Avient Corporation

10/28/2021 | Press release | Distributed by Public on 10/28/2021 07:41

Quarterly Report (Form 10-Q)

avnt-20210930


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 September 30, 2021
OR
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
________________________________________________
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. YesNo
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). YesNo

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 September 30, 2021 was 91,491,380.

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
September 30,
Nine Months Ended
September 30,
2021 2020 2021 2020
Sales $ 1,219.8 $ 924.5 $ 3,617.3 $ 2,245.1
Cost of sales 964.4 714.3 2,770.8 1,713.7
Gross margin 255.4 210.2 846.5 531.4
Selling and administrative expense 176.7 176.7 539.3 407.1
Operating income 78.7 33.5 307.2 124.3
Interest expense, net (19.0) (29.7) (57.8) (55.3)
Other income, net 1.4 1.5 4.1 12.6
Income from continuing operations before income taxes 61.1 5.3 253.5 81.6
Income tax expense (8.5) (2.7) (51.8) (22.5)
Net income from continuing operations 52.6 2.6 201.7 59.1
Loss from discontinued operations, net of income taxes - - - (0.5)
Net income $ 52.6 $ 2.6 $ 201.7 $ 58.6
Net loss (income) attributable to noncontrolling interests 0.3 (0.9) (0.7) (1.3)
Net income attributable to Avient common shareholders $ 52.9 $ 1.7 $ 201.0 $ 57.3
Earnings per share attributable to Avient common shareholders - Basic:
Continuing operations $ 0.58 $ 0.02 $ 2.20 $ 0.64
Discontinued operations - - - -
Total $ 0.58 $ 0.02 $ 2.20 $ 0.64
Earnings (loss) per share attributable to Avient common shareholders - Diluted:
Continuing operations $ 0.57 $ 0.02 $ 2.18 $ 0.64
Discontinued operations - - - (0.01)
Total $ 0.57 $ 0.02 $ 2.18 $ 0.63
Weighted-average shares used to compute earnings per common share:
Basic 91.4 91.5 91.3 89.7
Plus dilutive impact of share-based compensation 0.8 0.4 0.8 1.0
Diluted 92.2 91.9 92.1 90.7
Anti-dilutive shares not included in diluted common shares outstanding - 0.7 - 0.9
Cash dividends declared per share of common stock $ 0.2125 $ 0.2025 $ 0.6375 $ 0.6075
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

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Avient Corporation
Consolidated Statements of Comprehensive Income (Unaudited)
(In millions)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021 2020 2021 2020
Net income $ 52.6 $ 2.6 $ 201.7 $ 58.6
Other comprehensive income (loss), net of tax:
Translation adjustments and related hedging instruments (29.4) 59.3 (70.9) 56.6
Cash flow hedges 0.7 0.8 2.2 (2.4)
Total other comprehensive income (loss) (28.7) 60.1 (68.7) 54.2
Total comprehensive income 23.9 62.7 133.0 112.8
Comprehensive loss (income) attributable to noncontrolling interests 0.3 (0.9) (0.7) (1.3)
Comprehensive income attributable to Avient common shareholders $ 24.2 $ 61.8 $ 132.3 $ 111.5
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

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Avient Corporation
Condensed Consolidated Balance Sheets
(In millions)
(Unaudited) September 30, 2021
December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents $ 545.2 $ 649.5
Accounts receivable, net 703.0 516.6
Inventories, net 477.2 327.5
Other current assets 123.5 108.5
Total current assets 1,848.9 1,602.1
Property, net 669.6 694.9
Goodwill 1,293.9 1,308.1
Intangible assets, net 948.4 1,008.5
Operating lease assets, net 81.6 80.9
Other non-current assets 168.6 176.0
Total assets $ 5,011.0 $ 4,870.5
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term and current portion of long-term debt $ 8.7 $ 18.6
Accounts payable 557.7 471.7
Current operating lease obligations 24.1 25.1
Accrued expenses and other current liabilities 371.3 285.6
Total current liabilities 961.8 801.0
Non-current liabilities:
Long-term debt 1,851.0 1,854.0
Pension and other post-retirement benefits 111.0 115.0
Non-current operating lease obligations 57.7 56.0
Other non-current liabilities 244.1 332.8
Total non-current liabilities 2,263.8 2,357.8
SHAREHOLDERS' EQUITY
Avient shareholders' equity 1,768.8 1,697.1
Noncontrolling interest 16.6 14.6
Total equity 1,785.4 1,711.7
Total liabilities and equity $ 5,011.0 $ 4,870.5
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

