Slide 1: PolyOne Investor Presentation
PolyOne Investor Presentation March 2016 PolyOne Corporation Page 1
Slide 2: Forward-Looking Statements
Forward-Looking Statements In this presentation, 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 f
Slide 3: Use of Non-GAAP Measures
Use of Non-GAAP Measures This presentation includes the use of both GAAP (generally accepted accounting principles) and non-GAAP financial measures. The non-GAAP financial measures include: adjusted EPS, earnings before interest, tax, depreciation and amortization (EBITDA), adjusted EBITDA, net de
Slide 4: PolyOne Commodity to Specialty Transformation
PolyOne Commodity to Specialty Transformation 2016 and 2000-2005 2006 - 2009 2010 – 2015 beyond • Deliver consistent • Substantial EPS growth double digit annual from $0.13 to all-time EPS growth • Steve Newlin high of $1.96 appointed, Chairman, President and CEO • Maintain >35% vitality • Shift to
Slide 5: 25 Consecutive Quarters of EPS Growth
25 Consecutive Quarters of EPS Growth Adjusted Earnings Per Share Adjusted Consolidated Operating Margin 12% $0.60 9.5% 10% $0.50 8.3% $0.40 8% 6.7% 6.9% 5.6% 6% 5.2% $0.30 $0.20 4% 2.8% $0.10 2% $0.00 0% 2009 2010 2011 2012 2013 2014 2015 2009 2010 2011 2012 2013 2014 2015 -$0.10 -2% Note: 2009 has
Slide 6: PolyOne At A Glance
PolyOne At A Glance 2015 Revenues: $3.4 Billion 2015 Revenues: $3.4 Billion Canada Asia Latin America 7% PP&S Europe 7% 7% 20% 13% Distribution 29% Specialty 51% United States 66% End Markets Adjusted EPS Packaging Textiles $1.96 13% 2% $1.80 Industrial 14% Transportation $1.31 20% Healthcare $1.00
Slide 7: Mix Shift Highlights Specialty Transformation
Mix Shift Highlights Specialty Transformation 2020 Old PolyOne Transformation Platinum Vision 100% % of Operating Income* 80% 80%+ 60% 40% 65% 20% 43% 0% 2% 2005 2010 2015 2020 Specialty OI $5M $87M $229M Platinum Vision JV's Performance Products & Solutions Distribution Specialty *Operating Income
Slide 8: Color and Engineered Materials at the Heart of Specialty Transformation
Color and Engineered Materials at the Heart of Specialty Transformation OPERATING MARGIN COLOR, ADDITIVES SPECIALTY AND INKS 20%+ ENGINEERED MATERIALS 20%+ 16.7% 14.7% 14.7% 12.2% 12.1% 9.7% 9.6% 9.3% 8.6% 8.1% 8.0% 7.2% 5.1% 5.5% 5.1% 4.6% 3.4% 1.7% 1.1% 1.3% 2006 2007 2008 2009 2010 2011 2012 2013
Slide 9: Proof of Performance & 2020 Goals
Proof of Performance & 2020 Goals 2006 2015 2020 “Where we were” “Where we are” Platinum Vision 1) Operating Income % Specialty: Color, Additives & Inks 1.7% 16.7% 20%+ Specialty Engineered Materials 1.1% 14.7% 20%+ Designed Structures & Solutions 1.4% (2012) 3.0% 12 – 14% Performance Products & Sol
Slide 10: Target End Markets… Healthcare
TPE’s & Film GEON™ Vinyl Therma-Tech™ & Sheet TPE + OnForce™ Gravi-Tech™ Therma-Tech™ Polymer Colorants Film Target End Markets… Healthcare PolyOne Corporation Page Page10 10
Slide 11: Target End Markets… Outdoor High Performance
OnForce (SEM) Glasforms (SEM) TPE + OnForce (SEM) TPE Vibration Dampening (SEM/GLS) Source: Outdoor Industry Association Thermoplastic Elastomers (SEM) TPE & Film (SEM + DSS) TPE + OnForce (SEM) Polymer Colorants OnForce (CAI) (SEM) Thermoplastic Elastomers (SEM) Thermatech (SEM) Sheet (DSS) Glasfor
Slide 12: Target End Markets… Automotive
Sound & Vibration Roof Systems Management Interior & Exterior Trim Interior Structural Components Underhood Components Fuel Handling Air management Systems Electronics & Cameras Structural Braces & Brackets Lighting Fluid Handling Target End Markets… Automotive PolyOne Corporation Page 12
Slide 13: Target End Markets… Packaging
ColorMatrix™ ColorMatrix™ Amosorb™ Ultimate™ UV Oxygen Scavenger Light Barrier PreservaPak™ OnCap™ Laser Marking Additives OnColor™ Smart Batch™ VersaFlex™ TPE Cap Liner Target End Markets… Packaging PolyOne Corporation Page 13
Slide 14: Innovation Drives Earnings Growth
Innovation Drives Earnings Growth Research & Development Specialty Platform Specialty Platform Spending Vitality Index Progression* Gross Margin ($ millions) Target ≥ 35% $53 28% 43% 14% $20 12% 2006 2015 2006 2015 2006 2015 *Specialty Platform revenue from products introduced in last five years Inn
Slide 15: Investing to Drive Growth
