Treasury shares (in shares) at Dec. 31, 2018 | (44.5) | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | 80.4 | |||||||
Ending balance at Jun. 30, 2019 | 571.1 | 570.4 | $ 1.2 | $ (1,043.8) | 1,169.2 | 523.2 | (79.4) | 0.7 |
Ending balance (in shares) at Jun. 30, 2019 | 122.2 | |||||||
Ending Balance, Treasury shares (in shares) at Jun. 30, 2019 | (45.3) | |||||||
Beginning balance at Mar. 31, 2019 | 568.9 | 568.2 | $ 1.2 | $ (1,017.6) | 1,167.4 | 496.3 | (79.1) | 0.7 |
Beginning balance (in shares) at Mar. 31, 2019 | 122.2 | |||||||
Beginning Balance, Treasury shares (in shares) at Mar. 31, 2019 | (44.4) | |||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | 42.1 | 42.1 | 42.1 | |||||
Other comprehensive gain (loss) | (0.3) | (0.3) | (0.3) | |||||
Cash dividends declared | (15.2) | (15.2) | (15.2) | |||||
Repurchase of common shares | (26.9) | (26.9) | $ (26.9) | |||||
Repurchase of common shares (in shares) | (1) | |||||||
Share-based compensation and exercise of awards | 2.5 | 2.5 | $ 0.7 | 1.8 | ||||
Share-based compensation and exercise of awards (in shares) | 0.1 | |||||||
Ending balance at Jun. 30, 2019 | $ 571.1 | $ 570.4 | $ 1.2 | $ (1,043.8) | $ 1,169.2 | $ 523.2 | $ (79.4) | $ 0.7 |
Ending balance (in shares) at Jun. 30, 2019 | 122.2 | |||||||
Ending Balance, Treasury shares (in shares) at Jun. 30, 2019 | (45.3) |
Basis of Presentation
Basis of Presentation | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Note 1 — 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, including those that are normal, recurring and 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. Actual results could differ from these estimates. These interim financial statements should be read in conjunction with the financial statements and accompanying notes included in the Annual Report on Form 10-K for the year ended December 31, 2018 of PolyOne Corporation. When used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” “PolyOne” and the “Company” mean PolyOne Corporation and its consolidated subsidiaries. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be attained in subsequent periods or for the year ending December 31, 2019 . Accounting Standards Adopted On January 1, 2019, the Company adopted Accounting Standards Codification (ASC) 842, Leases (ASC 842). ASC 842 was issued to increase transparency and comparability among entities by recognizing right-of-use assets and lease liabilities on the balance sheet and disclosing key information about lease arrangements. We elected to transition to ASC 842 using the option to apply the standard on its effective date, January 1, 2019. The comparative periods presented reflect the former lease accounting guidance and the required comparative disclosures are included in Note 4, Leasing Arrangements . There was not a material cumulative-effect adjustment to our beginning retained earnings as a result of adopting ASC 842. We have recognized additional operating lease assets and obligations of $72.3 million and $73.7 million as of January 1, 2019 and June 30, 2019, respectively. We elected to not reassess prior conclusions related to the identification, classification and accounting for initial direct costs for leases that commenced prior to January 1, 2019. Additionally, we elected to not use hindsight to determine lease terms and to not separate non-lease components within our lease portfolio. For additional disclosure and detail, see Note 4, Leasing Arrangements . Accounting Standards Not Yet Adopted In June 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13). ASU 2016-13 changes the impairment model for most financial instruments. Current guidance requires the recognition of credit losses based on an incurred loss impairment methodology that reflects losses once the losses are probable. Under ASU 2016-13, the Company will be required to use a current expected credit loss (CECL) model that will immediately recognize an estimate of credit losses that are expected to occur over the life of the financial instruments that are in the scope of this update, including trade receivables. The CECL model uses a broader range of reasonable and supportable information in the development of credit loss estimates. This guidance becomes effective for the Company on January 1, 2020, including the interim periods in the year. The Company is currently evaluating the impact that the adoption of ASU 2016-13 will have on the consolidated financial statements and related disclosures. |
Business Combinations
Business Combinations | 6 Months Ended |
Jun. 30, 2019 | |
Business Combinations [Abstract] | |
Business Combinations | Note 2 — BUSINESS COMBINATIONS On January 2, 2019, the Company acquired Fiber-Line, LLC (Fiber-Line), a global leader in polymer coated engineered fibers and composite materials, for total consideration of $152.7 million , net of cash acquired and inclusive of contingent consideration. Fiber-Line's results are reported in the Specialty Engineered Materials segment. The preliminary purchase price allocation resulted in intangible assets of $77.4 million , goodwill of $46.0 million , and net working capital of $26.0 million . A portion of the goodwill is deductible for U.S. federal income tax purposes. The definite-lived intangible assets that have been acquired are being amortized over a period of five to 20 years . Fiber-Line's sales included in the Company's results for the three and six months ended June 30, 2019 were $29.1 million and $55.9 , respectively. Our acquisitions of PlastiComp, Inc. (PlastiComp) on May 31, 2018 and Fiber-Line involve contingent consideration that includes earnouts payable over periods of up to two years in the event that certain operating results are achieved. The PlastiComp earnout has a ceiling of $35 million . The Fiber-Line earnout is based on two annual earnout periods, with the second earnout period target based on year-one results. We estimate the total earnout payment for Fiber-Line to be in the range of $40 to $60 million . The earnouts are considered Level 3 under the fair value hierarchy as the fair value is based on unobservable inputs, which require PolyOne to develop its own assumptions. The earnouts are valued each quarter using Monte Carlo simulation analyses in a risk-neutral framework with assumptions for volatility, risk-free rate and dividend yield. As of June 30, 2019, we had recorded a total of $62.2 million of contingent liabilities for both acquisitions, of which $29.5 million was reflected within Accrued expenses and other current liabilities and $32.7 million was reflected within Other non-current liabilities on the Condensed Consolidated Balance Sheets. During the three and six months ended June 30, 2019, the Company recorded a charge of $10.7 million associated with the earnouts within Selling and administrative expense on the Condensed Consolidated Statements of Income that was primarily attributable to higher than originally anticipated earnings from the acquisitions. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 6 Months Ended |
