Avient Announces Record Third Quarter 2021 Results

Attachment 1

 Avient Corporation

Summary of Condensed Consolidated Statements of Income (Unaudited)

(In millions, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Sales

$

1,219.8

$

924.5

$

3,617.3

$

2,245.1

Operating Income

78.7

33.5

307.2

124.3

Net income from continuing operations attributable to Avient shareholders

52.9

1.7

201.0

57.8

Basic earnings per share from continuing operations attributable to Avient shareholders

$

0.58

$

0.02

$

2.20

$

0.64

Diluted earnings per share from continuing operations attributable to Avient shareholders

$

0.57

$

0.02

$

2.18

$

0.64

Three Months Ended September 30, 2021

Three Months Ended September 30, 2020

Reconciliation to Condensed Consolidated Statements of Income

$

EPS

$

EPS

Net income from continuing operations attributable to Avient shareholders

$

52.9

$

0.57

$

1.7

$

0.02

Special items, after tax (Attachment 3)

11.7

0.13

40.3

0.44

Adjusted net income / EPS - excluding special items

$

64.6

$

0.70

$

42.0

$

0.46

Nine Months Ended September 30, 2021

Nine Months Ended September 30, 2020

Reconciliation to Condensed Consolidated Statements of Income

$

EPS

$

EPS

Net income from continuing operations attributable to Avient shareholders

$

201.0

$

2.18

$

57.8

$

0.64

Special items, after tax (Attachment 3)

26.0

0.28

51.5

0.57

Adjusted net income / EPS - excluding special items

$

227.0

$

2.46

$

109.3

$

1.21

Attachment 2

Avient Corporation

Condensed Consolidated Statements of Income (Unaudited)

(In millions, except per share data)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2021

2020

2021

2020

Sales

$

1,219.8

$

924.5

$

3,617.3

$

2,245.1

Cost of sales

964.4

714.3

2,770.8

1,713.7

Gross margin

255.4

210.2

846.5

531.4

Selling and administrative expense

176.7

176.7

539.3

407.1

Operating income

78.7

33.5

307.2

124.3

Interest expense, net

(19.0)

(29.7)

(57.8)

(55.3)

Other income, net

1.4

1.5

4.1

12.6

Income from continuing operations before income taxes

61.1

5.3

253.5

81.6

Income taxes

(8.5)

(2.7)

(51.8)

(22.5)

Net income from continuing operations

52.6

2.6

201.7

59.1

Loss from discontinued operations, net of income taxes

—

—

—

(0.5)

Net income

52.6

2.6

201.7

58.6

Net loss (income) attributable to noncontrolling interests

0.3

(0.9)

(0.7)

(1.3)

Net income attributable to Avient common shareholders

$

52.9

$

1.7

$

201.0

$

57.3

Earnings per share attributable to Avient common shareholders - Basic:

Continuing operations

$

0.58

$

0.02

$

2.20

$

0.64

Discontinued operations

—

—

—

—

Total

$

0.58

$

0.02

$

2.20

$

0.64

Earnings per share attributable to Avient common shareholders - Diluted:

Continuing operations

$

0.57

$

0.02

$

2.18

$

0.64

Discontinued operations

—

—

—

(0.01)

Total

$

0.57

$

0.02

$

2.18

$

0.63

Cash dividends declared per share of common stock

$

0.2125

$

0.2025

$

0.6375

$

0.6075

Weighted-average shares used to compute earnings per common share:

Basic

91.4

91.5

91.3

89.7

Diluted

92.2

91.9

92.1

90.7

Attachment 3

Avient Corporation

Summary of Special Items (Unaudited)

(In millions, except per share data)

Special items ⁽¹⁾

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Cost of sales:

Restructuring costs, including accelerated depreciation and amortization

$

(5.3)

$

(1.3)

$

(8.6)

$

(2.5)

Environmental remediation costs

(9.4)

(15.8)

(22.4)

(19.3)

Reimbursement of previously incurred environmental costs

—

—

4.5

8.7

Acquisition related costs

(2.6)

(10.5)

(1.2)

(10.5)

Impact on cost of sales

(17.3)

(27.6)

(27.7)

(23.6)

Selling and administrative expense:

Restructuring, legal and other

—

(4.2)

(1.7)

(9.5)

Acquisition earn-out adjustments

—

(1.5)

—

(2.5)

Acquisition related costs

(2.7)

(7.1)

(7.2)

(23.5)

Impact on selling and administrative expense

(2.7)

(12.8)

(8.9)

(35.5)

Impact on operating income

(20.0)

(40.4)

(36.6)

(59.1)

Costs related to committed financing in interest expense, net

—

(9.6)

—

(10.1)

Other income, net

0.1

—

0.1

0.3

   Pension settlement gain and mark-to-market adjustment

—

—

—

6.9

Impact on income from continuing operations before income taxes

(19.9)

(50.0)

(36.5)

(62.0)

Income tax benefit on above special items

4.6

12.7

8.9

15.4

Tax adjustments⁽²⁾

3.6

(3.0)

1.6

(4.9)

Impact of special items on net income from continuing operations attributable to Avient Shareholders

$

(11.7)

$

(40.3)

$

(26.0)

$

(51.5)

Diluted earnings per common share impact

$

(0.13)

$

(0.44)

$

(0.28)

$

(0.57)

Weighted average shares used to compute adjusted earnings per share:

Diluted

92.2

91.9

92.1

90.7

⁽¹⁾ Special items include charges related to specific strategic initiatives or financial restructuring such as: consolidation of operations; debt extinguishment costs; costs incurred directly in relation to acquisitions or divestitures; employee separation costs resulting from personnel reduction programs, plant realignment costs, executive separation agreements; asset impairments; settlement gains or losses and mark-to-market adjustments associated with actuarial gains and losses on pension and other post-retirement benefit plans; environmental remediation costs, fines, penalties and related insurance recoveries related to facilities no longer owned or closed in prior years; gains and losses on the divestiture of operating businesses, joint ventures and equity investments; gains and losses on facility or property sales or disposals; results of litigation, fines or penalties, where such litigation (or action relating to the fines or penalties) arose prior to the commencement of the performance period; one-time, non-recurring items; and the effect of changes in accounting principles or other such laws or provisions affecting reported results.

⁽²⁾ Tax adjustments include the net tax benefit/(expense) from one-time income tax items, the set-up or reversal of uncertain tax position reserves and deferred income tax valuation allowance adjustments.

Attachment 4

Avient Corporation

Condensed Consolidated Balance Sheets

(In millions)

(Unaudited)

 September 30, 2021

December 31,
2020

ASSETS

Current assets:

Cash and cash equivalents

$

545.2

$

649.5

Accounts receivable, net

703.0

516.6

Inventories, net

477.2

327.5

Other current assets

123.5

108.5

Total current assets

1,848.9

1,602.1

Property, net

669.6

694.9

Goodwill

1,293.9

1,308.1

Intangible assets, net

948.4

1,008.5

Operating lease assets, net

81.6

80.9

Other non-current assets

168.6

176.0

Total assets

$

5,011.0

$

4,870.5

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Short-term and current portion of long-term debt

$

8.7

$

18.6

Accounts payable

557.7

471.7

Current operating lease obligations

24.1

25.1

Accrued expenses and other current liabilities

371.3

285.6

Total current liabilities

961.8

801.0

Non-current liabilities:

Long-term debt

1,851.0

1,854.0

Pension and other post-retirement benefits

111.0

115.0

Non-current operating lease obligations

57.7

56.0

Other non-current liabilities

244.1

332.8

Total non-current liabilities

2,263.8

2,357.8

SHAREHOLDERS' EQUITY

Avient shareholders' equity

1,768.8

1,697.1

Noncontrolling interest

16.6

14.6

Total equity

1,785.4

1,711.7

Total liabilities and equity

$

5,011.0

$

4,870.5

Attachment 5

Avient Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)

Nine Months Ended

September 30,

2021

2020

Operating Activities

Net income

$

201.7

$

58.6

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

105.8

74.8

Accelerated depreciation and amortization

1.9

2.5

Share-based compensation expense

8.4

7.1

Changes in assets and liabilities, net of the effect of acquisitions:

Increase in accounts receivable

(199.7)

(12.7)

