UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________________________

FORM 10-Q

________________________________________________

(Mark One)

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2020

OR

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from             to             .

Commission file number 1-16091

 ________________________________________________

AVIENT CORPORATION

(Exact name of registrant as specified in its charter)

________________________________________________

Ohio	34-1730488
(State or other jurisdiction	(I.R.S. Employer Identification No.)
of incorporation or organization)
Avient Center
33587 Walker Road	44012
Avon Lake, Ohio
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (440) 930-1000

________________________________________________

Former name, former address and former fiscal year, if changed since last report: Not Applicable

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, par value $.01 per share	AVNT	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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒    Yes   ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒    Yes   ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐  Yes   ☒  No

The number of the registrant’s outstanding common shares, par value $.01 per share, as of October 30, 2020 was 91,475,596.

AVIENT CORPORATION

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Avient Corporation

Condensed Consolidated Statements of Income (Unaudited)

(In millions, except per share data)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Sales	$	924.5	$	705.3	$	2,245.1	$	2,204.1
Cost of sales	714.3		544.8		1,713.7		1,700.2
Gross margin	210.2		160.5		531.4		503.9
Selling and administrative expense	176.7		117.4		407.1		367.6
Operating income	33.5		43.1		124.3		136.3
Interest expense, net	(29.7)		(15.5)		(55.3)		(47.6)
Other income, net	1.5		0.6		12.6		1.4
Income from continuing operations before income taxes	5.3		28.2		81.6		90.1
Income tax expense	(2.7)		(4.6)		(22.5)		(20.8)
Net income from continuing operations	2.6		23.6		59.1		69.3
Income (loss) from discontinued operations, net of income taxes	—		19.5		(0.5)		54.2
Net income	$	2.6	$	43.1	$	58.6	$	123.5
Net income attributable to noncontrolling interests	(0.9)		(0.1)		(1.3)		(0.2)
Net income attributable to Avient common shareholders	$	1.7	$	43.0	$	57.3	$	123.3
Earnings per share attributable to Avient common shareholders - Basic:
Continuing operations	$	0.02	$	0.31	$	0.64	$	0.89
Discontinued operations	—		0.25		—		0.71
Total	$	0.02	$	0.56	$	0.64	$	1.60
Earnings (loss) per share attributable to Avient common shareholders - Diluted:
Continuing operations	$	0.02	$	0.30	$	0.64	$	0.89
Discontinued operations	—		0.26		(0.01)		0.69
Total	$	0.02	$	0.56	$	0.63	$	1.58
Weighted-average shares used to compute earnings per common share:
Basic	91.5		76.9		89.7		77.3
Plus dilutive impact of share-based compensation	0.4		0.5		1.0		0.5
Diluted	91.9		77.4		90.7		77.8
Anti-dilutive shares not included in diluted common shares outstanding	0.7		0.6		0.9		0.8
Cash dividends declared per share of common stock	$	0.2025	$	0.1950	$	0.6075	$	0.5850

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

1 AVIENT CORPORATION

Avient Corporation

Consolidated Statements of Comprehensive Income (Unaudited)

(In millions)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Net income	$	2.6	$	43.1	$	58.6	$	123.5
Other comprehensive income (loss), net of tax:
Translation adjustments and related hedging instruments	59.3		(9.8)		56.6		(4.0)
Cash flow hedges	0.8		(0.4)		(2.4)		(3.3)
Total other comprehensive income (loss)	60.1		(10.2)		54.2		(7.3)
Total comprehensive income	62.7		32.9		112.8		116.2
Comprehensive income attributable to noncontrolling interests	(0.9)		(0.1)		(1.3)		(0.2)
Comprehensive income attributable to Avient common shareholders	$	61.8	$	32.8	$	111.5	$	116.0

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

2 AVIENT CORPORATION

Avient Corporation

Condensed Consolidated Balance Sheets

(In millions)