Jun. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | Note 3 — GOODWILL AND INTANGIBLE ASSETS Goodwill as of June 30, 2019 and December 31, 2018 and changes in the carrying amount of goodwill by segment were as follows: (In millions) Specialty Color, Performance PolyOne Total Balance December 31, 2018 $ 188.9 $ 448.6 $ 11.2 $ 1.6 $ 650.3 Acquisition of businesses 46.8 — — — 46.8 Currency translation — (0.2 ) — — (0.2 ) Balance June 30, 2019 $ 235.7 $ 448.4 $ 11.2 $ 1.6 $ 696.9 Indefinite and finite-lived intangible assets consisted of the following: As of June 30, 2019 (In millions) Acquisition Accumulated Currency Net Customer relationships $ 290.7 $ (82.3 ) $ (0.7 ) $ 207.7 Patents, technology and other 244.6 (74.5 ) (1.0 ) 169.1 Indefinite-lived trade names 108.9 — — 108.9 Total $ 644.2 $ (156.8 ) $ (1.7 ) $ 485.7 As of December 31, 2018 (In millions) Acquisition Accumulated Currency Net Customer relationships $ 278.4 $ (75.0 ) $ (0.7 ) $ 202.7 Patents, technology and other 188.1 (66.8 ) (0.9 ) 120.4 Indefinite-lived trade names 100.3 — — 100.3 Total $ 566.8 $ (141.8 ) $ (1.6 ) $ 423.4 |
Leasing Arrangements
Leasing Arrangements | 6 Months Ended |
Jun. 30, 2019 | |
Leases [Abstract] | |
Leasing Arrangements | Note 4 — LEASING ARRANGEMENTS We lease certain manufacturing facilities, warehouse space, machinery and equipment, vehicles and information technology equipment under operating leases. The majority of our leases are operating leases. Finance leases are immaterial to our condensed consolidated financial statements. Operating lease assets and obligations are reflected within Operating lease assets, net, Current operating lease obligations, and Non-current operating lease obligations, respectively, on the Condensed Consolidated Balance Sheets. Lease expense for these leases is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the period those payments are incurred. The components of lease cost recognized within our Condensed Consolidated Statements of Income were as follows: (In millions) Condensed Consolidated Statements of Income Location Three Months Ended June 30, 2019 Six Months Ended June 30, 2019 Lease cost: Operating lease cost Cost of sales $ 4.2 $ 7.6 Operating lease cost Selling and administrative expense 2.7 5.4 Other (1) Selling and administrative expense 0.1 0.8 Total operating lease cost $ 7.0 $ 13.8 (1) Other lease costs include short-term lease costs and variable lease costs We often have options to renew lease terms for buildings and other assets. The exercise of lease renewal options are generally at our sole discretion. In addition, certain lease arrangements may be terminated prior to their original expiration date at our discretion. We evaluate renewal and termination options at the lease commencement date to determine if we are reasonably certain to exercise the option on the basis of economic factors. The weighted average remaining lease term for our operating leases as of June 30, 2019 was 4.3 years . The discount rate implicit within our leases is generally not determinable and therefore the Company determines the discount rate based on its incremental borrowing rate. The incremental borrowing rate for our leases is determined based on lease term and currency in which lease payments are made, adjusted for impacts of collateral. The weighted average discount rate used to measure our operating lease liabilities as of June 30, 2019 was 6.8% . Maturity Analysis of Lease Liabilities: As of June 30, 2019 (In millions) Operating Leases 2019 $ 13.5 2020 23.7 2021 15.5 2022 11.1 2023 8.3 Thereafter 9.6 Total lease payments $ 81.7 Less amount of lease payment representing interest (8.0 ) Total present value of lease payments $ 73.7 As of December 31, 2018 (In millions) Operating Leases 2019 $ 24.5 2020 20.4 2021 12.4 2022 8.5 2023 5.8 Thereafter 9.0 Total $ 80.6 |
Inventories, Net
Inventories, Net | 6 Months Ended |
Jun. 30, 2019 | |
Inventory Disclosure [Abstract] | |
Inventories, Net | Note 5 — INVENTORIES, NET Components of Inventories, net are as follows: (In millions) As of June 30, 2019 As of December 31, 2018 Finished products $ 204.4 $ 204.3 Work in process 10.1 6.9 Raw materials and supplies 138.8 133.5 Inventories, net $ 353.3 $ 344.7 |
Property, Net
Property, Net | 6 Months Ended |
Jun. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property, Net | Note 6 — PROPERTY, NET Components of Property, net are as follows: (In millions) As of June 30, 2019 As of December 31, 2018 Land and land improvements $ 48.8 $ 48.8 Buildings 320.2 316.5 Machinery and equipment 1,099.3 1,082.2 Property, gross 1,468.3 1,447.5 Less accumulated depreciation and amortization (969.8 ) (952.1 ) Property, net $ 498.5 $ 495.4 |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 7 — INCOME TAXES During the three and six months ended June 30, 2019, the Company’s effective tax rate of 25.1% and 26.1% , respectively, was above the Company's federal statutory rate of 21.0% primarily due to state taxes, global intangible low-taxed income (GILTI) tax, unfavorable tax effects of foreign valuation allowances, and certain other non-deductible items, which were partially offset by lower statutory tax rate differences on foreign earnings and higher U.S. research and development tax credits. During the three months ended June 30, 2018, the Company’s effective tax rate of 16.4% was below the Company's U.S. federal statutory rate of 21.0%. This was primarily a result of foreign permanent items, impact from lower statutory tax rate differences on foreign earnings and a favorable impact resulting from the Staff Accounting Bulletin 118 (SAB 118) measurement period adjustment associated with the Tax Cuts and Jobs Act (TCJA). The repatriation of 2018 earnings, state taxes and the impact of GILTI tax partially offset this favorability. During the six months ended June 30, 2018, the Company's effective tax rate of 21.3% was above the Company's U.S. federal statutory rate of 21.0%. This was primarily a result of foreign taxes from repatriation of certain foreign earnings from prior periods and 2018, state taxes and the impact of GILTI tax. Largely offsetting these items were favorable impacts from foreign permanent items, lower statutory tax rate differences on foreign earnings and the SAB 118 measurement period adjustment associated with the TCJA. |
Financing Arrangements
Financing Arrangements | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
