PolyOne 2009 Annual Report

issuing standby letters of credit as a sub-limit within the $200.0 million
facility, of which $12.8 million was used at December 31, 2009.
The facility requires us to maintain a minimum fixed charge
coverage ratio (defined as Adjusted EBITDA less capital expenditures,
divided by interest expense and scheduled debt repayments
for the next four quarters) of at least 1 to 1 when average excess
availability under the facility is $40.0 million or less. As of December
31, 2009, the average excess availability under the facility was
greater than $40.0 million. Additionally, the fixed charge coverage
ratio exceeded 1 to 1.
Notes Receivable
Included in Other current assets as of December 31, 2009 is
$8.1 million outstanding on a seller note receivable due to us from
O’Sullivan Films, which purchased our engineered films business in
February 2006. This note accrues interest at 7% and is due in full
with accrued interest at maturity in December 2010.
Included in Other non-current assets as of December 31, 2009
is $23.5 million outstanding on a seller note receivable due from
Excel Polymers LLC, which purchased our elastomers and performance
additives business in August 2004. During 2009, we and
Excel agreed to extend the maturity of the seller note to February 29,
2012. As a result of this extension, we were given a secured
position in the assets of the business. This note accrues interest
at 10% per annum and is due in full with accrued interest at maturity.
Concentrations of Credit Risk
Financial instruments, including foreign exchange contracts and
interest rate swap agreements, along with trade accounts receivable
and notes receivable, subject us to potential credit risk. Concentration
of credit risk for trade accounts receivable is limited due
to the large number of customers constituting our customer base
and their distribution among many industries and geographic locations.
We are exposed to credit risk with respect to notes receivable
but we believe collection of the outstanding amounts is probable.
We are exposed to credit risk with respect to forward foreign
exchange contracts and interest rate swap agreements in the event
of non-performance by the counter-parties to these financial instruments.
We believe that the risk of incurring material losses related
to this credit risk is remote. We do not require collateral to support
the financial position of our credit risks.
Of the capital resource facilities available to us as of December
31, 2009, the portion of the receivables that was actually sold
under the receivables sale facility provided security for the transfer
of ownership of these receivables. Each indenture governing our
senior unsecured notes and debentures and our guarantee of
$48.8 million of SunBelt notes allows a specific level of secured
debt, above which security must be provided on each indenture and
our guarantee of the SunBelt notes. The receivables sale facility and
our guarantee of SunBelt debt are not considered debt under the
covenants associated with our senior unsecured notes and
debentures.
Off-Balance Sheet Arrangements
Receivables sale facility
We sell a portion of our domestic accounts receivable to PolyOne
Funding Corporation (PFC) and a portion of our Canadian accounts
receivable to PolyOne Funding Canada Corporation (PFCC), both
wholly-owned, bankruptcy-remote subsidiaries. At December 31,
2009, accounts receivable totaling $151.1 million were sold to
PFC and PFCC. When PFC and PFCC sell an undivided interest in
these accounts receivable to certain third-party investors, such
amounts are reflected as a reduction of accounts receivable in
the accompanying consolidated balance sheets. The maximum
proceeds that PFC and PFCC may receive under the facility is limited
to the lesser of $200.0 million or 85% of the eligible domestic and
Canadian accounts receivable sold. At December 31, 2009, PFC
and PFCC had not sold any of their undivided interests in accounts
receivable. We believe that available funding under our receivables
sale facility provides us increased flexibility to manage working
capital requirements and is an important source of liquidity.
Guarantee of indebtedness of others
We guarantee $48.8 million of unconsolidated equity affiliate debt
of SunBelt in connection with the construction of a chlor-alkali
facility in McIntosh, Alabama. This debt guarantee matures in 2017.
Letters of credit
The receivables sale facility makes up to $40.0 million available for
the issuance of standby letters of credit, $12.8 million of which was
used at December 31, 2009. These letters of credit are issued by
the bank in favor of third parties and are mainly related to insurance
claims and interest rate swap agreements.
We have no other off-balance sheet arrangements as defined in
Item 303(a)(4)(ii) of Regulation S-K.
Contractual Obligations
The following table summarizes our obligations under long-term
debt, operating leases, standby letters of credit, interest obligations,
pension and post-retirement obligations, guarantees and
purchase obligations as of December 31, 2009:
(In millions)
Total
Payment Due by Period
Less than
More than
1 Year 1-3 Years 4-5 Years 5 Years
Contractual Obligations
Long-term debt $409.1 $ 19.9 $339.2 $ — $ 50.0
Operating leases 75.6 19.8 26.3 12.5 17.0
Standby letters of credit 12.8 12.8 — — —
Interest on long-term debt
obligations (1) 88.8 32.2 45.5 7.5 3.6
Pension and post-retirement
obligations (2) 237.6 25.4 80.9 72.4 58.9
Guarantees 48.8 6.1 12.2 12.2 18.3
Purchase obligations 19.6 10.2 7.0 1.7 0.7
Total $892.3 $126.4 $511.1 $106.3 $148.5
POLYONE CORPORATION
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