10-Q

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 March 31, 2022

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

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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 March 31, 2022 was 91,426,041.

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 March 31,
	2022		2021
Sales	$	1,293.8	$	1,162.3
Cost of sales	1,000.1		859.9
Gross margin	293.7		302.4
Selling and administrative expense	165.1		182.0
Operating income	128.6		120.4
Interest expense, net	(16.9)		(19.3)
Other (expense) income, net	(0.6)		1.5
Income before income taxes	111.1		102.6
Income tax expense	(26.6)		(22.9)
Net income	84.5		79.7
Net income attributable to noncontrolling interests	(0.3)		(0.4)
Net income attributable to Avient common shareholders	$	84.2	$	79.3
Earnings per share attributable to Avient common shareholders - Basic	$	0.92	$	0.87
Earnings per share attributable to Avient common shareholders - Diluted	$	0.91	$	0.86
Weighted-average shares used to compute earnings per common share:
Basic	91.5		91.3
Dilutive impact of share-based compensation	0.8		0.9
Diluted	92.3		92.2
Anti-dilutive shares not included in diluted common shares outstanding	0.2		0.1
Cash dividends declared per share of common stock	$	0.2375	$	0.2125

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

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Avient Corporation

Consolidated Statements of Comprehensive Income (Unaudited)

(In millions)

	Three Months Ended March 31,
	2022		2021
Net income	$	84.5	$	79.7
Other comprehensive income (loss), net of tax:
Translation adjustments and related hedging instruments	(9.2)		(51.0)
Cash flow hedges	1.3		0.8
Total other comprehensive loss	(7.9)		(50.2)
Total comprehensive income	76.6		29.5
Comprehensive income attributable to noncontrolling interests	(0.3)		(0.4)
Comprehensive income (loss) attributable to Avient common shareholders	$	76.3	$	29.1

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

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Avient Corporation

Condensed Consolidated Balance Sheets

(In millions)

	(Unaudited) March 31, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	562.6	$	601.2
Accounts receivable, net	757.9		642.3
Inventories, net	475.4		461.1
Other current assets	134.3		122.4
Total current assets	1,930.2		1,827.0
Property, net	661.9		676.1
Goodwill	1,283.4		1,286.4
Intangible assets, net	904.1		925.2
Operating lease assets, net	67.1		74.1
Other non-current assets	200.3		208.4
Total assets	$	5,047.0	$	4,997.2
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term and current portion of long-term debt	$	607.5	$	8.6
Accounts payable	642.3		553.9
Current operating lease obligations	21.7		24.2
Accrued expenses and other current liabilities	288.1		353.9
Total current liabilities	1,559.6		940.6
Non-current liabilities:
Long-term debt	1,250.2		1,850.3
Pension and other post-retirement benefits	98.5		100.0
Deferred income taxes	99.4		100.6
Non-current operating lease obligations	45.9		50.1
Other non-current liabilities	164.1		165.1
Total non-current liabilities	1,658.1		2,266.1
SHAREHOLDERS' EQUITY
Avient shareholders’ equity	1,813.2		1,774.7
Noncontrolling interest	16.1		15.8
Total equity	1,829.3		1,790.5
Total liabilities and equity	$	5,047.0	$	4,997.2

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

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Avient Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)

	Three Months Ended March 31,
	2022		2021
Operating Activities
Net income	$	84.5	$	79.7
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	35.7		36.6
Accelerated depreciation and amortization	2.1		0.5
Share-based compensation expense	3.2		2.7
Changes in assets and liabilities, net of the effect of acquisitions:
Increase in accounts receivable	(118.8)		(137.6)
Increase in inventories	(15.1)		(35.1)
Increase in accounts payable	90.5		67.3
Decrease in pension and other post-retirement benefits	(4.0)		(7.1)
Decrease in accrued expenses and other assets and liabilities, net	(59.2)		(3.4)
Net cash provided by operating activities	18.9		3.6
Investing activities
Capital expenditures	(13.3)		(16.5)
Other investing activities	—		(2.0)
Net cash used by investing activities	(13.3)		(18.5)
Financing activities
Purchase of common shares for treasury	(15.8)		(4.2)
Cash dividends paid	(21.7)		(19.5)
Repayment of long-term debt	(2.4)		(2.3)
Payments of withholding tax on share awards	(3.9)		(3.1)
Net cash used by financing activities	(43.8)		(29.1)
Effect of exchange rate changes on cash	(0.4)		(11.0)
Decrease in cash and cash equivalents	(38.6)		(55.0)
Cash and cash equivalents at beginning of year	601.2		649.5
Cash and cash equivalents at end of period	$	562.6	$	594.5

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

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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, 2022	122.2	(30.6)	$	1.2	$	1,511.8	$	1,208.0	$	(900.7)	$	(45.6)	$	1,774.7	$	15.8	$	1,790.5
Net income	—	—	—		—		84.2		—		—		84.2		0.3		84.5
Other comprehensive loss	—	—	—		—		—		—		(7.9)		(7.9)		—		(7.9)
Cash dividends declared (1)	—	—	—		—		(21.7)		—		—		(21.7)		—		(21.7)
Repurchase of common shares	—	(0.3)	—		—		—		(15.8)		—		(15.8)		—		(15.8)
Share-based compensation and exercise of awards	—	0.1	—		(2.2)		—		1.9		—		(0.3)		—		(0.3)
Balance at March 31, 2022	122.2	(30.8)	$	1.2	$	1,509.6	$	1,270.5	$	(914.6)	$	(53.5)	$	1,813.2	$	16.1	$	1,829.3

(1) Dividends declared per share were $0.2375 for the three months ended March 31, 2022.

	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

(1) Dividends declared per share were $0.2125 for the three months ended March 31, 2021.

See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

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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, 2021 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 months ended March 31, 2022 are not necessarily indicative of the results that may be attained in subsequent periods or for the year ending December 31, 2022.

Accounting Standards Not Yet Adopted

Accounting Standards Update (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 rates 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, if any, on our consolidated financial statements and disclosures.

Note 2 — BUSINESS COMBINATIONS

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 $22.0 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.

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Note 3 — GOODWILL AND INTANGIBLE ASSETS

Goodwill as of March 31, 2022 and December 31, 2021 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, 2021	$	236.3	$	1,048.5	$	1.6	$	1,286.4
Currency translation	(0.1)		(2.9)		—		(3.0)
Balance at March 31, 2022	$	236.2	$	1,045.6	$	1.6	$	1,283.4

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

	As of March 31, 2022
(In millions)	Acquisition Cost		Accumulated Amortization		Currency Translation		Net
Customer relationships	$	507.2	$	(141.9)	$	3.1	$	368.4
Patents, technology and other	566.7		(141.7)		(2.5)		422.5
Indefinite-lived trade names	113.2		—		—		113.2
Total	$	1,187.1	$	(283.6)	$	0.6	$	904.1

	As of December 31, 2021
(In millions)	Acquisition Cost		Accumulated Amortization		Currency Translation		Net
Customer relationships	$	507.2	$	(135.4)	$	6.0	$	377.8
Patents, technology and other	566.7		(134.3)		1.8		434.2
Indefinite-lived trade names	113.2		—		—		113.2
Total	$	1,187.1	$	(269.7)	$	7.8	$	925.2

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 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 recognized within our Condensed Consolidated Statements of Income were as follows:

	Three Months Ended  March 31,
(In millions)	2022		2021
Cost of sales	$	4.4	$	5.6
Selling and administrative expense	2.3		2.6
Total operating lease cost	$	6.7	$	8.2

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 March 31, 2022 and 2021 was 4.7 years and 5.0 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

7 AVIENT CORPORATION

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 March 31, 2022 and 2021 were 3.7%.