	(Unaudited) September 30, 2020		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	577.3	$	864.7
Accounts receivable, net	514.3		330.0
Inventories, net	311.4		260.9
Other current assets	94.8		57.7
Total current assets	1,497.8		1,513.3
Property, net	674.5		407.4
Goodwill	1,280.0		685.7
Intangible assets, net	993.0		469.3
Operating lease assets, net	88.3		63.8
Other non-current assets	176.3		133.8
Total assets	$	4,709.9	$	3,273.3
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term and current portion of long-term debt	$	18.7	$	18.4
Accounts payable	403.6		287.7
Current operating lease obligations	25.3		21.0
Accrued expenses and other current liabilities	321.3		375.4
Total current liabilities	768.9		702.5
Non-current liabilities:
Long-term debt	1,855.2		1,210.9
Pension and other post-retirement benefits	113.8		56.6
Non-current operating lease obligations	63.0		42.8
Other non-current liabilities	297.9		207.8
Total non-current liabilities	2,329.9		1,518.1
SHAREHOLDERS' EQUITY
Avient shareholders’ equity	1,597.0		1,051.9
Noncontrolling interest	14.1		0.8
Total equity	1,611.1		1,052.7
Total liabilities and equity	$	4,709.9	$	3,273.3

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

3 AVIENT CORPORATION

Avient Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)

	Nine Months Ended September 30,
	2020		2019
Operating Activities
Net income	$	58.6	$	123.5
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	74.8		68.4
Accelerated depreciation and amortization	2.5		—
Share-based compensation expense	7.1		8.7
Changes in assets and liabilities, net of the effect of acquisitions:
Increase in accounts receivable	(12.7)		(12.7)
Decrease in inventories	53.0		20.0
Increase (decrease) in accounts payable	21.3		(28.3)
Decrease in pension and other post-retirement benefits	(14.4)		(7.0)
Increase in post-acquisition earnout liabilities	2.5		20.7
Increase in accrued expenses and other assets and liabilities, net	56.1		5.3
Taxes paid on gain on divestiture	(142.0)		—
Payment of post-acquisition date earnout liability	(38.1)		—
Net cash provided by operating activities	68.7		198.6
Investing activities
Capital expenditures	(38.6)		(47.9)
Business acquisitions, net of cash acquired	(1,342.7)		(119.6)
Net proceeds from divestiture	7.1		—
Net proceeds from other assets	5.2		5.3
Net cash used by investing activities	(1,369.0)		(162.2)
Financing activities
Debt offering proceeds	650.0		—
Borrowings under credit facilities	—		882.4
Repayments under credit facilities	—		(808.5)
Purchase of common shares for treasury	(13.6)		(26.9)
Cash dividends paid	(52.8)		(45.7)
Repayment of long-term debt	(6.0)		(4.9)
Payments of withholding tax on share awards	(1.9)		(2.0)
Debt financing costs	(9.5)		(0.2)
Equity offering proceeds, net of underwriting discount and issuance costs	496.1		—
Payment of acquisition date earnout liability	(50.8)		—
Net cash provided (used) by financing activities	1,011.5		(5.8)
Effect of exchange rate changes on cash	1.4		(1.9)
(Decrease) increase in cash and cash equivalents	(287.4)		28.7
Cash and cash equivalents at beginning of year	864.7		170.9
Cash and cash equivalents at end of period	$	577.3	$	199.6

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

4 AVIENT CORPORATION

Avient Corporation

Consolidated Statements of Shareholders' Equity (Unaudited)

(In millions)

