Avient Announces Second Quarter 2023 Results

Attachment 1

 Avient Corporation

Summary of Condensed Consolidated Statements of Income (Unaudited)

(In millions, except per share data)

Three Months Ended

June 30,

Six Months Ended

June 30,

2023

2022

2023

2022

Sales

$       824.4

$       891.0

$    1,670.1

$    1,783.2

Operating Income

62.3

100.1

119.4

202.3

Net income from continuing operations attributable to Avient

shareholders

22.1

62.8

42.9

127.2

Basic earnings per share from continuing operations attributable to

Avient shareholders

$         0.24

$         0.69

$         0.47

$         1.39

Diluted earnings per share from continuing operations attributable to

Avient shareholders

$         0.24

$         0.68

$         0.47

$         1.38

Senior management uses comparisons of adjusted net income from continuing operations attributable to Avient shareholders and diluted adjusted earnings per share (EPS) from continuing operations attributable to Avient shareholders, excluding special items, to assess performance and facilitate comparability of results.  Further, as a result of Avient's portfolio shift to a pure play specialty formulator, it has completed several acquisitions and divestitures which have resulted in a significant amount of intangible asset amortization. Management excludes intangible asset amortization from adjusted EPS as it believes excluding acquired intangible asset amortization is a useful measure of current period earnings per share. Senior management believes these measures are useful to investors because they allow for comparison to Avient's performance in prior period s 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

June 30, 2023

Three Months Ended

June 30, 2022

Reconciliation to Condensed Consolidated Statements of Income

$

EPS

$

EPS

Net income from continuing operations attributable to Avient shareholders

$         22.1

$         0.24

$         62.8

$         0.68

Special items, after tax (Attachment 3)

19.6

0.21

3.2

0.03

Amortization expense, after-tax

16.2

0.18

10.5

0.12

Adjusted net income / EPS

$         57.9

$         0.63

$         76.5

$         0.83

Six Months Ended

June 30, 2023

Six Months Ended

June 30, 2022

Reconciliation to Condensed Consolidated Statements of Income

$

EPS

$

EPS

Net income from continuing operations attributable to Avient shareholders

$         42.9

$         0.47

$       127.2

$         1.38

Special items, after tax (Attachment 3)

41.9

0.46

9.6

0.10

Amortization expense, after-tax

31.3

0.34

21.3

0.23

Adjusted net income / EPS

$       116.1

$         1.27

$       158.1

$         1.71

Attachment 2

Avient Corporation

Condensed Consolidated Statements of Income (Unaudited)

(In millions, except per share data)

Three Months Ended

June 30,

Six Months Ended

June 30,

2023

2022

2023

2022

Sales

$        824.4

$        891.0

$    1,670.1

$    1,783.2

Cost of sales

583.7

630.1

1,181.8

1,267.9

Gross margin

240.7

260.9

488.3

515.3

Selling and administrative expense

178.4

160.8

368.9

313.0

Operating income

62.3

100.1

119.4

202.3

Interest expense, net

(29.4)

(16.2)

(58.2)

(33.1)

Other (expense) income, net

(0.2)

1.6

0.5

1.0

Income from continuing operations before income taxes

32.7

85.5

61.7

170.2

Income tax expense

(10.4)

(22.7)

(18.1)

(42.7)

Net income from continuing operations

22.3

62.8

43.6

127.5

Income (loss) from discontinued operations, net of income taxes

—

21.9

(0.9)

41.7

Net income

22.3

84.7

42.7

169.2

Net income attributable to noncontrolling interests

(0.2)

—

(0.7)

(0.3)

Net income attributable to Avient common shareholders

$          22.1

$          84.7

$          42.0

$        168.9

Earnings (loss) per share attributable to Avient common shareholders - Basic:

Continuing operations

$          0.24

$          0.69

$          0.47

$          1.39

Discontinued operations

—

0.24

(0.01)

0.46

Total

$          0.24

$          0.93

$          0.46

$          1.85

Earnings (loss) per share attributable to Avient common shareholders - Diluted:

Continuing operations

$          0.24

$          0.68

$          0.47

$          1.38

Discontinued operations

—

0.24

(0.01)

0.45

Total

$          0.24

$          0.92

$          0.46

$          1.83

Cash dividends declared per share of common stock

$     0.2475

$     0.2375

$     0.4950

$     0.4750

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

Basic

91.1

91.4

91.1

91.4

Diluted

91.9

92.1

91.9

92.2

Attachment 3

Avient Corporation

Summary of Special Items (Unaudited)