Maturity Analysis of Operating Lease Liabilities:

	As of March 31, 2022
(In millions)
2022	$	19.3
2023	19.9
2024	12.7
2025	7.7
2026	4.6
Thereafter	10.3
Total lease payments	74.5
Less amount of lease payment representing interest	(6.8)
Total present value of lease payments	$	67.7

Note 5 — INVENTORIES, NET

Components of Inventories, net are as follows:

(In millions)	As of March 31, 2022		As of December 31, 2021
Finished products	$	248.7	$	244.4
Work in process	27.0		21.2
Raw materials and supplies	199.7		195.5
Inventories, net	$	475.4	$	461.1

Note 6 — PROPERTY, NET

Components of Property, net are as follows:

(In millions)	As of March 31, 2022		As of December 31, 2021
Land and land improvements	$	89.6	$	91.5
Buildings	351.6		350.6
Machinery and equipment	976.3		972.3
Property, gross	1,417.5		1,414.4
Less accumulated depreciation	(755.6)		(738.3)
Property, net	$	661.9	$	676.1

Note 7 — INCOME TAXES

During the three months ended March 31, 2022, the Company’s effective tax rate of 23.9% was above the U.S. federal statutory rate of 21.0% primarily due to state taxes, foreign withholding tax liability accrued associated with the future repatriation of certain current year foreign earnings, and global intangible low-taxed income (GILTI) tax. These unfavorable items were partially offset by the favorable foreign tax rate differential and U.S. research and development credit.

During the three months ended March 31, 2021, the Company’s effective tax rate of 22.3% was above the U.S. federal statutory rate of 21.0% primarily due to state taxes, foreign withholding tax liability accrued associated with the future repatriation of certain current year foreign earnings, and GILTI tax. These unfavorable items were partially offset by the favorable foreign tax rate differential and U.S. research and development credit.

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Note 8 — FINANCING ARRANGEMENTS

Debt consists of the following instruments:

As of March 31, 2022 (in millions)	Principal Amount		Unamortized discount and debt issuance cost		Net Debt		Weighted average interest rate
Senior secured revolving credit facility due 2026	$	—	$	—	$	—	—	%
Senior secured term loan due 2026	609.8		5.7		604.1		1.89	%
5.25% senior notes due 2023	600.0		1.1		598.9		5.25	%
5.75% senior notes due 2025	650.0		6.3		643.7		5.75	%
Other Debt	11.0		—		11.0
Total Debt	1,870.8		13.1		1,857.7
Less short-term and current portion of long-term debt	608.6		1.1		607.5
Total long-term debt, net of current portion	$	1,262.2	$	12.0	$	1,250.2

As of December 31, 2021 (in millions)	Principal Amount		Unamortized discount and debt issuance cost		Net Debt		Weighted average interest rate
Senior secured revolving credit facility due 2026	$	—	$	—	$	—	—	%
Senior secured term loan due 2026	611.5		6.2		605.3		1.85	%
5.25% senior notes due 2023	600.0		1.4		598.6		5.25	%
5.75% senior notes due 2025	650.0		6.8		643.2		5.75	%
Other Debt	11.8		—		11.8
Total Debt	1,873.3		14.4		1,858.9
Less short-term and current portion of long-term debt	8.6		—		8.6
Total long-term debt, net of current portion	$	1,864.7	$	14.4	$	1,850.3

As of March 31, 2022, we had no borrowings outstanding under our Revolving Credit Facility, which had remaining availability of $464.4 million.

The agreements governing our senior secured revolving credit facility, our senior secured term loan, and the indentures and credit agreements governing other debt contain a number of customary financial and restrictive covenants that, among other things, limit our ability to: consummate asset sales, incur additional debt or liens, consolidate or merge with any entity or transfer or sell all or substantially all of our assets, pay dividends or make certain other restricted payments, make investments, enter into transactions with affiliates, create dividend or other payment restrictions with respect to subsidiaries, make capital investments and alter the business we conduct. As of March 31, 2022, we were in compliance with all covenants.

The estimated fair value of Avient’s debt instruments at March 31, 2022 and December 31, 2021 was $1,881.3 million and $1,917.7 million, respectively. The fair value of Avient’s debt instruments was estimated using prevailing market interest rates on debt with similar creditworthiness, terms and maturities and represent Level 2 measurements within the fair value hierarchy.

Note 9 — SEGMENT INFORMATION

Avient has three reportable segments: (1) Color, Additives and Inks; (2) Specialty Engineered Materials; and (3) Distribution. Operating income is the primary measure that is reported to our chief operating decision maker (CODM) for purposes of allocating resources to the segments and assessing their performance. Operating income at the segment level does not include: corporate general and administrative expenses that are not allocated to segments; intersegment sales and profit eliminations; charges related to specific strategic initiatives such as the consolidation of operations; restructuring activities, including employee separation costs resulting from personnel reduction programs, plant closure and phase-in costs; executive separation agreements; share-based compensation costs; asset impairments; environmental remediation costs, along with related gains from insurance recoveries, and other liabilities for facilities no longer owned or closed in prior years; gains and losses on the divestiture of joint ventures and equity investments; actuarial gains and losses associated with our pension and other post-retirement benefit plans; and certain other items that are not included in the measure of segment profit or loss that is reported to and reviewed by our CODM. These costs are included in Corporate and eliminations.

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Segment information for the three months ended March 31, 2022 and 2021 is as follows:

	Three Months Ended March 31, 2022						Three Months Ended March 31, 2021
(In millions)	Sales to External Customers		Total Sales		Operating Income		Sales to External Customers		Total Sales		Operating Income
Color, Additives and Inks	$	648.0	$	649.5	$	94.5	$	607.9	$	609.3	$	88.8
Specialty Engineered Materials	223.3		244.7		39.7		195.8		216.5		34.2
Distribution	422.5		432.9		24.2		354.9		362.7		24.0
Corporate and eliminations	—		(33.3)		(29.8)		3.7		(26.2)		(26.6)
Total	$	1,293.8	$	1,293.8	$	128.6	$	1,162.3	$	1,162.3	$	120.4

	Total Assets
(In millions)	As of March 31, 2022		As of December 31, 2021
Color, Additives and Inks	$	3,021.0	$	2,965.2
Specialty Engineered Materials	783.8		771.0
Distribution	397.4		384.9
Corporate and eliminations	844.8		876.1
Total assets	$	5,047.0	$	4,997.2

Note 10 — COMMITMENTS AND CONTINGENCIES

We have been notified by federal and state environmental agencies and by private parties that we may be a potentially responsible party (PRP) in connection with the environmental investigation and remediation of certain sites. While government agencies frequently assert that PRPs are jointly and severally liable at these sites, in our experience, the interim and final allocations of liability costs are generally made based on the relative contribution of waste. We may also initiate corrective and preventive environmental projects of our own to ensure safe and lawful activities at our operations. We believe that compliance with current governmental regulations at all levels will not have a material adverse effect on our financial position, results of operations or cash flows.

In September 2007, the United States District Court for the Western District of Kentucky (Court) in the case of Westlake Vinyls, Inc. v. Goodrich Corporation, et al., held that Avient must pay the remediation costs at the former Goodrich Corporation Calvert City facility (now largely owned and operated by Westlake Vinyls, Inc. (Westlake Vinyls)), together with certain defense costs of Goodrich Corporation. The rulings also provided that Avient can seek indemnification for contamination attributable to Westlake Vinyls.

Following the rulings, the parties to the litigation agreed to settle all claims regarding past environmental costs incurred at the site. The settlement agreement provides a mechanism to pursue allocation of future remediation costs at the Calvert City site to Westlake Vinyls. We will adjust our accrual, in the future, consistent with any such future allocation of costs. Additionally, we continue to pursue available insurance coverage related to this matter and recognize gains as we receive reimbursement.