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Avient Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In millions)
Nine Months Ended
September 30,
2021 2020
Operating Activities
Net income $ 201.7 $ 58.6
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 105.8 74.8
Accelerated depreciation and amortization 1.9 2.5
Share-based compensation expense 8.4 7.1
Changes in assets and liabilities, net of the effect of acquisitions:
Increase in accounts receivable (199.7) (12.7)
(Increase) decrease in inventories (156.2) 53.0
Increase in accounts payable 95.3 21.3
Decrease in pension and other post-retirement benefits (14.2) (14.4)
Increase in post-acquisition earnout liabilities - 2.5
Increase in accrued expenses and other assets and liabilities, net 67.0 56.1
Taxes paid on gain on divestiture - (142.0)
Payment of post-acquisition date earnout liability - (38.1)
Net cash provided by operating activities 110.0 68.7
Investing activities
Capital expenditures (62.7) (38.6)
Business acquisitions, net of cash acquired (47.6) (1,342.7)
Net proceeds from divestiture - 7.1
Other investing activities (2.0) 5.2
Net cash used by investing activities (112.3) (1,369.0)
Financing activities
Debt offering proceeds - 650.0
Purchase of common shares for treasury (4.2) (13.6)
Cash dividends paid (58.2) (52.8)
Repayment of long-term debt (16.5) (6.0)
Payments of withholding tax on share awards (9.1) (1.9)
Debt financing costs - (9.5)
Equity offering proceeds, net of underwriting discount and issuance costs - 496.1
Payment of acquisition date earnout liability - (50.8)
Other financing activities (3.5) -
Net cash (used) provided by financing activities (91.5) 1,011.5
Effect of exchange rate changes on cash (10.5) 1.4
Decrease in cash and cash equivalents (104.3) (287.4)
Cash and cash equivalents at beginning of year 649.5 864.7
Cash and cash equivalents at end of period $ 545.2 $ 577.3
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

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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, 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
Net income - - - - 68.8 - - 68.8 0.6 69.4
Other comprehensive income - - - - - - 10.2 10.2 - 10.2
Acquisitions/other - - - - - - - - 2.6 2.6
Cash dividends declared (1)
- - - - (19.4) - - (19.4) - (19.4)
Share-based compensation and exercise of awards - - - 1.0 - 0.6 - 1.6 - 1.6
Balance at June 30, 2021 122.2 (30.8) $ 1.2 $ 1,517.2 $ 1,166.6 $ (903.2) $ (13.6) $ 1,768.2 $ 18.2 $ 1,786.4
Net income - - - - 52.9 - - 52.9 (0.3) 52.6
Other comprehensive income - - - - - - (28.7) (28.7) - (28.7)
Noncontrolling interest activity - - - - - - - - (1.3) (1.3)
Cash dividends declared (1)
- - - - (19.6) - - (19.6) - (19.6)
Share-based compensation and exercise of awards - 0.1 - (3.2) - 1.6 - (1.6) - (1.6)
Acquisitions/other - - - (2.4) - - - (2.4) - (2.4)
Balance at September 30, 2021 122.2 (30.7) 1.2 $ 1,511.6 $ 1,199.9 $ (901.6) $ (42.3) $ 1,768.8 $ 16.6 $ 1,785.4
(1)Dividends declared per share were $0.2125 and $0.6375 for the three and nine months ended September 30, 2021.






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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, 2020 122.2 (45.3) $ 1.2 $ 1,175.2 $ 1,001.2 $ (1,043.1) $ (82.6) $ 1,051.9 $ 0.8 $ 1,052.7
Net income - - - - 32.8 - - 32.8 - 32.8
Other comprehensive loss - - - - - - (10.7) (10.7) - (10.7)
Noncontrolling interest activity - - - - - - - - (0.8) (0.8)
Cash dividends declared (1)
- - - - (18.7) - - (18.7) - (18.7)
Repurchase of common shares - (1.0) - - - (13.6) - (13.6) - (13.6)
Common shares equity offering - 15.3 334.6 - 161.3 - 495.9 - 495.9
Share-based compensation and exercise of awards - 0.2 - (0.5) - 1.6 - 1.1 - 1.1
Other - - - - (0.3) - - (0.3) - (0.3)
Balance at March 31, 2020 122.2 (30.8) $ 1.2 $ 1,509.3 $ 1,015.0 $ (893.8) $ (93.3) $ 1,538.4 $ - $ 1,538.4
Net income - - - - 22.8 - - 22.8 0.4 23.2
Other comprehensive loss - - - - - - 4.8 4.8 - 4.8
Cash dividends declared (1)
- - - - (18.5) - - (18.5) - (18.5)
Share-based compensation and exercise of awards - - - 3.2 - 0.4 - 3.6 - 3.6
Balance at June 30, 2020 122.2 (30.8) $ 1.2 $ 1,512.5 $ 1,019.3 $ (893.4) $ (88.5) $ 1,551.1 $ 0.4 $ 1,551.5
Net income - - - - 1.7 - - 1.7 0.9 2.6
Other comprehensive loss - - - - - - 60.1 60.1 - 60.1
Noncontrolling interest activity - - - - - - - - - -
Cash dividends declared (1)
- - - - (18.5) - - (18.5) - (18.5)
Repurchase of common shares - - - - - - - - - -
Share-based compensation and exercise of awards - - - 1.9 - 0.5 - 2.4 - 2.4
Other - - - - - - - - 12.8 12.8
Balance at September 30, 2020 122.2 (30.8) $ 1.2 $ 1,514.4 $ 1,002.5 $ (892.9) $ (28.4) $ 1,596.8 $ 14.1 $ 1,610.9
(1)Dividends declared per share were $0.2025 and $0.6075 for the three and nine months ended September 30, 2020.
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.






