PolyOne 2009 Annual Report

POLYONE CORPORATION
2009. However, such additional costs, if any, cannot be currently
estimated. Our estimate of this liability may be revised as new
regulations or technologies are developed or additional information
is obtained. These remediation costs are expected to be paid over
the next 30 years.
The following table details the changes in the environmental
accrued liabilities:
(In millions) 2009 2008 2007
Balance at beginning of the year $ 85.6 $ 83.8 $ 59.5
Environmental remediation (benefit)
expenses, net of recoveries (12.2) 15.6 48.8
Cash receipts (payments), net of
insurance recoveries 7.6 (12.6) (25.5)
Translation and other adjustments 0.7 (1.2) 1.0
Balance at end of year $ 81.7 $ 85.6 $ 83.8
Our environmental expense is presented net of insurance and
other recoveries of $23.9 million in 2009 and $1.5 million in 2008
and is included in Cost of sales in the accompanying consolidated
statements of operations. There were no insurance recoveries
during 2007. In 2009, we received $23.9 million from our former
parent company as partial reimbursement of certain previously
incurred environmental remediation costs. In 2007, environmental
expense included the $15.6 million charge related to the settlement
agreement and the $28.8 million reserve adjustment discussed
above.
Guarantees — We guarantee $48.8 million of SunBelt’s outstanding
senior secured notes in connection with the construction
of a chlor-alkali facility in McIntosh, Alabama. This debt matures in
equal installments annually until 2017.
Related-Party Transactions — We purchase a substantial portion
of our PVC resin and all of our vinyl chloride monomer (VCM) raw
materials under supply agreements with OxyVinyls. We have also
entered into various service agreements with OxyVinyls. We sold our
24% equity interest in OxyVinyls on July 6, 2007. Purchases of raw
materials from OxyVinyls were $152 million for the six months
ended June 30, 2007.
Note 13 — OTHER EXPENSE, NET
Other expense, net for the years ended December 31, 2009, 2008
and 2007 consist of the following:
(In millions) 2009 2008 2007
Currency exchange gain (loss) $(0.1) $ 1.2 $(5.0)
Foreign exchange contracts (loss) gain (7.9) (1.3) 0.7
Discount on sale of trade receivables (1.3) (3.6) (2.0)
Impairment of available for sale security — (0.6) —
Other expense, net (0.3) (0.3) (0.3)
$(9.6) $(4.6) $(6.6)
Note 14 — INCOME TAXES
For financial statement reporting purposes, income before income
taxes is summarized below based on the geographic location of the
operation to which such earnings are attributable. Certain foreign
operations are branches of PolyOne and are, therefore, subject to
United States (U.S.) as well as foreign income tax regulations. As a
result, pre-tax income by location and the components of income tax
expense by taxing jurisdiction are not directly related.
Income (loss) before income taxes and discontinued operations
for the periods ended December 31, 2009, 2008 and 2007
consists of the following:
(In millions) 2009 2008 2007
Domestic $51.6 $(138.8) $(57.7)
Foreign 2.9 (32.3) 25.3
$54.5 $(171.1) $(32.4)
A summary of income tax (expense) benefit for the periods
ended December 31, 2009, 2008 and 2007 is as follows:
(In millions) 2009 2008 2007
Current:
Federal $ 4.0 $ — $ (3.3)
State 4.3 (3.9) (3.2)
Foreign 10.9 (8.5) (6.8)
Total current $19.2 $ (12.4) $(13.3)
Deferred:
Federal $ (1.7) $ (88.6) $ 55.3
State — (3.3) 2.6
Foreign (4.2) 2.5 (0.8)
Total deferred $ (5.9) $ (89.4) $ 57.1
Total tax benefit (expense) $13.3 $(101.8) $ 43.8
The principal items accounting for the difference in income
taxes computed at the U.S. statutory rate for the periods ended
December 31, 2009, 2008 and 2007 are as follows:
(In millions) 2009 2008 2007
Computed tax (expense) benefit at
35% of income (loss) from
continuing operations before taxes $(19.1) $ 59.9 $11.3
State tax, net of federal benefit 2.8 (2.5) (0.4)
Differences in rates of foreign
operations 4.5 1.2 2.6
Changes in valuation allowances 23.3 (105.9) (1.0)
Impact from sale of interest in
OxyVinyls — — 31.5
Impact of goodwill impairment charge 0.6 (54.2) —
Recognition of uncertain tax positions 1.2 (0.3) —
Other, net — — (0.2)
Income tax benefit (expense) $ 13.3 $(101.8) $43.8
We have U.S. federal net operating loss carryforwards of
$66.0 million, which expire at various dates from 2024 through
2028 and combined state net operating loss carryforwards of
$314.6 million, which expire at various dates from 2010 through
52