The environmental obligation at the site arose as a result of an agreement between The B.F. Goodrich Company (n/k/a Goodrich Corporation) and our predecessor, The Geon Company, at the time of the initial public offering in 1993. Under the agreement, The Geon Company agreed to indemnify Goodrich Corporation for certain environmental costs at the site. Neither Avient nor The Geon Company ever operated the facility.

Since 2009, Avient, along with respondents Westlake Vinyls, and Goodrich Corporation, has worked with the United States Environmental Protection Agency (USEPA) to address contamination at the site. The USEPA issued its Record of Decision (ROD) in September 2018, selecting a remedy consistent with our accrual assumptions. In April 2019, the respondents signed an Administrative Settlement Agreement and Order on Consent with the USEPA to conduct the remedial design actions at the site. In February 2020, the respondents signed the agreed Consent Decree and remedial action Work Plan, which received Federal Court approval in January 2021. Our current reserve totals $110.7 million for this matter.

During the three months ended March 31, 2022, Avient recognized $2.0 million of expense related to environmental remediation costs, compared to $0.5 million recognized during the three months ended March 31, 2021.

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During the three months ended March 31, 2022 and 2021, Avient received $0.6 million and $4.5 million, respectively, of insurance recoveries for previously incurred environmental costs. These expenses and insurance recoveries are included within Cost of sales within our Condensed Consolidated Statements of Income.

Our Condensed Consolidated Balance Sheets include accruals totaling $122.5 million and $124.5 million as of March 31, 2022 and December 31, 2021, respectively, based on our estimates of probable future environmental expenditures relating to previously contaminated sites. These undiscounted amounts are included in Accrued expenses and other current liabilities and Other non-current liabilities on the accompanying Condensed Consolidated Balance Sheets. The accruals represent our best estimate of probable future costs that we can reasonably estimate, based upon currently available information and technology and our view of the most likely remedy. Depending upon the results of future testing, completion and results of remedial investigation and feasibility studies, the ultimate remediation alternatives undertaken, changes in regulations, technology development, new information, newly discovered conditions and other factors, it is reasonably possible that we could incur additional costs in excess of the amount accrued at March 31, 2022. However, such additional costs, if any, cannot be currently estimated.

Avient is subject to a broad range of claims, administrative and legal proceedings such as lawsuits that relate to contractual allegations, tax audits, product claims, personal injuries, and employment related matters. Although it is not possible to predict with certainty the outcome or cost of these matters, the Company believes our current reserves are appropriate and these matters will not have a material adverse effect on the condensed consolidated financial statements.

Note 11 — DERIVATIVES AND HEDGING

We are exposed to market risks, such as changes in foreign currency exchange rates and interest rates. To manage the volatility related to these exposures we may enter into various derivative transactions. We formally assess, designate and document, as a hedge of an underlying exposure, the qualifying derivative instrument that will be accounted for as an accounting hedge at inception. Additionally, we assess both at inception and at least quarterly thereafter, whether the financial instruments used in the hedging transaction are effective at offsetting changes in either the fair values or cash flows of the underlying exposures. In accordance with ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12), that ongoing assessment will be done qualitatively for highly effective relationships.

Net Investment Hedge

During October and December 2018, as a means of mitigating the impact of currency fluctuations on our euro investments in foreign entities, we executed a total of six cross currency swaps, in which we will pay fixed-rate interest in euros and receive fixed-rate interest in U.S. dollars with a combined notional amount of 250.0 million euros and which mature in March 2023. In August and September 2020, we executed an additional five cross currency swaps, which were structured similarly to those executed in 2018. These swaps had a combined notional amount of 677.0 million euros, which were set to mature in May 2025. In September 2021, we executed five cross currency swap transactions that extended the length of the 2020 swaps agreements through 2028. Additionally, we entered into three new cross currency swaps with a combined notional amount of 338.7 million euros that also mature in 2028. These effectively convert a portion of our U.S. dollar denominated fixed-rate debt to euro denominated fixed-rate debt. Included in Interest expense, net within the Condensed Consolidated Statements of Income are a gain of $5.6 million and $3.5 million for the three months ended March 31, 2022 and 2021, respectively. These gains were recognized within Interest expense, net within the Condensed Consolidated Statements of Income.

We designated the cross currency swaps as net investment hedges of our net investment in our European operations under ASU 2017-12 and applied the spot method to these hedges. The changes in fair value of the derivative instruments that are designated and qualify as hedges of net investments in foreign operations are recognized within Accumulated Other Comprehensive Income (AOCI) to offset the changes in the values of the net investment being hedged. Gains of $6.8 million and $22.9 million, net of tax, were recognized within translation adjustments in AOCI for the three months ended March 31, 2022 and 2021, respectively.

Derivatives Designated as Cash Flow Hedging Instruments

In August 2018, we entered into two interest rate swaps with a combined notional amount of $150.0 million to manage the variability of cash flows in the interest rate payments associated with our existing LIBOR-based interest payments, effectively converting $150.0 million of our floating rate debt to a fixed rate. We began to receive floating rate interest payments based upon one-month U.S. dollar LIBOR and in return are obligated to pay interest at a fixed rate of 2.732% until November 2022. We have designated these interest rate swap contracts as cash flow hedges pursuant to ASC Topic 815, Derivatives and Hedging. The net interest payments accrued each month for these highly effective hedges are reflected in net income as adjustments of interest expense and the remaining change in the fair

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value of the derivatives is recorded as a component of AOCI. The amount of expense recognized within Interest expense, net in our Condensed Consolidated Statements of Income was $1.0 million for each of the three months ended March 31, 2022 and 2021. Gains of $1.3 million and $0.8 million, net of tax, were recognized in AOCI for the three months ended March 31, 2022 and 2021, respectively.

All of our derivative assets and liabilities measured at fair value are classified as Level 2 within the fair value hierarchy. We determine the fair value of our derivatives based on valuation methods, which project future cash flows and discount the future amounts present value using market based observable inputs, including interest rate curves and foreign currency rates.

The fair value of derivative financial instruments recognized in the Condensed Consolidated Balance Sheets is as follows:

(In millions)	Balance Sheet Location	As of March 31, 2022		As of December 31, 2021
Assets
Cross Currency Swaps (Net Investment Hedge)	Other current assets	$	17.0	$	—
Cross Currency Swaps (Net Investment Hedge)	Other non-current assets	24.5		31.7
Liabilities
Interest Rate Swaps (Cash Flow Hedge)	Other current liabilities	1.3		3.1

Note 12 — SUBSEQUENT EVENTS

On April 19, 2022, we entered into a signing protocol (the Signing Protocol) with Koninklijke DSM N.V., a public limited liability company incorporated under the laws of the Netherlands (DSM). Pursuant to the terms of the Signing Protocol, after completion of the consultation process with the relevant Dutch works council, Avient and DSM will enter into a Sale and Purchase Agreement (the Purchase Agreement) pursuant to which we will, among other things, acquire from DSM (a) all of the equity of DSM Protective Materials International B.V., a private limited liability company organized under the laws of the Netherlands, DSM Protective Materials B.V., a private limited liability company organized under the laws of the Netherlands, and DSM Protective Materials LLC, a Delaware limited liability company, and (b) certain other assets related to DSM's protective materials business (including the Dyneema© Brand) (such equity and assets together, the Dyneema Business) (such acquisition of the Dyneema Business, the Dyneema Acquisition).

Pursuant to the terms of the Purchase Agreement, we have agreed to acquire the Dyneema Business for an aggregate purchase price of €1.38 billion, subject to certain customary adjustments for a European “locked box” transaction (the Purchase Price). Certain Purchase Price payments are Euro-denominated and are subject to change based on fluctuations in the Euro-USD exchange rate. In addition to the consultation process with the Dutch works council, the closing of the Dyneema Acquisition will be subject to the satisfaction or waiver of customary and other conditions, including the receipt of required regulatory approvals.

