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, 2021

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 September 30, 2021 was 91,491,380.

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,
	2021		2020		2021		2020
Sales	$	1,219.8	$	924.5	$	3,617.3	$	2,245.1
Cost of sales	964.4		714.3		2,770.8		1,713.7
Gross margin	255.4		210.2		846.5		531.4
Selling and administrative expense	176.7		176.7		539.3		407.1
Operating income	78.7		33.5		307.2		124.3
Interest expense, net	(19.0)		(29.7)		(57.8)		(55.3)
Other income, net	1.4		1.5		4.1		12.6
Income from continuing operations before income taxes	61.1		5.3		253.5		81.6
Income tax expense	(8.5)		(2.7)		(51.8)		(22.5)
Net income from continuing operations	52.6		2.6		201.7		59.1
Loss from discontinued operations, net of income taxes	—		—		—		(0.5)
Net income	$	52.6	$	2.6	$	201.7	$	58.6
Net loss (income) attributable to noncontrolling interests	0.3		(0.9)		(0.7)		(1.3)
Net income attributable to Avient common shareholders	$	52.9	$	1.7	$	201.0	$	57.3
Earnings per share attributable to Avient common shareholders - Basic:
Continuing operations	$	0.58	$	0.02	$	2.20	$	0.64
Discontinued operations	—		—		—		—
Total	$	0.58	$	0.02	$	2.20	$	0.64
Earnings (loss) per share attributable to Avient common shareholders - Diluted:
Continuing operations	$	0.57	$	0.02	$	2.18	$	0.64
Discontinued operations	—		—		—		(0.01)
Total	$	0.57	$	0.02	$	2.18	$	0.63
Weighted-average shares used to compute earnings per common share:
Basic	91.4		91.5		91.3		89.7
Plus dilutive impact of share-based compensation	0.8		0.4		0.8		1.0
Diluted	92.2		91.9		92.1		90.7
Anti-dilutive shares not included in diluted common shares outstanding	—		0.7		—		0.9
Cash dividends declared per share of common stock	$	0.2125	$	0.2025	$	0.6375	$	0.6075

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,
	2021		2020		2021		2020
Net income	$	52.6	$	2.6	$	201.7	$	58.6
Other comprehensive income (loss), net of tax:
Translation adjustments and related hedging instruments	(29.4)		59.3		(70.9)		56.6
Cash flow hedges	0.7		0.8		2.2		(2.4)
Total other comprehensive income (loss)	(28.7)		60.1		(68.7)		54.2
Total comprehensive income	23.9		62.7		133.0		112.8
Comprehensive loss (income) attributable to noncontrolling interests	0.3		(0.9)		(0.7)		(1.3)
Comprehensive income attributable to Avient common shareholders	$	24.2	$	61.8	$	132.3	$	111.5

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

2 AVIENT CORPORATION

Avient Corporation

Condensed Consolidated Balance Sheets

(In millions)

	(Unaudited) September 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	545.2	$	649.5
Accounts receivable, net	703.0		516.6
Inventories, net	477.2		327.5
Other current assets	123.5		108.5
Total current assets	1,848.9		1,602.1
Property, net	669.6		694.9
Goodwill	1,293.9		1,308.1
Intangible assets, net	948.4		1,008.5
Operating lease assets, net	81.6		80.9
Other non-current assets	168.6		176.0
Total assets	$	5,011.0	$	4,870.5
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term and current portion of long-term debt	$	8.7	$	18.6
Accounts payable	557.7		471.7
Current operating lease obligations	24.1		25.1
Accrued expenses and other current liabilities	371.3		285.6
Total current liabilities	961.8		801.0
Non-current liabilities:
Long-term debt	1,851.0		1,854.0
Pension and other post-retirement benefits	111.0		115.0
Non-current operating lease obligations	57.7		56.0
Other non-current liabilities	244.1		332.8
Total non-current liabilities	2,263.8		2,357.8
SHAREHOLDERS' EQUITY
Avient shareholders’ equity	1,768.8		1,697.1
Noncontrolling interest	16.6		14.6
Total equity	1,785.4		1,711.7
Total liabilities and equity	$	5,011.0	$	4,870.5

