As a result of recent unprecedented declines in demand due to the deteriorating
global economic climate, PolyOne
Corporation (NYSE: POL) today announced restructuring and cost savings initiatives
to enhance the Company’s long-term performance while helping to mitigate
the near-term effects of the economic downturn.
In order to remain competitive and enable the execution of its transformational
strategy during a period of weakened demand, the Company will enact further
cost saving measures that include eliminating approximately 370 jobs worldwide,
implementing reduced work schedules for another 100 to 300 employees, closing
its Niagara, Ontario facility and idling certain other capacity. Additionally,
the Company is planning other actions that include freezing executive salaries
throughout 2009.
PolyOne expects to incur one-time pre-tax charges of approximately $45 million
related to these actions, of which approximately $22 million will be recorded
during the fourth quarter of 2008. In total, these one-time charges will include
cash costs of approximately $35 million related to severance and site closure
costs with the remaining $10 million of non-cash costs related to asset write-downs
and accelerated depreciation. The Company expects these actions will deliver
pre-tax savings of approximately $25 to $30 million in 2009 and approximately
$40 million on an annualized run-rate basis.
While the Company’s specialization strategy has allowed it to increase
sales in growth markets such as healthcare and consumer goods, demand in cyclical
end markets such as housing and automotive has weakened considerably over the
last year. As such, the Company has taken a disciplined and proactive approach
to reducing costs and conserving cash, and in July 2008, the Company announced
a manufacturing realignment to streamline its operations and supply chain, and
these actions are on schedule to be completed by March 2009.
“When we announced the manufacturing realignment in July, we expected
that our actions would be sufficient to position the Company for an economic
slowdown that was principally US-based,” said Stephen D. Newlin. “Since
that time, we have observed a precipitous decline in global demand brought on
by the recent worldwide financial crisis.” Newlin added, “The impact
of these events has been exacerbated by significant customer inventory destocking,
which we have yet to see reverse. Accordingly, we are taking immediate additional
actions to further reduce capacity and costs and prepare ourselves for what
may be a prolonged economic downturn.”
Newlin continued, “We recognize that our announcement today has far-reaching
impacts on our associates, their families and the communities in which we operate.
However, this urgent and aggressive response is prudent and required to ensure
that PolyOne remains competitive. Taking care of our customers remains our top
priority and this restructuring plan was designed to ensure that they do not
experience service disruptions.”
In its third quarter 2008 earnings announcement, the Company reported that
it had $170 million in total liquidity, including $37 million of cash and $133
million of borrowing availability under its accounts receivable securitization
facility as of September 30, 2008. “We focused our cost reduction efforts
on actions that have a short payback of about a year or less ensuring that they
will not significantly impact our liquidity,” said Robert M. Patterson,
senior vice president and chief financial officer. “In fact, we anticipate
that these efforts will ultimately drive higher earnings and free cash flow
which will provide PolyOne greater financial flexibility in the future, and
position the Company for even greater future growth and earnings expansion as
the economy recovers.”