In connection with the Dyneema Acquisition, on April 19, 2022, we entered into a Commitment Letter with Morgan Stanley Senior Funding, Inc. and J.P. Morgan (the Commitment Parties), pursuant to which the Commitment Parties will commit to providing us with a senior secured term loan facility and a senior unsecured bridge loan (the Bridge Facility) for an aggregated $1.54 billion for the purpose of funding the Dyneema Acquisition. The commitment is subject to various conditions, including the execution of definitive documentation and other customary closing conditions. We currently intend to issue new senior unsecured notes in lieu of borrowing under the Bridge Facility.

On April 20, 2022, we executed additional cross currency swaps, pursuant to which we will pay fixed-rate interest in euros and receive fixed-rate interest in U.S. dollars with a combined notional amount of €900 million, which mature in April 2028. Additionally, we entered into foreign currency forward contracts with an aggregate notional amount of €350 million, which are scheduled to mature within one year.

In conjunction with our intent to acquire the Dyneema Business, we plan to explore a potential sale of our Distribution business.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Business

We are a premier provider of specialized and sustainable material solutions that transform customer challenges into opportunities, bringing new products to life for a better world. Our products include specialty engineered materials, advanced composites, color and additive systems and polymer distribution. We are also a highly specialized developer and manufacturer of performance enhancing additives, liquid colorants, and fluoropolymer and silicone colorants. Headquartered in Avon Lake, Ohio, we have employees at sales, manufacturing and distribution facilities across the globe. We provide value to our customers through our ability to link our knowledge of polymers and formulation technology with our manufacturing and supply chain capabilities to provide value-added solutions to designers, assemblers and processors of plastics. When used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” “Avient” and the “Company” mean Avient Corporation, formerly known as PolyOne Corporation, and its consolidated subsidiaries.

Highlights and Executive Summary

A summary of Avient’s sales, operating income, net income and net income attributable to Avient common shareholders follows:

	Three Months Ended March 31,
(In millions)	2022		2021
Sales	$	1,293.8	$	1,162.3
Operating income	128.6		120.4
Net income	$	84.5	$	79.7
Net income attributable to Avient common shareholders	$	84.2	$	79.3

Trends and Developments

COVID-19

We have continued to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including how it has impacted our employees, customers, supply chain and distribution network. Although we are unable to predict the ultimate impact of the COVID-19 outbreak at this time, the pandemic has in the past adversely affected, and could in the future adversely affect our business. While we concluded there were no indicators of impairment as of March 31, 2022, any significant sustained adverse change in financial results or macroeconomic conditions could result in future impairments of long-lived assets. The extent to which our operations may continue to be impacted by the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of the outbreak and actions by government authorities to contain the outbreak or treat its impact.

Magna Colours Acquisition

On July 1, 2021, the Company completed its acquisition of 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 $22.0 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.

Dyneema Acquisition

On April 19, 2022, we entered into a signing protocol (the Signing Protocol) with Koninklijke DSM N.V., a public limited liability company incorporated under the laws of the Netherlands (DSM). Pursuant to the terms of the Signing Protocol, after completion of the consultation process with the relevant Dutch works council, Avient and DSM will enter into a Sale and Purchase Agreement (the Purchase Agreement) pursuant to which we will, among other things, acquire from DSM (a) all of the equity of DSM Protective Materials International B.V., a private limited liability company organized under the laws of the Netherlands, DSM Protective Materials B.V., a private limited liability company organized under the laws of the Netherlands, and DSM Protective Materials LLC, a Delaware limited liability company, and (b) certain other assets related to DSM's protective materials business (including the

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Dyneema© Brand) (such equity and assets together, the Dyneema Business) (such acquisition of the Dyneema Business, the Dyneema Acquisition).

Pursuant to the terms of the Purchase Agreement, we have agreed to acquire the Dyneema Business for an aggregate purchase price of €1.38 billion, subject to certain customary adjustments for a European “locked box” transaction (the Purchase Price). Certain Purchase Price payments are Euro-denominated and are subject to change based on fluctuations in the Euro-USD exchange rate. In addition to the consultation process with the Dutch works council, the closing of the Dyneema Acquisition will be subject to the satisfaction or waiver of customary and other conditions, including the receipt of required regulatory approvals.

In conjunction with our intent to acquire the Dyneema Business, we plan to explore a potential sale of our Distribution business.

Results of Operations — The three months ended March 31, 2022 compared to three months ended March 31, 2021:

	Three Months Ended March 31,				Variances — Favorable (Unfavorable)
(Dollars in millions, except per share data)	2022		2021		Change		% Change
Sales	$	1,293.8	$	1,162.3	$	131.5	11.3	%
Cost of sales	1,000.1		859.9		(140.2)		(16.3)	%
Gross margin	293.7		302.4		(8.7)		(2.9)	%
Selling and administrative expense	165.1		182.0		16.9		9.3	%
Operating income	128.6		120.4		8.2		6.8	%
Interest expense, net	(16.9)		(19.3)		2.4		12.4	%
Other (expense) income, net	(0.6)		1.5		(2.1)		nm
Income before income taxes	111.1		102.6		8.5		8.3	%
Income tax expense	(26.6)		(22.9)		(3.7)		(16.2)	%
Net income	84.5		79.7		4.8		6.0	%
Net income attributable to noncontrolling interests	(0.3)		(0.4)		0.1		nm
Net income attributable to Avient common shareholders	$	84.2	$	79.3	$	4.9	6.2	%
Earnings per share attributable to Avient common shareholders - Basic	$	0.92	$	0.87
Earnings (loss) per share attributable to Avient common shareholders - Diluted	$	0.91	$	0.86

nm - not meaningful

Sales

Sales increased $131.5 million in the three months ended March 31, 2022 compared to the three months ended March 31, 2021 as a result of price increases associated with raw material inflation, growth in the healthcare and consumer end market and certain composite applications. These increases offset demand conditions in China as a result of the recent COVID lockdowns and in Europe as a result of the ongoing war in Ukraine, as well as weaker foreign exchange rates primarily from the Euro.

Cost of sales

As a percent of sales, cost of sales increased from 74.0% to 77.3% in the three months ended March 31, 2021 to March 31, 2022, primarily as a result of raw material inflation, higher wages and logistics costs, and lower insurance recoveries on previously incurred environmental remediation costs.

Selling and administrative expense

Selling and administrative expense decreased $16.9 million during the three months ended March 31, 2022 compared to the three months ended March 31, 2021, driven primarily by weaker foreign exchange and lower incentive accruals.

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Interest expense, net

Interest expense, net decreased $2.4 million in the three months ended March 31, 2022 compared to the three months ended March 31, 2021 due to additional cross currency swaps entered into in 2021 (See Note 11, Derivatives and Hedging for details).

Income taxes

During the three months ended March 31, 2022, the Company’s effective tax rate was 23.9% versus 22.3% for the three months ended March 31, 2021. The income tax rate increase is primarily due to the higher tax effects of state income taxes, GILTI tax and less of a favorable foreign tax rate differential.

SEGMENT INFORMATION

Avient has three reportable segments: (1) Color, Additives and Inks; (2) Specialty Engineered Materials; and (3) Distribution. Operating income is the primary measure that is reported to our chief operating decision maker (CODM) for purposes of allocating resources to the segments and assessing their performance. Operating income at the segment level does not include: corporate general and administrative expenses that are not allocated to segments; intersegment sales and profit eliminations; charges related to specific strategic initiatives such as the consolidation of operations; restructuring activities, including employee separation costs resulting from personnel reduction programs, plant closure and phase-in costs; executive separation agreements; share-based compensation costs; asset impairments; environmental remediation costs, along with related gains from insurance recoveries, and other liabilities for facilities no longer owned or closed in prior years; gains and losses on the divestiture of joint ventures and equity investments; actuarial gains and losses associated with our pension and other post-retirement benefit plans; and certain other items that are not included in the measure of segment profit or loss that is reported to and reviewed by our CODM. These costs are included in Corporate and eliminations.