6 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, 2020 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 and nine months ended September 30, 2021 are not necessarily indicative of the results that may be attained in subsequent periods or for the year ending December 31, 2021.
Accounting Standards Adopted
On January 1, 2021, the Company adopted Accounting Standards Update (ASU) 2019-12, Income Taxes (ASC 740) - Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Financial Accounting Standards Board Accounting Standards Codification (ASC) 740 and also clarifies and amends existing guidance to improve consistent application. The adoption of ASU 2019-12 did not result in any material impact.
Accounting Standards Not Yet Adopted
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 rate 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 on our consolidated financial statements and disclosures.

Note 2 - BUSINESS COMBINATIONS

Clariant Color Acquisition
On July 1, 2020, the Company completed its acquisition of the equity interests in the global masterbatch business of Clariant AG, a corporation organized and existing under the law of Switzerland (Clariant), and the masterbatch assets in India of Clariant Chemicals (India) Limited, a public limited company incorporated in India and an indirect majority owned subsidiary of Clariant (Clariant India). The business and assets are collectively referred to as Clariant Color and the acquisitions are collectively referred to as the Clariant Color Acquisition.
Total consideration paid by the Company to complete the Clariant Color Acquisition was $1.4 billion net of cash and debt acquired. To finance the purchase of Clariant Color, the Company used $496.1 million in net proceeds from the issuance of common shares in an underwritten public offering completed in February 2020 and $640.5 million in net proceeds from a senior unsecured notes offering completed in May 2020, and funded the balance using the net proceeds of the October 2019 sale of our Performance Products and Solutions business segment (PP&S).
The Clariant Color Acquisition was accounted for under the acquisition method of accounting in accordance with ASC Topic 805. As of June 30, 2021, the purchase accounting for the Clariant Color Acquisition was finalized.






7 AVIENT CORPORATION


The summarized purchase price allocation is as follows:
(in millions) Preliminary Allocation
As of December 31, 2020
Measurement Period Adjustments Final Allocation
Cash and cash equivalents $ 145.1 $ - $ 145.1
Accounts receivable 170.8 - 170.8
Inventories 99.0 0.2 99.2
Other current assets 56.9 6.3 63.2
Property 267.6 (7.5) 260.1
Goodwill 569.0 (7.8) 561.2
Intangible assets:
Customer relationships 221.9 (20.7) 201.2
Trade names and trademarks 32.0 2.8 34.8
Patents, technology and other 273.9 7.4 281.3
Operating lease assets 30.1 - 30.1
Other long-term assets 1.3 5.8 7.1
Short term debt (0.4) - (0.4)
Accounts payable (92.7) 1.2 (91.5)
Current operating lease obligations (2.8) - (2.8)
Accrued expenses and other current liabilities (81.2) (4.5) (85.7)
Long-term debt (6.7) - (6.7)
Non-current operating lease obligations (25.8) - (25.8)
Deferred tax liabilities (60.7) 25.9 (34.8)
Pension and other post retirement benefits (53.8) - (53.8)
Other long-term liabilities (5.4) (6.7) (12.1)
Non-controlling interests (12.8) (2.4) (15.2)
Total purchase price consideration $ 1,525.3 $ - $ 1,525.3

The intangible assets that have been acquired are being amortized over a period of 18 to 20 years.
Goodwill of $561.2 million was recorded and allocated to the Color, Additives and Inks segment. The goodwill recognized is primarily attributable to the expected synergies to be achieved from the business combination. A portion of goodwill is deductible for tax purposes.
Had the Clariant Color Acquisition occurred on January 1, 2019, which was the beginning of the fiscal year prior to the acquisition, sales and income from continuing operations before income taxes on a pro forma basis would have been as follows:
(Unaudited)
(in millions) Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020
Sales $ 924.5 $ 2,782.6
Income from continuing operations before income taxes 28.9 146.5

The unaudited pro forma financial information has been calculated after applying our accounting policies and adjusting the historical results with pro forma adjustments that assume the acquisition occurred on January 1, 2019. These unaudited pro forma results do not represent financial results realized, nor are they intended to be a projection of future results. In preparation of the pro forma financial information, we eliminated certain historical allocations made by Clariant as they do not represent the stand alone operations of Clariant Color and replaced them with costs

8 AVIENT CORPORATION

more likely to occur as a part of Avient. This elimination removed expense of $7.5 million during the nine months ended September 30, 2020, while the three months ended September 30, 2020 reflect actual results.

Costs incurred in connection with the Clariant Color Acquisition were $3.5 million and $15.1 million for the three and nine months ended September 30, 2020, respectively. These fees were charged to Selling and Administrative expenseon the Condensed Consolidated Statements of Income.
Other Acquisitions
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 $22.2 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.
Our acquisitions of PlastiComp, Inc. (PlastiComp) on May 31, 2018 and Fiber-Line, LLC (Fiber-Line) on January 2, 2019 involved contingent earnout consideration. The PlastiComp earnout had a ceiling of $35.0 million that was reached during the first quarter of 2020 and paid in the third quarter of 2020. The Fiber-Line earnout was based on two annual earnout periods, with the second earnout period target based on year-one results. A payment of $53.9 million associated with the first Fiber-Line earnout period was made in the first quarter of 2020. There was no payment made for the second Fiber-Line earnout period, which ended on December 31, 2020.