	Common Shares		Shareholders’ Equity
	Common Shares	Common Shares Held in Treasury	Common Shares		Additional Paid-in Capital		Retained Earnings		Common Shares Held in Treasury		Accumulated Other Comprehensive (Loss) Income		Total Avient shareholders' equity		Non-controlling Interests		Total equity
Balance at January 1, 2020	122.2	(45.3)	$	1.2	$	1,175.2	$	1,001.2	$	(1,043.1)	$	(82.6)	$	1,051.9	$	0.8	$	1,052.7
Net income	—	—	—		—		32.8		—		—		32.8		—		32.8
Other comprehensive loss	—	—	—		—		—		—		(10.7)		(10.7)		—		(10.7)
Noncontrolling interest activity	—	—	—		—				—		—		—		(0.8)		(0.8)
Cash dividends declared (1)	—	—	—		—		(18.7)		—		—		(18.7)		—		(18.7)
Repurchase of common shares	—	(1.0)	—		—		—		(13.6)		—		(13.6)		—		(13.6)
Common shares equity offering	—	15.3	0.2		334.6		—		161.3		—		496.1		—		496.1
Share-based compensation and exercise of awards	—	0.2	—		(0.5)		—		1.6		—		1.1		—		1.1
Other	—	—	—		—		(0.3)		—		—		(0.3)		—		(0.3)
Balance at March 31, 2020	122.2	(30.8)	$	1.4	$	1,509.3	$	1,015.0	$	(893.8)	$	(93.3)	$	1,538.6	$	—	$	1,538.6
Net income	—	—	—		—		22.8		—		—		22.8		0.4		23.2
Other comprehensive income	—	—	—		—		—		—		4.8		4.8		—		4.8
Cash dividends declared (1)	—	—	—		—		(18.5)		—		—		(18.5)		—		(18.5)
Share-based compensation and exercise of awards	—	—	—		3.2		—		0.4		—		3.6		—		3.6
Balance at June 30, 2020	122.2	(30.8)	$	1.4	$	1,512.5	$	1,019.3	$	(893.4)	$	(88.5)	$	1,551.3	$	0.4	$	1,551.7
Net income	—	—	—		—		1.7		—		—		1.7		0.9		2.6
Other comprehensive income	—	—	—		—		—		—		60.1		60.1		—		60.1
Cash dividends declared (1)	—	—	—		—		(18.5)		—		—		(18.5)		—		(18.5)
Share-based compensation and exercise of awards	—	—	—		1.9		—		0.5		—		2.4		—		2.4
Acquisitions/other	—	—	—		—		—		—		—		—		12.8		12.8
Balance at September 30, 2020	122.2	(30.8)	1.4		$	1,514.4	$	1,002.5	$	(892.9)	$	(28.4)	$	1,597.0	$	14.1	$	1,611.1

(1) Dividends declared per share were $0.2025 and $0.6075 for the three and nine months ended September 30, 2020, respectively.

5 AVIENT CORPORATION

	Common Shares		Shareholders’ Equity
	Common Shares	Common Shares  Held in Treasury	Common Shares		Additional Paid-in Capital		Retained Earnings		Common Shares  Held in Treasury		Accumulated Other Comprehensive (Loss) Income		Total Avient shareholders' equity		Non-controlling Interests		Total equity
Balance at January 1, 2019	122.2	(44.5)	$	1.2	$	1,166.9	$	472.9	$	(1,018.7)	$	(82.3)	$	540.0	$	0.6	$	540.6
Net income	—	—	—		—		38.2		—		—		38.2		0.1		38.3
Other comprehensive gain	—	—	—		—		—		—		3.2		3.2		—		3.2
Cash dividends declared (1)	—	—	—		—		(14.8)		—		—		(14.8)		—		(14.8)
Share-based compensation and exercise of awards	—	0.1	—		0.5		—		1.1		—		1.6		—		1.6
Balance at March 31, 2019	122.2	(44.4)	$	1.2	$	1,167.4	$	496.3	$	(1,017.6)	$	(79.1)	$	568.2	$	0.7	$	568.9
Net income	—	—	—		—		42.1		—		—		42.1		—		42.1
Other comprehensive loss	—	—	—		—		—		—		(0.3)		(0.3)		—		(0.3)
Cash dividends declared (1)	—	—	—		—		(15.2)		—		—		(15.2)		—		(15.2)
Repurchase of common shares	—	(1.0)	—		—		—		(26.9)		—		(26.9)		—		(26.9)
Share-based compensation and exercise of awards	—	0.1	—		1.8		—		0.7		—		2.5		—		2.5
Balance at June 30, 2019	122.2	(45.3)	$	1.2	$	1,169.2	$	523.2	$	(1,043.8)	$	(79.4)	$	570.4	$	0.7	$	571.1
Net income	—	—	—		—		43.0		—		—		43.0		0.1		43.1
Other comprehensive loss	—	—	—		—		—		—		(10.2)		(10.2)		—		(10.2)
Cash dividends declared (1)	—	—	—		—		(14.7)		—		—		(14.7)		—		(14.7)
Share-based compensation and exercise of awards	—	—	—		2.4		—		0.5		—		2.9		—		2.9
Balance at September 30, 2019	122.2	(45.3)	$	1.2	$	1,171.6	$	551.5	$	(1,043.3)	$	(89.6)	$	591.4	$	0.8	$	592.2

(1) Dividends declared per share were $0.1950 and $0.5850 for the three and nine months ended September 30, 2019, respectively.