Sales and Operating Income — The three months ended March 31, 2022 compared to the three months ended March 31, 2021: 

	Three Months Ended March 31,						Variances — Favorable (Unfavorable)
(Dollars in millions)	2022			2021			Change		%  Change
Sales:
Color, Additives and Inks	$	649.5		$	609.3		$	40.2	6.6	%
Specialty Engineered Materials	244.7			216.5			28.2		13.0	%
Distribution	432.9			362.7			70.2		19.4	%
Corporate and eliminations	(33.3)			(26.2)			(7.1)		(27.1)	%
Total Sales	$	1,293.8		$	1,162.3		$	131.5	11.3	%
Operating income:
Color, Additives and Inks	$	94.5		$	88.8		$	5.7	6.4	%
Specialty Engineered Materials	39.7			34.2			5.5		16.1	%
Distribution	24.2			24.0			0.2		0.8	%
Corporate and eliminations	(29.8)			(26.6)			(3.2)		(12.0)	%
Total Operating Income	$	128.6		$	120.4		$	8.2	6.8	%
Operating income as a percentage of sales:
Color, Additives and Inks	14.5		%	14.6		%	(0.1)		% points
Specialty Engineered Materials	16.2		%	15.8		%	0.4		% points
Distribution	5.6		%	6.6		%	(1.0)		% points
Total	9.9		%	10.4		%	(0.5)		% points

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Color, Additives and Inks    

Sales increased $40.2 million in the three months ended March 31, 2022 compared to the three months ended March 31, 2021 due to higher selling prices across all regions and end markets. Demand conditions in the Americas remained strong, particularly in healthcare, which was offset by slowdowns in China as a result of the recent COVID lockdowns and in Europe as a result of the ongoing war in Ukraine.

Operating income increased $5.7 million in the three months ended March 31, 2022 compared to the three months ended March 31, 2021 due to aforementioned price increases associated with raw material inflation, lower selling, general, and administrative expenses driven by synergies from prior acquisitions and lower incentives. These benefits were partially offset by weaker foreign exchange rates, wage inflation, higher supply chain costs, and demand conditions in China and Europe.

Specialty Engineered Materials

Sales increased $28.2 million in the three months ended March 31, 2022 compared to the three months ended March 31, 2021 due to higher selling prices across all regions and end markets. Gains in the healthcare end market and growth in certain composite applications more than offset lower demand in China and transportation applications.

Operating income increased $5.5 million in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 due to aforementioned sales increases. These benefits were partially offset by wage inflation and higher supply chain costs.

Distribution

Sales increased $70.2 million in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021, driven by increased average selling prices which offset lower demand.

Operating income in the three months ended March 31, 2022 was flat compared to the three months ended March 31, 2021 as margins were slightly compressed from higher cost inventory.

Corporate and Eliminations

Costs increased $3.2 million, or 12%, in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 due to higher environmental remediation costs and lower insurance recoveries on previously incurred environmental costs.

Liquidity and Capital Resources

Our objective is to finance our business through operating cash flow and an appropriate mix of debt and equity. By laddering the maturity structure, we avoid concentrations of debt maturities, reducing liquidity risk. We may from time to time seek to retire or purchase our outstanding debt with cash and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. We may also seek to repurchase our outstanding common shares. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved have been and may continue to be material.

The following table summarizes our liquidity as of March 31, 2022 and December 31, 2021:

(In millions)	As of March 31, 2022		As of December 31, 2021
Cash and cash equivalents	$	562.6	$	601.2
Revolving credit availability	464.4		485.5
Liquidity	$	1,027.0	$	1,086.7

As of March 31, 2022, approximately 66% of the Company’s cash and cash equivalents resided outside the United States.

In connection with the Dyneema Acquisition, on April 19, 2022, we entered into a Commitment Letter with Morgan Stanley Senior Funding, Inc. and J.P. Morgan (the Commitment Parties), pursuant to which the Commitment Parties will commit to providing us with a $640.0 million senior secured term loan facility and a $900.0 million senior unsecured bridge loan (the Bridge Facility) for purposes of funding the Dyneema Acquisition. The commitment is subject to various conditions, including the execution of definitive documentation and other customary closing conditions. We currently intend to issue new senior unsecured notes in lieu of borrowing under the Bridge Facility.

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Expected sources of cash needed to satisfy cash requirements for the remainder of 2022 outside of the Dyneema Acquisition include our cash on hand, cash from operations and available liquidity under our revolving credit facility, if needed. Outside of the Dyneema Acquisition, expected uses of cash for the remainder of 2022 include interest payments, cash taxes, dividend payments, share repurchases, environmental remediation costs, capital expenditures, and debt repayment.

Cash Flows

The following describes the significant components of cash flows from operating, investing and financing activities for the three months ended March 31, 2022 and 2021.

Operating Activities — In the three months ended March 31, 2022, net cash provided by operating activities was $18.9 million as compared to $3.6 million for the three months ended March 31, 2021, driven by increased earnings in 2022 and lower comparative investment in working capital.

Investing Activities — Net cash used by investing activities during the three months ended March 31, 2022 of $13.3 million reflects capital expenditures.

Net cash used by investing activities during the three months ended March 31, 2021 of $18.5 million primarily reflects capital expenditures of $16.5 million.

Financing Activities — Net cash used by financing activities for the three months ended March 31, 2022 of $43.8 million primarily reflects $21.7 million of dividends paid, repayment of debt of $2.4 million, repurchases of our outstanding common shares of $15.8 million, and the payment of withholding tax on share awards of $3.9 million.

Net cash provided by financing activities for the three months ended March 31, 2021 of $29.1 million primarily reflects $19.5 million of dividends paid, repurchases of our outstanding common shares of $4.2 million, and the payment of withholding tax on share awards of $3.1 million.

Debt

As of March 31, 2022, our principal amount of debt totaled $1,870.8 million. Aggregate maturities of the principal amount of debt for the current year, next four years and thereafter, are as follows:

(In millions)
2022	$	6.0
2023	608.6
2024	8.6
2025	658.7
2026	6.9
Thereafter	582.0
Aggregate maturities	$	1,870.8

As of March 31, 2022, we were in compliance with all financial and restrictive covenants pertaining to our debt. For additional information regarding our debt, please see Note 8, Financing Arrangements to the accompanying condensed consolidated financial statements.

Derivatives and Hedging

We are exposed to market risks, such as changes in foreign currency exchange rates and interest rates. To manage the volatility related to these exposures we may enter into various derivative transactions. For additional information regarding our derivative instruments, please see Note 11, Derivatives and Hedging and Note 12, Subsequent Events to the accompanying condensed consolidated financial statements.

Material Cash Requirements

We have future obligations under various contracts relating to debt and interest payments, operating leases, pension and post-retirement benefit plans and purchase obligations. During the three months ended March 31, 2022, there were no material changes to these obligations as reported in our Annual Report on Form 10-K for the year ended December 31, 2021.

