10-K 1 l92591ae10-k.txt POLYONE CORPORATION FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 COMMISSION FILE NUMBER 1-16091 POLYONE CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) OHIO 34-1730488 (State or other jurisdiction of (I.R.S. Employer Identification No) incorporation or organization) Suite 36-5000, 200 Public Square, Cleveland, Ohio 44114-2403 (Address of principal executive offices) (Zip-Code)
Registrant's telephone number, including area code (216) 589-4000 Securities registered pursuant to Section 12(b) of the Act: ----------------------------------------------------------- Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- Common Stock, par value $.01 per share New York Stock Exchange Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No[ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock, consisting solely of common stock, held by non-affiliates of the registrant as of March 25, 2002 was approximately $1,114.1 million. On this date, 91,166,922 shares of the registrant's common stock were outstanding. DOCUMENTS INCORPORATED BY REFERENCE ----------------------------------- Portions of the following documents are incorporated by reference into the designated parts of this Form 10-K: (1) Registrant's definitive proxy statement to be filed with the Commission, on or about April 4, 2002, pursuant to Regulation 14A and incorporated by reference into Part III of this Form 10-K; and (2) Registrant's Annual Report distributed to shareholders for the fiscal year ended December 31, 2001, incorporated by reference into Parts I and II of this Form 10-K. With the exception of the information specifically incorporated by reference, neither the Registrant's proxy statement nor the 2001 Annual Report to shareholders is deemed to be filed as part of this Form 10-K. Except as otherwise stated, the information contained in this report is given as of December 31, 2001, the end of the Registrant's last fiscal year. PART I -------------------------------------------------------------------------------- ITEM 1. DESCRIPTION OF THE BUSINESS ------- --------------------------- PolyOne Corporation (PolyOne or Company) is a leading global polymer services company with operations in thermoplastic compounds, specialty resins, specialty polymer formulations, engineered films, color and additive systems, elastomer compounds and additives and thermoplastic resin distribution. PolyOne was formed on August 31, 2000 as a result of the consolidation of The Geon Company (Geon) and M.A. Hanna Company (Hanna). PolyOne is a leader in delivering value to customers through its strengths in polymer technology, manufacturing and supply chain processes, information technology, environmental and safety performance, overall quality and operational excellence. The formation of PolyOne is discussed in more detail in Notes A and C to the Consolidated Financial Statements. OPERATING SEGMENTS: PolyOne operates in four business segments: Performance Plastics, Elastomers and Performance Additives (E&A), Distribution and Resin and Intermediates (R&I). Financial information regarding the Registrant's business segments is incorporated by reference to Note R to the Consolidated Financial Statements in the Registrant's Annual Report distributed to shareholders for the fiscal year ended December 31, 2001. PERFORMANCE PLASTICS. PolyOne is a leading merchant producer of compounded plastics to the specifications of manufacturers of plastic products throughout North America, Europe and Asia. PolyOne engages in the custom compounding of plastic materials to the specifications of manufacturers of molded and extruded plastic products through its compounding business. PolyOne's compounds are used in end products such as appliance components, automotive trim, business equipment housing, computer disk drive components, bottles, pipe and pipe fitting, windows, wire and cable. Through its custom formulated colorants and additives business, PolyOne manufactures custom formulated colorants in the form of color concentrates, liquid dispersions, dry colorants and additives for customers in the plastic industry throughout North America, Europe, South America and Asia. PolyOne is also a leading North American producer of specialty vinyl dispersion resins. In addition, its business processes specialty dispersion resins with different additives, such as plastisizers and fillers, to produce liquid or solid plastisol formulations. PolyOne also produces formulations using urethanes and latex polymers. Through its engineered films business, PolyOne processes flexible compounds into rolls of various-gauge films. These products are incorporated into automotive instrument panels, airbags, furniture fabrics, loose-leaf binder covers, medical bloodbags and pool liners. ELASTOMERS AND PERFORMANCE ADDITIVES. PolyOne engages in the custom compounding of rubber materials to the specifications of manufacturers of rubber products throughout North America through its rubber compounding and additives businesses. This includes products used in the manufacture of automobile hoses and belts, footwear, escalator railings and industrial conveyors. PolyOne also produces rubber colorants and additives for the rubber industry worldwide. PolyOne believes it is the largest independent custom rubber compounder in North America. DISTRIBUTION. PolyOne distributes more than 3,500 grades of engineering and commodity resins and plastic compounds