(In millions, except per share data)

Special items ⁽¹⁾

Three Months Ended

June 30,

Six Months Ended

June 30,

2023

2022

2023

2022

Cost of sales:

Restructuring costs, including accelerated depreciation

$         (1.2)

$         (2.6)

$         (7.8)

$         (7.0)

Environmental remediation costs

(13.0)

(3.0)

(14.4)

(5.0)

Reimbursement of previously incurred environmental costs

—

7.6

—

8.2

Impact on cost of sales

(14.2)

2.0

(22.2)

(3.8)

Selling and administrative expense:

Restructuring

(0.5)

(2.9)

(11.9)

(1.3)

Legal and other

(6.4)

1.2

(10.6)

1.5

Acquisition related costs

(0.7)

(2.1)

(4.2)

(5.0)

Impact on selling and administrative expense

(7.6)

(3.8)

(26.7)

(4.8)

Impact on operating income

(21.8)

(1.8)

(48.9)

(8.6)

Other income (loss), net

0.1

0.9

(0.1)

1.0

Impact on income from continuing operations before income taxes

(21.7)

(0.9)

(49.0)

(7.6)

Income tax expense (benefit) on above special items

5.5

0.2

12.4

2.0

Tax adjustments⁽²⁾

(3.4)

(2.5)

(5.3)

(4.0)

Impact of special items on net income from continuing operations

$       (19.6)

$         (3.2)

$       (41.9)

$         (9.6)

Diluted earnings per common share impact

$       (0.21)

$       (0.03)

$       (0.46)

$       (0.10)

Weighted average shares used to compute adjusted earnings per share:

Diluted

91.9

92.1

91.9

92.2

⁽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  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, 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 impact from non-recurring income tax items, adjustments to uncertain tax position reserves and the establishment, reversal or changes to valuation allowances.

Attachment 4

Avient Corporation

Condensed Consolidated Balance Sheets

(In millions)

(Unaudited)

June 30, 2023

December 31,
2022

ASSETS

Current assets:

Cash and cash equivalents

$                             528.7

$                    641.1

Accounts receivable, net

506.4

440.6

Inventories, net

359.0

372.7

Other current assets

116.6

115.3

Total current assets

1,510.7

1,569.7

Property, net

1,007.4

1,049.2

Goodwill

1,705.7

1,671.9

Intangible assets, net

1,614.7

1,597.6

Other non-current assets

213.3

196.6

Total assets

$                         6,051.8

$                6,085.0

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Short-term debt

$                                 2.2

$                        2.2

Accounts payable

428.7

454.4

Accrued expenses and other current liabilities

345.6

412.8

Total current liabilities

776.5

869.4

Non-current liabilities:

Long-term debt

2,179.2

2,176.7

Pension and other post-retirement benefits

67.3

67.2

Deferred income taxes

304.8

342.5

Other non-current liabilities

370.3

276.4

Total non-current liabilities

2,921.6

2,862.8

SHAREHOLDERS' EQUITY

Avient shareholders' equity

2,334.7

2,334.5

Noncontrolling interest

19.0

18.3

Total equity

2,353.7

2,352.8

Total liabilities and equity

$                         6,051.8

$                6,085.0

Attachment 5

Avient Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)

Six Months Ended

June 30,

2023

2022

Operating Activities

Net income

$                42.7

$              169.2

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

Depreciation and amortization

96.2

71.1

Accelerated depreciation

1.9

3.2

Share-based compensation expense

6.5

6.3

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

Increase in accounts receivable

(66.6)

(133.2)

Decrease (increase) in inventories

14.0

(45.9)

(Decrease) increase in accounts payable

(26.2)

98.5

Accrued expenses and other assets and liabilities, net

(93.2)

(62.5)

Net cash (used) provided by operating activities

(24.7)

106.7

Investing activities

Capital expenditures

(45.9)

(34.0)

Settlement of foreign exchange derivatives

—

75.1

Net proceeds from divestiture

7.3

—

Net cash used by investing activities

(38.6)

41.1

Financing activities

Purchase of common shares for treasury

—

(36.4)

Cash dividends paid

(45.0)

(43.5)

Repayment of long-term debt

(1.0)

(4.4)

Other financing

(2.3)

(4.1)

Net cash used by financing activities

(48.3)

(88.4)

Effect of exchange rate changes on cash

(0.8)

(15.5)

Decrease in cash and cash equivalents

(112.4)

43.9

Cash and cash equivalents at beginning of year

641.1

601.2

Cash and cash equivalents at end of period

$              528.7

$              645.1

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.