Note 3 - GOODWILL AND INTANGIBLE ASSETS
Goodwill as of September 30, 2021 and December 31, 2020 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, 2020 $ 237.8 $ 1,068.7 $ 1.6 $ 1,308.1
Acquisition of businesses - 14.1 - 14.1
Currency translation (1.0) (27.3) - (28.3)
Balance at September 30, 2021 $ 236.8 $ 1,055.5 $ 1.6 $ 1,293.9

Indefinite and finite-lived intangible assets consisted of the following:
As of September 30, 2021
(In millions) Acquisition Cost Accumulated Amortization Currency Translation Net
Customer relationships $ 507.2 $ (130.1) $ 7.3 $ 384.4
Patents, technology and other 566.7 (125.1) 9.2 450.8
Indefinite-lived trade names 113.2 - - 113.2
Total $ 1,187.1 $ (255.2) $ 16.5 $ 948.4

As of December 31, 2020
(In millions) Acquisition Cost Accumulated Amortization Currency Translation Net
Customer relationships $ 508.7 $ (109.8) $ 23.8 $ 422.7
Patents, technology and other 549.9 (102.4) 28.8 476.3
Indefinite-lived trade names 109.5 - - 109.5
Total $ 1,168.1 $ (212.2) $ 52.6 $ 1,008.5

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

9 AVIENT CORPORATION

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 from continued operations recognized within our Condensed Consolidated Statements of Income were as follows:
Three Months Ended September 30, Nine Months Ended September 30,
(In millions) 2021 2020 2021 2020
Cost of sales $ 4.4 $ 4.4 $ 13.7 $ 9.3
Selling and administrative expense 2.6 5.4 10.4 14.5
Total operating lease cost $ 7.0 $ 9.8 $ 24.1 $ 23.8

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 September 30, 2021 and 2020 was 4.9 years and 5.4 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 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 September 30, 2021 and 2020 were 3.6% and 3.0%, respectively.
Maturity Analysis of Operating Lease Liabilities:
As of September 30, 2021
(In millions)
2021 $ 7.6
2022 26.6
2023 20.0
2024 12.8
2025 8.0
Thereafter 15.7
Total lease payments 90.7
Less amount of lease payment representing interest (8.9)
Total present value of lease payments $ 81.8

Note 5 - INVENTORIES, NET
Components of Inventories, netare as follows:
(In millions) As of September 30, 2021 As of December 31, 2020
Finished products $ 243.5 $ 171.7
Work in process 22.0 16.6
Raw materials and supplies 211.7 139.2
Inventories, net $ 477.2 $ 327.5


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Note 6 - PROPERTY, NET
Components of Property, net are as follows:
(In millions) As of September 30, 2021 As of December 31, 2020
Land and land improvements $ 92.4 $ 95.7
Buildings 350.9 333.5
Machinery and equipment 957.5 948.2
Property, gross 1,400.8 1,377.4
Less accumulated depreciation (731.2) (682.5)
Property, net $ 669.6 $ 694.9

Note 7 - INCOME TAXES
During the three and nine months ended September 30, 2021, the Company's effective tax rate of 14.1% and 20.5%, respectively, was below the U.S. federal statutory rate of 21.0% primarily due higher U.S. foreign-derived intangible income (FDII) tax benefits, favorable prior year U.S. return-to-provision adjustments and U.S. research and development tax credit. These favorable items were partially offset by state taxes, foreign withholding tax liability accrued associated with the repatriation of certain current and prior year foreign earnings and global intangible low-taxed income (GILTI) tax.
During the three and nine months ended September 30, 2020, the Company's effective tax rate of 51.9% and 27.6%, respectively, was above the U.S. federal statutory rate of 21.0% primarily due to foreign withholding tax liability accrued associated with the future repatriation of certain current year foreign earnings, GILTI tax and certain other non-deductible items. The impact of the effective rate was significant during the third quarter of 2020 because of low pre-tax income. These items were partially offset by the benefit of the U.S. research and development tax credit and favorable mix of earnings in foreign jurisdictions with lower effective tax rates.
Note 8 - FINANCING ARRANGEMENTS
Debt consists of the following instruments:
As of September 30, 2021 (in millions) Principal Amount Unamortized discount and debt issuance cost Net Debt Weighted average interest rate
Senior secured revolving credit facility due 2022 $ - $ - $ - - %
Senior secured term loan due 2026 613.1 6.6 606.5 1.86 %
5.25% senior notes due 2023
600.0 1.7 598.3 5.25 %
5.75% senior notes due 2025
650.0 7.3 642.7 5.75 %
Other Debt 12.2 - 12.2
Total Debt 1,875.3 15.6 1,859.7
Less short-term and current portion of long-term debt 8.7 - 8.7
Total long-term debt, net of current portion $ 1,866.6 $ 15.6 $ 1,851.0
As of December 31, 2020 (in millions) Principal Amount Unamortized discount and debt issuance cost Net Debt Weighted average interest rate
Senior secured revolving credit facility due 2022 $ - $ - $ - - %
Senior secured term loan due 2026 618.0 8.0 610.0 2.36 %
5.25% senior notes due 2023
600.0 2.5 597.5 5.25 %
5.75% senior notes due 2025
650.0 8.8 641.2 5.75 %
Other Debt 23.9 - 23.9
Total Debt 1,891.9 19.3 1,872.6
Less short-term and current portion of long-term debt 18.6 - 18.6
Total long-term debt, net of current portion $ 1,873.3 $ 19.3 $ 1,854.0