from approximately 12 major suppliers including its own polyvinyl chloride, or PVC, compounds through its distribution business. These products are sold to custom molders and extruders who convert them into plastic products. PolyOne's customers produce products that are sold to a number of different industries and end markets. PolyOne believes it is one of the leading distributors of plastic resins and compounds in North America. RESIN AND INTERMEDIATES. PolyOne's Resin and Intermediates segment manufactures products such as PVC resins, vinyl chloride monomer, or VCM, and caustic soda. These products are sold to customers in the aluminum, paper and pulp and construction industries. This segment also produces intermediates, such as chlorine, for internal consumption by PolyOne's affiliates in the production of PVC resins. This segment consists primarily of investments in equity affiliates, principally Oxy Vinyls, LP (OxyVinyls) and SunBelt Chlor-Alkali Partnership (SunBelt). COMPETITION: The production of compounded plastics and the manufacture of custom formulated color and additives systems for the plastics industry is highly competitive, with product quality, service and price to customers being principal factors affecting competition. PolyOne believes it is a leading independent compounder of plastics in North America and Europe and one of the leading producers of custom formulated color and additive systems in the United States and Europe. The custom compounding of rubber materials and the manufacture of rubber colorants and additives are highly competitive with product quality, service and price to customers being principal factors affecting competition. PolyOne believes it is a leading independent custom compounder of rubber in North America. The distribution of polymer resin is highly competitive, with product quality, service and price to customers being principal factors affecting competition. PolyOne believes it is one of the leading distributors of plastic resins in North America. RAW MATERIALS: In PolyOne's Performance Plastics business, the primary raw materials are PVC resin, VCM, other resins, plasticizers, inorganic and organic pigments, and chemicals, all of which are in adequate supply. PolyOne is a party to long-term supply contracts with OxyVinyls, under which the majority of PolyOne's PVC resin and all of its VCM requirements will be supplied. The supply contracts have initial terms of 15 years (expiring in 2013) and have provisions for renewal after the initial contract term. PolyOne believes the supply contracts should assure availability of PVC resin and VCM, technical development and support and competitively priced PVC resin and VCM. PolyOne further believes that the pricing under these supply contracts provides PVC resin at a competitive cost to PolyOne. In PolyOne's Elastomers and Performance Additives business, the primary raw materials are natural and synthetic rubbers, resins and chemicals, all of which are available in adequate supply. PATENTS AND TRADEMARKS: PolyOne owns numerous patents and trademarks, which are important in that they protect inventions and product names against infringement by others and thereby enhance PolyOne's position in the marketplace. The patents vary in duration of up to 20 years, and the trademarks have an indefinite life that is based upon continued use. RESEARCH AND DEVELOPMENT: PolyOne has developed substantial research and development capability. PolyOne's efforts are devoted to (1) developing new products to satisfy defined market needs, (2) providing quality technical services to assure the continued success of its products for its customers' applications, (3) providing technology for improvements to its products, processes and applications, and (4) providing support to its manufacturing plants for cost reduction, productivity and quality improvement programs. PolyOne operates a research and development center that supports its compounding and specialty resin operations. The laboratory is equipped with state-of-the-art analytical, synthesis, polymer characterization and testing equipment and pilot plants and polymer compounding operations that simulate specific production processes for rapid translation of new technology into new products. PolyOne spent $18.8 million in 2001, $21.4 million in 2000 and $18.5 million in 1999 on product research and product development. In 2002, PolyOne expects spending to show a small increase over 2001. METHODS OF DISTRIBUTION: PolyOne's Performance Plastics, Elastomers and Performance Additives and Distribution business segments primarily sell products through their direct sales personnel. The Performance Plastics business segment supplements its direct sales personnel with distributors and/or commissioned sales agents for various products and geographic areas. PolyOne's products are primarily transported to customers using truck carriers, with some customer product pick-ups at its operating facilities in all three of these business segments. In addition, PolyOne's Performance Plastics business segment ships products to some customers using railroad cars. EMPLOYEES: As of December 31, 2001, PolyOne had approximately 8,000 employees. ENVIRONMENTAL, HEALTH AND SAFETY: PolyOne is subject to various environmental laws and regulations concerning production; use and sale of chemicals; emissions to the air; discharges to waterways; the release of materials into the environment; the