(Increase) decrease in inventories

(156.2)

53.0

Increase in accounts payable

95.3

21.3

Decrease in pension and other post-retirement benefits

(14.2)

(14.4)

Increase in post-acquisition earnout liabilities

—

2.5

Increase in accrued expenses and other assets and liabilities, net

67.0

56.1

Taxes paid on gain on divestiture

—

(142.0)

Payment of post-acquisition date earnout liability

—

(38.1)

Net cash provided by operating activities

110.0

68.7

Investing activities

Capital expenditures

(62.7)

(38.6)

Business acquisitions, net of cash acquired

(47.6)

(1,342.7)

Net proceeds from divestiture

—

7.1

Other investing activities

(2.0)

5.2

Net cash used by investing activities

(112.3)

(1,369.0)

Financing activities

Debt offering proceeds

—

650.0

Purchase of common shares for treasury

(4.2)

(13.6)

Cash dividends paid

(58.2)

(52.8)

Repayment of long-term debt

(16.5)

(6.0)

Payments of withholding tax on share awards

(9.1)

(1.9)

Debt financing costs

—

(9.5)

Equity offering proceeds, net of underwriting discount and issuance costs

—

496.1

Payment of acquisition date earnout liability

—

(50.8)

Other financing activities

(3.5)

—

Net cash (used) provided by financing activities

(91.5)

1,011.5

Effect of exchange rate changes on cash

(10.5)

1.4

Decrease in cash and cash equivalents

(104.3)

(287.4)

Cash and cash equivalents at beginning of year

649.5

864.7

Cash and cash equivalents at end of period

$

545.2

$

577.3

Attachment 6

Avient Corporation

Business Segment Operations (Unaudited)

(In millions)

Operating income and earnings before interest, taxes, depreciation and amortization (EBITDA) at the segment level does not include: special items as defined in Attachment 3; corporate general and administration costs that are not allocated to segments; intersegment sales and profit eliminations; share-based compensation costs; and certain other items that are not included in the measure of segment profit and loss that is reported to and reviewed by the chief operating decision maker. These costs are included in Corporate and eliminations.

Three Months Ended

September 30,

Nine Months Ended

September 30,

2021

2020

2021

2020

Sales:

   Color, Additives and Inks

$

586.6

$

493.8

$

1,820.3

$

977.1

   Specialty Engineered Materials

233.6

174.1

690.7

518.2

   Distribution

438.8

276.9

1,205.9

805.2

   Corporate and eliminations

(39.2)

(20.3)

(99.6)

(55.4)

      Sales

$

1,219.8

$

924.5

$

3,617.3

$

2,245.1

Gross margin:

   Color, Additives and Inks

$

172.1

$

155.0

$

563.0

$

320.1

   Specialty Engineered Materials

63.1

53.4

197.4

148.5

   Distribution

39.9

30.8

119.3

91.6

   Corporate and eliminations

(19.7)

(29.0)

(33.2)

(28.8)

      Gross margin

$

255.4

$

210.2

$

846.5

$

531.4

Selling and administrative expense:

   Color, Additives and Inks

$

105.3

$

104.5

$

321.1

$

196.8

   Specialty Engineered Materials

31.4

28.7

94.2

84.5

   Distribution

16.1

13.3

47.8

40.1

   Corporate and eliminations

23.9

30.2

76.2

85.7

      Selling and administrative expense

$

176.7

$

176.7

$

539.3

$

407.1

Operating income:

   Color, Additives and Inks

$

66.8

$

50.5

$

241.9

$

123.3

   Specialty Engineered Materials

31.7

24.7

103.2

64.0

   Distribution

23.8

17.5

71.5

51.5

   Corporate and eliminations

(43.6)

(59.2)

(109.4)

(114.5)

      Operating income

$

78.7

$

33.5

$

307.2

$

124.3

Earnings before interest, taxes, depreciation and amortization (EBITDA):

   Color, Additives and Inks

$

93.4

$

76.8

$

321.1

$

171.3

   Specialty Engineered Materials

39.6

32.2

127.0

86.7

   Distribution

24.0

17.7

72.1

51.9

   Corporate and eliminations

(41.5)

(56.7)

(105.3)

(108.3)