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

6 AVIENT CORPORATION

Avient Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1 — BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Form 10-Q instructions and in the opinion of management contain all adjustments, including those that are normal, recurring and necessary to present fairly the financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. These interim financial statements should be read in conjunction with the financial statements and accompanying notes included in the Annual Report on Form 10-K for the year ended December 31, 2019 of Avient Corporation, formerly known as PolyOne Corporation. When used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” “Avient” and the “Company” mean Avient Corporation and its consolidated subsidiaries.

Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be attained in subsequent periods or for the year ending December 31, 2020. Historical information has been retrospectively adjusted to reflect the classification of discontinued operations. Discontinued operations are further discussed in Note 3, Discontinued Operations.

Accounting Standards Adopted

On January 1, 2020, the Company adopted Account Standards Update (ASU) 2016-03, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13). ASU 2016-13 changed the impairment model for most financial instruments. Previous guidance required the recognition of credit losses based on an incurred loss impairment methodology that reflects losses once the losses are probable. Under ASU 2016-13, the Company is required to use a current expected credit loss (CECL) model that immediately recognizes an estimate of credit losses that are expected to occur over the life of the financial instruments that are in the scope of the update, including trade receivables. The CECL model uses a broader range of reasonable and supportable information in the development of credit loss estimates. The adoption of ASU 2016-13 resulted in a cumulative-effect adjustment to beginning retained earnings that was not material.

Note 2 — BUSINESS COMBINATIONS

On July 1, 2020, the Company completed its acquisition of the equity interests in the global masterbatch business of Clariant AG, a corporation organized and existing under the law of Switzerland (Clariant), and the masterbatch assets in India of Clariant Chemicals (India) Limited, a public limited company incorporated in India and an indirect majority owned subsidiary of Clariant (Clariant India). The business and assets are collectively referred to as Clariant MB and the acquisitions are collectively referred to as the Clariant MB Acquisition. The Clariant MB Acquisition increased the Company's scale, product depth and geographic reach in its Color, Additives and Inks segment. Clariant MB has leading portfolios of solid and liquid masterbatches that include sustainable solutions for alternative energy, and reduced material requirements for packaging and light weighting. In connection with the completion of the Clariant MB Acquisition and effective as of June 30, 2020, the Company amended its existing Articles of Incorporation to change its name to Avient Corporation. In conjunction with its rebranding and new name, the Company also changed its ticker symbol from “POL” to “AVNT”, effective at the start of trading on July 13, 2020.

Total consideration paid by the Company to complete the Clariant MB Acquisition was $1.3 billion, net of cash, which includes preliminary working capital and net debt adjustments. Clariant's proposed net debt and working capital adjustment reflects a $44.0 million adjustment, representing a payment by the Company to Clariant. The review period for this proposed adjustment is still open and the adjustment will likely be finalized prior to the end of the first quarter of 2021. To finance the purchase of Clariant MB, the Company used $496.1 million in net proceeds from the issuance of common shares in an underwritten public offering completed in February 2020 and $640.5 million in net proceeds from a senior unsecured notes offering completed in May 2020, and funded the balance using the net proceeds of the October 2019 sale of our Performance Products and Solutions business segment (PP&S). For additional details related to the sale of PP&S and the senior unsecured notes offering, refer to Note 3, Discontinued Operations and Note 9, Financing Arrangements, respectively.

The Clariant MB Acquisition is being accounted for under the acquisition method of accounting in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 805. As of September 30,

7 AVIENT CORPORATION

2020, the purchase accounting for the Clariant MB Acquisition is preliminary and the amounts recognized in the financial statements for the Clariant MB Acquisition are provisional. The purchase price allocation adjustments will be made throughout the end of Company’s measurement period, which is not to exceed one year from the acquisition date. During the measurement period, we will continue to obtain information to assist in finalizing the fair value of assets acquired and liabilities assumed, which may differ materially from the preliminary estimates. We are in the ongoing process of conducting a valuation of the assets acquired and liabilities assumed related to the acquisition, including the personal and real property, lease obligations, deferred taxes, pension and other post-employment benefit plan liabilities, and intangible assets. The provisional measurements and preliminary allocation of consideration transferred and determination of fair values of assets acquired and liabilities assumed, reflect estimates, judgments and assumptions made by management. These estimates, judgments and assumptions are subject to change upon final valuation.

