PolyOne 2009 Annual Report

$5.7 million. Additionally, liquidity was negatively impacted by the
reduction in availability under our receivables sale facility due to the
decrease in our U.S. and Canadian accounts receivable.
Cash Flows
The following discussion focuses on the material components of
cash flows from operating, investing and financing activities.
Operating Activities
(In millions) 2009 2008 2007
Cash Flows from Operating Activities
Net income (loss) $ 67.8 $(272.9) $ 11.4
Depreciation and amortization 64.8 68.0 57.4
Deferred income tax provision
(benefit) 5.9 89.4 (57.1)
Premium on early extinguishment of
long-term debt — — 12.8
Provision for doubtful accounts 3.3 6.0 1.9
Stock compensation expense 2.6 3.0 4.3
Impairment of goodwill 5.0 170.0 —
Asset write-downs and impairment
charges, net of (gain) on sale of
closed facilities 3.7 3.6 3.3
Companies carried at equity and
minority interest:
Income from equity affiliates and
minority interest (35.2) (31.2) (27.7)
Distributions and distributions
received 36.5 32.9 37.6
Change in assets and liabilities:
Decrease (increase) in accounts
receivable 1.3 60.8 (10.8)
Decrease in inventories 39.1 33.6 26.7
Increase (decrease) in accounts
payable 76.3 (94.7) 17.8
Increase (decrease) in sale of
accounts receivable (14.2) 14.2 —
(Decrease) increase in accrued
expenses and other (27.2) (10.2) (10.4)
Net cash provided by operating
activities $229.7 $ 72.5 $ 67.2
Cash provided by operating activities increased in 2009 as compared
to 2008 due primarily to improved earnings and the previously
described favorable impacts related to improved working capital
performance.
Cash provided by operating activities increased in 2008 as
compared to 2007 due to higher earnings before giving effect to
non-cash restructuring and tax valuation allowance charges, lower
debt extinguishment premiums, lower cash payments for environmental
remediation, and an increase in the sale of accounts receivable,
all of which more than offset higher pension funding.
Investing Activities
(In millions) 2009 2008 2007
Cash Flows from Investing Activities
Capital expenditures $(31.7) $ (42.5) $ (43.4)
Investment in affiliated company — (1.1) —
Business acquisitions, net of cash
acquired (11.5) (150.2) (11.2)
Proceeds from sale of investment
in equity affiliate and other
assets 17.0 0.3 269.9
Net cash (used) provided by
investing activities $(26.2) $(193.5) $215.3
Net cash used by investing activities in 2009 reflects $13.5 million
of cash proceeds from the sale of our interest in GPA and $3.5 million
of proceeds from the sale of other assets. Capital expenditures
primarily related to maintenance spending and implementing our
restructuring initiatives. Business acquisitions, net of cash
acquired in 2009 reflects cash paid for our acquisition of NEU.
Net cash used by investing activities in 2008 relates primarily
to the $150.2 million to fund the acquisition of GLS and $42.5 million
of capital expenditures. Capital expenditures in 2008 reflect
strategic investments to upgrade our Enterprise Resource Planning
system, expand our global footprint in China and India through
investment in manufacturing and customer specific projects, product
line investments to support our specialization strategy, and the
enablement of the manufacturing restructuring initiative we
announced in July 2008. Spending on strategic projects constituted
approximately 48% of total spending. The remainder of spending
was related to productivity improvement, on-going maintenance of
the asset base and critical environmental, health and safety (EH&S)
projects.
Net cash provided by investing activities in 2007 totaled
$215.3 million, primarily from the proceeds of the sale of our
24% interest in OxyVinyls. In a transaction related to the sale of
our interest in OxyVinyls, we purchased the remaining 10% minority
interest in Powder Blends, LP. Included in the $43.4 million of
capital expenditures were strategic investments to expand our
footprint in Eastern Europe through the building of our Poland
facility, and increase our capabilities to compete in more specialized
end-markets related to additives and liquid color applications.
Spending on strategic projects constituted approximately 42% of
total spending. The remainder of spending was related to productivity
improvement, on-going maintenance of the asset base and
critical EH&S projects.
Capital expenditures are currently estimated to be approximately
$40 million in 2010, primarily to maintain manufacturing
operations, support an implementation of a Enterprise Resource
Planning system in Asia and other strategic spending.
POLYONE CORPORATION
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