Other income, net

1.4

1.5

4.1

12.6

      EBITDA

$

116.9

$

71.5

$

419.0

$

214.2

Attachment 7

Avient Corporation

Reconciliation of Non-GAAP Financial Measures (Unaudited)

(In millions, except per share data)

Senior management uses gross margin before special items and operating income before special items to assess performance and allocate resources because senior management believes that these measures are useful in understanding current profitability levels and how it may serve as a basis for future performance. In addition, operating income before the effect of special items is a component of Avient annual and long-term employee incentive plans and is used in debt covenant computations. Senior management believes these measures are useful to investors because they allow for comparison to Avient's performance in prior periods without the effect of items that, by their nature, tend to obscure Avient's operating results due to the potential variability across periods based on timing, frequency and magnitude. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or solely as alternatives to, financial measures prepared in accordance with GAAP. Below is a reconciliation of these non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with GAAP. See Attachment 3 for a definition and summary of special items.

Three Months Ended

September 30,

Nine Months Ended

September 30,

Reconciliation to Consolidated Statements of Income

2021

2020

2021

2020

Sales

$

1,219.8

$

924.5

$

3,617.3

$

2,245.1

Gross margin - GAAP

255.4

210.2

846.5

531.4

Special items in gross margin (Attachment 3)

17.3

27.6

27.7

23.6

Adjusted gross margin

$

272.7

$

237.8

$

874.2

$

555.0

Adjusted gross margin as a percent of sales

22.4

%

25.7

%

24.2

%

24.7

%

Operating income - GAAP

78.7

33.5

307.2

124.3

Special items in operating income (Attachment 3)

20.0

40.4

36.6

59.1

Adjusted operating income

$

98.7

$

73.9

$

343.8

$

183.4

Adjusted operating income as a percent of sales

8.1

%

8.0

%

9.5

%

8.2

%

The table below reconciles pre-special income tax expense and the pre-special effective tax rate to their most comparable US GAAP figures.

Three Months Ended September 30,

2021

2020

GAAP Results

Special Items

Adjusted Results

GAAP Results

Special Items

Adjusted Results

Income from continuing operations before income taxes

$

61.1

$

19.9

$

81.0

$

5.3

$

50.0

$

55.3

Income tax expense - GAAP

(8.5)

—

(8.5)

(2.7)

—

(2.7)

Income tax impact of special items (Attachment 3)

—

(4.6)

(4.6)

—

(12.7)

(12.7)

Tax adjustments (Attachment 3)

—

(3.6)

(3.6)

—

3.0

3.0

Income tax (expense) benefit

$

(8.5)

$

(8.2)

$

(16.7)

$

(2.7)

$

(9.7)

$

(12.4)

Effective Tax Rate⁽¹⁾

14.1

%

20.8

%

51.9

%

22.7

%

⁽¹⁾ Rates may not recalculate from figures presented herein due to rounding

Nine Months Ended September 30,

2021

2020

GAAP Results

Special Items

Adjusted Results

GAAP Results

Special Items

Adjusted Results

Income from continuing operations before income taxes

$

253.5

$

36.5

$

290.0

$

81.6

$

62.0

$

143.6

Income tax expense - GAAP

(51.8)

—

(51.8)

(22.5)

—

(22.5)

Income tax impact of special items (Attachment 3)

—

(8.9)

(8.9)

—

(15.4)

(15.4)

Tax adjustments (Attachment 3)

—

(1.6)

(1.6)

—

4.9

4.9

Income tax (expense) benefit

$

(51.8)

$

(10.5)

$

(62.3)

$

(22.5)

$

(10.5)

$

(33.0)

Effective Tax Rate⁽¹⁾

20.5

%

21.5

%

27.6

%

23.0

%

⁽¹⁾ Rates may not recalculate from figures presented herein due to rounding

The following pro forma adjustments are referenced by management to provide comparable business performance by incorporating the Clariant Masterbatch business in periods prior to the acquisition date (July 1, 2020). Financial information referenced here is provided to aid in reconciling back to the most comparable GAAP figures.