Investing to Drive Growth Commercial, R&D Volume Adjusted and Marketing (lbs in millions) Gross Margin ($M) Spending ($M) 2,883 $721 $192 -16% +138% +86% $103 2,414 $303 2006 2015 2006 2015 2006 2015 Ours Is Not a Cost Cutting Story PolyOne Corporation Page 15
Slide 16: Design and Service as a Differentiator
Design and Service as a Differentiator Right Material & Color Desired Product Design Appropriate Manufacturing Process Connecting the Dots with iQ Design Labs and Delivering Concept to InVisiO Color Design Commercialization PolyOne Corporation Page 16
Slide 17: Customer First Through World-Class Service
Customer First Through World-Class Service Strengthening relationships through: Providing LSS services to small/medium sized customers Providing training in Customer Centric Selling Skills with customers On-Time Delivery Commitment to Operational Excellence 93% World’s Best Start-up World’s Best
Slide 18: Debt Maturities & Pension Funding
Debt Maturities & Pension Funding $800 Debt Maturities Pension Funding** As of December 31, 2015 As of December 31, 2015 ($ millions) 97% 100% $700 90% $600 $600 80% $550 70% $500 60% 60% $400 50% 40% $300 30% $200 20% 2022 2023 2008 Q4 2015 Coupon Rate: 3.750% 5.250% Net Debt / Adjusted EBITDA*= 2.
Slide 19: Free Cash Flow and Strong Balance Sheet Fund Investment / Shareholder Return
Free Cash Flow and Strong Balance Sheet Fund Investment / Shareholder Return Expanding our sales, Repurchased nearly marketing, and 1.0 million shares in technical capabilities Q4 2015 Investing in operational Repurchased 15.8 and LSS initiatives million shares since ~75% of capital early
Slide 20: Why Invest In PolyOne?
Why Invest In PolyOne? Addressable market exceeds $40 billion Strong performance demonstrates that our strategy and execution are working Megatrends and emerging opportunities align with our strengths Innovation and services provide differentiation, incremental pricing power, and competitive
Slide 21: Appendix
Appendix PolyOne Corporation Page 21
Slide 22: Recent Acquisitions
Recent Acquisitions Kraton TPE Assets Magenta Master Fibers February 2016 – Acquired Kraton’s thermoplastic December 2015 – Acquired Magenta Master Fibers, elastomer (TPE) assets an innovative developer of specialty color Serve personal care, medical, packaging (protective concentrates for the
Slide 23: 2015 Full Year Financial Highlights
2015 Full Year Financial Highlights CAI Operating Profit Color Additives & Inks operating $160 $135 $125 $104 margin reached record level $120 $75 $80 $50 of 16.7% $40 $0 2011 2012 2013 2014 2015 SEM Operating Profit Specialty Engineered Materials $100 $80 operating margin grew 260 basis $80 $72
Slide 24: At a Glance: Color, Additives and Inks
At a Glance Color, Additives and Inks 2015 Revenues: $0.8 Billion Solutions United States 48% Europe 33% Asia 12% Latin America 5% Canada 2% 2015 Revenue by Industry Segment Expanding Profits Packaging Operating Income % of Sales 20%+ 31% 16.7% Textiles 14.7% 8% 12.2% Industrial 13% Transportation 9
Slide 25: At a Glance: Specialty Engineered Materials
At a Glance Specialty Engineered Materials 2015 Revenues: $0.5 Billion Solutions United States 49% Europe 29% Asia 20% Canada 2% 2015 Revenue by Industry Segment Expanding Profits Packaging Appliances Operating Income % of Sales 20%+ 5% 3% Transportation Wire & Cable 19% 15% 14.7% Building & 12.1% I
Slide 26: At a Glance: Designed Structures and Solutions
At a Glance Designed Structures and Solutions 2015 Revenues: $0.5 Billion Solutions United States 97% Canada 3% 2015 Revenue by Industry Segment Expanding Profits Packaging Operating Income % of Sales 19% 12-14% Industrial Transportation 24% 7.3% 33% 5.6% 3.0% Healthcare Building & 1.4% 7% Construct
Slide 27: At a Glance: Performance Products and Solutions
At a Glance Performance Products and Solutions 2015 Revenues: $0.7 Billion Solutions United States 79% Canada 14% Latin America 5% Asia 2% 2015 Revenue by Industry Segment Expanding Profits Packaging Operating Income % of Sales 5% Transportation 19% Wire & Cable 10-12% 16% Industrial Appliances 8.3%
Slide 28: At a Glance: Distribution
At a Glance Distribution 2015 Revenues: $1.0 Billion Key Suppliers Packaging 4% Wire & Cable Transportation 4% 24% Appliances Industrial 6% 16% Building & Construction Consumer 4% Healthcare 13% 23% Electrical & Electronics 6% ROIC Expanding Profits 53% Operating Income % of Sales 6.4% 6.6% 6.5-7.5%
