After receiving a much-needed cash infusion, officials at Cleveland-based PolyOne Corp., say the firm no longer is concerned about its financial liquidity.
``We now have ample flexibility no matter what the economy brings us,'' President and Chief Executive Officer Thomas Waltermire said at the firm's annual meeting, which was held May 15 in Cleveland. ``We said we'd improve our balance sheet and that's what we did.''
PolyOne was able to meet an $87.8 million debt payment due in September by issuing $300 million in new long-term debt. The arrangement also provides PolyOne, North America's largest compounder, with a three-year, $225 million accounts receivable facility and a three-year, $50 million revolving credit facility.
Citigroup of New York was the lead bank in the refinancing. Cleveland-based National City Bank and Key Bank also were involved.
Things might be looking up for PolyOne, which saw its sales grow more than 8 percent in the first quarter while it posted a much-smaller loss than it did in the same quarter last year.
PolyOne lost $19.3 million in the first quarter on sales of $645.5 million. By comparison, the firm lost $57.3 million in the first quarter of 2002.
``This isn't a trend yet, but it's an encouraging first-step,'' Chief Financial Officer David Wilson said in a May 2 conference call with stock analysts.
Battered by economic slowdown, PolyOne has struggled to integrate the businesses of Geon Co. and M.A. Hanna Co., which merged to form PolyOne in 2000. The firm posted annual losses of more than $46 million in 2001 and almost $59 million last year. After closing more than a dozen plants in that two-year period, officials took further action in the first quarter of 2003, cutting 400 salaried jobs and announcing the June closing of an engineered films plant in Yerington, Nev.
In spite of the challenges, stock analyst Saul Ludwig, who covers PolyOne for McDonald Securities in Cleveland, thinks the firm is heading in the right direction.
``By the third quarter, they should be reaping all the benefits they intended to capture from the beginning,'' Ludwig said. ``They've got the integration done, even if it took a little longer than they expected.
``They need a little help from the economy, but that's been the story for PolyOne and a lot of other companies in the plastics industry.''
PolyOne's distribution unit, which made up about 21 percent of first-quarter sales, led the way with a growth rate of almost 13 percent. The performance plastics unit - including PolyOne's massive plastic colors and compounds business - was not far behind, with first-quarter growth of almost 10 percent.
Although Waltermire said PolyOne management expects the economy to be ``sluggish for some time to come,'' he added that PolyOne's efforts in information technology and customer service could provide short-term gains. PolyOne has set a goal of growing sales 3-5 percent in a flat economy in 2003.
More than 75 percent of PolyOne's businesses now are using the same IT system, which Waltermire said will allow faster order confirmation and overall improved logistics handling. In customer service, PolyOne plans to allocate more personnel to its major accounts, making more frequent customer visits and increasing sales support, technical assistance and laboratory time.
Waltermire declined to reveal how many customers were in this category, but he said that the firm's top 250-300 customers make up a large percentage of its sales. He cited the Hoover vacuum cleaner division of Maytag Corp. as an example.
``When you look at a customer like [Hoover], they need a variety of things from a supplier, and there's nobody else of our scale in the polymer services market that can provide what they need,'' Waltermire said.
PolyOne will continue to explore ways to reduce its debt, but Waltermire said the firm ``isn't running any fire sale'' to divest assets in order to raise cash.
``With our refinancing, we were able to improve our financial situation,'' he said. ``We're not being forced to do some kind of giveaway for somebody.''
Overall, Waltermire said he's hoping for a change in the attitudes of business owners and consumers.
``The tone among our customers is one of a lot of caution,'' he said. ``No one can cite reasons why they're not going to grow or invest. Everbody's just watching, even though most of the major impediments to the economy have been removed.
``The stock bubble is fading in our memory. It's time to grow and expand.''