PolyOne 2009 Annual Report

POLYONE CORPORATION
and The Bank of New York, as paying agent. The credit agreement
provides for an unsecured revolving and letter of credit facility with
total commitments of up to $40.0 million. The credit agreement
expires on March 20, 2011. Borrowings under the credit facility are
based on the applicable LIBOR rate plus a fixed facility fee of 4.77%.
During 2007, we repurchased $241.4 million aggregate principal
amounts of our 10.625% senior notes at a premium of
$12.8 million. The premium is shown as a separate line item in
the accompanying consolidated statements of operations. Unamortized
deferred note issuance costs of $2.8 million were charged
to expense due to this repurchase and are included in Interest
expense, net in the accompanying consolidated statements of
operations in 2007. Also, during each of the years ended December
31, 2009, 2008 and 2007, $20.0 million of aggregate principal
amount of our medium-term notes became due and were paid.
Included in Interest expense, net for the years ended
December 31, 2009, 2008 and 2007 was interest income of
$3.2 million, $3.4 million, and $4.5 million. Total interest paid
on long-term and short-term borrowings was $35.1 million in 2009,
$37.1 million in 2008 and $45.7 million in 2007.
As of December 31, 2009, our secured borrowings were not at
levels that would trigger the security provisions of the indentures
governing our senior notes and debentures and our guarantee of the
SunBelt notes. See Note 12, Commitments and Related-Party
Information.
We entered into a definitive Guarantee and Agreement with
Citicorp USA, Inc., KeyBank National Association and National City
Bank on June 6, 2006. Under this Guarantee and Agreement, we
guarantee some treasury management and banking services provided
to us and our subsidiaries, such as foreign currency forwards
and bank overdrafts. This guarantee is secured by our inventories
located in the United States.
We are exposed to market risk from changes in interest rates
on our debt obligations. In prior years we entered into interest rate
swap agreements that modified our exposure to interest rate risk by
converting fixed-rate obligations to floating rates or floating rate
obligations to fixed rates. As of December 31, 2009, there were no
open interest rate swap agreements. The following table shows the
interest rate impact of the swap agreements during 2008 and
2007:
Effective
Interest Rate
during 2008
Effective
Interest Rate
during 2007
$40.0 million of borrowings under credit
facility with an interest rate of 6.65% 8.4% —
$60.0 million of medium-term notes with a
weighted-average interest rate of 6.67% 7.1% —
$80.0 million of medium-term notes with a
weighted-average interest rate of 6.76% — 9.5%
Note 6 — LEASING ARRANGEMENTS
We lease certain manufacturing facilities, warehouse space,
machinery and equipment, automobiles and railcars under operating
leases. Rent expense was $20.6 million in 2009, $24.0 million
in 2008 and $22.4 million in 2007.
Future minimum lease payments under non-cancelable operating
leases with initial lease terms longer than one year as of
December 31, 2009 were as follows: 2010 — $19.8 million;
2011 — $15.2 million; 2012 — $11.1 million; 2013 — $6.9 million;
2014 — $5.6 million; and thereafter — $17.0 million.
Note 7 — ACCOUNTS RECEIVABLE
Accounts receivable as of December 31 consist of the following:
(In millions) 2009 2008
Trade accounts receivable $129.2 $141.6
Retained interest in securitized accounts
receivable 151.1 127.2
Allowance for doubtful accounts (5.9) (6.7)
$274.4 $262.1
The following table details the changes in allowance for doubtful
accounts:
(In millions) 2009 2008 2007
Balance at beginning of the year $(6.7) $(4.8) $(5.9)
Provision for doubtful accounts (3.3) (6.0) (1.9)
Accounts written off 4.0 4.2 3.3
Translation and other adjustments 0.1 (0.1) (0.3)
Balance at end of year $(5.9) $(6.7) $(4.8)
Sale of Accounts Receivable — Under the terms of our receivables
sale facility, we sell accounts receivable to PolyOne Funding
Corporation (PFC) and PolyOne Funding Canada Corporation (PFCC),
both wholly-owned, bankruptcy-remote subsidiaries. PFC and PFCC,
in turn, may sell an undivided interest in up to $175.0 million and
$25.0 million of these accounts receivable, respectively, to certain
investors. The receivables sale facility was amended in June 2007
to extend the maturity of the facility to June 2012 and to, among
other things, modify certain financial covenants and reduce the cost
of utilizing the facility.
As of December 31, 2009 and 2008, accounts receivable
totaling $151.1 million and $141.4 million, respectively, were sold
by us to PFC and PFCC. 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. As of December 31, 2009, neither PFC nor PFCC had sold
any of their undivided interests in accounts receivable. As of December
31, 2008, PFC and PFCC had sold $14.2 million of their undivided
interests in accounts receivable.
We retain an interest in the difference between the amount of
trade receivables sold by us to PFC and PFCC and the undivided
interest sold by PFC and PFCC as of December 31, 2009 and 2008.
As a result, the interest retained by us is $151.1 million and
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