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CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

In this Quarterly Report on Form 10-Q, 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. Forward-looking statements give current expectations or forecasts of future events and are not guarantees of future performance. They are based on management’s expectations that involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. You can identify these statements by the fact that they do not relate strictly to historic or current facts. They use words such as "will," “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning in connection with any discussion of future operating or financial condition, performance and/or sales. In particular, these include statements relating to future actions; prospective changes in raw material costs, product pricing or product demand; future performance; estimated capital expenditures; results of current and anticipated market conditions and market strategies; sales efforts; expenses; the outcome of contingencies such as legal proceedings and environmental liabilities; and financial results. Factors that could cause actual results to differ materially from those implied by these forward-looking statements include, but are not limited to:

•disruptions, uncertainty or volatility in the credit markets that could adversely impact the availability of credit already arranged and the availability and cost of credit in the future;

•the effect on foreign operations of currency fluctuations, tariffs and other political, economic and regulatory risks;

•the current and potential future impact of the COVID-19 pandemic on our business, results of operations, financial position or cash flows, including without limitation, any supply chain and logistics issues;

•changes in polymer consumption growth rates and laws and regulations regarding plastics in jurisdictions where we conduct business;

•fluctuations in raw material prices, quality and supply, and in energy prices and supply;

•production outages or material costs associated with scheduled or unscheduled maintenance programs;

•unanticipated developments that could occur with respect to contingencies such as litigation and environmental matters;

•our ability to pay regular quarterly cash dividends and the amounts and timing of any future dividends;

•information systems failures and cyberattacks;

•amounts for cash and non-cash charges related to restructuring plans that may differ from original estimates, including because of timing changes associated with the underlying actions;

•any material adverse changes in the Dyneema Business;

•our ability to achieve the strategic and other objectives relating to the Dyneema Acquisition, including any expected synergies, and the possible sale of the Distribution business segment; and

•other factors described in our Annual Report on Form 10-K for the year ended December 31, 2021 under Item 1A, “Risk Factors.”

We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties and assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law. You are advised, however, to consult any further disclosures we make on related subjects in our reports on Forms 10-Q, 8-K and 10-K filed with the Securities and Exchange Commission. You should understand that it is not possible to predict or identify all risk factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to exposures to market risk as reported in our Annual Report on Form 10-K for the year ended December 31, 2021.

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ITEM 4. CONTROLS AND PROCEDURES

Disclosure controls and procedures

Avient’s management, under the supervision of and with the participation of its Chief Executive Officer and its Chief Financial Officer, has evaluated the effectiveness of the design and operation of Avient’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the period covered by this Quarterly Report. Based upon this evaluation, Avient’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report, its disclosure controls and procedures were effective.

Changes in internal control over financial reporting

There were no changes in Avient’s internal control over financial reporting during the quarter ended March 31, 2022 that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information regarding certain legal proceedings can be found in Note 10, Commitments and Contingencies to the accompanying condensed consolidated financial statements and is incorporated by reference herein.

ITEM 1A. RISK FACTORS

The disclosure below modifies the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. These risks, along with those previously disclosed, could adversely affect our business, results of operations, financial position or cash flows.

Dyneema Acquisition Risks

The Dyneema Acquisition may not occur at all or may not occur in the expected time frame, which may negatively impact our share price.

On April 19, 2022, we entered into the Signing Protocol with DSM, pursuant to which we will enter into the Purchase Agreement and, subject to the satisfaction or waiver of specified conditions, we will acquire the Dyneema Business. The consummation of the Dyneema Acquisition is not assured. The Dyneema Acquisition is subject to risks and uncertainties, including the risks that the necessary regulatory approvals will not be obtained, the risk that Avient may be required to divest certain businesses or assets in connection with the Dyneema Acquisition, or that other closing conditions will not be satisfied. We cannot predict whether and when such conditions will be required or satisfied.

We may experience other difficulties integrating the Dyneema Business.

There can be no assurance that we will successfully or cost-effectively integrate the Dyneema Business. The failure to do so could have an adverse effect on our business, financial condition, results of operations and cash flow.

We will incur additional debt to complete the Dyneema Acquisition. Our ability to generate cash to service this debt depends on many factors beyond our control.

At March 31, 2022, we had total debt of approximately $1,870.8 million. We expect to incur approximately $1,390.0 million of debt to complete the Dyneema Acquisition.

Our ability to make payments on our debt, fund our other liquidity needs, and make planned capital expenditures will depend on our ability to generate cash in the future. A significant portion of our operations are conducted by our subsidiaries. Our cash flows and our ability to service our indebtedness, including our ability to pay the interest on and principal of our debt when due, may be dependent upon cash dividends and other distributions or other transfers from our subsidiaries. Our ability to generate cash, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

The degree to which we are currently leveraged and will be leveraged following the consummation of the Dyneema Acquisition could have important consequences for shareholders.

19 AVIENT CORPORATION

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The table below sets forth information regarding the repurchase of shares of our common shares during the period indicated.

Period	Total Number of Shares Purchased	Weighted Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number of Shares that May Yet be Purchased Under the Program (1)
January 1 to January 31	—	$	—	—	5,757,472
February 1 to February 28	300,000	52.69		300,000	5,457,472
March 1 to March 31	—	—		—	5,457,472
Total	300,000	$	52.69	300,000

(1) Our Board of Directors approved a common share repurchase program authorizing Avient to purchase its common shares in August 2008, which share repurchase authorization has been subsequently increased from time to time. On December 9, 2020, we announced that we would increase our share buyback by an additional 5 million shares. As of March 31, 2022, approximately 5.5 million shares remained available for purchase under these authorizations, which have no expiration. Purchases of common shares may be made by open market purchases or privately negotiated transactions and may be made pursuant to Rule 10b5-1 plans and accelerated share repurchases.

20 AVIENT CORPORATION

ITEM 6. EXHIBITS

EXHIBIT INDEX

Exhibit No.	Exhibit Description
2.1†**	Signing Protocol between Avient Corporation and Koninklijke DSM N.V., dated April 19, 2022 (including the final form of Sale and Purchase Agreement between Avient Corporation and Koninklijke DSM N.V. as Annex A)
3.1	Amended and Restated Articles of Incorporation of Avient Corporation (as amended through June 30, 2020) (incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020, SEC File No. 1-16091)
3.2	Amended and Restated Code of Regulations, effective June 30, 2020 (incorporated by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020, SEC File No. 1-16091)
31.1	Certification of Robert M. Patterson, Chairman, President and Chief Executive Officer, pursuant to SEC Rules 13a-14(a) and 15d-14(a), adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Jamie A. Beggs, Senior Vice President and Chief Financial Officer, pursuant to SEC Rules 13a-14(a) and 15d-14(a), adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification pursuant to 18 U.S.C. § 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as signed by Robert M. Patterson, Chairman, President and Chief Executive Officer
32.2	Certification pursuant to 18 U.S.C. § 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as signed by Jamie A. Beggs, Senior Vice President and Chief Financial Officer
101.INS	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
†	Certain exhibits and schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K and will be provided to the Securities and Exchange Commission upon request.
**	Filed herewith.

21 AVIENT CORPORATION

SIGNATURES

Pursuant to the requirements 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.

 

April 27, 2022	AVIENT CORPORATION
	/s/ Jamie A. Beggs
	Jamie A. Beggs Senior Vice President and Chief Financial Officer

22 AVIENT CORPORATION

EX-2.1

Execution copy

19 APRIL 2022

KONINKLIJKE DSM N.V.
AS THE SELLER

AND

AVIENT CORPORATION

AS THE PURCHASER

NAI-1529660846v3

SIGNING PROTOCOL

THE UNDERSIGNED:

(1)    KONINKLIJKE DSM N.V., a public limited liability company (naamloze vennootschap met beperkte aansprakelijkheid), incorporated under the laws of the Netherlands, having its official seat (statutaire zetel) in Heerlen, with its registered office at Het Overloon 1, 6411TE Heerlen and registered with the Dutch Trade Register under number 14022069 (the "Seller"); and

(2)    AVIENT CORPORATION, incorporated under the laws of Ohio, registered with the Ohio Secretary of State under number 1181191 (the "Purchaser").

The parties shall hereinafter each be referred to as a "Party"and together they shall be referred to as the "Parties".