The summarized preliminary purchase price allocation is as follows:

	July 1, 2020
Cash and cash equivalents	$	145.1
Accounts receivable	170.8
Inventories	102.3
Other current assets	54.1
Property	267.6
Goodwill	570.1
Intangible assets:
Customer relationships	221.4
Trade names and trademarks	32.0
Patents, technology and other	273.9
Operating lease assets	33.6
Other long-term assets	1.1
Short term debt	(0.4)
Accounts payable	(91.6)
Current operating lease obligations	(3.1)
Accrued expenses and other current liabilities	(81.9)
Long-term debt	(6.7)
Non-current operating lease obligations	(29.0)
Deferred tax liabilities	(58.2)
Pension and other post retirement benefits	(56.7)
Non-controlling interests	(12.7)
Total purchase price consideration	$	1,531.7

The intangible assets that have been acquired are being amortized over a period of 18 to 20 years.

Goodwill of $570.1 million was recorded and allocated to the Color, Additives and Inks segment. The goodwill recognized is primarily attributable to the expected synergies to be achieved from the business combination. We expect a portion of goodwill to be deductible for tax purposes.

The amounts of revenue and income from continuing operations before income taxes of Clariant MB since the acquisition date included in the consolidated income statement for the three months ended September 30, 2020 are $264.2 million and $18.3 million, respectively. Had the Clariant MB Acquisition occurred as of the beginning of fiscal 2019, sales and income from continuing operations before income taxes on a pro forma basis would have been as follows:

8 AVIENT CORPORATION

	(Unaudited)				(Unaudited)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Sales	$	924.5	$	976.3	$	2,782.6	$	3,055.5
Income from continuing operations before income taxes	28.9		29.8		146.5		78.4

The unaudited pro forma financial information has been calculated after applying our accounting policies and adjusting the historical results with pro forma adjustments that assume the acquisition occurred on January 1, 2019. These unaudited pro forma results do not represent financial results realized, nor are they intended to be a projection of future results. In preparation of the pro forma financial information, we eliminated certain historical allocations made by Clariant as they do not represent the stand alone operations of Clariant MB and replaced them with costs more likely to occur as a part of Avient. This elimination removed expense of $7.5 million and $10.0 million during the nine months ended September 30, 2020 and 2019, respectively, while the three months ended September 30, 2020 reflect actual results. The amortization of inventory step-up from the preliminary purchase price allocation was $10.5 million, and is reflected in Cost of sales in the three and nine months ended September 30, 2020. Additionally, we incurred $9.6 million and $10.1 million of costs related to committed financing which are reflected in Interest expense, net in the three and nine months ended September 30, 2020, respectively. The amounts associated with the amortization of inventory step-up and costs related to committed financing were removed from the three and nine months ended September 30, 2020, and presented in the nine months ended September 30, 2019 pro forma financial information.

Costs incurred in connection with the Clariant MB Acquisition were $3.5 million and $15.1 million in the three and nine months ended September 30, 2020, respectively. These fees were charged to Selling and Administrative expense on the Condensed Consolidated Statements of Income.

Other Acquisitions

Our acquisitions of PlastiComp, Inc. (PlastiComp) on May 31, 2018 and Fiber-Line, LLC (Fiber-Line) on January 2, 2019 involve contingent earnout consideration. The PlastiComp earnout had a ceiling of $35.0 million that was reached during the first quarter of 2020 and paid in the third quarter of 2020. The Fiber-Line earnout is based on two annual earnout periods, with the second earnout period target based on year-one results. The second earnout period ends on December 31, 2020 and we expect settlement in 2021. A payment of $53.9 million associated with the first Fiber-Line earnout period was made in the first quarter of 2020. During the three and nine months ended September 30, 2020, the Company recorded charges of $1.5 million and $2.5 million, respectively, associated with the earnouts within Selling and administrative expense on the Condensed Consolidated Statements of Income that were primarily attributable to improved earnings from the acquisitions.

