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PolyOne Announces Fourth Quarter 2008 Results

Published on 2009-02-06. Author : SpecialChem

CLEVELAND -- PolyOne Corporation reported fiscal fourth quarter revenues of $541.8 million, a 14.2 percent decrease compared with revenues of $631.3 million in the fourth quarter of 2007. Price increases and the acquisition of GLS only partially offset an unprecedented decline in demand as volume fell 24% from the fourth quarter of 2007 to the fourth quarter of 2008.

PolyOne reported a net loss of $282.6 million or $3.07 per share in the fourth quarter of 2008 compared with net income of $7.1 million or $0.08 per diluted share in the fourth quarter of 2007. Included in the results for the fourth quarter of 2008 are a series of special items, the largest of which are a non-cash goodwill impairment charge of $170.0 million (pre-tax) and a non-cash valuation allowance of $104.5 million recorded against deferred tax assets. Total special items of $289.5 million (after-tax) or $3.15.

On a comparable basis, before special items, PolyOne reported earnings of $0.08 per share in the fourth quarter of 2008 matching the $0.08 per share amount reported in the fourth quarter of last year. For the full year, PolyOne reported a net loss of $2.94 per share compared with net income of $0.12 per diluted share in 2007. Before special items, PolyOne reported earnings per share of $0.41 in 2008 - equal to that reported in 2007.

"Despite extraordinary volatility in raw material and energy costs, and unprecedented demand declines in the fourth quarter, we are reporting full year and fourth quarter earnings per share before special items equal to last year," said Stephen D. Newlin, chairman, president and chief executive officer. "While we believe this is solid performance in the current environment, we must remain focused on the year ahead. I am proud of the way the PolyOne team is stepping up to contribute as we face a widely expected continued deterioration of the economy in 2009."

Newlin continued, "We believe the volume declines observed during the fourth quarter were at least partially due to customer inventory destocking, and we have yet to see that trend reverse. Three weeks ago, we announced additional cost cutting measures and restructuring actions that will allow PolyOne to remain competitive through the near-term economic downturn. We believe these actions set the stage for significant earnings improvement when the economy ultimately recovers."

Special items in the fourth quarter included a tax valuation allowance of $104.5 million against U.S. deferred tax assets. The valuation allowance is larger than previously disclosed primarily due to finalizing the accounting and determining that about $35 million of the allowance that we previously planned as a direct reduction of equity now must be charged as expense. This does not change the Company's previous statements that this is a non-cash charge that has no impact on PolyOne's cash flow, liquidity, or credit facilities. Further, the Company expects that it will have sufficient U.S. profitability during the tax-loss carry-forward period to realize substantially all of the deferred tax benefits.

The non-cash goodwill impairment charge of $170 million relates to the Company's Geon Compounds and Specialty Coatings reporting units within the Performance Products and Solutions Segment. This goodwill impairment charge is preliminary based on management's best estimates and may be revised prior to the Company filing its 2008 annual report on Form 10-K or during the first quarter of 2009 after management has an opportunity to conduct a full valuation study of these two reporting units.

Special charges recorded during the fourth quarter also include $26.6 million of pre-tax charges related to the combined restructuring actions announced on January 15, 2009 and announced on July 28, 2008.

Commenting on the goodwill impairment, senior vice president and chief financial officer, Robert M. Patterson, said, "The non-cash goodwill impairment charge in 2008 reflects an increase in our cost of capital due primarily to the significant deterioration in the capital markets during the fourth quarter and related decline in the market value of equity and debt securities. The cost of capital is used to discount future cash flows and therefore is a key assumption used in estimating the fair value of a business. The impairment also reflects a reduction in the near-term earnings outlook for the Geon Compounds and Specialty Coatings reporting units. While the outlook for these businesses declined in the fourth quarter of 2008, we believe they will both generate significant earnings improvement when the economy recovers."

Patterson added, "We generated strong cash flow during the quarter and we applied this principally to debt reduction. From the third quarter of 2008, overall debt has declined $50 million, including our Sunbelt joint venture guarantee. As of December 31, 2008, we had $44 million of cash, plus borrowing availability of $121 million under our accounts receivable securitization facility, for total liquidity of $165 million."

About PolyOne:

PolyOne Corporation, with annual revenues of more than $2.7 billion, is a premier provider of specialized polymer materials, services and solutions. Headquartered outside of Cleveland, Ohio USA, PolyOne has operations around the world.

Source: PolyOne

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