Consumables

PolyOne Announces Fourth Quarter and Full Year 2010 Results

Friday 04. February 2011 - Fourth Quarter Results

Earnings per share of $1.00 versus $0.22 in prior year fourth quarter
Excluding special items and tax adjustments in both periods, earnings per share improve 55% to $0.17 from $0.11 in prior year fourth quarter
All three strategic platforms record double digit revenue growth versus prior year fourth quarter
Full Year Results
Revenues increase 27% to $2.6 billion versus full year 2009
Earnings per share of $1.69 versus $0.53 in prior year
Excluding special items and tax adjustments in both periods, full year earnings per share grew 252% to $0.88 from $0.25 in the prior year
Record-breaking year completed and double digit EPS expansion expected in 2011, excluding special items
PolyOne Corporation (NYSE: POL) today reported revenues of $617.8 million for the fourth quarter of 2010, a 12% increase compared to revenues of $552.5 million in the fourth quarter of 2009. Consolidated revenue growth was driven by a 6% increase in volume and higher selling prices principally associated with raw material cost increases.
Diluted earnings per share totaled $1.00 in the fourth quarter of 2010, compared to $0.22 per diluted share in the fourth quarter of 2009. Excluding special items and one-time tax adjustments in both periods, earnings per share increased to $0.17 per diluted share for the fourth quarter of 2010 compared with $0.11 per diluted share recorded in the fourth quarter of 2009.
Full year revenues in 2010 increased 27% to $2.6 billion, compared to $2.1 billion in the prior year. Diluted earnings per share totaled $1.69 for the full year 2010, compared to $0.53 per diluted share in 2009. Excluding special items and one-time tax adjustments in both periods, earnings per share increased to $0.88 per diluted share for full year 2010 compared with $0.25 per diluted share recorded in the prior year.
“I am pleased with our fourth quarter results as each of our three strategic platforms recorded double digit revenue growth, and earnings per share, excluding special items and tax adjustments, expanded 55% over prior year levels,” said Stephen D. Newlin, chairman, president and chief executive officer. “These quarterly results mark the completion of a record-breaking year, and illustrate the progress we have made in transforming PolyOne.”
Newlin added, “For the full year, both our Specialty Platform and PolyOne Distribution achieved record levels of operating income and profitability, while operating margins in Performance Products and Solutions reached a new record return on sales of 7.0%.”
“Our balance sheet has never been stronger as we ended the year with $378 million in cash, $506 million of liquidity and a net debt to EBITDA ratio of 0.5 times,” added Robert M. Patterson, executive vice president and chief financial officer. “We are using this cash to further reposition our portfolio of assets to drive additional specialty growth, and in the last four months, we have acquired two Specialty platform businesses in Brazil.”
In January 2011, the Company acquired Uniplen, a Brazilian specialty engineered materials and thermoplastics distribution business with annual revenues of $34 million. When combined with Polimaster, the Brazilian color business acquired in October 2010, the Company has firmly established specialty engineered materials, color masterbatch and distribution capabilities in this attractive growing market.
Included in the results for the fourth quarter of 2010 are pre-tax special items netting to $5.5 million ($2.9 million after tax), primarily related to the Company’s $16.3 million gain on the sale of its BayOne joint venture investment, offset by environmental remediation costs. The Company also recorded $78.2 million of favorable tax adjustments primarily related to the reversal of its U.S. deferred tax asset valuation allowance. During the fourth quarter of 2009, the Company recorded charges of $1.9 million ($0.8 million after tax), primarily related to expenses associated with environmental remediation and previously announced restructuring actions, net of asset sale gains.
The chart below provides a comparison of fourth quarter 2010 results with the fourth quarter of 2009, showing the impact of special items and the above-mentioned tax matters:
In millions (except per share amounts)
Q4 2010
EPS
Q4 2009
EPS
Net Income
$ 97.5
$ 1.00
$ 20.8
$ 0.22
Special items, after tax
(2.9)
(0.03)
0.8
0.01
Tax adjustments
(78.2)
(0.80)
(10.8)
(0.12)
$ 16.4
$ 0.17
$ 10.8
$ 0.11
“During the fourth quarter we reversed the remainder of our U.S. deferred tax asset valuation allowance initially recorded during the fourth quarter of 2008,” added Patterson. “With the significant profitability improvements we have achieved and a bright outlook for the future, we fully expect to realize the benefit of these assets.”
Outlook Update
“Our focus on transforming PolyOne into a specialty company is unwavering,” said Newlin about the Company’s strategy and outlook. “Over the last four years, we have made significant progress in overhauling our commercial philosophy, strengthening our leadership team, and monetizing non-core investments. We have also enhanced operational excellence using lean six sigma and expanded our geographic footprint. We have instilled a culture of discipline and radically shifted the earnings profile of our company which is reflected in the numerous record breaking performances delivered during 2010.”
Newlin continued, “It is important for investors to understand that the PolyOne story is far from over. We view the past several quarters of success as just the beginning of a multi-year improvement in revenue, profit margin, and earnings per share. We expect double digit EPS expansion in 2011, and we are well on our way to meeting or exceeding our aggressive 2012 financial targets.”
The table below highlights the Company’s operating margin expansion progress since 2006 and against its 2012 targets:
Operating Income Expansion
Target
2006
2010
2012
Operating Income % of Sales
Specialty Platform
1.5%
8.4%
10% – 12%
Performance Products and Solutions
5.5%
7.0%
8% – 10%
PolyOne Distribution
2.6%
4.6%
4% – 5%
Specialty Platform % of Operating Income
6.4%
43.2%
> 50%