11 AVIENT CORPORATION

On May 13, 2020, the Company entered into an indenture (the Indenture) with U.S. Bank National Association, as trustee (the Trustee), relating to the issuance by the Company of $650 million aggregate principal amount of 5.75% Senior Notes due 2025 (the Notes). The Notes were sold on May 13, 2020 in a private transaction exempt from the registration requirements of the Securities Act of 1933 (the Securities Act), have not been and will not be registered under the Securities Act, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act. The Company received net proceeds of $640.5 million from the Notes offering, net of debt issuance costs, which were recorded on the balance sheet and are being amortized intoInterest expense, neton the Condensed Consolidated Statements of Income over the term of the debt.
The Notes bear interest at a rate of 5.75% per annum, which is payable semi-annually in arrears on May 15 and November 15 of each year. The Notes will mature on May 15, 2025. The Notes are senior unsecured obligations of the Company.
The agreements governing our senior secured revolving credit facility, our senior secured term loan, and the indentures and credit agreements governing other debt, contain a number of customary financial and restrictive covenants that, among other things, limit our ability to: consummate asset sales, incur additional debt or liens, consolidate or merge with any entity or transfer or sell all or substantially all of our assets, pay dividends or make certain other restricted payments, make investments, enter into transactions with affiliates, create dividend or other payment restrictions with respect to subsidiaries, make capital investments and alter the business we conduct. As of September 30, 2021, we were in compliance with all covenants.
The estimated fair value of Avient's debt instruments at September 30, 2021 and December 31, 2020 was $1,929.3 million and $1,955.9 million, respectively. The fair value of Avient's debt instruments was estimated using prevailing market interest rates on debt with similar creditworthiness, terms and maturities and represent Level 2 measurements within the fair value hierarchy.
Note 9 - SEGMENT INFORMATION
Avient has three reportable segments: (1) Color, Additives and Inks; (2) Specialty Engineered Materials; and (3) Distribution. Operating income is the primary measure that is reported to our chief operating decision maker (CODM) for purposes of allocating resources to the segments and assessing their performance. For additional information regarding Avient's business segments, see Note 15 to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2020.

12 AVIENT CORPORATION

Segment information for the three and nine months ended September 30, 2021 and 2020 is as follows:
Three Months Ended
September 30, 2021
Three Months Ended
September 30, 2020
(In millions) Sales to
External
Customers
Total Sales Operating
Income
Sales to
External
Customers
Total Sales Operating
Income
Color, Additives and Inks $ 583.9 $ 586.6 $ 66.8 $ 492.1 $ 493.8 $ 50.5
Specialty Engineered Materials 211.3 233.6 31.7 156.6 174.1 24.7
Distribution 424.4 438.8 23.8 272.1 276.9 17.5
Corporate and eliminations 0.2 (39.2) (43.6) 3.7 (20.3) (59.2)
Total $ 1,219.8 $ 1,219.8 $ 78.7 $ 924.5 $ 924.5 $ 33.5
Nine Months Ended
September 30, 2021
Nine Months Ended
September 30, 2020
(In millions) Sales to
External
Customers
Total Sales Operating
Income
Sales to
External
Customers
Total Sales Operating
Income
Color, Additives and Inks $ 1,814.1 $ 1,820.3 $ 241.9 $ 973.4 $ 977.1 $ 123.3
Specialty Engineered Materials 626.2 690.7 103.2 472.1 518.2 64.0
Distribution 1,171.4 1,205.9 71.5 790.1 805.2 51.5
Corporate and eliminations 5.6 (99.6) (109.4) 9.5 (55.4) (114.5)
Total $ 3,617.3 $ 3,617.3 $ 307.2 $ 2,245.1 $ 2,245.1 $ 124.3
Total Assets
(In millions) As of September 30, 2021 As of December 31, 2020
Color, Additives and Inks $ 3,065.6 $ 3,018.7
Specialty Engineered Materials 772.7 728.1
Distribution 423.9 244.9
Corporate and eliminations 748.8 878.8
Total assets $ 5,011.0 $ 4,870.5