generation, handling, storage, transportation, treatment and disposal of waste materials; or otherwise relating to the protection of the environment. PolyOne endeavors to ensure the safe and lawful operation of its facilities in manufacturing and distribution of products and believes it is in compliance in all material respects with applicable laws and regulations. PolyOne maintains a disciplined environmental and occupational safety and health compliance program and conducts periodic internal and external regulatory audits at its plants in order to identify and categorize potential environmental exposures, including compliance issues, and measures to address them. This is an effort that has required and may continue to require process or operational modifications and the installation of pollution control devices and cleanups. PolyOne incurred environmental expense of $3.9 million in 2001, $2.2 million in 2000 and $1.7 million in 1999. PolyOne believes that compliance with current governmental regulations at all levels will not have a material adverse effect on its financial condition. However, the risk of additional costs and liabilities is inherent in certain plant operations and certain products produced at the plants, as is the case with other companies involved in the plastics PVC industry. PolyOne cannot assure that it will not incur additional costs and liabilities in the future. Other developments, such as increasingly strict environmental, safety and health laws; regulations and related enforcement policies; discovery of unknown conditions; and claims for damages to property, persons or natural resources resulting from plant emissions or products, could also result in additional costs and liabilities to PolyOne. A number of foreign countries and domestic local communities have enacted, or have under consideration, laws and regulations relating to the use and disposal of plastic materials. Widespread adoption of these laws and regulations, or public perception, may have an adverse impact on plastic materials. Although many of PolyOne's major markets are in durable, longer-life applications that could reduce the impact of any such environmental regulation, PolyOne cannot assure that more stringent regulation of use and disposal of plastics would not have an adverse effect on its business. PolyOne conducts a comprehensive occupational safety and health program and believes it is in material compliance with applicable requirements. PolyOne has been notified by federal and state environmental agencies and by private parties that it may be a potentially responsible party in connection with several environmental sites. While government agencies assert that potentially responsible parties are jointly and severally liable at these sites, in PolyOne's experience, interim and final allocation of liability costs are generally made based on the relative contribution of waste. However, where such allocations of costs based on relative contribution of waste have been made, PolyOne cannot assure that the relevant third parties will pay their share of the liability and related clean-up costs. In addition, PolyOne conducts investigations and remediation at several of its active and inactive facilities, and has assumed responsibility for environmental liabilities based on pre-1993 operations at sites formerly owned or operated by PolyOne or its predecessors. PolyOne believes that its potential continuing liability with respect to such sites will not have a material adverse effect on its consolidated financial position, results of operations or cash flows. In addition, PolyOne initiates corrective and preventive environmental projects of its own at its operations. Based on current information and estimates prepared by PolyOne's environmental engineers and consultants, PolyOne, at December 31, 2001, had accruals totaling $56.2 million to cover probable future environmental expenditures relating to previously contaminated sites. The accrual represents PolyOne's best estimate within its range of estimated costs associated with probable remediation, based upon information and technology currently available and PolyOne's view of the most likely remedy. Depending upon the results of future testing, the ultimate remediation alternatives undertaken, changes in regulations, new information and other factors, it is possible that PolyOne could incur costs in excess of the accrual at December 31, 2001. PolyOne's estimate of the liability may be revised as new regulations, technologies or additional information is obtained. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: In the above "Description of the Business" section, statements that are not reported financial results or other historical information are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including, for example, statements concerning trends and other forward-looking information affecting or relating to PolyOne and its industry. Actual results could differ materially from those expressed in or implied by these statements based on a variety of factors, which are incorporated by reference to page 37 of PolyOne's 2001 Annual Report to Shareholders. ITEM 2. PROPERTIES ------- ---------- As of December 31, 2001, PolyOne, which is headquartered in Cleveland, Ohio, operated facilities in the United States and foreign countries. Substantially all of PolyOne's facilities are owned. The charts below list the principal facilities