PolyOne 2009 Annual Report

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders PolyOne Corporation We have audited PolyOne Corporation’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). PolyOne Corporation’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying “Management’s Annual Report on Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, PolyOne Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of PolyOne Corporation and subsidiaries as of December 31, 2009, and 2008, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2009, and our report dated February 18, 2010 expressed an unqualified opinion thereon. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders PolyOne Corporation We have audited the accompanying consolidated balance sheets of PolyOne Corporation as of December 31, 2009 and 2008, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of PolyOne Corporation at December 31, 2009 and 2008, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), PolyOne Corporation’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 18, 2010 expressed an unqualified opinion thereon. /s/ ERNST & YOUNG LLP Cleveland, Ohio February 18, 2010 /s/ ERNST & YOUNG LLP Cleveland, Ohio February 18, 2010 POLYONE CORPORATION 34
Consolidated Statements of Operations Year Ended December 31, (In millions, except per share data) 2009 2008 2007 Sales $2,060.7 $2,738.7 $2,642.7 Cost of sales 1,720.2 2,442.1 2,381.7 Gross margin 340.5 296.6 261.0 Selling and administrative 272.3 287.1 254.8 Impairment of goodwill 5.0 170.0 — Income from equity affiliates 35.2 31.2 27.7 Operating income (loss) 98.4 (129.3) 33.9 Interest expense, net (34.3) (37.2) (46.9) Premium on early extinguishment of long-term debt — — (12.8) Other expense, net (9.6) (4.6) (6.6) Income (loss) before income taxes 54.5 (171.1) (32.4) Income tax benefit (expense) 13.3 (101.8) 43.8 Net income (loss) $ 67.8 $ (272.9) $ 11.4 Basic and diluted earnings (loss) per common share: $ 0.73 $ (2.94) $ 0.12 Weighted-average shares used to compute earnings (loss) per common share: Basic 92.4 92.7 92.8 Diluted 93.4 92.7 93.1 The accompanying notes to consolidated financial statements are an integral part of these statements. POLYONE CORPORATION 35
Page 1 and 2: 2009 ANNUAL REPORT leaner. stronger
Page 3 and 4: fortified our strategic focus and t
Page 5 and 6: The New PolyOne PolyOne launched Le
Page 7 and 8: United States Securities and Exchan
Page 9 and 10: manufacturing sites and 11 distribu
Page 11 and 12: Vinyl is one of the most widely use
Page 13 and 14: A number of foreign countries and d
Page 15 and 16: We also conduct investigations and
Page 17 and 18: and the availability and cost of cr
Page 19 and 20: Executive officers are elected by o
Page 21 and 22: PART II ITEM 5. MARKET FOR REGISTRA
Page 23 and 24: on the opportunity to accelerate de
Page 25 and 26: Results of Operations Variances—F
Page 27 and 28: Sales and Operating Income (Loss)
Page 29 and 30: Sales and Operating Income (Loss)
Page 31 and 32: $5.7 million. Additionally, liquidi
Page 33 and 34: issuing standby letters of credit a
Page 35 and 36: Description Pension and Other Post-
Page 37 and 38: Description Share-Based Compensatio
Page 39: MANAGEMENT’S REPORT The managemen
Page 43 and 44: Consolidated Statements of Cash Flo
Page 45 and 46: Note 1 — DESCRIPTION OF BUSINESS
Page 47 and 48: As of December 31, 2009, included i
Page 49 and 50: derivative agreements. This new gui
Page 51 and 52: OxyVinyls, a former 24% owned affil
Page 53 and 54: $127.2 million and is included in a
Page 55 and 56: Change in AOCI: Pension Benefits He
Page 57 and 58: pricing the asset. Unobservable inp
Page 59 and 60: 2029. Various foreign subsidiaries
Page 61 and 62: During 2008, RSUs were granted to e
Page 63 and 64: partner, Producer Services offers r
Page 65 and 66: Outstanding stock options with exer
Page 67 and 68: for approximately $8.9 million. The
Page 69 and 70: ITEM 12. SECURITY OWNERSHIP OF CERT
Page 71 and 72: Exhibit No. Exhibit Description 10.
Page 73 and 74: SIGNATURES Pursuant to the requirem
Page 75 and 76: Exhibit No. Exhibit Description 10.
Page 77 and 78: Exhibit 31.1 CERTIFICATION I, Steph
Page 79 and 80: Exhibit 32.1 CERTIFICATION PURSUANT
Page 81 and 82: THIS PAGE IS NOT PART OF POLYONE’

PolyOne 2009 Annual Report

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