Financing Arrangements | Note 8 — FINANCING ARRANGEMENTS Debt consists of the following instruments: As of June 30, 2019 (In millions) Principal Amount Unamortized discount and debt issuance cost Net Debt Weighted average interest rate Senior secured revolving credit facility due 2022 $ 179.0 $ — $ 179.0 3.97 % Senior secured term loan due 2026 627.7 10.4 617.3 4.23 % 5.25% senior notes due 2023 600.0 4.2 595.8 5.25 % Other debt 19.1 — 19.1 Total debt $ 1,425.8 $ 14.6 $ 1,411.2 Less short-term and current portion of long-term debt 18.7 — 18.7 Total long-term debt, net of current portion $ 1,407.1 $ 14.6 $ 1,392.5 As of December 31, 2018 (In millions) Principal Amount Unamortized discount and debt issuance cost Net Debt Weighted average interest rate Senior secured revolving credit facility due 2022 $ 120.1 $ — $ 120.1 3.35 % Senior secured term loan due 2026 631.0 11.2 619.8 3.80 % 5.25% senior notes due 2023 600.0 5.0 595.0 5.25 % Other debt 20.7 — 20.7 Total debt $ 1,371.8 $ 16.2 $ 1,355.6 Less short-term and current portion of long-term debt 19.4 — 19.4 Total long-term debt, net of current portion $ 1,352.4 $ 16.2 $ 1,336.2 On June 28, 2019, the Company amended the senior secured revolving credit facility to add a European line of credit, up to the euro equivalent of $50.0 million , subject to a borrowing base with advances against certain European accounts receivable. The agreements governing our senior secured revolving credit facility, our senior secured term loan, and the indentures and credit agreements governing other debt, contain a number of customary financial and restrictive covenants that, among other things, limit our ability to: consummate asset sales, incur additional debt or liens, consolidate or merge with any entity or transfer or sell all or substantially all of our assets, pay dividends or make certain other restricted payments, make investments, enter into transactions with affiliates, create dividend or other payment restrictions with respect to subsidiaries, make capital investments and alter the business we conduct. As of June 30, 2019 , we were in compliance with all covenants. The estimated fair value of PolyOne’s debt instruments at June 30, 2019 and December 31, 2018 was $ 1,439.7 million and $ 1,316.8 million , respectively. The fair value of PolyOne’s debt instruments was estimated using prevailing market interest rates on debt with similar creditworthiness, terms and maturities and represent Level 2 measurements within the fair value hierarchy. |
Segment Information
Segment Information | 6 Months Ended |
Jun. 30, 2019 | |
Segment Reporting [Abstract] | |
Segment Information | Note 9 — SEGMENT INFORMATION Operating income is the primary measure that is reported to our chief operating decision maker (CODM) for purposes of allocating resources to the segments and assessing their performance. Operating income at the segment level does not include: corporate general and administrative expenses that are not allocated to segments; intersegment sales and profit eliminations; charges related to specific strategic initiatives such as the consolidation of operations; restructuring activities, including employee separation costs resulting from personnel reduction programs, plant closure and phase-in costs; executive separation agreements; share-based compensation costs; asset impairments; environmental remediation costs, along with related gains from insurance recoveries, and other liabilities for facilities no longer owned or closed in prior years; gains and losses on the divestiture of joint ventures and equity investments; actuarial gains and losses associated with our pension and other post-retirement benefit plans; and certain other items that are not included in the measure of segment profit or loss that is reported to and reviewed by our CODM. These costs are included in Corporate and eliminations . PolyOne has four reportable segments: (1) Color, Additives and Inks; (2) Specialty Engineered Materials; (3) Performance Products and Solutions; and (4) Distribution. Segment information for the three and six months ended June 30, 2019 and 2018 is as follows: Three Months Ended June 30, 2019 Three Months Ended June 30, 2018 (In millions) Sales to Total Sales Operating Sales to Total Sales Operating Color, Additives and Inks $ 266.0 $ 267.5 $ 42.3 $ 272.7 $ 273.7 $ 45.3 Specialty Engineered Materials 180.3 195.3 25.7 152.6 165.5 21.1 Performance Products and Solutions 155.6 174.9 19.5 170.9 191.9 22.6 Distribution 301.9 306.6 20.1 318.6 323.3 18.7 Corporate and eliminations — (40.5 ) (36.0 ) — (39.6 ) (30.3 ) Total $ 903.8 $ 903.8 $ 71.6 $ 914.8 $ 914.8 $ 77.4 Six Months Ended Six Months Ended (In millions) Sales to Total Sales Operating Sales to Total Sales Operating Color, Additives and Inks $ 528.1 $ 530.8 $ 81.8 $ 541.8 $ 544.6 $ 87.4 Specialty Engineered Materials 356.1 385.2 47.0 303.3 328.6 41.2 Performance Products and Solutions 304.9 344.7 34.7 341.5 382.9 45.3 Distribution 614.6 623.9 39.6 629.8 638.8 36.9 Corporate and eliminations — (80.9 ) (63.2 ) — (78.5 ) (54.6 ) Total $ 1,803.7 $ 1,803.7 $ 139.9 $ 1,816.4 $ 1,816.4 $ 156.2 Total Assets (In millions) As of June 30, 2019 As of December 31, 2018 Color, Additives and Inks $ 1,269.7 $ 1,235.1 Specialty Engineered Materials 779.6 596.2 Performance Products and Solutions 281.5 275.4 Distribution 258.3 249.0 Corporate and eliminations 341.5 367.6 Total assets $ 2,930.6 $ 2,723.3 |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 10 — COMMITMENTS AND CONTINGENCIES We have been notified by federal and state environmental agencies and by private parties that we may be a potentially responsible party (PRP) in connection with the environmental investigation and remediation of certain sites. While government agencies frequently assert that PRPs are jointly and severally liable at these sites, in our experience, the interim and final allocations of liability costs are generally made based on the relative contribution of waste. We may also initiate corrective and preventive environmental projects of our own to ensure safe and lawful activities at our operations. We believe that compliance with current governmental regulations at all levels will not have a material adverse effect on our financial position, results of operations or cash flows. In September 2007, the United States District Court for the Western District of Kentucky (Court) in the case of Westlake Vinyls, Inc. v. Goodrich Corporation, et al ., held that PolyOne must pay the remediation costs at the former Goodrich Corporation Calvert City facility (now largely owned and operated by Westlake Vinyls, Inc. (Westlake Vinyls)), together with certain defense costs of Goodrich Corporation. Following the Court rulings, the parties to the litigation agreed to settle all claims regarding past environmental costs incurred at the site. The settlement agreement provides a mechanism to pursue allocation of future remediation costs at the Calvert City site to Westlake Vinyls. We will adjust our accrual, in the future, consistent with any such future allocation of costs. Additionally, we continue to pursue available insurance coverage related to this matter and recognize gains as we receive reimbursement. The environmental obligation at the site arose as a result of an agreement between The B.F. Goodrich Company (n/k/a Goodrich Corporation) and our predecessor, The Geon Company, at the time of the initial public offering in 1993. Under the agreement, The Geon Company agreed to indemnify Goodrich Corporation for certain environmental costs at the site. Neither PolyOne nor The Geon Company ever operated the facility. PolyOne, along with respondents Westlake Vinyls, and Goodrich Corporation, has worked with the United States Environmental Protection Agency (USEPA) to address site contamination. The USEPA issued its Record of Decision (ROD) in September 2018, selecting a remedy consistent with our accrual assumptions, and in April 2019, the USEPA and respondents executed an Administrative Settlement Agreement and Order on Consent to conduct the remedial design. That design is ongoing. Our current reserve of $103.2 million is consistent with the USEPA's estimates contained in the ROD. On March 13, 2013, PolyOne acquired Spartech Corporation (Spartech). One of Spartech's subsidiaries, Franklin-Burlington Plastics, Inc. (Franklin-Burlington), operated a plastic resin compounding facility in Kearny, New Jersey, located adjacent to the Passaic River. The USEPA requested that companies located in the area of the lower Passaic River, including Franklin-Burlington, cooperate in an investigation of contamination of approximately 17 miles of the lower Passaic River Study Area (LPRSA). In response, Franklin-Burlington and approximately 70 other companies (collectively, the Cooperating Parties) agreed, pursuant to an Administrative Order on Consent (AOC) with the USEPA, to assume responsibility for development of a Remedial Investigation and Feasibility Study of the LPRSA. Franklin-Burlington has not admitted to any liability or agreed to bear any other costs for remediation or natural resource damage. In 2015, the Cooperating Parties submitted to the USEPA a remedial investigation report and feasibility study for the LPRSA, and are currently engaged in technical discussions with the USEPA regarding those documents. Neither of those documents contemplates who is responsible for remediation or how such costs might be allocated to PRPs. In March 2016, the USEPA issued a ROD selecting a remedy for an eight -mile portion of the LPRSA at an estimated and discounted cost of $1.4 billion . On March 31, 2016, the USEPA sent a Notice of Potential Liability to over 100 companies, including Franklin-Burlington, and several municipalities for this eight -mile portion. In September 2016, the USEPA reached an agreement with Occidental Chemical Corporation (OCC), which orders OCC to conduct the remedial design for the lower eight -mile portion of the Passaic River. In September 2017, the USEPA sent a letter to over 80 companies, including Franklin-Burlington, indicating that the USEPA would engage the recipients in an allocation process for the lower eight miles of the LPRSA and has engaged a third-party allocator as part of that process. Along with other parties, Franklin-Burlington is participating in the development of this allocation process with the allocator retained by the USEPA, and this process is expected to continue into at least 2020. On June 30, 2018, OCC, independent of the USEPA, filed suit against 100 named entities, including Franklin-Burlington, seeking contribution for past and future costs associated with the remediation of the lower eight -mile portion of the LPRSA. Based on the currently available information, we have not identified evidence that Franklin-Burlington contributed any of the primary contaminants of concern to the lower Passaic River. A timeline as to when an allocation of the remedial costs may be determined is not yet known and any allocation to Franklin-Burlington has not been determined. As a result of these uncertainties, we are unable to estimate a liability related to this matter and, as of June 30, 2019 , we have not accrued for costs of remediation related to the lower Passaic River. During the three months ended June 30, 2019 and 2018 , PolyOne recognized $1.9 million and $8.7 million , respectively, of expense related to environmental remediation costs. During the six months ended June 30, 2019 and 2018 , PolyOne recognized $4.0 million and $11.8 million , respectively, of expense related to environmental remediation costs. During the three and six months ended June 30, 2018 , PolyOne received $1.6 million and $2.3 million , respectively, of insurance recoveries for previously incurred environmental costs. These expenses and insurance recoveries are included within Cost of sales within our Condensed Consolidated Statements of Income . Insurance recoveries are recognized as a gain when received. Our Condensed Consolidated Balance Sheets include accruals totaling $112.8 million and $114.1 million as of June 30, 2019 and December 31, 2018 , respectively, based on our estimates of probable future environmental expenditures relating to previously contaminated sites. These undiscounted amounts are included in Accrued expenses and other current liabilities and Other non-current liabilities on the accompanying Condensed Consolidated Balance Sheets. The accruals represent our best estimate of probable future costs that we can reasonably estimate, based upon currently available information and technology and our view of the most likely remedy. Depending upon the results of future testing, completion and results of remedial investigation and feasibility studies, the ultimate remediation alternatives undertaken, changes in regulations, technology development, new information, newly discovered conditions and other factors, it is reasonably possible that we could incur additional costs in excess of the amount accrued at June 30, 2019 . However, such additional costs, if any, cannot be currently estimated. |
Derivatives and Hedging
Derivatives and Hedging | 6 Months Ended |
Jun. 30, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivatives and Hedging | Note 11 — DERIVATIVES AND HEDGING We are exposed to market risks, such as changes in foreign currency exchange rates and interest rates. To manage the volatility related to these exposures we may enter into various derivative transactions. We formally assess, designate and document, as a hedge of an underlying exposure, the qualifying derivative instrument that will be accounted for as an accounting hedge at inception. Additionally, we assess both at inception and at least quarterly thereafter, whether the financial instruments used in the hedging transaction are effective at offsetting changes in either the fair values or cash flows of the underlying exposures. In accordance with ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12), that ongoing assessment will be done qualitatively for highly effective relationships. Net Investment Hedge During October and December 2018, as a means of mitigating the impact of currency fluctuations on our euro investments in foreign entities, we executed