Note 3 — DISCONTINUED OPERATIONS

On October 25, 2019, Avient divested PP&S to SK Echo Group S.à.r.l. We received total proceeds from the divestiture of $768.9 million, which were net of cash transaction costs and included a working capital adjustment of $7.1 million received in the first quarter of 2020. Upon completion of the transaction, we recognized an after-tax gain of $457.7 million during 2019, which is included in the Income (loss) from discontinued operations, net of income taxes line of the Condensed Consolidated Statements of Income.

Avient has continuing involvement with the former PP&S business following the close of the transaction. The Company entered into a four-year distribution agreement with the former PP&S business to be the exclusive distributor for certain products, under terms that were similar prior to the disposal transaction. Avient and the former PP&S business have also entered into contract manufacturing and supply agreements for certain products for a two-year period. For the nine months ended September 30, 2020, our net cash outflow related to the agreements was approximately $45.4 million.

The following table summarizes the major line items constituting pre-tax income of discontinued operations for the three and nine months ended September 30, 2020 and 2019:

9 AVIENT CORPORATION

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Sales	$	—	$	143.1	$	—	$	448.0
Cost of sales	—		(114.0)		—		(358.4)
Selling and administrative expense	—		(8.2)		(0.5)		(21.7)
Income (loss) of discontinued operations before income taxes	—		20.9		(0.5)		67.9
Income tax expense	—		(1.4)		—		(13.7)
Income (loss) from discontinued operations, net of income taxes	$	—	$	19.5	$	(0.5)	$	54.2

The following table presents the depreciation, amortization, and capital expenditures of our discontinued operations for the three and nine months ended September 30, 2019. No such amounts were recorded for the three and nine months ended September 30, 2020.

(In millions)	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Depreciation and amortization	$	1.8	$	9.4
Capital Expenditures	4.0		11.2

Note 4 — GOODWILL AND INTANGIBLE ASSETS

Goodwill as of September 30, 2020 and December 31, 2019 and changes in the carrying amount of goodwill by segment were as follows: 

(In millions)	Specialty Engineered Materials		Color, Additives and Inks		Distribution		Total
Balance at December 31, 2019	$	236.3	$	447.8	$	1.6	$	685.7
Acquisition of businesses	—		570.1		—		570.1
Currency translation	0.1		24.1		—		24.2
Balance at September 30, 2020	$	236.4	$	1,042.0	$	1.6	$	1,280.0

Indefinite and finite-lived intangible assets consisted of the following: 

	As of September 30, 2020
(In millions)	Acquisition Cost		Accumulated Amortization		Currency Translation		Net
Customer relationships	$	508.2	$	(102.8)	$	10.4	$	415.8
Patents, technology and other	549.9		(94.6)		12.4		467.7
Indefinite-lived trade names	109.5		—				109.5
Total	$	1,167.6	$	(197.4)	$	22.8	$	993.0

	As of December 31, 2019
(In millions)	Acquisition Cost		Accumulated Amortization		Currency Translation		Net
Customer relationships	$	286.8	$	(89.1)	$	(1.0)	$	196.7
Patents, technology and other	244.0		(79.6)		(1.3)		163.1
Indefinite-lived trade names	109.5		—		—		109.5
Total	$	640.3	$	(168.7)	$	(2.3)	$	469.3

Note 5 — LEASING ARRANGEMENTS

We lease certain manufacturing facilities, warehouse space, machinery and equipment, vehicles and information technology equipment under operating leases. The majority of our leases are operating leases. Finance leases are immaterial to our condensed consolidated financial statements. Operating lease assets and obligations are reflected

10 AVIENT CORPORATION

within Operating lease assets, net, Current operating lease obligations, and Non-current operating lease obligations, respectively, on the Condensed Consolidated Balance Sheets.