Slide 29: Plastics: Key to Future Sustainable Development
Plastics: Key to Future Sustainable Development 2 lbs Plastic Requires 91% less energy to = recycle a pound of plastic versus 3 lbs aluminum a pound of paper or 8 lbs steel or 27 lbs glass 33% less material by weight than aluminum 75% less material by weight than steel 93% less material by weight th
Slide 30: Application Examples
Application Examples PolyOne Corporation Page 30
Slide 31: Outdoor Applications
Outdoor Applications • Leading provider of high performance specialty materials for the recreational and sports & leisure industry • Well positioned across all segments to address market needs Metal to Polymer Conversion Lightweighting Thermal Management Impact Performance Source: Outdoor In
Slide 32: PET Bottling Technology
PET Bottling Technology Market Opportunity $1.5 billion attractive, growing market Additives improve performance and reduce cost through light-weighting, reduced waste, faster Shelf-life extension cycle times, and extended shelf life of finished product Weight reduction Aligned with megatrend
Slide 33: Authentication Technology
Authentication Technology • Includes formulation and consultative services to assist manufacturers and brand owners in positively identifying their finished goods • Protects brand equity & consumer welfare • Reduces exposure to unwarranted recall expenses • Secures supply chain integrity – support f
Slide 34: Metal Replacement Solutions
Metal Replacement Solutions • Replaces metal in LED lighting • Extends LED durability and life span eliminating hot spots • Greater design flexibility with fewer parts • Weight reduction • Simplifies manufacturing and lowers total production cost PolyOne Corporation Page 34
Slide 35: Range Rover Evoque Interior
Range Rover Evoque Interior • Color harmonization across 15 unique color-and-polymer combinations • Eliminated need for multiple pre- colored materials • Reduced Land Rover’s working capital PolyOne Corporation Page 35
Slide 36: CT Scanner
CT Scanner • Reduced health and environmental impact • System cost reduction • Radiation-shielding performance • Parts consolidation • Design freedom PolyOne Corporation Page 36
Slide 37: High-Barrier Packaging Containers
High-Barrier Packaging Containers • Capability to extrude up to 13 layers • Strong oxygen and moisture vapor transmission protection • Can be made symmetrical or asymmetrical to meet customized needs of broad variety of applications • Barrier protection and superior sensory properties PolyOne Corpor
Slide 38: Aerospace Applications
Aerospace Applications • Leading provider of specialty materials for the aerospace industry • Typical applications Mil-spec aircraft windows, canopies, windscreens, instrument panels, wingtip lenses Interior – gallery furnishings, tray tables, arm rests, trim strips, joint/edge coverings • Benef
Slide 39: Reconciliation of Non-GAAP Financial Measures (Unaudited)
Reconciliation of Non-GAAP Financial Measures (Unaudited) (Dollars in millions, except per share data) Below is a reconciliation of non-GAAP financial measures to the most directly comparable measures calculated and presented in accordance with U.S. GAAP. Senior management uses operating income excl
Slide 40: Adjusted EPS Reconciliation
Adjusted EPS Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Net income (loss) attributable to PolyOne common shareholders $ 11.2 $ 38.6 $ 23.2 $ 21.0 $ 29.4 $ 30.9 $ 32.3 $ (14.6) Special items, after tax(1) 17.7 (2.0) 12.3 4.6 12.5 17.4 13.1 47.5 Adjusted net income $ 28.9 $ 36.6 $
Slide 41: Adjusted Operating and Gross Margin Reconciliation
Adjusted operating margin Q1 2013 Q2 2013 Q3 2013 Q4 2013 YTD 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 YTD 2014 Operating income (loss) $ 40.5 $ 80.7 $ 61.6 $ 48.7 $ 231.5 $ 56.4 $ 49.4 $ 63.6 $ (14.3) $ 155.1 (1) Special items 16.6 (5.2) 10.8 7.8 30.0 22.9 39.8 22.0 80.2 164.9 Adjusted operating income
Slide 42: Adjusted EBITDA and Net Debt to Adjusted EBITDA
Adjusted EBITDA and net debt to adjusted EBITDA is calculated as follows: (In millions) Twelve Months Ended December 31, 2015 Income from continuing operations, before income taxes $ 167.7 Interest expense, net 64.1 Depreciation and amortization 104.3 Special items, impact on income from continuing