avnt-20220331

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


☐			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.

1 AVIENT CORPORATION

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.

2 AVIENT CORPORATION

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.

3 AVIENT CORPORATION

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.

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, 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.

5 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, 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.

6 AVIENT CORPORATION

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 representi

SEC Form 10-Q filed by Avient Corporation