PolyOne 2009 Annual Report

POLYONE CORPORATION
Note 3 — EMPLOYEE SEPARATION AND PLANT PHASEOUT
Management has undertaken certain restructuring initiatives to
reduce costs and, as a result, we have incurred employee separation
and plant phaseout costs.
Employee separation costs include one-time termination benefits
including salary continuation benefits, medical coverage and
outplacement assistance and are based on a formula that takes
into account each individual employee’s base compensation and
length of service. Employee separation costs also include on-going
postemployment benefits accounted for under FASB ASC Topic 712,
Compensation — Nonretirement Postemployment Benefits, which
are accrued when it is probable that a liability has been incurred and
the amount can be reasonably estimated.
Plant phaseout costs include the impairment of property, plant
and equipment at manufacturing facilities and the resulting writedown
of the carrying value of these assets to fair value, which
represents management’s best estimate of the net proceeds to be
received for the assets to be sold or scrapped, less any costs to
sell. Plant phaseout costs also include cash facility closing costs
and lease termination costs. Assets transferred to our other facilities
are transferred at net book value.
Employee separation and plant phaseout costs associated
with continuing operations are reflected on the line Corporate
and eliminations in Note 16, Segment Information. A summary of
total employee separation and plant phaseout costs, including
where the charges are recorded in the accompanying consolidated
statements of operations, follows:
(In millions) 2009 2008 2007
Cost of sales $24.4 $29.3 $1.4
Selling and administrative 2.8 10.4 0.8
Total employee separation and plant
phaseout $27.2 $39.7 $2.2
Included in employee separation and plant phaseout costs
shown in the preceding table were charges of $7.4 million, included
in Cost of sales, and $1.2 million, included in Selling and administrative,
for accelerated depreciation on assets related to the 2009
restructuring initiatives discussed below. Cash payments for
employee separation and plant phaseout costs during 2009,
2008 and 2007 were $32.1 million, $5.5 million and $1.5 million,
respectively.
In July 2008, we announced the restructuring of certain manufacturing
assets, including the closure of seven production facilities
in North America and one in the United Kingdom. In January
2009, we announced further cost saving measures that included
eliminating approximately 370 positions worldwide, implementing
reduced work schedules for another 100 to 300 employees, closing
our Niagara, Ontario facility and idling certain other capacity. We
recognized charges of $26.9 million and $38.3 million in 2009 and
2008, respectively, related to these actions. We do not expect to
incur significant additional expenses associated with these
activities.
The following table details the charges and changes to the
reserves associated with these initiatives for the year ended
December 31, 2009:
(Dollars in millions, except employee
numbers)
Employee
Separation
Costs
Plant Phaseout Costs
Cash
Closure
Asset
Write-downs
Total
Balance at January 1, 2008 $ — $ — $ — $ —
Charge 26.1 2.2 10.0 38.3
Utilized (2.4) (1.5) (10.0) (13.9)
Balance at December 31,
2008 $ 23.7 $ 0.7 $ — $ 24.4
Charge 3.0 8.4 15.5 26.9
Utilized (23.8) (7.5) (15.5) (46.8)
Impact of foreign currency
translation 0.1 0.1 — 0.2
Balance at December 31,
2009 $ 3.0 $ 1.7 $ — $ 4.7
In addition to the above, during 2009 and 2008, we incurred
$0.3 million and $1.1 million, respectively, of expense related to
executive severance agreements, which was included in Selling and
administrative in the accompanying consolidated statements of
operations. In 2009 and 2008, we paid $0.8 million and $1.0 million,
respectively, related to executive severance agreements. Our
liability for unpaid executive severance costs was $0.6 million at
December 31, 2009 and will be paid over the next 12 months.
Note 4 — FINANCIAL INFORMATION OF EQUITY AFFILIATES
SunBelt Chlor-Alkali Partnership (SunBelt) is the most significant of
our equity investments and is reported in the Resin and Intermediates
segment. PolyOne owns 50% of SunBelt. The remaining 50%
of SunBelt is owned by Olin SunBelt Inc., a wholly owned subsidiary
of the Olin Corporation.
Summarized financial information for SunBelt follows:
(In millions) 2009 2008 2007
SunBelt:
Net sales $167.4 $173.0 $180.6
Operating income $ 67.6 $ 73.6 $ 91.3
Partnership income as reported by
SunBelt $ 59.4 $ 65.1 $ 82.0
PolyOne’s ownership of SunBelt 50% 50% 50%
Earnings of equity affiliate recorded
by PolyOne $ 29.7 $ 32.5 $ 41.0
Summarized balance sheet as of December 31: 2009 2008
Current assets $ 16.1 $ 22.4
Non-current assets 94.1 107.7
Total assets 110.2 130.1
Current liabilities 21.4 19.7
Non-current liabilities 85.3 97.5
Total liabilities 106.7 117.2
Partnership interest $ 3.5 $ 12.9
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