Note 10 - COMMITMENTS AND CONTINGENCIES
We have been notified by federal and state environmental agencies and by private parties that we may be a potentially responsible party (PRP) in connection with the environmental investigation and remediation of certain sites. While government agencies frequently assert that PRPs are jointly and severally liable at these sites, in our experience, the interim and final allocations of liability costs are generally made based on the relative contribution of waste. We may also initiate corrective and preventive environmental projects of our own to ensure safe and lawful activities at our operations. We believe that compliance with current governmental regulations at all levels will not have a material adverse effect on our financial position, results of operations or cash flows.
In September 2007, the United States District Court for the Western District of Kentucky (Court) in the case of Westlake Vinyls, Inc. v. Goodrich Corporation, et al., held that Avient must pay the remediation costs at the former Goodrich Corporation Calvert City facility (now largely owned and operated by Westlake Vinyls, Inc. (Westlake Vinyls)), together with certain defense costs of Goodrich Corporation. The rulings also provided that Avient can seek indemnification for contamination attributable to Westlake Vinyls.
Following the rulings, the parties to the litigation agreed to settle all claims regarding past environmental costs incurred at the site. The settlement agreement provides a mechanism to pursue allocation of future remediation costs at the Calvert City site to Westlake Vinyls. We will adjust our accrual, in the future, consistent with any such future allocation of costs. Additionally, we continue to pursue available insurance coverage related to this matter and recognize gains as we receive reimbursement.
The environmental obligation at the site arose as a result of an agreement between The B.F. Goodrich Company (n/k/a Goodrich Corporation) and our predecessor, The Geon Company, at the time of the initial public offering in 1993. Under the agreement, The Geon Company agreed to indemnify Goodrich Corporation for certain environmental costs at the site. Neither Avient nor The Geon Company ever operated the facility.

13 AVIENT CORPORATION

Since 2009, Avient, along with respondents Westlake Vinyls, and Goodrich Corporation, have worked with the United States Environmental Protection Agency (USEPA) on the investigation of contamination at the site as well as the evaluation of potential remedies to address the contamination. The USEPA issued its Record of Decision (ROD) in September 2018, selecting a remedy consistent with our accrual assumptions. In April 2019, the respondents signed an Administrative Settlement Agreement and Order on Consent with the USEPA to conduct the remedial actions at the site. In February 2020, the three companies signed the agreed Consent Decree and remedial action Work Plan, which received Federal Court approval in January 2021. Our current reserve totals $117.6 million for this matter.
During the three and nine months ended September 30, 2021, Avient recognized $9.4 million and $22.4 million of expense, respectively, related to environmental remediation costs, compared to $15.8 million and $19.3 million recognized during the three and nine months ended September 30, 2020, respectively. During the nine months ended September 30, 2021 and 2020, Avient received $4.5 million and $8.7 million, respectively, of insurance recoveries for previously incurred environmental costs. These expenses and insurance recoveries are included within Cost of saleswithin our Condensed Consolidated Statements of Income.
Our Condensed Consolidated Balance Sheets include accruals totaling $129.3 million and $119.7 million as of September 30, 2021 and December 31, 2020, respectively, based on our estimates of probable future environmental expenditures relating to previously contaminated sites. These undiscounted amounts are included in Accrued expenses and other current liabilitiesand Other non-current liabilitieson the accompanying Condensed Consolidated Balance Sheets. The accruals represent our best estimate of probable future costs that we can reasonably estimate, based upon currently available information and technology and our view of the most likely remedy. Depending upon the results of future testing, completion and results of remedial investigation and feasibility studies, the ultimate remediation alternatives undertaken, changes in regulations, technology development, new information, newly discovered conditions and other factors, it is reasonably possible that we could incur additional costs in excess of the amount accrued at September 30, 2021. However, such additional costs, if any, cannot be currently estimated.
Avient is subject to a broad range of claims, administrative and legal proceedings such as lawsuits that relate to contractual allegations, tax audits, product claims, personal injuries, and employment related matters. Although it is not possible to predict with certainty the outcome or cost of these matters, the Company believes our current reserves are appropriate and these matters will not have a material adverse effect on the condensed consolidated financial statements.
Note 11 - DERIVATIVES AND HEDGING
We are exposed to market risks, such as changes in foreign currency exchange rates and interest rates. To manage the volatility related to these exposures we may enter into various derivative transactions. We formally assess, designate and document, as a hedge of an underlying exposure, the qualifying derivative instrument that will be accounted for as an accounting hedge at inception. Additionally, we assess both at inception and at least quarterly thereafter, whether the financial instruments used in the hedging transaction are effective at offsetting changes in either the fair values or cash flows of the underlying exposures. In accordance with ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12), that ongoing assessment will be done qualitatively for highly effective relationships.
Net Investment Hedge
During October and December 2018, as a means of mitigating the impact of currency fluctuations on our euro investments in foreign entities, we executed a total of six cross currency swaps, in which we will pay fixed-rate interest in euros and receive fixed-rate interest in U.S. dollars with a combined notional amount of 250.0 million euros and which mature in March 2023. In August and September 2020, we executed an additional five cross currency swaps, which were structured similarly to those executed in 2018. These swaps had a combined notional amount of 677.0 million euros, which were set to mature in May 2025. In September 2021, we executed five cross currency swap transactions that extended the length of the 2020 swaps agreements through 2028. Additionally, we entered into three new cross currency swaps with a combined notional amount of 338.7 million euros that also mature in 2028. These effectively convert a portion of our U.S. dollar denominated fixed-rate debt to euro denominated fixed-rate debt. Included in Interest expense, netwithin the Condensed Consolidated Statements of Income are gains of $3.8 million and $10.8 million for the three and nine months ended September 30, 2021, respectively, compared to gains of $2.8 million and $6.9 million for the three and nine months ended September 30, 2020, respectively. These gains were recognized within Interest expense, netwithin the Condensed Consolidated Statements of Income.
We designated the cross currency swaps as net investment hedges of our net investment in our European operations under ASU 2017-12 and applied the spot method to these hedges. The changes in fair value of the derivative instruments that are designated and qualify as hedges of net investments in foreign operations are