a total of six cross currency swaps, in which we will pay fixed-rate interest in euros and receive fixed-rate interest in U.S. dollars with a combined notional amount of 250.0 million euros and which mature in March 2023. This effectively converts a portion of our U.S. dollar denominated fixed-rate debt to euro denominated fixed-rate debt. That conversion resulted in gains of $2.0 million and $4.1 million for the three and six months ended June 30, 2019, respectively. These gains were recognized within Interest expense, net within the Condensed Consolidated Statements of Income. We designated the swaps as net investment hedges of our net investment in our European operations under ASU 2017-12 and applied the spot method to these hedges. The changes in fair value of the derivative instruments that are designated and qualify as hedges of net investments in foreign operations are recognized within A ccumulated Other Comprehensive Income (AOCI) to offset the changes in the values of the net investment being hedged. For the three and six months ended June 30, 2019, gains of $0.3 million and $4.9 million , respectively, were recognized within translation adjustments in AOCI, net of tax. Derivatives Designated as Cash Flow Hedging Instruments In August 2018, we entered into two interest rate swaps with a combined notional amount of $150.0 million to manage the variability of cash flows in the interest rate payments associated with our existing LIBOR-based interest payments, effectively converting $150.0 million of our floating rate debt to a fixed rate. We began to receive floating rate interest payments based upon one month U.S. dollar LIBOR and in return are obligated to pay interest at a fixed rate of 2.732% until November 2022. We have designated these swap contracts as cash flow hedges pursuant to ASC 815, Derivatives and Hedging . The net interest payments accrued each month for these highly effective hedges are reflected in net income as adjustments of interest expense and the remaining change in the fair value of the derivatives is recorded as a component of AOCI. The amount of expense recognized within Interest expense, net in our Condensed Consolidated Statements of Income was $0.1 million and $0.2 million for the three and six months ended June 30, 2019, respectively. For the three and six months ended June 30, 2019, losses of $1.9 million and $2.9 million , respectively, were recognized in AOCI, net of tax. All of our derivative assets and liabilities measured at fair value are classified as Level 2 within the fair value hierarchy. We determine the fair value of our derivatives based on valuation methods, which project future cash flows and discount the future amounts present value using market based observable inputs, including interest rate curves and foreign currency rates. The fair value of derivative financial instruments recognized in the Condensed Consolidated Balance Sheets is as follows: (In millions) Balance Sheet Location As of June 30, 2019 As of December 31, 2018 Assets Cross Currency Swaps (Net Investment Hedge) Other non-current assets $ 9.2 $ 2.6 Liabilities Interest Rate Swap (Cash Flow Hedge) Other non-current liabilities $ 5.6 $ 1.7 |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
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, including those that are normal, recurring and 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. Actual results could differ from these estimates. These interim financial statements should be read in conjunction with the financial statements and accompanying notes included in the Annual Report on Form 10-K for the year ended December 31, 2018 of PolyOne Corporation. When used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” “PolyOne” and the “Company” mean PolyOne Corporation and its consolidated subsidiaries. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be attained in subsequent periods or for the year ending December 31, 2019 . |
Accounting Standards Adopted and Not Yet Adopted | Accounting Standards Adopted On January 1, 2019, the Company adopted Accounting Standards Codification (ASC) 842, Leases (ASC 842). ASC 842 was issued to increase transparency and comparability among entities by recognizing right-of-use assets and lease liabilities on the balance sheet and disclosing key information about lease arrangements. We elected to transition to ASC 842 using the option to apply the standard on its effective date, January 1, 2019. The comparative periods presented reflect the former lease accounting guidance and the required comparative disclosures are included in Note 4, Leasing Arrangements . There was not a material cumulative-effect adjustment to our beginning retained earnings as a result of adopting ASC 842. We have recognized additional operating lease assets and obligations of $72.3 million and $73.7 million as of January 1, 2019 and June 30, 2019, respectively. We elected to not reassess prior conclusions related to the identification, classification and accounting for initial direct costs for leases that commenced prior to January 1, 2019. Additionally, we elected to not use hindsight to determine lease terms and to not separate non-lease components within our lease portfolio. For additional disclosure and detail, see Note 4, Leasing Arrangements . Accounting Standards Not Yet Adopted In June 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13). ASU 2016-13 changes the impairment model for most financial instruments. Current guidance requires the recognition of credit losses based on an incurred loss impairment methodology that reflects losses once the losses are probable. Under ASU 2016-13, the Company will be required to use a current expected credit loss (CECL) model that will immediately recognize an estimate of credit losses that are expected to occur over the life of the financial instruments that are in the scope of this update, including trade receivables. The CECL model uses a broader range of reasonable and supportable information in the development of credit loss estimates. This guidance becomes effective for the Company on January 1, 2020, including the interim periods in the year. The Company is currently evaluating the impact that the adoption of ASU 2016-13 will have on the consolidated financial statements and related disclosures. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Changes in Carrying Amount of Goodwill by Operating Segment | Goodwill as of June 30, 2019 and December 31, 2018 and changes in the carrying amount of goodwill by segment were as follows: (In millions) Specialty Color, Performance PolyOne Total Balance December 31, 2018 $ 188.9 $ 448.6 $ 11.2 $ 1.6 $ 650.3 Acquisition of businesses 46.8 — — — 46.8 Currency translation — (0.2 ) — — (0.2 ) Balance June 30, 2019 $ 235.7 $ 448.4 $ 11.2 $ 1.6 $ 696.9 |
