Slide 1: PolyOne Corporation January 2008 Sidoti Conference
PolyOne Corporation January 2008 Sidoti Conference
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 for
Slide 3: Forward-looking Statements: Risk Factors
Forward-looking statements are subject to risks that may cause results to differ materially from those projected, including those listed below and the other factors set forth in our SEC filings, including our Form 10-K. The effect on foreign operations of currency fluctuations, tariffs, nationalizat
Slide 4: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures This presentation includes the use of both GAAP (generally accepted accounting principles) and non-GAAP financial measures. The non- GAAP financial measures include: operating income (loss) before special items, gross margin as adjusted, Debt/EBITDA and Net Debt/EB
Slide 5: PolyOne at a Glance
PolyOne at a Glance 4,800 employees, 62 plants / warehouses and 14 technology centers worldwide 11,000 customers in 35 countries 3 operating platforms: Specialty businesses ($1.1 billion); PolyOne Distribution ($0.75 billion); and General Purpose businesses ($1.1 billion) Significant opportunities f
Slide 6: 2007 Summary Highlights
2007 Summary Highlights Divestment of OxyVinyls - redeemed $241m 2010 high-yield notes Announced acquisitions of specialty TPE leader GLS and vinyl compounder NHPC in South China Specialty platform businesses operating income improved over 60% compared to 2006 for first 9-months 2007: Double-digit I
Slide 7: The New Team is in Place
The New Team is in Place Tom Kedrowski Senior Vice President Supply Chain & Operations Lisa Kunkle Vice President General Counsel & Secretary Dave Wilson Senior Vice President & Chief Financial Officer Dr. Cecil Chappelow Vice President Research & Innovation Randy Fortin Vice President Corporate Mar
Slide 8: 2011 Key Performance Objectives
Drive profitable growth, multiple expansion and shareholder value creation Key 2011 performance objectives: 25% to 35% specialty business gross margins 40% sales outside United States 25% vitality index Strong double-digit earnings CAGR Generate economic return - ROIC >15% 2011 Key Performance Objec
Slide 9: Our Vision and Strategy
Our Vision and Strategy The World's Premier Provider of Specialized Polymer Materials, Services & Solutions
Slide 10: Specialization
Specialization Shift the basis of competition to differentiation from cost / commodity Become a high value-added solutions provider Leverage our in-depth knowledge of polymers, formulations and polymer processing Redirect our strategic focus to the most attractive market segments
Slide 11: PolyOne Innovation Pipeline
PolyOne Innovation Pipeline Innovation ? Driving Specialization Prototype Frame Opportunity Scale-up & Test Market Build Business Case Commercial Launch Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 20 Commercial Launches made in the second-half 2007 Phase 0 Idea Generation & Shaping 60 Commercial Launch
Slide 12: Globalization
Page 12 Globalization Geographic footprint and cross-selling capability with our customer base provides unique growth opportunities Demand for our products and knowledge is robust in many key regional growth markets Customers desire global partners who can provide consistent standards of performance
Slide 13: Globalization - Plastics Demand
Globalization - Plastics Demand 9% Eastern Europe 14% India 10% China Annual Demand Million Metric Tons Plastic Demand Annual Growth Rate Priority Market Opportunities 5% South America 230 4% World 3% North America 2% Western Europe 64 10 52 8 16 46
Slide 14: Commercial Excellence
Commercial Excellence Upgrading talent and increasing sales, marketing and innovation resources Developing marketing/sales skills Implementing new commercial tools to increase business gains Providing our customers the value and solutions that will help them achieve their growth and profit improveme
Slide 15: Focused Approach to Improving Commercial Performance
Focused Approach to Improving Commercial Performance Incentive compensation changes Prune unprofitable business Drive new business gains Sales efficiency Sales effectiveness Proof of Performance
Slide 16: Operational Excellence
Operational Excellence Operational Excellence is our never ending quest for improvement to answer the voice of our customers Instilling Lean Six Sigma culture through organization Strengthening capabilities to deliver value flawlessly to customers Launching Supply Chain initiatives - targeting $50 m
Slide 17: Business Unit Profiles
o/ \ Business Unit Profiles
Slide 18: North American Color and Additives Profile
Profile Industry leader with superior technical expertise Achieved strong profitability turnaround - - $10m 2007 OI improvement Scale capabilities to meet global customer requirements Available market: $3.2 billion Strategic Initiatives Targeting healthcare, consumer and packaging industries Develop