14 AVIENT CORPORATION

recognized within Accumulated Other Comprehensive Income (AOCI) to offset the changes in the values of the net investment being hedged. For the three and nine months ended September 30, 2021, gains of $7.1 million and $24.8 million were recognized within translation adjustments in AOCI, net of tax, respectively, compared to losses of $11.7 million and $5.7 million for the three and nine months ended September 30, 2020, respectively.
Derivatives Designated as Cash Flow Hedging Instruments
In August 2018, we entered into two interest rate swaps with a combined notional amount of $150.0 million to manage the variability of cash flows in the interest rate payments associated with our existing LIBOR-based interest payments, effectively converting $150.0 million of our floating rate debt to a fixed rate. We began to receive floating rate interest payments based upon one-month U.S. dollar LIBOR and in return are obligated to pay interest at a fixed rate of 2.732% until November 2022. We have designated these interest rate swap contracts as cash flow hedges pursuant to ASC Topic 815, Derivatives and Hedging. The net interest payments accrued each month for these highly effective hedges are reflected in net income as adjustments of interest expense and the remaining change in the fair value of the derivatives is recorded as a component of AOCI. The amount of expense recognized within Interest expense, netin our Condensed Consolidated Statements of Income was $1.0 million and $3.0 million for the three and nine months ended September 30, 2021, compared to $1.0 million and $2.2 million for the three and nine months ended September 30, 2020. For the three and nine months ended September 30, 2021, gains of $0.7 million and $2.2 million were recognized in AOCI, net of tax, compared to a gain of $0.8 million and a loss of $2.4 million for the three and nine months ended September 30, 2020.
All of our derivative assets and liabilities measured at fair value are classified as Level 2 within the fair value hierarchy. We determine the fair value of our derivatives based on valuation methods, which project future cash flows and discount the future amounts present value using market based observable inputs, including interest rate curves and foreign currency rates.

The fair value of derivative financial instruments recognized in the Condensed Consolidated Balance Sheets is as follows:
(In millions) Balance Sheet Location
As of
September 30, 2021
As of December 31, 2020
Liabilities
Cross Currency Swaps (Net Investment Hedge)
Other non-current liabilities $ 5.9 $ 41.1
Interest Rate Swaps (Cash Flow Hedge)
Other non-current liabilities $ 4.4 $ 7.3

Note 12 - SUBSEQUENT EVENTS
On October 26, 2021, the Company and certain of its subsidiaries entered into the First Amendment to the Third Amended and Restated Credit Agreement (the ABL Amendment) with Wells Fargo Capital Finance, LLC, as administrative agent (in such capacity, Administrative Agent) and the various lenders and other agents party thereto. The ABL Amendment amends the Third Amended and Restated Credit Agreement, dated June 28, 2019 (the ABL Credit Agreement), by and among the Company and certain subsidiaries of the Company party thereto, Wells Fargo Capital Finance, LLC, as administrative agent, and the various lenders and other agents party thereto.
The ABL Amendment, among other things, (i) increases the Company's total revolving credit line to $500 million (which may be increased by up to $150 million subject to the Company meeting certain requirements and obtaining commitments for such increase) (the Revolving Credit Facility), subject to the borrowing base limitations, (ii) extends the maturity date of the Revolving Credit Facility to October 26, 2026 (subject to certain exceptions), (iii) modifies the borrowing base to include qualified cash subject to certain limitations, (iv) modifies the applicable margin and the unused line fee to be based on availability, and (v) modifies certain negative covenants to provide additional flexibility.