Lease expense for these leases is recognized on a straight-line basis over the lease term, with variable lease payments recognized in the period those payments are incurred. The components of lease cost from continued operations recognized within our Condensed Consolidated Statements of Income were as follows:

		Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	Condensed Consolidated Statements of Income Location	2020		2019		2020		2019
Lease cost:
Operating lease cost	Cost of sales	$	4.4	$	2.6	$	9.3	$	7.8
Operating lease cost	Selling and administrative expense	5.4		2.7		14.5		9.6
Total operating lease cost		$	9.8	$	5.3	$	23.8	$	17.4

We often have options to renew lease terms for buildings and other assets. The exercise of lease renewal options are generally at our sole discretion. In addition, certain lease arrangements may be terminated prior to their original expiration date at our discretion. We evaluate renewal and termination options at the lease commencement date to determine if we are reasonably certain to exercise the option on the basis of economic factors. The weighted average remaining lease term for our operating leases as of September 30, 2020 and 2019 was 5.4 years and 5.9 years, respectively.

The discount rate implicit within our leases is generally not determinable and, therefore, the Company determines the discount rate based on its incremental borrowing rate. The incremental borrowing rate for our leases is determined based on lease term and currency in which lease payments are made, adjusted for impacts of collateral. The weighted average discount rates used to measure our operating lease liabilities as of September 30, 2020 and 2019 were 3.0% and 5.2%, respectively.

Maturity Analysis of Lease Liabilities:

	As of September 30, 2020 Operating Leases
(In millions)
2020	$	8.1
2021	25.8
2022	19.4
2023	13.5
2024	7.8
Thereafter	17.8
Total lease payments	92.4
Less amount of lease payment representing interest	(4.1)
Total present value of lease payments	$	88.3

Note 6 — INVENTORIES, NET

Components of Inventories, net are as follows: 

(in millions)	As of September 30, 2020		As of December 31, 2019
Finished products	$	163.7	$	157.6
Work in process	17.7		8.0
Raw materials and supplies	130.0		95.3
Inventories, net	$	311.4	$	260.9

11 AVIENT CORPORATION

Note 7 — PROPERTY, NET

Components of Property, net are as follows: 

(in millions)	As of September 30, 2020		As of December 31, 2019
Land and land improvements	$	91.6	$	32.8
Buildings	335.6		231.8
Machinery and equipment	898.3		748.9
Property, gross	1,325.5		1,013.5
Less accumulated depreciation	(651.0)		(606.1)
Property, net	$	674.5	$	407.4

Note 8 — INCOME TAXES

On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act, among other things, includes certain income tax provisions for individuals and corporations, including certain provisions for the amount of interest expense that can be deducted. Pursuant to the CARES Act, the Company expects to be able to deduct all U.S. interest expense incurred in 2020.

We continue to recognize the tax on global intangible low-taxed income (GILTI) as an expense in the period the tax is incurred and we have included a provisional estimate for GILTI in our estimated annual effective tax rate.

During the three and nine months ended September 30, 2020, the Company’s effective tax rate of 51.9% and 27.6%, respectively, was above the U.S. federal statutory rate of 21.0% primarily due to foreign withholding tax liability accrued associated with the future repatriation of certain current year foreign earnings, the U.S. GILTI tax and certain other non-deductible items. The impact on the effective rate was significant during the third quarter of 2020 because of the low pre-tax income as a result of the impacts associated with the Clariant MB Acquisition. These items were partially offset by the benefit of the U.S. research and development tax credit and favorable mix of earnings in foreign jurisdictions with lower effective tax rates.

During the three months ended September 30, 2019, the Company’s effective tax rate of 16.3% was below the U.S. federal statutory rate of 21.0% primarily due to lower statutory tax rate differences on foreign earnings, reversal of uncertain tax positions due to tax audit settlements and U.S. research and development tax credits, which were partially offset by state taxes, GILTI tax, unfavorable tax effects of foreign valuation allowances and certain other non-deductible items.

During the nine months ended September 30, 2019, the Company’s effective tax rate of 23.1% was above the U.S. federal statutory rate of 21.0% primarily due to state taxes, GILTI tax, unfavorable tax effects of foreign valuation allowances, and certain other non-deductible items, which were partially offset by lower statutory tax rate differences on foreign earnings, reversal of uncertain tax positions due to tax audit settlements, and U.S. research and development tax credits.

Note 9 — FINANCING ARRANGEMENTS

Debt consists of the following instruments:

As of September 30, 2020 (in millions)	Principal Amount	Unamortized discount and debt issuance cost	Net Debt	Weighted average interest rate
Senior secured revolving credit facility due 2022	$