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,
	2021		2020
Operating Activities
Net income	$	201.7	$	58.6
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	105.8		74.8
Accelerated depreciation and amortization	1.9		2.5
Share-based compensation expense	8.4		7.1
Changes in assets and liabilities, net of the effect of acquisitions:
Increase in accounts receivable	(199.7)		(12.7)
(Increase) decrease in inventories	(156.2)		53.0
Increase in accounts payable	95.3		21.3
Decrease in pension and other post-retirement benefits	(14.2)		(14.4)
Increase in post-acquisition earnout liabilities	—		2.5
Increase in accrued expenses and other assets and liabilities, net	67.0		56.1
Taxes paid on gain on divestiture	—		(142.0)
Payment of post-acquisition date earnout liability	—		(38.1)
Net cash provided by operating activities	110.0		68.7
Investing activities
Capital expenditures	(62.7)		(38.6)
Business acquisitions, net of cash acquired	(47.6)		(1,342.7)
Net proceeds from divestiture	—		7.1
Other investing activities	(2.0)		5.2
Net cash used by investing activities	(112.3)		(1,369.0)
Financing activities
Debt offering proceeds	—		650.0
Purchase of common shares for treasury	(4.2)		(13.6)
Cash dividends paid	(58.2)		(52.8)
Repayment of long-term debt	(16.5)		(6.0)
Payments of withholding tax on share awards	(9.1)		(1.9)
Debt financing costs	—		(9.5)
Equity offering proceeds, net of underwriting discount and issuance costs	—		496.1
Payment of acquisition date earnout liability	—		(50.8)
Other financing activities	(3.5)		—
Net cash (used) provided by financing activities	(91.5)		1,011.5
Effect of exchange rate changes on cash	(10.5)		1.4
Decrease in cash and cash equivalents	(104.3)		(287.4)
Cash and cash equivalents at beginning of year	649.5		864.7
Cash and cash equivalents at end of period	$	545.2	$	577.3

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, 2021	122.2	(30.8)	$	1.2	$	1,513.3	$	1,057.4	$	(901.2)	$	26.4	$	1,697.1	$	14.6	$	1,711.7
Net income	—	—	—		—		79.3		—		—		79.3		0.4		79.7
Other comprehensive loss	—	—	—		—		—		—		(50.2)		(50.2)		—		(50.2)
Cash dividends declared (1)	—	—	—		—		(19.5)		—		—		(19.5)		—		(19.5)
Repurchase of common shares	—	(0.1)	—		—		—		(4.2)		—		(4.2)		—		(4.2)
Share-based compensation and exercise of awards	—	0.1	—		2.9		—		1.6		—		4.5		—		4.5
Balance at March 31, 2021	122.2	(30.8)	$	1.2	$	1,516.2	$	1,117.2	$	(903.8)	$	(23.8)	$	1,707.0	$	15.0	$	1,722.0
Net income	—	—	—		—		68.8		—		—		68.8		0.6		69.4
Other comprehensive income	—	—	—		—		—		—		10.2		10.2		—		10.2
Acquisitions/other	—	—	—		—		—		—		—		—		2.6		2.6
Cash dividends declared (1)	—	—	—		—		(19.4)		—		—		(19.4)		—		(19.4)
Share-based compensation and exercise of awards	—	—	—		1.0		—		0.6		—		1.6		—		1.6
Balance at June 30, 2021	122.2	(30.8)	$	1.2	$	1,517.2	$	1,166.6	$	(903.2)	$	(13.6)	$	1,768.2	$	18.2	$	1,786.4
Net income	—	—	—		—		52.9		—		—		52.9		(0.3)		52.6
Other comprehensive income	—	—	—		—		—		—		(28.7)		(28.7)		—		(28.7)
Noncontrolling interest activity	—	—	—		—		—		—		—		—		(1.3)		(1.3)
Cash dividends declared (1)	—	—	—		—		(19.6)		—		—		(19.6)		—		(19.6)
Share-based compensation and exercise of awards	—	0.1	—		(3.2)		—		1.6		—		(1.6)		—		(1.6)
Acquisitions/other	—	—	—		(2.4)		—		—		—		(2.4)		—		(2.4)
Balance at September 30, 2021	122.2	(30.7)	1.2		$	1,511.6	$	1,199.9	$	(901.6)	$	(42.3)	$	1,768.8	$	16.6	$	1,785.4

(1) Dividends declared per share were $0.2125 and $0.6375 for the three and nine months ended September 30, 2021.