Reconciliation of Pro Forma Adjusted Earnings per Share:

Nine Months Ended

September 30, 2020

Year Ended December 31, 2020

Net income from continuing operations attributable to Avient shareholders

$

57.8

$

132.0

Special items, after tax

42.0

24.8

Adjusted net income from continuing operations excluding special items

99.8

156.8

Clariant MB pro forma adjustments to net income from continuing operations⁽²⁾

20.7

20.7

Pro forma adjusted net income from continuing operations attributable to Avient shareholders

$

120.5

$

177.5

Weighted average diluted shares

90.7

90.6

Pro forma impact to diluted shares from January 2020 equity offering⁽²⁾

2.9

1.5

Pro forma weighted average diluted shares

93.6

92.1

Adjusted EPS - excluding special items pro forma for Clariant MB acquisition

$

1.29

$

1.93

⁽²⁾ Pro forma adjustments for the periods prior to the acquisition date (July 1, 2020) and to give effects to the financing for the acquisition

Nine Months Ended

September 30, 2020

Reconciliation of Pro Forma Adjusted Earnings per Share:

Avient

Special Items

Adjusted Avient

Clariant MB

Pro Forma Adjustments⁽²⁾

Pro Forma Adjusted Avient

Sales

$

2,245.1

$

—

$

2,245.1

$

540.5

$

2,785.6

Operating income

$

124.3

$

59.1

$

183.4

$

45.0

$

228.4

Interest expense, net

(55.3)

—

(55.3)

(18.1)

(73.4)

Pension settlement gain and mark-to-market adjustment

—

(6.9)

(6.9)

—

(6.9)

Other income, net

12.6

0.3

12.9

—

12.9

Income taxes

(22.5)

(10.5)

(33.0)

(6.2)

(39.2)

Net income attributable to noncontrolling interests

(1.3)

—

(1.3)

—

(1.3)

Net income from continuing operations attributable to Avient shareholders

$

57.8

$

42.0

$

99.8

$

20.7

$

120.5

Weighted average diluted shares

90.7

Impact to diluted shares from January 2020 equity offering

2.9

Pro forma weighted average diluted shares

93.6

Pro forma adjusted EPS

$

1.29

⁽²⁾ Pro forma adjustments for the periods prior to the acquisition date (July 1, 2020) and to give effects to the financing for the acquisition

Reconciliation of EBITDA by Segment

Three Months Ended

September 30,

Nine Months Ended

September 30,

2021

2020

2021

2020

Operating income:

   Color, Additives and Inks

$

66.8

$

50.5

$

241.9

$

123.3

   Specialty Engineered Materials

31.7

24.7

103.2

64.0

   Distribution

23.8

17.5

71.5

51.5

   Corporate and eliminations

(43.6)

(59.2)

(109.4)

(114.5)

      Operating income

$

78.7

$

33.5

$

307.2

$

124.3

Items below OI in Corporate:

Other income, net

$

1.4

$

1.5

$

4.1

$

12.6

Depreciation & amortization:

Color, Additives and Inks

$

26.6

$

26.3

$

79.2

$

48.0

Specialty Engineered Materials

7.9

7.5

23.8

22.7

Distribution

0.2

0.2

0.6

0.4

Corporate and eliminations

2.1

2.5

4.1

6.2

Depreciation & Amortization

$

36.8

$

36.5

$

107.7

$

77.3

EBITDA:

   Color, Additives and Inks

$

93.4

$

76.8

$

321.1

$

171.3

   Specialty Engineered Materials

39.6

32.2

127.0

86.7

   Distribution

24.0

17.7

72.1

51.9

   Corporate and eliminations

(41.5)

(56.7)

(105.3)

(108.3)

      EBITDA

$

116.9

$

71.5

$

419.0

$

214.2

EBITDA as a % of Sales:

Color, Additives and Inks

15.9

%

15.6

%

17.6

%

17.5

%

Specialty Engineered Materials

17.0

%

18.5

%

18.4

%

16.7

%

Distribution

5.5

%

6.4

%

6.0

%

6.4

%

Reconciliation of Pro Forma EBITDA - Color, Additives and Inks

Nine Months Ended

September 30, 2020

Sales:

   Color, Additives and Inks

$

977.1

   Clariant MB pro forma adjustments⁽²⁾

540.5

      Pro forma sales