Schedule of Finite-Lived Intangible Assets | Indefinite and finite-lived intangible assets consisted of the following: As of June 30, 2019 (In millions) Acquisition Accumulated Currency Net Customer relationships $ 290.7 $ (82.3 ) $ (0.7 ) $ 207.7 Patents, technology and other 244.6 (74.5 ) (1.0 ) 169.1 Indefinite-lived trade names 108.9 — — 108.9 Total $ 644.2 $ (156.8 ) $ (1.7 ) $ 485.7 As of December 31, 2018 (In millions) Acquisition Accumulated Currency Net Customer relationships $ 278.4 $ (75.0 ) $ (0.7 ) $ 202.7 Patents, technology and other 188.1 (66.8 ) (0.9 ) 120.4 Indefinite-lived trade names 100.3 — — 100.3 Total $ 566.8 $ (141.8 ) $ (1.6 ) $ 423.4 |
Schedule of Indefinite-Lived Intangible Assets | Indefinite and finite-lived intangible assets consisted of the following: As of June 30, 2019 (In millions) Acquisition Accumulated Currency Net Customer relationships $ 290.7 $ (82.3 ) $ (0.7 ) $ 207.7 Patents, technology and other 244.6 (74.5 ) (1.0 ) 169.1 Indefinite-lived trade names 108.9 — — 108.9 Total $ 644.2 $ (156.8 ) $ (1.7 ) $ 485.7 As of December 31, 2018 (In millions) Acquisition Accumulated Currency Net Customer relationships $ 278.4 $ (75.0 ) $ (0.7 ) $ 202.7 Patents, technology and other 188.1 (66.8 ) (0.9 ) 120.4 Indefinite-lived trade names 100.3 — — 100.3 Total $ 566.8 $ (141.8 ) $ (1.6 ) $ 423.4 |
Leasing Arrangements (Tables)
Leasing Arrangements (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Leases [Abstract] | |
Schedule of Lease Cost | The components of lease cost recognized within our Condensed Consolidated Statements of Income were as follows: (In millions) Condensed Consolidated Statements of Income Location Three Months Ended June 30, 2019 Six Months Ended June 30, 2019 Lease cost: Operating lease cost Cost of sales $ 4.2 $ 7.6 Operating lease cost Selling and administrative expense 2.7 5.4 Other (1) Selling and administrative expense 0.1 0.8 Total operating lease cost $ 7.0 $ 13.8 (1) Other lease costs include short-term lease costs and variable lease costs |
Schedule of Maturity of Operating Lease Liabilities | Maturity Analysis of Lease Liabilities: As of June 30, 2019 (In millions) Operating Leases 2019 $ 13.5 2020 23.7 2021 15.5 2022 11.1 2023 8.3 Thereafter 9.6 Total lease payments $ 81.7 Less amount of lease payment representing interest (8.0 ) Total present value of lease payments $ 73.7 As of December 31, 2018 (In millions) Operating Leases 2019 $ 24.5 2020 20.4 2021 12.4 2022 8.5 2023 5.8 Thereafter 9.0 Total $ 80.6 |
Inventories, Net (Tables)
Inventories, Net (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Inventory Disclosure [Abstract] | |
Components of Inventories, Net | Components of Inventories, net are as follows: (In millions) As of June 30, 2019 As of December 31, 2018 Finished products $ 204.4 $ 204.3 Work in process 10.1 6.9 Raw materials and supplies 138.8 133.5 Inventories, net $ 353.3 $ 344.7 |
Property, Net (Tables)
Property, Net (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Components of Property, Net | Components of Property, net are as follows: (In millions) As of June 30, 2019 As of December 31, 2018 Land and land improvements $ 48.8 $ 48.8 Buildings 320.2 316.5 Machinery and equipment 1,099.3 1,082.2 Property, gross 1,468.3 1,447.5 Less accumulated depreciation and amortization (969.8 ) (952.1 ) Property, net $ 498.5 $ 495.4 |
Financing Arrangements (Tables)
Financing Arrangements (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
Components of Debt | Debt consists of the following instruments: As of June 30, 2019 (In millions) Principal Amount Unamortized discount and debt issuance cost Net Debt Weighted average interest rate Senior secured revolving credit facility due 2022 $ 179.0 $ — $ 179.0 3.97 % Senior secured term loan due 2026 627.7 10.4 617.3 4.23 % 5.25% senior notes due 2023 600.0 4.2 595.8 5.25 % Other debt 19.1 — 19.1 Total debt $ 1,425.8 $ 14.6 $ 1,411.2 Less short-term and current portion of long-term debt 18.7 — 18.7 Total long-term debt, net of current portion $ 1,407.1 $ 14.6 $ 1,392.5 As of December 31, 2018 (In millions) Principal Amount Unamortized discount and debt issuance cost Net Debt Weighted average interest rate Senior secured revolving credit facility due 2022 $ 120.1 $ — $ 120.1 3.35 % Senior secured term loan due 2026 631.0 11.2 619.8 3.80 % 5.25% senior notes due 2023 600.0 5.0 595.0 5.25 % Other debt 20.7 — 20.7 Total debt $ 1,371.8 $ 16.2 $ 1,355.6 Less short-term and current portion of long-term debt 19.4 — 19.4 Total long-term debt, net of current portion $ 1,352.4 $ 16.2 $ 1,336.2 |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Segment Reporting [Abstract] | |
Schedule of Segment Information | Segment information for the three and six months ended June 30, 2019 and 2018 is as follows: Three Months Ended June 30, 2019 Three Months Ended June 30, 2018 (In millions) Sales to Total Sales Operating Sales to Total Sales Operating Color, Additives and Inks $ 266.0 $ 267.5 $ 42.3 $ 272.7 $ 273.7 $ 45.3 Specialty Engineered Materials 180.3 195.3 25.7 152.6 165.5 21.1 Performance Products and Solutions 155.6 174.9 19.5 170.9 191.9 22.6 Distribution 301.9 306.6 20.1 318.6 323.3 18.7 Corporate and eliminations — (40.5 ) (36.0 ) — (39.6 ) (30.3 ) Total $ 903.8 $ 903.8 $ 71.6 $ 914.8 $ 914.8 $ 77.4 Six Months Ended Six Months Ended (In millions) Sales to Total Sales Operating Sales to Total Sales Operating Color, Additives and Inks $ 528.1 $ 530.8 $ 81.8 $ 541.8 $ 544.6 $ 87.4 Specialty Engineered Materials 356.1 385.2 47.0 303.3 328.6 41.2 Performance Products and Solutions 304.9 344.7 34.7 341.5 382.9 45.3 Distribution 614.6 623.9 39.6 629.8 638.8 36.9 Corporate and eliminations — (80.9 ) (63.2 ) — (78.5 ) (54.6 ) Total $ 1,803.7 $ 1,803.7 $ 139.9 $ 1,816.4 $ 1,816.4 $ 156.2 Total Assets (In millions) As of June 30, 2019 As of December 31, 2018 Color, Additives and Inks $ 1,269.7 $ 1,235.1 Specialty Engineered Materials 779.6 596.2 Performance Products and Solutions 281.5 275.4 Distribution 258.3 249.0 Corporate and eliminations 341.5 367.6 Total assets $ 2,930.6 $ 2,723.3 |
Derivatives and Hedging (Tables
Derivatives and Hedging (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | The fair value of derivative financial instruments recognized in the Condensed Consolidated Balance Sheets is as follows: (In millions) Balance Sheet Location As of June 30, 2019 As of December 31, 2018 Assets Cross Currency Swaps (Net Investment Hedge) Other non-current assets $ 9.2 $ 2.6 Liabilities Interest Rate Swap (Cash Flow Hedge) Other non-current liabilities $ 5.6 $ 1.7 |
Basis of Presentation (Narrativ
Basis of Presentation (Narrative) (Details) - USD ($) $ in Millions | Jun. 30, 2019 | Jan. 01, 2019 | Dec. 31, 2018 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Operating lease assets, net | $ 73.7 | $ 0 | |
Operating lease obligations | 73.7 | ||
Accounting Standards Update 2016-02 | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Operating lease assets, net | 73.7 | $ 72.3 | |
Operating lease obligations | $ 73.7 | $ 72.3 |