of PolyOne's business segments. PERFORMANCE PLASTICS FACILITIES: Vinyl Compounding Specialty Dispersion Resin Plastisol Formulators Engineered Films ----------------- -------------------------- --------------------- ---------------- Avon Lake, Ohio Henry, Illinois Bolton, England Burlington, New Jersey Burlington, New Jersey Pedricktown, New Jersey Kennesaw, Georgia Lebanon, Pennsylvania Conroe, Texas Los Angeles, California Winchester, Virginia Farmington, New Jersey Melbourne, Australia Yerington, Nevada Long Beach, California North Baltimore, Ohio Upper Newton Falls, Louisville, Kentucky St. Louis, Missouri Massachusetts Niagara Falls, Ontario, Sullivan, Missouri Canada Sussex, Wisconsin Orangeville, Ontario, Widnes, England Canada Hyde, England Pasadena, Texas Dartford, England Plaquemine, Louisiana Newton, Aycliffe, St. Remi de Naperville, England Quebec, Canada Terre Haute, Indiana Valleyfield, Quebec, Canada Cartagena, Colombia (joint venture) Melbourne, Australia (joint venture) Singapore (joint venture)
Custom Formulated Colorants and Additives Custom Compounding ----------------------------------------- ------------------ Broadview Heights, Ohio Macedonia, Ohio Glendale, Arizona Kingstree, South Carolina Vonore, Tennessee Dyersburg, Tennessee Suwanee, Georgia Bethlehem, Pennsylvania Somerset, New Jersey Seabrook, Texas Florence, Kentucky Houston, Texas Gastonia, North Carolina Corona, California Elk Grove Village, Illinois Gaggenau, Germany St. Peters, Missouri Barbastro, Spain Fort Worth, Texas Jurong, Singapore Norwalk, Ohio Suzhou, China Clinton, Tennessee (joint venture) Melle, Germany Rancho Dominguez, California (joint venture) Forli, Italy (joint venture) Gainesville, Georgia (joint venture) Civitanova, Italy (joint venture) Toluca, Mexico Lecco, Italy (joint venture) Assesse, Belgium Istanbul, Turkey (joint venture) Tossiat, France Dortmund, Germany Bendorf, Germany Angered, Sweden Manchester, England Pudong (Shanghai), China Glostrup, Denmark Bangkok, Thailand Gyor, Hungary
RESIN AND INTERMEDIATES FACILITIES: OxyVinyls joint venture - various locations in North America SunBelt joint venture - McIntosh, Alabama Welvic Australia Pty Ltd. joint venture - various locations in Australia (February 2002) ELASTOMERS AND PERFORMANCE ADDITIVES FACILITIES: Burton, Ohio Tillsonburg, Ontario, Canada Jonesborough, Tennessee DeForest, Wisconsin Queretaro, Mexico Chicago, Illinois Kennedale, Texas Kingstree, South Carolina Dyersburg, Tennessee Massillon, Ohio Wynne, Arkansas Santa Fe Springs, California DISTRIBUTION FACILITIES: Lemont, Illinois Ayer, Massachusetts Massillon, Ohio Rancho Cucamonga, California Statesville, North Carolina Denver, Colorado Chesterfield Township, Michigan Eagan, Minnesota St. Louis, Missouri Vancouver, Washington Grand Prairie, Texas Mississauga, Ontario, Canada Mexico - various locations ITEM 3. LEGAL PROCEEDINGS ------- ----------------- In addition to the matters regarding the environment described above under the heading "Environmental, Health and Safety", PolyOne is involved in various pending or threatened claims, lawsuits and administrative proceedings, all arising from the ordinary course of business concerning commercial, product liability, employment and environmental matters, which seek remedies or damages. In addition, PolyOne has been named in several lawsuits involving multiple claimants and defendants relating to alleged asbestos exposure in the past by, among others, workers and their families at plants owned by PolyOne or its predecessors or on board ships owned or operated by PolyOne or its predecessors. PolyOne believes that any liability that may be finally determined should not have a material adverse effect on its financial condition taken as a whole. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. ------- ---------------------------------------------------- No matters were submitted to a vote of security holders during the fourth quarter of 2001. EXECUTIVE OFFICERS OF THE COMPANY. ---------------------------------- (INCLUDED PURSUANT TO INSTRUCTION 3 TO PARAGRAPH (B) OF ITEM 401 OF REGULATION S-K) The table below lists information as of March 31, 2002, as to each executive officer of PolyOne, including his or her position with PolyOne as of that date and other positions held by him or her for at least the past five years. The executive officers are elected by the Board of Directors to serve one-year terms. Roger W. Avakian ---------------- Age: 50 Vice President and Chief Technology Officer, September 1, 2000 to date. Vice President - M.A. Hanna Company, Rubber Compounding division, December 1999 to August 31, 2000. Various technical and technical management positions in the U.S. and Europe with GE Plastics (plastics resins), a business unit of General Electric Company, April 1980 to November 1999. Bernard Baert ------------- Age: 52 Vice President, International Operations, January 31, 2001 to date and General Manager, Color - Europe, September 1, 2000 to January 31, 2001. General Manager, M.A. Hanna Color Europe, November 1998 to August 31, 2000. General Manager, Wilson Color Europe, a division of M.A. Hanna Company, July 1997 to November 1998. General Manager Wilson Color North Europe operations March 1996 to July 1997. Denis L. Belzile ---------------- Age: 45 Vice President, Specialty Resins and Formulators, September 1, 2000 to date. Vice President and General Manager - Specialty Resins and Formulators, The