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, 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			334.6		—		161.3		—		495.9		—		495.9
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)	$	1.2	$	1,509.3	$	1,015.0	$	(893.8)	$	(93.3)	$	1,538.4	$	—	$	1,538.4
Net income	—	—	—		—		22.8		—		—		22.8		0.4		23.2
Other comprehensive loss	—	—	—		—		—		—		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)	$	1.2	$	1,512.5	$	1,019.3	$	(893.4)	$	(88.5)	$	1,551.1	$	0.4	$	1,551.5
Net income	—	—	—		—		1.7		—		—		1.7		0.9		2.6
Other comprehensive loss	—	—	—		—		—		—		60.1		60.1		—		60.1
Noncontrolling interest activity	—	—	—		—		—		—		—		—		—		—
Cash dividends declared (1)	—	—	—		—		(18.5)		—		—		(18.5)		—		(18.5)
Repurchase of common shares	—	—	—		—		—		—		—		—		—		—
Share-based compensation and exercise of awards	—	—	—		1.9		—		0.5		—		2.4		—		2.4
Other	—	—	—		—		—		—		—		—		12.8		12.8
Balance at September 30, 2020	122.2	(30.8)	$	1.2	$	1,514.4	$	1,002.5	$	(892.9)	$	(28.4)	$	1,596.8	$	14.1	$	1,610.9

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

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, 2020 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, 2021 are not necessarily indicative of the results that may be attained in subsequent periods or for the year ending December 31, 2021.

Accounting Standards Adopted

On January 1, 2021, the Company adopted Accounting Standards Update (ASU) 2019-12, Income Taxes (ASC 740) - Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Financial Accounting Standards Board Accounting Standards Codification (ASC) 740 and also clarifies and amends existing guidance to improve consistent application. The adoption of ASU 2019-12 did not result in any material impact.

Accounting Standards Not Yet Adopted

ASU 2020-04, Reference Rate Reform (ASU 2020-04), provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as LIBOR. The amendments in ASU 2020-04 apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued. The amendments in ASU 2020-04 are effective through December 31, 2022. The Company is currently evaluating the impact of adopting this standard on our consolidated financial statements and disclosures.

Note 2 — BUSINESS COMBINATIONS

Clariant Color Acquisition

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 Color and the acquisitions are collectively referred to as the Clariant Color Acquisition.

Total consideration paid by the Company to complete the Clariant Color Acquisition was $1.4 billion net of cash and debt acquired. To finance the purchase of Clariant Color, 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).

The Clariant Color Acquisition was accounted for under the acquisition method of accounting in accordance with ASC Topic 805. As of June 30, 2021, the purchase accounting for the Clariant Color Acquisition was finalized.

7 AVIENT CORPORATION

The summarized purchase price allocation is as follows:

(in millions)	Preliminary Allocation As of December 31, 2020		Measurement Period Adjustments		Final Allocation
Cash and cash equivalents	$	145.1	$	—	$	145.1
Accounts receivable	170.8		—		170.8
Inventories	99.0		0.2		99.2
Other current assets	56.9		6.3		63.2
Property	267.6		(7.5)		260.1
Goodwill	569.0		(7.8)		561.2
Intangible assets:
Customer relationships	221.9		(20.7)		201.2
Trade names and trademarks	32.0		2.8		34.8
Patents, technology and other	273.9		7.4		281.3
Operating lease assets	30.1		—		30.1
Other long-term assets	1.3		5.8		7.1
Short term debt	(0.4)		—		(0.4)
Accounts payable	(92.7)		1.2		(91.5)
Current operating lease obligations	(2.8)		—		(2.8)
Accrued expenses and other current liabilities	(81.2)		(4.5)		(85.7)
Long-term debt	(6.7)		—		(6.7)
Non-current operating lease obligations	(25.8)		—		(25.8)
Deferred tax liabilities	(60.7)		25.9		(34.8)
Pension and other post retirement benefits	(53.8)		—		(53.8)
Other long-term liabilities	(5.4)		(6.7)		(12.1)
Non-controlling interests	(12.8)		(2.4)		(15.2)
Total purchase price consideration	$	1,525.3	$	—	$	1,525.3

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

Goodwill of $561.2 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. A portion of goodwill is deductible for tax purposes.

Had the Clariant Color Acquisition occurred on January 1, 2019, which was the beginning of the fiscal year prior to the acquisition, sales and income from continuing operations before income taxes on a pro forma basis would have been as follows:

	(Unaudited)
(in millions)	Three Months Ended September 30, 2020		Nine Months Ended September 30, 2020
Sales	$	924.5	$	2,782.6
Income from continuing operations before income taxes	28.9		146.5

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 Color and replaced them with costs

8 AVIENT CORPORATION

more likely to occur as a part of Avient. This elimination removed expense of $7.5 million during the nine months ended September 30, 2020, while the three months ended September 30, 2020 reflect actual results.