Business Combinations (Narrativ
Business Combinations (Narrative) (Details) | Jan. 02, 2019USD ($)period | Jun. 30, 2019USD ($) | Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) | Jan. 02, 2019USD ($)period | Dec. 31, 2018USD ($) | May 31, 2018USD ($) |
Business Acquisition [Line Items] | |||||||
Purchase price, net of cash acquired | $ 119,600,000 | $ 98,600,000 | |||||
Goodwill | $ 696,900,000 | 696,900,000 | $ 650,300,000 | ||||
Earn-out period | 2 years | ||||||
Contingent liabilities | 62,200,000 | 62,200,000 | |||||
Contingent liabilities, current | 29,500,000 | 29,500,000 | |||||
Contingent liabilities, noncurrent | 32,700,000 | 32,700,000 | |||||
Decrease to contingent liabilities | 10,700,000 | 10,700,000 | |||||
Fiber-Line | |||||||
Business Acquisition [Line Items] | |||||||
Purchase price, net of cash acquired | $ 152,700,000 | ||||||
Intangible assets acquired | 77,400,000 | $ 77,400,000 | |||||
Goodwill | 46,000,000 | 46,000,000 | |||||
Net working capital acquired | $ 26,000,000 | 26,000,000 | |||||
Sales from companies acquired since acquisition date | $ 29,100,000 | $ 55,900,000 | |||||
Earn-out period | 2 years | ||||||
Earn-out ceiling | $ 60,000,000 | $ 60,000,000 | |||||
Number of earn-out periods | period | 2 | 2 | |||||
Earn-out floor | $ 40,000,000 | $ 40,000,000 | |||||
PlastiComp | |||||||
Business Acquisition [Line Items] | |||||||
Earn-out ceiling | $ 35,000,000 | ||||||
Minimum | Fiber-Line | |||||||
Business Acquisition [Line Items] | |||||||
Acquired finite-lived intangible assets, weighted average useful life | 5 years | ||||||
Maximum | Fiber-Line | |||||||
Business Acquisition [Line Items] | |||||||
Acquired finite-lived intangible assets, weighted average useful life | 20 years |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets (Goodwill and Changes in Carrying Amount of Goodwill by Operating Segment) (Details) $ in Millions | 6 Months Ended |
Jun. 30, 2019USD ($) | |
Goodwill [Roll Forward] | |
Balance December 31, 2018 | $ 650.3 |
Acquisitions of businesses | 46.8 |
Currency translation | (0.2) |
Balance June 30, 2019 | 696.9 |
Specialty Engineered Materials | |
Goodwill [Roll Forward] | |
Balance December 31, 2018 | 188.9 |
Acquisitions of businesses | 46.8 |
Currency translation | 0 |
Balance June 30, 2019 | 235.7 |
Color, Additives and Inks | |
Goodwill [Roll Forward] | |
Balance December 31, 2018 | 448.6 |
Acquisitions of businesses | 0 |
Currency translation | (0.2) |
Balance June 30, 2019 | 448.4 |
Performance Products and Solutions | |
Goodwill [Roll Forward] | |
Balance December 31, 2018 | 11.2 |
Acquisitions of businesses | 0 |
Currency translation | 0 |
Balance June 30, 2019 | 11.2 |
PolyOne Distribution | |
Goodwill [Roll Forward] | |
Balance December 31, 2018 | 1.6 |
Acquisitions of businesses | 0 |
Currency translation | 0 |
Balance June 30, 2019 | $ 1.6 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets (Schedule of Indefinite and Finite-Lived Intangible Assets) (Details) - USD ($) $ in Millions | Jun. 30, 2019 | Dec. 31, 2018 |
Intangible Assets [Line Items] | ||
Accumulated Amortization | $ (156.8) | $ (141.8) |
Currency Translation | (1.7) | (1.6) |
Indefinite-lived Intangible Assets [Line Items] | ||
Acquisition Cost | 644.2 | 566.8 |
Net | 485.7 | 423.4 |
Indefinite-lived trade names | ||
Indefinite-lived Intangible Assets [Line Items] | ||
Indefinite-lived intangible assets | 108.9 | 100.3 |
Customer relationships | ||
Intangible Assets [Line Items] | ||
Acquisition Cost | 290.7 | 278.4 |
Accumulated Amortization | (82.3) | (75) |
Currency Translation | (0.7) | (0.7) |
Net | 207.7 | 202.7 |
Patents, technology and other | ||
Intangible Assets [Line Items] | ||
Acquisition Cost | 244.6 | 188.1 |
Accumulated Amortization | (74.5) | (66.8) |
Currency Translation | (1) | (0.9) |
Net | $ 169.1 | $ 120.4 |
Leasing Arrangements (Lease Cos
Leasing Arrangements (Lease Cost) (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019 | Jun. 30, 2019 | |
Lessee, Lease, Description [Line Items] | ||
Total operating lease cost | $ 7 | $ 13.8 |
Cost of sales | ||
Lessee, Lease, Description [Line Items] | ||
Operating lease cost | 4.2 | 7.6 |
Selling and administrative expense | ||
Lessee, Lease, Description [Line Items] | ||
Operating lease cost | 2.7 | 5.4 |
Other | $ 0.1 | $ 0.8 |
Leasing Arrangements (Narrative
Leasing Arrangements (Narrative) (Details) | Jun. 30, 2019 |
Leases [Abstract] | |
Weighted average remaining lease term | 4 years 3 months 18 days |
Weighted average discount rate | 6.80% |
Leasing Arrangements (Schedule
Leasing Arrangements (Schedule of Maturity Of Lease Liabilities) (Details) - USD ($) $ in Millions | Jun. 30, 2019 | Dec. 31, 2018 |
Operating Leases | ||
2019 | $ 13.5 | |
2019 | $ 24.5 | |
2020 | 23.7 | 20.4 |
2021 | 15.5 | 12.4 |
2022 | 11.1 | 8.5 |
2023 | 8.3 | 5.8 |
Thereafter | 9.6 | 9 |
Total lease payments | 81.7 | $ 80.6 |
Less amount of lease payment representing interest | (8) | |
Total present value of lease payments | $ 73.7 |
Inventories, Net (Components of
Inventories, Net (Components of Inventories) (Details) - USD ($) $ in Millions | Jun. 30, 2019 | Dec. 31, 2018 |
Inventory Disclosure [Abstract] | ||
Finished products | $ 204.4 | $ 204.3 |
Work in process | 10.1 | 6.9 |
Raw materials and supplies | 138.8 | 133.5 |
Inventories, net | $ 353.3 | $ 344.7 |
Property, Net (Details)
Property, Net (Details) - USD ($) $ in Millions | Jun. 30, 2019 | Dec. 31, 2018 |
Property, Plant and Equipment [Line Items] | ||
Property, gross | $ 1,468.3 | $ 1,447.5 |
Less accumulated depreciation and amortization | (969.8) | (952.1) |
Property, net | 498.5 | 495.4 |
Land and land improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property, gross | 48.8 | 48.8 |
Buildings | ||
Property, Plant and Equipment [Line Items] | ||
Property, gross | 320.2 | 316.5 |
Machinery and equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property, gross | $ 1,099.3 | $ 1,082.2 |
Income Taxes (Narrative) (Detai
Income Taxes (Narrative) (Details) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | ||||
Effective income tax rate | 25.10% | 16.40% | 26.10% | 21.30% |
Financing Arrangements (Compone
Financing Arrangements (Components of Long-Term Debt) (Details) - USD ($) $ in Millions | 6 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Dec. 31, 2018 | |
Debt Instrument [Line Items] | ||
Principal Amount | $ 1,425.8 | $ 1,371.8 |
Unamortized discount and debt issuance cost | 14.6 | 16.2 |
Net Debt | 1,411.2 | 1,355.6 |
Less short-term and current portion of long-term debt, Principal Amount | 18.7 | 19.4 |
Less short-term and current portion of long-term debt, Unamortized discount and debt issuance cost | 0 | 0 |
Short-term and current portion of long-term debt | 18.7 | 19.4 |
Total long-term debt, net of current portion, Principal Amount | 1,407.1 | 1,352.4 |
Total long-term debt, net of current portion, Unamortized discount and debt issuance cost | 14.6 | 16.2 |