Geon Company, October 1999 to August 31, 2000. General Manager - Plastisol, The Geon Company, January 1998 to October 1999. Director - Plastisol Business, The Geon Company, May 1997 to January 1998. Senior Business Manager - Plastisol Resins, The Geon Company, January 1994 to May 1997. Dennis A. Cocco --------------- Age: 53 Vice President and Chief Investor and Communications Officer, September 1, 2000 to date. Vice President - Corporate and Investor Affairs, The Geon Company, January 1998 to August 31, 2000. Director of Marketing, The Geon Company, April 1993 to December 1997. Diane J. Davie -------------- Age: 46 Vice President and Chief Human Resources Officer, September 1, 2000 to date. Vice President, Human Resources, The Geon Company, May 1998 to August 31, 2000. Principal and Founder, Human Asset Strategies (human resources consulting), December 1995 to May 1998. Ronald C. Kaminski, Sr. ----------------------- Age: 59 Vice President and Chief Environmental, Health, Safety and Quality Officer, November 1, 2000 to date and Director of Technology, September 1, 2000 to November 1, 2000. Director of Research, The Geon Company, April 1998 to August 31, 2000. Director of Compound Technology, The Geon Company, September 1997 to April 1998. Director of Manufacturing Processes, The Geon Company, January 1994 to August 1997. Daniel L. Kickel ---------------- Age: 52 Vice President and Chief Sourcing Officer, September 1, 2000 to date. Director of Sourcing and Supply Chain, The Geon Company, June 1999 to August 31, 2000. Director of Purchasing, The Geon Company, April 1995 to June 1999. V. Lance Mitchell ----------------- Age: 42 Group Vice President, Plastic Compounds and Colors, September 1, 2000 to date. Vice President and General Manager, Compounds, The Geon Company, May 1997 to August 31, 2000. Business Director, Compounds, The Geon Company, November 1993 to May 1997. David D. Quester ---------------- Age: 49 Vice President, Engineered Films, January 31, 2001 to date and General Manager, Engineered Films, September 1, 2000 to January 31, 2001. Director of Manufacturing and Operational Business Development, The Geon Company, May 1999 to August 31, 2000. Director - Manufacturing of PVC Resins, The Geon Company, June 1997 to May 1999. Director - International Business Development, The Geon Company, June 1995 to May 1999. John E. Quinn ------------- Age: 54 Group Vice President, Elastomers and Performance Additives, September 1, 2000 to date. President, M.A. Hanna Rubber Compounding, May 1998 to August 31, 2000. General Manager Noryl(R) Resins Business, GE Plastics (plastics resins), a business unit of General Electric Company, 1991 to 1998. Michael L. Rademacher --------------------- Age: 51 Group Vice President, Distribution, September 1, 2000 to date. Senior Vice President - Plastics Americas, M.A. Hanna Company, January 2000 to August 31, 2000. Vice President and General Manager, Industrial Chemical and Solvents Division, Ashland Chemical Company (chemical manufacturing and distribution), 1998 to January 2000. Vice President of Distribution Services of Ashland Chemical, 1995 to 1998. Wendy C. Shiba -------------- Age: 51 Chief Legal Officer, November 15, 2001 to date and Vice President and Secretary, December 5, 2001 to date. Vice President, Bowater Incorporated (pulp and paper), 1997 to November 9, 2001, and Secretary and Assistant General Counsel, 1993 to November 9, 2001. Kenneth M. Smith ---------------- Age: 47 Vice President and Chief Information Officer, September 1, 2000 to date. Vice President, Information Systems, The Geon Company, August 1999 to August 31, 2000 and Chief Information Officer, August 1997 to August 31, 1999. Director of Information Systems, The Geon Company, 1993 to 1997. Thomas A. Waltermire -------------------- Age: 52 Chairman of the Board, President and Chief Executive Officer, September 1, 2000 to date. Chairman, The Geon Company, August 1999 to August 31, 2000, and Chief Executive Officer, May 1999 to August 31, 2000. President, The Geon Company, February 1998 to May 1999 and Executive Vice President and Chief Operating Officer, May 1997 to February 1998. Vice President and Chief Financial Officer, The Geon Company, 1993 to May 1997. W. David Wilson --------------- Age: 48 Vice President and Chief Financial Officer, September 1, 2000 to date. Vice President and Chief Financial Officer, The Geon Company, May 1997 to August 31, 2000. Director of Business Management - Resins, The Geon Company, 1995 to May 1997. PART II -------------------------------------------------------------------------------- ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS. ------- ---------------------------------------------------------------------- (a) PolyOne's common stock, $.01 par value per share, is listed on the New York Stock Exchange. The information required under this item is incorporated by reference to the table on page 34 of PolyOne's 2001 Annual Report to Shareholders under the caption "Quarterly Data (Unaudited)." (b) As of March 25, 2002, there were approximately 3,582 holders of record of PolyOne's common stock. (c) PolyOne has paid consecutive quarterly dividends of $.0625 per share of common stock during 2000 (since September 1, 2000, its formation date) and 2001. Future declarations of dividends on common stock are discretionary with the Board of Directors, and the declaration of any dividends will depend upon, among other things, earnings, capital requirements and the Company's financial condition. In addition, future dividends on common stock could be limited to $6 million per quarter if under the current revolving credit agreement the ratio of borrowed debt to EBITDA, as defined, exceeds 3.99. ITEM 6. SELECTED FINANCIAL DATA. ------- ------------------------ The information required by this item is incorporated by reference to page 35 of PolyOne's 2001 Annual Report to Shareholders under the caption "Selected Financial Data." ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND ------- ---------------------------------------------------------------- RESULTS OF OPERATIONS. ---------------------- The information required by this item is incorporated by reference to the caption "Management's Analysis" on pages 6 through 10, 12, 15 and 16 of PolyOne's 2001 Annual Report to Shareholders. This report contains statements concerning trends and other forward-looking information affecting or relating to PolyOne and its industry that are intended to qualify for the protections afforded "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those expressed in or implied by these statements based on a variety of factors, which are incorporated by reference to page 37 of PolyOne's 2001 Annual Report to Shareholders under the caption "Cautionary Note on Forward-Looking Statements." ITEM 7A. QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK. -------- ----------------------------------------------------------- The information required by this item is incorporated by reference to the captions "Concentration of Credit Risk" on page 18, "Derivative Financial Instruments" on page 19, "Financial Instruments" on pages 32 and 33 and "Market Risk Disclosures" on page 16 of PolyOne's 2001 Annual Report to Shareholders. This information contains statements concerning trends and other forward-looking information affecting or relating to PolyOne and its industry that are intended to qualify for the protections afforded "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those expressed in or implied by these statements based on a variety of factors, which are incorporated by reference to page 37 of PolyOne's 2001 Annual Report to Shareholders under the caption "Cautionary Note on Forward-Looking Statements." ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. ------- -------------------------------------------- The information required by this item is incorporated by reference to page 11, 13, 14 and 17 through 33 of PolyOne's 2001 Annual Report to Shareholders. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND ------- --------------------------------------------------------------- FINANCIAL DISCLOSURE. --------------------- None. PART III -------------------------------------------------------------------------------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. -------- --------------------------------------------------- The information regarding PolyOne's directors is incorporated by reference to the information contained in PolyOne's Proxy Statement to be filed on or about April 4, 2002 with respect to the 2002 Annual Meeting of Shareholders (2002 Proxy Statement). Information concerning executive officers is contained in Part I of this Report under the heading "Executive Officers of the Company". Information regarding Section 16(a) beneficial ownership reporting compliance is incorporated by reference to the material under the heading "Section 16(a) Beneficial Ownership Reporting Compliance" in PolyOne's 2002 Proxy Statement. ITEM 11. EXECUTIVE COMPENSATION. -------- ----------------------- The information regarding executive compensation is incorporated by reference to the information contained in PolyOne's 2002 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. -------- --------------------------------------------------------------- The information regarding security ownership of certain beneficial owners and management is incorporated by reference to the information contained in PolyOne's 2002 Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -------- ---------------------------------------------- The information regarding certain relationships and related transactions is incorporated by reference to the information contained in PolyOne's 2002 Proxy Statement. PART IV -------------------------------------------------------------------------------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON -------- ------------------------------------------------------- FORM 8-K. --------- (a)(1) and (2) and (d) - The response to these portions of Item 14 are submitted as a separate section of this Report beginning on page F-1 of this Report. (a)(3) and (c) - An index of Exhibits filed as part of this Report is located beginning on page I-1 of this report. (b) Reports on Form 8-K filed in the Fourth Quarter of 2001. None. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on April 1, 2002. POLYONE CORPORATION /s/ W. David Wilson ------------------- W. David Wilson Vice President and Chief Financial Officer (Authorized Officer and Principal Financial Officer) /s/ Gregory P. Smith -------------------- Gregory P. Smith Corporate Controller and Assistant Treasurer (Principal Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated, as of April 1, 2002. SIGNATURE TITLE --------- ----- /s/Thomas A. Waltermire Chairman of the Board, President, --------------------------- Chief Executive Officer and Director Thomas A. Waltermire (Principal Executive Officer) /s/W. David Wilson Vice President and Chief Financial Officer --------------------------- (Authorized Officer and Principal Financial W. David Wilson Officer) /s/Gregory P. Smith Corporate Controller and Assistant Treasurer --------------------------- (Principal Accounting Officer) Gregory P. Smith /s/James K. Baker Director --------------------------- James K. Baker /s/J. Douglas Campbell Director --------------------------- J. Douglas Campbell /s/Carol A. Cartwright Director --------------------------- Carol A. Cartwright /s/ Gale Duff-Bloom Director --------------------------- Gale Duff-Bloom /s/Wayne R. Embry Director --------------------------- Wayne R. Embry /s/ Robert A. Garda Director --------------------------- Robert A. Garda /s/Gordon D. Harnett Director --------------------------- Gordon D. Harnett /s/David H. Hoag Director --------------------------- David H. Hoag /s/D. Larry Moore Director --------------------------- D. Larry Moore /s/Farah M. Walters Director --------------------------- Farah M. Walters ANNUAL REPORT ON FORM 10-K ITEM 14(a)(1) AND (2) AND (d) INDEX OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES YEAR ENDED DECEMBER 31, 2001 POLYONE CORPORATION F-1 ITEM 14(a)(1) AND (2) AND 14(d) ------------------------------- POLYONE CORPORATION AND SUBSIDIARIES INDEX OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES The following consolidated financial statements of PolyOne Corporation and subsidiaries, included in the Annual Report of the Registrant to its Stockholders for the year ended December 31, 2001, filed as Exhibit 13.1 to this Form 10-K are incorporated herein by reference in Item 8. Consolidated statements of income - Years ended December 31, 2001, 2000 and 1999. Consolidated balance sheets - December 31, 2001 and 2000. Consolidated statements of cash flows - Years ended December 31, 2001, 2000 and 1999. Consolidated statements of shareholders' equity - Years ended December 31, 2001, 2000 and 1999. Notes to consolidated financial statements - December 31, 2001. Quarterly data (unaudited) - Years ended December 31, 2001 and 2000. Report of Independent Auditors The following financial statements of subsidiaries not consolidated and 50% or less owned persons filed as Exhibit 13.2 to this Form 10-K are incorporated by reference included in Item 14(d): Consolidated financial statements of Oxy Vinyls, LP from inception through December 31, 2001. The following consolidated financial statement schedule for the Registrant and its subsidiaries is included in Item 14(d): Schedule II Page F-3 Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore, have been omitted. F-2 SCHEDULE II
POLYONE CORPORATION AND SUBSIDIARIES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (Dollars in millions) Charged to Balance at Charged to Other Balance at Beginning of Costs and Accounts Other Other End of Period Expenses (C) Deductions Additions Period -------------- ------------- -------------- -------------- -------------- -------------- Year ended December 31, 2001 Reserves for doubtful accounts $ 9.8 $ 4.7 $ --- $(5.0) (A) $ --- $ 9.5 Accrued liabilities for environmental matters 58.4 3.9 0.1 (6.2) (B) --- 56.2 Year ended December 31, 2000 Reserves for doubtful accounts $ 3.8 $ 5.0 $ --- $(5.6) (A) $ 6.6 (E) $ 9.8 Accrued liabilities for environmental matters 44.1 2.2 0.3 (2.3) (B) 14.1 (E) 58.4 Year Ended December 31, 1999 Reserves for doubtful accounts $ 4.5 $(1.3) $ --- $ (0.8) (A) $ 1.4 (D) $ 3.8 Accrued liabilities for environmental matters 45.9 1.7 0.1 (6.4) (B) 2.8 (D) 44.1
Notes: (A) - Accounts charged off. (B) - Represents cash payments during the year. (C) - Translation adjustments. (D) - Represents the additional reserves related to businesses acquired on the date of acquisition. (E) - Represents the additional reserves related to consolidation on date of consolidation. F-3 POLYONE CORPORATION Index to Exhibits
Exhibit Description Filed: ------- ----------- ------ 3.1 Articles of Incorporation (k) 3.2 Regulations (k) 4.2 Indenture dated as of December 1, 1995 between the Company and NBD Bank, Trustee (f) 4.3 Indenture dated November 9, 1996 between the Company and NBD Bank, as trustee, governing the Company's Medium Term Notes (d) 4.4 Indenture dated September 15, 1991 between the Company and Ameritrust Company, National Association, Trustee related to the Company's $150,000,000 aggregate amount of 9.375% Senior Notes due 2003 (c) 4.5 Associates Ownership Trust Agreement dated September 12, 1991 between the Company and Wachovia Bank of North Carolina (b) 10.1 + Long-Term Incentive Plan, as amended and restated (a) 10.2 + Incentive Stock Plan, as amended and restated through August 31, 2000 (k) 10.3 + 1995 Incentive Stock Plan, as amended and restated through August 31, 2000 (k) 10.4 + 1998 Interim Stock Award Incentive Plan, as amended and restated through August 31, 2000 (k) 10.5 + 1999 Incentive Stock Plan, as amended and restated (k) through August 31, 2000 10.6 + 2000 Stock Incentive Plan (j) 10.7 + Benefit Restoration Plan (Section 415) (f) 10.8 + Benefit Restoration Plan (Section 401(a)(17)) (f)