Costs incurred in connection with the Clariant Color Acquisition were $3.5 million and $15.1 million for 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

On July 1, 2021, the Company completed its acquisition of Magna Colours Ltd. (Magna Colours), a market leader in sustainable, water-based inks technology for the textile screen printing industry, for the purchase price of $47.6 million, net of cash acquired. The results of the Magna Colours business are reported in the Color, Additives and Inks segment. The preliminary purchase price allocation resulted in intangible assets of $27.5 million and goodwill of $22.2 million, partially offset by net liabilities assumed. Goodwill is not deductible for tax purposes. The intangible assets that have been acquired are being amortized over a period of 10 to 20 years.

Our acquisitions of PlastiComp, Inc. (PlastiComp) on May 31, 2018 and Fiber-Line, LLC (Fiber-Line) on January 2, 2019 involved 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 was based on two annual earnout periods, with the second earnout period target based on year-one results. A payment of $53.9 million associated with the first Fiber-Line earnout period was made in the first quarter of 2020. There was no payment made for the second Fiber-Line earnout period, which ended on December 31, 2020.

Note 3 — GOODWILL AND INTANGIBLE ASSETS

Goodwill as of September 30, 2021 and December 31, 2020 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, 2020	$	237.8	$	1,068.7	$	1.6	$	1,308.1
Acquisition of businesses	—		14.1		—		14.1
Currency translation	(1.0)		(27.3)		—		(28.3)
Balance at September 30, 2021	$	236.8	$	1,055.5	$	1.6	$	1,293.9

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

	As of September 30, 2021
(In millions)	Acquisition Cost		Accumulated Amortization		Currency Translation		Net
Customer relationships	$	507.2	$	(130.1)	$	7.3	$	384.4
Patents, technology and other	566.7		(125.1)		9.2		450.8
Indefinite-lived trade names	113.2		—		—		113.2
Total	$	1,187.1	$	(255.2)	$	16.5	$	948.4

	As of December 31, 2020
(In millions)	Acquisition Cost		Accumulated Amortization		Currency Translation		Net
Customer relationships	$	508.7	$	(109.8)	$	23.8	$	422.7
Patents, technology and other	549.9		(102.4)		28.8		476.3
Indefinite-lived trade names	109.5		—		—		109.5
Total	$	1,168.1	$	(212.2)	$	52.6	$	1,008.5

Note 4 — LEASING ARRANGEMENTS

We lease certain manufacturing facilities, warehouse space, machinery and equipment, vehicles and information technology equipment. 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 within Operating

9 AVIENT CORPORATION

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

Lease expense 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)	2021		2020		2021		2020
Cost of sales	$	4.4	$	4.4	$	13.7	$	9.3
Selling and administrative expense	2.6		5.4		10.4		14.5
Total operating lease cost	$	7.0	$	9.8	$	24.1	$	23.8

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, 2021 and 2020 was 4.9 years and 5.4 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, 2021 and 2020 were 3.6% and 3.0%, respectively.

Maturity Analysis of Operating Lease Liabilities:

	As of September 30, 2021
(In millions)
2021	$	7.6
2022	26.6
2023	20.0
2024	12.8
2025	8.0
Thereafter	15.7
Total lease payments	90.7
Less amount of lease payment representing interest	(8.9)
Total present value of lease payments	$	81.8

Note 5 — INVENTORIES, NET

Components of Inventories, net are as follows:

(In millions)	As of September 30, 2021		As of December 31, 2020
Finished products	$	243.5	$	171.7
Work in process	22.0		16.6
Raw materials and supplies	211.7		139.2
Inventories, net	$	477.2	$	327.5

10 AVIENT CORPORATION

Note 6 — PROPERTY, NET

Components of Property, net are as follows:

(In millions)	As of September 30, 2021		As of December 31, 2020
Land and land improvements	$	92.4	$	95.7
Buildings	350.9		333.5
Machinery and equipment	957.5		948.2
Property, gross	1,400.8		1,377.4
Less accumulated depreciation	(731.2)		(682.5)
Property, net	$	669.6	$	694.9

Note 7 — INCOME TAXES

During the three and nine months ended September 30, 2021, the Company’s effective tax rate of 14.1% and 20.5%, respectively, was below the U.S. federal statutory rate of 21.0% primarily due higher U.S. foreign-derived intangible income (FDII) tax benefits, favorable prior year U.S. return-to-provision adjustments and U.S. research and development tax credit. These favorable items were partially offset by state taxes, foreign withholding tax liability accrued associated with the repatriation of certain current and prior year foreign earnings and global intangible low-taxed income (GILTI) tax.

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, GILTI tax and certain other non-deductible items. The impact of the effective rate was significant during the third quarter of 2020 because of low pre-tax income. 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.

Note 8 — FINANCING ARRANGEMENTS