WHEREAS:

(A)    the Seller intends to sell its DSM Protective Materials business, comprising inter alia of various direct or indirect subsidiaries of the Seller in The Netherlands, China, and the United States of America as well as its interest in a Japanese joint venture (collectively the "TargetGroup"and each a"TargetGroup Company");

(B)    the Dutch part of the Target Group is comprised inter alia of the following direct or indirect subsidiaries of the Seller: DSM Protective Materials International B.V., DSM Protective Materials B.V., DSM ICD Participations B.V., DSM High Performance Polyethylenes B.V. and DPM Services B.V. (to be incorporated by DSM Protective Materials B.V. between the Signing Protocol Date and Completion) (the "Dutch Group Companies");

(C)    the Seller has conducted discussions with the Purchaser as to whether it is in the best interest of the Business, the Target Group Companies and Seller’s stakeholders (including employees and shareholders) to sell the DSM Protective Materials business, including inter alia the Target Group, including the Dutch Group Companies to the Purchaser (the "Proposed Transaction");

(D)    in view of these discussions, the Parties have conducted negotiations regarding a sale and purchase agreement in respect of the Proposed Transaction;

(E)    as a result of the negotiations, the terms and conditions of the Proposed Transaction have been laid down in an agreed form draft sale and purchase agreement (attached hereto as Annex 1) (the "Draft SPA");

(F)    with reference to the Dutch Works Councils Act (Wet op de Ondernemingsraden), the Parties acknowledge that their intention to proceed with the Proposed Transaction on the terms and subject to the conditions of the Draft SPA requires the prior advice of the central works council (centrale ondernemingsraad) of DSM Nederland B.V. (the "CWC") with respect to the transfer of control of the Dutch Group Companies and the associated transfer of certain personnel to DPM Services B.V. (“DPM Services”);

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(G)    the Seller will use all reasonable efforts (consistent with its customary practice) to procure that DSM Nederland B.V.'s management will request the CWC to render advice on the intended transfer of control of the Dutch Group Companies and the associated transfer of certain personnel to DPM Services in the context of the Proposed Transaction in accordance with Article 25 of the Dutch Works Councils Act (the "Works Council Consultation");

(H)    the Parties furthermore acknowledge that, pursuant to the Dutch Social and Economic Council Merger Regulations (SER Fusiegedragsregels 2015 or the "Merger Code"), the transfer of control of the Dutch Group Companies requires the prior notification of the Social Economic Council (Sociaal Economische Raad or "SER") and the prior notification of, and consultation with, the relevant trade unions, if any (the "Merger Code Procedure");

(I)    in relation to the Proposed Transaction, the Purchaser intends to arrange new debt financing for itself, without requiring the Dutch Target Group Companies to, at Completion, act as co-debtor or as provider of any guarantees or security in this respect, or without requiring the Dutch Target Group Companies to enter into any (proposed) decision in relation to such new debt financing that would require the advice from the CWC or any works council established for any of the Dutch Target Group Companies before Completion;

(J)    the Parties wish to agree in this Signing Protocol (the "Signing Protocol") the terms and conditions applicable to the conduct of the Works Council Consultation, the Merger Code Procedure and entering into the Draft SPA; and

(K)    each of the Parties obtained all necessary corporate and other internal approvals to enter into this Signing Protocol.

IT IS HEREBY AGREED as follows:

1.    CONDITION TO SIGNING

1.1    The Parties acknowledge and agree that the Draft SPA cannot and shall not be signed until the Works Council Consultation has been completed in accordance with Clause 1.2 below (the "Condition").

1.2    The Condition shall only be satisfied in any one of the following events:

(a)    the advice of the CWC with respect to the transfer of control over the Dutch Group Companies to the Purchaser as the new (indirect) controlling shareholder and the associated transfer of certain personnel to DPM Services as contemplated by the Proposed Transaction is in accordance with the intended decision (voorgenomen besluit) as contained in the request for advice as referred to in Clause 1.4(a) and is unconditional; or

(b)    the CWC has irrevocably and unconditionally waived its right to render advice on the intended transfer of control of the Dutch Group Companies and the associated transfer of certain personnel to DPM Services in the context of the Proposed Transaction; or

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(c)    the procedure described in Clauses 1.5, 1.6 or 1.7 of this Signing Protocol has been complied with and has been finalised.

1.3    Without prejudice to Clause 1.4, the Parties agree that as of signing of this Signing Protocol, each Party will, and will procure that each of its respective Affiliates will, each use all their respective reasonable efforts to ensure satisfaction of the Condition in an expeditious manner.

1.4    With respect to the process of the Works Council Consultation, the Parties agree as follows:

(a)    The Seller shall procure that DSM Nederland B.V.'s management submits, after consultation with the Purchaser, to the CWC as soon as reasonably possible following the date of this Signing Protocol a request for advice with respect to the transfer of control to the Purchaser of the Dutch Group Companies and the associated transfer of certain personnel to DPM Services as contemplated by the Proposed Transaction.

(b)    The Seller shall, as soon as reasonably practicable (and in any event within two (2) Business Days), inform the Purchaser of any material developments in the Works Council Consultation and shall as soon as reasonably practicable provide the Purchaser with copies of all material documents sent to the CWC.

(c)    The Purchaser shall not, whether by itself or through any of its or its Affiliates’ representatives and/or advisors, without the prior consent of the Seller, approach or communicate directly or indirectly with any member of the CWC, or take any action that would reasonably be expected to adversely affect the Works Council Consultation or the timely satisfaction of the Condition.

(d)    The Purchaser shall, upon request of the Seller or the CWC, instruct the senior representatives of the Purchaser's Group reasonably requested by the Seller to (i) participate in one or more meetings, video and/or telephone calls with the CWC and/or meetings, video and/or telephone calls with one or more of its delegates during normal business hours and upon reasonable notice, and (ii) use all their reasonable efforts to address any concerns or conditions of the CWC and to facilitate a smooth and expedient Works Council Consultation by providing all cooperation reasonably necessary in connection therewith.

(e)    The Purchaser shall and shall procure that its Affiliates shall promptly provide all information, assistance and cooperation reasonably requested by the Seller or DSM Nederland B.V.'s management, including information to be shared with the CWC on the (expected) consequences of the transfer of control of the Dutch Group Companies, if any, and the measures, if any, that will be taken in connection therewith, including with respect to the CWC as set out in article 25 paragraph 3 of the Dutch Works Councils Act; provided that nothing herein shall require the Purchaser to provide any information the provision of which would violate applicable contract or law or cause forfeiture of attorney/client privilege or an attorney work-product privilege.

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(f)    The Parties shall and shall procure that their respective Affiliates and their and their respective Affiliates’ representatives and advisors all act promptly and without undue delay in relation to their respective dealings with the CWC.

(g)    The Seller shall consult the Purchaser in relation to the conduct of discussions and consultation with, and the provision of documents and information to, the CWC.

(h)    The Seller shall, or shall procure that DSM Nederland B.V.'s management shall, notify the Purchaser of any commitment, condition, obligation, requirement or undertaking raised in the context of the Works Council Consultation (a "Commitment"). The Seller shall procure that DSM Nederland B.V.'s management shall, in consultation with the Purchaser, negotiate in good faith with the CWC to seek an outcome with respect to any such Commitment that is reasonably satisfactory to the CWC, the Seller and the Purchaser. The Purchaser will cooperate with all reasonable requests made by the CWC and shall accept and agree to the relevant Dutch Group Companies accepting, all reasonable Commitments required by the CWC. The costs or value impact, if any, of any agreement(s) reached with or Commitments undertaken in response to comments from the CWC in the context of the Works Council Consultation shall solely be for the risk and account of the Purchaser and the Target Group Companies including the Dutch Group Companies and nothing in this Signing Protocol, the outcome of the Works Council Consultation or otherwise shall oblige the Seller to agree to any amendment of the Draft SPA.

(i)    The Seller shall procure that DSM Nederland B.V.'s management shall inform the CWC of the final decision with respect to the transfer of control of the Dutch Group Companies in accordance with Article 25 paragraph 5 of the Dutch Works Councils Act.

