PolyOne 2009 Annual Report

Outstanding stock options with exercise prices greater than the
average price of the common shares are anti-dilutive and are not
included in the computation of diluted earnings per share. The
number of anti-dilutive options and awards was 5.3 million, 4.1 million
and 6.4 million at December 31, 2009, 2008 and 2007,
respectively.
Note 18 — FINANCIAL INSTRUMENTS
The estimated fair values of financial instruments were principally
based on market prices where such prices were available and,
where unavailable, fair values were estimated based on market
prices of similar instruments. The fair value of short-term foreign
exchange contracts is based on exchange rates at December 31,
2009.
The following table summarizes the contractual amounts of our
foreign exchange contracts as of December 31, 2009 and 2008.
Foreign currency amounts are translated at exchange rates as of
December 31, 2009 and 2008, respectively. The “Buy” amounts
represent the U.S. dollar equivalent of commitments to purchase
currencies, and the “Sell” amounts represent the U.S. dollar equivalent
of commitments to sell currencies.
December 31, 2009 December 31, 2008
Currency (In millions) Buy Sell Buy Sell
U.S. dollar $59.9 $ — $ 4.6 $29.7
Euro — 55.5 8.9 4.5
British pound — 4.4 — —
Canadian dollar — — 20.4 —
The carrying amounts and fair values of our financial instruments as of December 31, 2009 and 2008 are as follows:
2009 2008
(In millions)
Carrying
Amount
Fair
Value
Carrying
Amount
Cash and cash equivalents $222.7 $222.7 $ 44.3 $ 44.3
Long-term debt
Credit facility borrowings 40.0 40.0 40.0 40.0
7.500% debentures 50.0 45.8 50.0 30.0
8.875% senior notes 279.5 285.1 279.2 139.6
Medium-term notes 39.6 38.4 58.9 35.4
Foreign exchange contracts 0.5 0.5 (0.3) (0.3)
Fair
Value
Note 19 — FAIR VALUE
The fair values of financial assets and liabilities are measured on a
recurring or non-recurring basis. Financial assets and liabilities
measured on a recurring basis are those that are adjusted to fair
value each time a financial statement is prepared. Financial assets
and liabilities measured on a non-recurring basis are those that are
adjusted to fair value when a significant event occurs. In determining
fair value of financial assets and liabilities, we use various
valuation techniques. The availability of inputs observable in the
market varies from instrument to instrument and depends on a
variety of factors including the type of instrument, whether the
instrument is actively traded, and other characteristics particular
to the transaction. For many financial instruments, pricing inputs
are readily observable in the market, the valuation methodology
used is widely accepted by market participants, and the valuation
does not require significant management discretion. For other
financial instruments, pricing inputs are less observable in the
market and may require management judgment.
We assess the inputs used to measure fair value using a threetier
hierarchy. The hierarchy indicates the extent to which inputs
used in measuring fair value are observable in the market. Level 1
inputs include quoted prices for identical instruments and are the
most observable. Level 2 inputs include quoted prices for similar
assets and observable inputs such as interest rates, foreign currency
exchange rates, commodity rates and yield curves. Level 3
inputs are not observable in the market and include management’s
own judgments about the assumptions market participants would
use in pricing the asset or liability. The use of observable and
unobservable inputs is reflected in the discussion below.
In accordance with the provisions of FASB ASC Topic 350,
Intangibles — Goodwill and Other, we assess the fair value of
goodwill on a non-recurring basis. Accordingly, goodwill with a preliminary
carrying amount of $334.0 million as of December 31,
2008 was adjusted to its implied fair value of $159.0 million,
resulting in an impairment charge of $175.0 million, of which
$170.0 million was included in earnings for the three-month period
ended December 31, 2008 and $5.0 million was included in earnings
for the three-month period ended March 31, 2009. The implied
fair value of goodwill is determined based on significant unobservable
inputs as summarized below. Accordingly, these inputs fall
within Level 3 of the fair value hierarchy.
We use a combination of two valuation methods, a market
approach and an income approach, to estimate the fair value of our
reporting units. Absent an indication of fair value from a potential
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