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Exhibit Description Filed: ------- ----------- ------ 10.9a + Senior Executive PolyOne Annual Incentive Plan (amended (k) as of February 28, 2001 by Exhibit A [Definition of Change of Control] to Exhibit 10.9b below) 10.9b + Strategic Improvement Incentive Plan Overview and Form of Award * 10.10 + Non-Employee Directors Deferred Compensation Plan effective (k) December 9, 1993, as amended 10.11a + Form of Management Continuity Agreement (k) 10.11b + Schedule of Executives with Management Continuity Agreements * 10.12a U.S. $85 million Fourth Amended and Restated Trade Receivables * Purchase and Sale Agreement, dated May 28, 1999 among The Geon Company, CIESCO, L.P., Corporate Receivables Corporation and Citicorp North America, Inc. as Agent 10.12b U.S. $85 million Third Amended and Restated Parallel Purchase * Commitment date as of May 28, 1999 among The Geon Company, the Banks Named therein and Citicorp North America, N.A., as agent 10.12c Letter Amendment No. 4, dated as of March 14, 2001, among the Company, * the Investors, the Banks, and Citicorp North America, Inc. as agent, amending Exhibits 10.12a and 10.12b by, INTER ALIA, increasing the Commitment thereunder to $200 million 10.12d Letter Amendment No. 5, dated as of June 22, 2001, among the Company, * the Investors, the Banks, and Citicorp North America, Inc. as agent, amending Exhibits 10.12a and 10.12b by, INTER ALIA, increasing the Commitment thereunder to $250 million 10.13 Intentionally omitted. 10.14 Amended and Restated Instrument Guaranty dated as of December 19, 1996 (f) 10.15 Amended and Restated Plant Services Agreement between the Company and The B.F. Goodrich Company (f) 10.16 Amended and Restated Assumption of Liabilities and indemnification Agreement dated March 1, 1993 and amended and restated April 27, 1993 (f) 10.17a Partnership Agreement, by and between 1997 Chloralkali Venture Inc. and Olin Sunbelt, Inc. (e) 10.17b Amendment to aforesaid Partnership Agreement (Addition of Section 5.03 of Article 5) (g) 10.17c Amendment to aforesaid Partnership Agreement (Addition of Section 1.12) (g)
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Exhibit Description Filed: ------- ----------- ------ 10.18 Chlorine Sales Agreement, by and between Sunbelt Chlor Alkali Partnership and the Company (e) 10.19 Intercompany Guarantee Agreement between the Company on the one hand and Olin Corporation and Sunbelt Chlor Alkali Partnership on the other hand (e) 10.20 Guarantee by the Company of the Series G Sunbelt Chlor Alkali Partnership Guaranteed Secured Senior Notes Due 2017, dated December 22, 1997 (g) 10.21 Master Transaction Agreement dated December 22, 1998 between The Geon Company and Occidental Chemical Company (h) 10.22 Limited Partnership Agreement of Oxy Vinyls, LP (i) 10.23 Asset Contributions Agreement - PVC Partnership (Geon) (i) 10.24 Parent Agreement (Oxy Vinyls, LP) (i) 10.25 Parent Agreement (PVC Powder Blends, LP) and Business Opportunity Agreement (i) 10.26a Amendment, Waiver and Consent No. 4, dated as of March 28, 2002, to * the $200 million Five-Year Credit Agreement dated as of October 30, 2000, among the Company, Citicorp USA, Inc. and the other banks signatory thereto 10.26b $200 million Five Year Credit Agreement dated October 30, 2000, * among the Company, Citicorp USA and the other banks signatory thereto, as amended and restated as of March 28, 2002 13.1 Annual Report to Shareholders for the Year Ended December 31, 2001 * 13.2 Audited Financial Statements of Oxy Vinyls, LP * 21 Subsidiaries * 23.1 Consent of Independent Auditors - Ernst & Young LLP * 23.2 Consent of Independent Auditors - Arthur Andersen LLP * 99.1 Letter re: Arthur Andersen LLP *
-------------------------------------------------------------------------------- I-3 + Indicates management contract or compensatory plan, contract or arrangement in which one or more directors or executive officers of the Registrant may be participants * Filed herewith (a) Incorporated by reference to the corresponding Exhibit filed with M.A. Hanna Company's definitive proxy statement dated March 23, 2000, SEC File No. 1-05222. (b) Incorporated by reference to the corresponding Exhibit filed with M.A. Hanna Company's Form 8-K dated September 12, 1991, SEC File No. 1-05222. (c) Incorporated by reference to the corresponding Exhibit filed with M.A. Hanna Company's Form S-3 dated September 18, 1991, SEC File No. 1-05222. (d) Incorporated by reference to the corresponding Exhibit filed with M.A. Hanna Company's Form S-3 Registration Statement No. 333-05763, dated June 12, 1996. (e) Incorporated by reference to the corresponding Exhibit filed with The Geon Company's Form 10-Q for the Quarter ended September 30, 1996, SEC File No. 1-11804. (f) Incorporated by reference to the corresponding Exhibit filed with The Geon Company's Form 10-K for the Year ended December 31, 1996, SEC File No. 1-11804. (g) Incorporated by reference to the corresponding Exhibit filed with The Geon Company's Form 10-K for the Year ended December 31, 1997, SEC File No. 1-11804. (h) Incorporated by reference to the corresponding Exhibit filed with The Geon Company's Special Meeting Proxy Statement dated March 30, 1999, SEC File No. 1-11804. (i) Incorporated by reference to the corresponding Exhibit filed with The Geon Company's Form 8-K filed on May 13, 1999, SEC File No.1-11804. (j) Incorporated by reference to the corresponding Exhibit filed with Amendment No. 3 to Form S-4 Registration Statement No. 333-37344, dated July 31, 2000. (k) Incorporated by reference to the corresponding Exhibit filed with PolyOne Corporation's Form 10-K for the Year ended December 31, 2000, SEC File No. 1-16091. I-4