1.5    If the Works Council Consultation results in (a) an advice from the CWC which rejects the proposed decision (voorgenomen besluit) to enter into the transfer of control of the Dutch Group Companies, or (b) an advice subject to any Commitment relating to the terms of the Proposed Transaction, then the Parties, taking into account Clauses 1.3 and 1.4(h) will discuss in good faith whether and to what extent the Proposed Transaction can be altered, with a view to accommodate the CWC's advice. In this event, the Condition shall be deemed satisfied if the Parties agree in writing to alterations to the Proposed Transaction in such a manner that the terms of the Proposed Transaction are brought in line with the CWC's (conditional) advice and a final decision can be made by DSM Nederland B.V.’s management in accordance with Clause 1.4(i).

1.6    If, notwithstanding their obligations under Clauses 1.3, 1.4(h) and 1.5, the Parties do not agree on changes to the terms of the Proposed Transaction, to accommodate the CWC's requested Commitments or on other measures that bring the Proposed Transaction in line with the CWC's (conditional) advice, then the Seller, after consultation with the Purchaser, shall at its reasonable discretion inform the CWC of its decision in writing in accordance with Article 25 paragraph 5 of the Dutch Works Councils Act, in which case the Condition shall be deemed satisfied if:

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(a)    the period as set out in Article 25 paragraph 6 of the Dutch Works Councils Act shall have lapsed, without the CWC having initiated legal proceedings as set out in Article 26 of the Dutch Works Councils Act; or

(b)    the CWC has unconditionally and irrevocably waived its right to initiate the legal proceedings referred to in paragraph (a) above, or the CWC has otherwise given its consent to the Seller to proceed with the transfer of control of the Dutch Group Companies in accordance with Article 25 paragraph 6 of the Dutch CWCs Act; or

(c)    after the legal proceedings as set out in Article 26 of the Dutch Works Councils Act have been initiated, the Enterprise Section of the Amsterdam Court of Appeal (Ondernemingskamer) (the "Dutch Court") has rendered a final order dismissing the CWC's appeal.

The Parties agree, for the avoidance of doubt, that if notwithstanding their obligations under Clauses 1.3, 1.4(h), 1.5, the Parties cannot agree on changes to the terms of the Proposed Transaction to accommodate the CWC's Commitments or on other measures that bring the Proposed Transaction in line with the CWC's (conditional) advice, the Seller may, after due consultation with the Purchaser, acting reasonably and taking any reasonable recommendations and/or views of the Purchaser into consideration, also resolve in writing not to enter into the Draft SPA, in which case the Condition shall not be satisfied, and to terminate this Signing Protocol with immediate effect, without the Seller being liable towards the Purchaser for any costs and/or damages.

1.7    In the event that the Dutch Court in a final order (not being an interlocutory judgment) decides in favour of the CWC, the Parties will re-open the consultation with the CWC taking the Dutch Court's decision into account. The provisions of this Clause 1 will apply to that re-opened consultation process. The Parties shall discuss in good faith, taking into account Clauses 1.3 and 1.4(h) and 1.5, whether and to what extent the Proposed Transaction should be altered to accommodate the outcome of this second round of the Works Council Consultation and the Dutch Court's decision.

2.    SIGNING

2.1    Subject only to the satisfaction of the Condition and subject to Clause 6.2, the Parties irrevocably commit to sign the Draft SPA within two (2) Business Days (as defined in the Draft SPA) after the date on which the Condition is satisfied.

2.2    The Parties confirm that all respective required internal approvals for signing the Draft SPA and its ancillary agreements have been obtained and signing of the Draft SPA shall not be conditional on any other matters, other than satisfaction of the Condition in accordance with this Signing Protocol.

3.    OTHER INFORMATION AND CONSULTATION OBLIGATIONS

3.1    The Parties acknowledge and agree that they will comply with, or will procure that their respective relevant Affiliates will comply with, all applicable information and/or consultation obligations towards all relevant employee representatives or employee representative bodies within the Target Group and the Purchaser will at the Seller’s request provide such cooperation as outlined in Clauses 1.4(c) through 1.4(f) and 1.4(h) mutatis mutandis with respect to these information and/or consultation obligations.

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3.2    The Seller shall, concurrently with submitting the request for advice to the CWC in accordance with Clause 1.4(a), notify the SER and the relevant trade unions of the transfer of control of the Dutch Group Companies in writing, after consultation with the Purchaser, on behalf of itself, the Dutch Group Companies and the Purchaser. To the extent conducive and necessary to comply with Article 4 of the Merger Code, Clauses 1.4(a) through 1.4(h) above shall apply mutatis mutandis to the conduct of the Merger Code Procedure.

3.3    The Parties acknowledge and agree that these information, notifications and/or consultation obligations as set out in this Clause 3 are not part of the Condition.

4.    SHARE PURCHASE AGREEMENT UNDERTAKINGS

Without any intention to take any step to implement the Proposed Transaction, each of the Parties hereby agrees that:

(a)    the provisions stipulated in Clause 4 (Conditions to Completion and Termination Rights), Clause 10 (Pensions and Employees) and Clause 19 (Purchaser's Assurances) of the Draft SPA shall be deemed incorporated herein and take effect from the date of this Signing Protocol, it being understood that any references to "as at the date hereof" or "as at the date of this Agreement" in the above referenced clauses of the Draft SPA are, for purposes of clause 4(a) of this Signing Protocol, deemed to be references to "the date of this Signing Protocol";

(b)    the provisions on the pre-Completion covenants as set out in Clause 6 (Pre-Completion) of the Draft SPA shall be deemed incorporated herein, it being understood that for purposes of this Signing Protocol references to "prior to Completion", "up to Completion" or "pending Completion" are references to "as of the date of this Signing Protocol up to Completion"; and

(c)    the provisions on (i) the Seller's Warranties as stipulated in Clauses 15 (Due Diligence Investigation), 16 (Warranties and Limitations of Liability) and 17 (W&I Insurance) and Schedules 5 (Seller Warranties) and 10 (Limitations of Seller's Liability) of the Draft SPA (as well as the Clauses and Schedules referred to therein), (ii) Schedule 7 (Tax), (iii) the Purchaser's Warranties as stipulated in Clause 16 (Warranties and Limitations of Liability) and Schedule 6 (Purchaser Warranties) of the Draft SPA (as well as the Clauses and Schedules referred to therein), shall for purposes of this Signing Protocol be deemed incorporated herein, it being understood that references to "the date of this Agreement" (or similar phrases) are references to "the date of this Signing Protocol", and the relevant Parties shall comply with these provisions as from the date of this Signing Protocol.

5.    CONFIDENTIALITY

The Parties confirm that they will keep the terms of this Signing Protocol and the Proposed Transaction confidential in accordance with Clause 21 (Confidentiality) of

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the Draft SPA, except for disclosures required by applicable law or regulations (including any Merger Control Filing or any other filing the Purchaser is legally required to make) and if reasonably required in order to satisfy the Works Council Consultation or the Merger Code Procedure.

6.    TERMINATION

6.1    This Signing Protocol shall automatically terminate upon the execution of the Draft SPA.

6.2    This Signing Protocol may be terminated:

(a)    by a Party with immediate effect, without that Party being liable for any costs and/or damages and without any obligation on any Party to proceed with the Proposed Transaction or to continue negotiations if the Condition has not been satisfied ultimately on the Drop Dead Date (as defined in the SPA), provided that the non-completion of the Condition is not primarily attributable to such Party’s breach of this Signing Protocol (including its obligations under Clause 1); or

(b)    by the Seller if the Seller resolves in writing not to proceed with the Proposed Transaction as per Clause 1.6 above.

6.3    If this Signing Protocol is terminated in accordance with Clause 1.6 or this Clause 6:

(a)    each Party shall pay its own costs and expenses incurred by the relevant Party or any of its Affiliates in connection with the Proposed Transaction including the negotiation, implementation and termination of this Signing Protocol and the negotiation and preparation of the Draft SPA and the other Transaction Documents;