Three Months Ended

June 30,

Six Months Ended

June 30,

2023

2022

2023

2022

Sales:

   Color, Additives and Inks

$        524.5

$           649.1

$        1,061.5

$        1,298.6

   Specialty Engineered Materials

300.8

242.3

610.5

485.4

   Corporate

(0.9)

(0.4)

(1.9)

(0.8)

      Sales

$        824.4

$           891.0

$        1,670.1

$        1,783.2

Gross margin:

   Color, Additives and Inks

$        164.1

$           193.4

$           326.1

$           385.5

   Specialty Engineered Materials

91.5

66.0

185.4

134.4

   Corporate

(14.9)

1.5

(23.2)

(4.6)

      Gross margin

$        240.7

$           260.9

$           488.3

$           515.3

Selling and administrative expense:

   Color, Additives and Inks

$          96.1

$             99.8

$           192.5

$           197.4

   Specialty Engineered Materials

51.8

30.8

102.6

60.9

   Corporate

30.5

30.2

73.8

54.7

      Selling and administrative expense

$        178.4

$           160.8

$           368.9

$           313.0

Operating income:

   Color, Additives and Inks

$          68.0

$             93.6

$           133.6

$           188.1

   Specialty Engineered Materials

39.7

35.2

82.8

73.5

   Corporate

(45.4)

(28.7)

(97.0)

(59.3)

      Operating income

$          62.3

$           100.1

$           119.4

$           202.3

Depreciation & amortization:

Color, Additives and Inks

$          25.7

$             25.8

$             51.5

$             51.9

Specialty Engineered Materials

19.9

7.6

41.1

15.5

Corporate

2.0

3.1

5.5

6.9

Depreciation & Amortization

$          47.6

$             36.5

$             98.1

$             74.3

Earnings before interest, taxes, depreciation and

amortization (EBITDA):

   Color, Additives and Inks

$          93.7

$           119.4

$           185.1

$           240.0

   Specialty Engineered Materials

59.6

42.8

123.9

89.0

   Corporate

(43.4)

(25.6)

(91.5)

(52.4)

Other income (expense), net

(0.2)

1.6

0.5

1.0

EBITDA including special items

$        109.7

$           138.2

$           218.0

$           277.6

Total Company special items in EBITDA

21.6

(0.2)

47.1

4.4

Total Company, EBITDA adjusted

$        131.3

$           138.0

$           265.1

$           282.0

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's annual 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

June 30,

Six Months Ended

June 30,

Reconciliation to Consolidated Statements of Income

2023

2022

2023

2022

Sales

$              824.4

$              891.0

$   1,670.1

$   1,783.2

Gross margin - GAAP

240.7

260.9

488.3

515.3

Special items in gross margin (Attachment 3)

14.2

(2.0)

22.2

3.8

Adjusted gross margin

$              254.9

$              258.9

$      510.5

$      519.1

Adjusted gross margin as a percent of sales

30.9 %

29.1 %

30.6 %

29.1 %

Operating income - GAAP

62.3

100.1

119.4

202.3

Special items in operating income (Attachment 3)

21.8

1.8

48.9

8.6

Adjusted operating income

$                84.1

$              101.9

$      168.3

$      210.9

Adjusted operating income as a percent of sales

10.2 %

11.4 %

10.1 %

11.8 %

Three Months Ended

June 30,

Six Months Ended

June 30,

Reconciliation to EBITDA and Adjusted EBITDA:

2023

2022

2023

2022

Net income from continuing operations – GAAP

$        22.3

$        62.8

$        43.6

$    127.5

Income tax expense

10.4

22.7

18.1

42.7

Interest expense, net

29.4

16.2

58.2

33.1

Depreciation and amortization

47.6

36.5

98.1

74.3

EBITDA from continuing operations

$     109.7

$     138.2

$     218.0

$    277.6

Special items, before tax

21.7

0.9

49.0

7.6

Depreciation and amortization included in special items

(0.1)

(1.1)

(1.9)

(3.2)

Adjusted EBITDA 

$     131.3

$     138.0

$     265.1

$    282.0

Adjusted EBITDA as a % of sales

15.9 %

15.5 %

15.9 %

15.8 %