Total long-term debt, net of current portion | 1,392.5 | 1,336.2 |
Senior secured revolving credit facility due 2022 | Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Principal Amount | 179 | 120.1 |
Unamortized discount and debt issuance cost | 0 | 0 |
Net Debt | $ 179 | $ 120.1 |
Weighted average interest rate | 3.97% | 3.35% |
Senior secured term loan due 2026 | Secured Debt | ||
Debt Instrument [Line Items] | ||
Principal Amount | $ 627.7 | $ 631 |
Unamortized discount and debt issuance cost | 10.4 | 11.2 |
Net Debt | $ 617.3 | $ 619.8 |
Weighted average interest rate | 4.23% | 3.80% |
5.25% senior notes due 2023 | Senior Notes | ||
Debt Instrument [Line Items] | ||
Stated interest rate | 5.25% | 5.25% |
Principal Amount | $ 600 | $ 600 |
Unamortized discount and debt issuance cost | 4.2 | 5 |
Net Debt | $ 595.8 | $ 595 |
Weighted average interest rate | 5.25% | 5.25% |
Other debt | ||
Debt Instrument [Line Items] | ||
Principal Amount | $ 19.1 | $ 20.7 |
Unamortized discount and debt issuance cost | 0 | 0 |
Net Debt | $ 19.1 | $ 20.7 |
Financing Arrangements (Narrati
Financing Arrangements (Narrative) (Details) - USD ($) | Jun. 30, 2019 | Jun. 28, 2019 | Dec. 31, 2018 |
Line of Credit Facility [Line Items] | |||
Fair value of debt instruments | $ 1,439,700,000 | $ 1,316,800,000 | |
Senior secured revolving credit facility due 2022 | European Line Of Credit | |||
Line of Credit Facility [Line Items] | |||
Maximum borrowing capacity | $ 50,000,000 |
Segment Information (Narrative)
Segment Information (Narrative) (Details) | 6 Months Ended |
Jun. 30, 2019segment | |
Segment Reporting [Abstract] | |
Number of reportable segments | 4 |
Segment Information (Schedule o
Segment Information (Schedule of Segment Information) (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Segment Reporting Information [Line Items] | |||||
Sales | $ 903.8 | $ 914.8 | $ 1,803.7 | $ 1,816.4 | |
Operating Income | 71.6 | 77.4 | 139.9 | 156.2 | |
Assets | 2,930.6 | 2,930.6 | $ 2,723.3 | ||
Color, Additives and Inks | |||||
Segment Reporting Information [Line Items] | |||||
Sales | 266 | 272.7 | 528.1 | 541.8 | |
Specialty Engineered Materials | |||||
Segment Reporting Information [Line Items] | |||||
Sales | 180.3 | 152.6 | 356.1 | 303.3 | |
Performance Products and Solutions | |||||
Segment Reporting Information [Line Items] | |||||
Sales | 155.6 | 170.9 | 304.9 | 341.5 | |
Distribution | |||||
Segment Reporting Information [Line Items] | |||||
Sales | 301.9 | 318.6 | 614.6 | 629.8 | |
Operating Segments | Color, Additives and Inks | |||||
Segment Reporting Information [Line Items] | |||||
Sales | 267.5 | 273.7 | 530.8 | 544.6 | |
Operating Income | 42.3 | 45.3 | 81.8 | 87.4 | |
Assets | 1,269.7 | 1,269.7 | 1,235.1 | ||
Operating Segments | Specialty Engineered Materials | |||||
Segment Reporting Information [Line Items] | |||||
Sales | 195.3 | 165.5 | 385.2 | 328.6 | |
Operating Income | 25.7 | 21.1 | 47 | 41.2 | |
Assets | 779.6 | 779.6 | 596.2 | ||
Operating Segments | Performance Products and Solutions | |||||
Segment Reporting Information [Line Items] | |||||
Sales | 174.9 | 191.9 | 344.7 | 382.9 | |
Operating Income | 19.5 | 22.6 | 34.7 | 45.3 | |
Assets | 281.5 | 281.5 | 275.4 | ||
Operating Segments | Distribution | |||||
Segment Reporting Information [Line Items] | |||||
Sales | 306.6 | 323.3 | 623.9 | 638.8 | |
Operating Income | 20.1 | 18.7 | 39.6 | 36.9 | |
Assets | 258.3 | 258.3 | 249 | ||
Corporate and eliminations | |||||
Segment Reporting Information [Line Items] | |||||
Sales | (40.5) | (39.6) | (80.9) | (78.5) | |
Operating Income | (36) | $ (30.3) | (63.2) | $ (54.6) | |
Assets | $ 341.5 | $ 341.5 | $ 367.6 |
Commitments and Contingencies (
Commitments and Contingencies (Details) $ in Millions | Jun. 30, 2018entitymi | Mar. 31, 2016company | Mar. 13, 2013companymi | Sep. 30, 2017companymi | Sep. 30, 2016mi | Mar. 31, 2016mi | Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($)entity | Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($)entity | Dec. 31, 2018USD ($) | Mar. 04, 2016USD ($) |
Schedule of Equity Method Investments [Line Items] | ||||||||||||
Accrued probable future environmental expenditures | $ 112.8 | $ 112.8 | $ 114.1 | |||||||||
Cost of Sales | ||||||||||||
Schedule of Equity Method Investments [Line Items] | ||||||||||||
Expense related to environmental activities | 1.9 | $ 8.7 | 4 | $ 11.8 | ||||||||
Proceeds from insurance recoveries | $ 1.6 | $ 2.3 | ||||||||||
Calvert City | ||||||||||||
Schedule of Equity Method Investments [Line Items] | ||||||||||||
Accrued probable future environmental expenditures | $ 103.2 | $ 103.2 | ||||||||||
Contamination of Passaic River Study Area | ||||||||||||
Schedule of Equity Method Investments [Line Items] | ||||||||||||
Approximate number of other companies assuming responsibility | company | 70 | |||||||||||
Contamination of Passaic River Study Area | Lower Passaic River | ||||||||||||
Schedule of Equity Method Investments [Line Items] | ||||||||||||
Length of portion of river | mi | 8 | 17 | 8 | 8 | 8 | |||||||
Total estimated cost of remedy | $ 1,400 | |||||||||||
Number of companies receiving notice of potential liability | company | 100 | |||||||||||
Number of companies receiving notice of process to allocate remedial costs | company | 80 | |||||||||||
Number of entities named in suit | entity | 100 | 100 | 100 |
Derivatives and Hedging (Narrat
Derivatives and Hedging (Narrative) (Details) € in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2019USD ($) | Jun. 30, 2018USD ($) | Aug. 24, 2018USD ($)swap | Jul. 25, 2018EUR (€)swap | |
Derivative [Line Items] | ||||||
Unrealized loss | $ 1.9 | $ 0 | $ 2.9 | $ 0 | ||
Net Investment Hedging | Cross Currency Swaps | ||||||
Derivative [Line Items] | ||||||
Notional amount | € | € 250 | |||||
Unrealized gain | 0.3 | 4.9 | ||||
Cash Flow Hedging | Interest Rate Swap | ||||||
Derivative [Line Items] | ||||||
Notional amount | $ 150 | |||||
Number of interest rate swaps | swap | 2 | |||||
Floating rate debt | $ 150 | |||||
Floating rate | 2.732% | |||||
Unrealized loss | 1.9 | 2.9 | ||||
Interest Expense, Net | Net Investment Hedging | Cross Currency Swaps | ||||||
Derivative [Line Items] | ||||||
Number of cross currency swaps | swap | 6 | |||||
Conversion benefit | 2 | 4.1 | ||||
Interest Expense, Net | Cash Flow Hedging | Interest Rate Swap | ||||||
Derivative [Line Items] | ||||||
Expense recognized | $ 0.1 | $ 0.2 |
Derivatives and Hedging (Fair V
Derivatives and Hedging (Fair Value Of Derivatives) (Details) - Designated as Hedging Instrument - USD ($) $ in Millions | Jun. 30, 2019 | Dec. 31, 2018 |
Net Investment Hedging | Cross Currency Swaps | Other non-current assets | ||
Derivatives, Fair Value [Line Items] | ||
Derivative asset, fair value | $ 9.2 | $ 2.6 |
Cash Flow Hedging | Interest Rate Swap | Other non-current liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Derivative liability, fair value | $ 5.6 | $ 1.7 |