Slide 19: North American Engineered Materials Profile
North American Engineered Materials Profile New leadership team in place 2007 Customized specialty polymers and solutions Quantified competitive advantage -- innovation, speed, flexibility, global reach Available market: $6.8 billion Strategic Initiatives Transforming business by increasing specialt
Slide 20: GLS Corporation
GLS Corporation North American leader of specialty thermoplastic elastomer compounds (TPE's) for consumer, healthcare and packaging applications $3.5 billion available market Experienced leadership team with stellar reputation for product innovation, speed-to-market and customer service Leading and
Slide 21: International Engineered Materials and Color Profile
International Engineered Materials and Color Profile Premier European and Asian EM and Color business Global custom solutions delivery capabilities for leading MNC's 2007 double-digit sales and OI growth Available market: $11.3 billion Strategic Initiatives Aggressively expanding footprint in attrac
Slide 22: Vinyl Business Profile
Vinyl Business Profile World's premier brand recognized for excellence, reliability, quality Unmatched technical expertise Current weak residential housing market resulted in 2007 revenue and OI declines Available market: $2.6 billion Strategic Initiatives Reducing vulnerability to B&C market throug
Slide 23: PolyOne Distribution Profile
PolyOne Distribution Profile National plastics distributor with over 5,000 customers Experienced management and sales team and strong technical service Key channel for PolyOne Vinyl Compounds and EM products Available market: $7.6 billion Strategic Initiatives Accelerating sales and OI growth throug
Slide 24: Financial Summary
o/ \ Financial Summary
Slide 25: Financial Summary
Strong financial profile established, providing greater flexibility: Total debt and interest expense lowest since formation Current leverage ratio of 2.0x to 2.5x; credit ratings upgraded Invested capital productivity targets delivered Investment capacity grows consistently Transformation strategies
Slide 26: Operating Income Mix
Operating Income Mix Projected operating income CAGR exceeds 25%, driving greater than three-fold increase in EPS by 2011, including GLS. Specialty earnings lifted by strong gross margin increases. Earnings quality improves with meaningful mix shift towards Specialty Businesses 2006 2007 2011 Specia
Slide 27: Gross Margin % of Sales Outlook
Specialization drives increases across each platform. Specialty platform achieves 25% objective by 2010. Gross Margin % of Sales Outlook 2006 2007 2008 2009 2010 2011 Specialty 0.145 0.168 0.189 0.223 0.252 0.265 POD 0.079 0.082 0.085 0.087 0.089 0.091 General Purpose 0.105 0.098 0.095 0.119 0.132 0
Slide 28: Operating Income % of Sales Outlook
Specialty platform approaches 11% operating margin in 2011. Total 2011 operating margin projected to increase >4% points from 2007. Operating Income % of Sales Outlook 2006 2007 2008 2009 2010 2011 Specialty 0.018 0.035 0.051 0.071 0.092 0.1079 POD 0.029 0.03 0.031 0.032 0.036 0.0397 General Purpose
Slide 29: Return on Invested Capital Summary
Return on Invested Capital Summary Each platform achieves ROIC objective to generate a target return by 2011. POD and GP performing at or above target in 2007. Total PolyOne ROIC reaches 18% by 2011. Specialty POD General Purpose Total POL 2007 0.066 0.172 0.148 0.081 2011 0.16 0.078 0.052 0.1 Sourc
Slide 30: Strengthening Financial Profile
Strengthening Financial Profile Target leverage ratio of 2.0x to 2.5x achieved in 2007. GLS acquired in 2008. Net interest expense reduction should exceed $20 million in 2008 vs. 2006. Redemption of 2010 Senior Notes in 2007 reduces total debt to half level at POL formation. $26 million annual debt
Slide 31: Key Performance Indicators
Return on Invested Capital: Total PolyOne (pre-tax) Business Units (pre-tax) Core Business OI Growth Vitality Index Sales Outside the USA Gross Margin Attainment Key Performance Indicators > 15% > 15% Double Digit CAGR 25% 40% 25% - 35% for Specialty Businesses 2011 Objective 18% achieved by 2011 Ea
Slide 32: Transformation strategies deliver key objectives
Transformation strategies deliver key objectives Specialization drives meaningful increases in gross margins, which deliver ROS and ROIC Quality of earnings mix reshapes portfolio; underpins sustainable, high-value base; and expands equity valuation multiples Financial profile is strong, enabling fl
Slide 33: Our Value Proposition to Investors
Our Value Proposition to Investors Proven leadership team in place driving cultural change - instilling urgency and accountability to deliver results Specialization strategy producing demonstrable results Investing in and upgrading commercial resources Prioritized expansion into high-growth, high-va
Slide 34: PolyOne Corporation January 2008
PolyOne Corporation January 2008