15 AVIENT CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our Business
We are a premier provider of specialized and sustainable material solutions that transform customer challenges into opportunities, bringing new products to life for a better world. Our products include specialty engineered materials, advanced composites, color and additive systems and polymer distribution. We are also a highly specialized developer and manufacturer of performance enhancing additives, liquid colorants, and fluoropolymer and silicone colorants. Headquartered in Avon Lake, Ohio, we have employees at sales, manufacturing and distribution facilities across the globe. We provide value to our customers through our ability to link our knowledge of polymers and formulation technology with our manufacturing and supply chain capabilities to provide value-added solutions to designers, assemblers and processors of plastics. When used in this Quarterly Report on Form 10-Q, the terms "we," "us," "our," "Avient" and the "Company" mean Avient Corporation, formerly known as PolyOne Corporation, and its consolidated subsidiaries.
Highlights and Executive Summary
A summary of Avient's sales, operating income, net income and net income attributable to Avient common shareholders follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In millions) 2021 2020 2021 2020
Sales $ 1,219.8 $ 924.5 $ 3,617.3 $ 2,245.1
Operating income 78.7 33.5 307.2 124.3
Net income from continuing operations 52.6 2.6 201.7 59.1
Income (loss) from discontinued operations, net of income taxes - - - (0.5)
Net income $ 52.6 $ 2.6 $ 201.7 $ 58.6
Net income attributable to Avient common shareholders $ 52.9 $ 1.7 $ 201.0 $ 57.3
Trends and Developments
COVID-19
We have continued to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including how it has impacted our employees, customers, supply chain and distribution network. While our business was adversely affected by the COVID-19 pandemic in 2020, we have seen recovery through the third quarter of 2021. The scope and duration of the pandemic continues to be uncertain, and evolving factors such as the level and timing of vaccine distribution across the world and the extent of any resurgences of the virus or emergence of new variants will impact the stability of the economic recovery and growth. The extent to which our operations may be adversely impacted by the COVID-19 pandemic will depend largely on these future developments, which are highly uncertain and cannot be accurately predicted. For further information regarding the impact that the COVID-19 pandemic could have on our business, see Part I - Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2020.
Clariant Color Acquisition
On July 1, 2020, the Company completed the Clariant Color Acquisition. The Clariant Color Acquisition increased the Company's scale, product depth and geographic reach in its Color, Additives and Inks segment. Clariant Color has leading portfolios of solid and liquid systems that include sustainable solutions for alternative energy, and reduced material requirements for packaging and lightweighting.
Total consideration paid by the Company to complete the Clariant Color Acquisition was $1.4 billion, net of cash and debt acquired. To finance the purchase of Clariant Color, the Company used $496.1 million in net proceeds from the issuance of common shares in an underwritten public offering completed in February 2020 and $640.5 million in net proceeds from a senior unsecured notes offering completed in May 2020, and funded the balance using the net proceeds of the October 2019 sale of PP&S. We finalized the purchase accounting for the Clariant Color Acquisition as of June 30, 2021. For details related to the effects of adjustments recognized in the current reporting period, refer to Note 2, Business Combinationsto the accompanying condensed consolidated financial statements.

16 AVIENT CORPORATION

Magna Colours Acquisition
On July 1, 2021, the Company completed its acquisition of 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 $22.2 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.
Results of Operations - The three and nine months ended September 30, 2021 compared to three and nine months ended September 30, 2020:
Three Months Ended September 30, Variances - Favorable (Unfavorable) Nine Months Ended September 30, Variances -
Favorable (Unfavorable)
(Dollars in millions, except per share data) 2021 2020 Change %
Change
2021 2020 Change %
Change
Sales $ 1,219.8 $ 924.5 $ 295.3 32 % $ 3,617.3 $ 2,245.1 $ 1,372.2 61 %
Cost of sales 964.4 714.3 (250.1) (35) % 2,770.8 1,713.7 (1,057.1) (62) %
Gross margin 255.4 210.2 45.2 22 % 846.5 531.4 315.1 59 %
Selling and administrative expense 176.7 176.7 - - % 539.3 407.1 (132.2) (32) %
Operating income 78.7 33.5 45.2 135 % 307.2 124.3 182.9 147 %
Interest expense, net (19.0) (29.7) 10.7 36 % (57.8) (55.3) (2.5) (5) %
Other income, net 1.4 1.5 (0.1) nm 4.1 12.6 (8.5) nm
Income from continuing operations before income taxes 61.1 5.3 55.8 1053 % 253.5 81.6 171.9 211 %
Income tax expense (8.5) (2.7) (5.8) (215) % (51.8) (22.5) (29.3) (130) %
Net income from continuing operations 52.6 2.6 50.0 1923 % 201.7 59.1 142.6 241 %
Loss from discontinued operations, net of income taxes - - - nm - (0.5) 0.5 nm
Net income 52.6 2.6 50.0 1923 % 201.7 58.6 143.1 244 %
Net income attributable to noncontrolling interests 0.3 (0.9) 1.2 nm (0.7) (1.3) 0.6 nm
Net income attributable to Avient common shareholders $ 52.9 $ 1.7 $ 51.2 3012 % $ 201.0 $ 57.3 $ 143.7 251 %
Earnings per share attributable to Avient common shareholders - Basic:
Continuing operations $ 0.58 $ 0.02 $ 2.20 $ 0.64
Discontinued operations - - - -
Total $ 0.58 $ 0.02 $ 2.20 $ 0.64
Earnings (loss) per share attributable to Avient common shareholders - Diluted:
Continuing operations $ 0.57 $ 0.02 $ 2.18 $ 0.64
Discontinued operations - - - (0.01)
Total $ 0.57 $ 0.02 $ 2.18 $ 0.63
nm - not meaningful

Sales
Sales increased $295.3 million in the three months ended September 30, 2021 compared to the three months ended September 30, 2020 as a result of the growth in nearly all end markets and regions and price increases associated with raw material inflation.
Sales increased $1,372.2 million in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 as a result of the Clariant Color Acquisition, as well as growth in nearly all end markets and regions and price increases associated with raw material inflation.



17 AVIENT CORPORATION

Cost of sales
As a percent of sales, cost of sales increased from 77.3% to 79.1% in the three months ended September 30, 2020 to September 30, 2021, respectively, and 76.3% to 76.6% in the nine months ended September 30, 2020 to September 30, 2021, respectively, as a result of rising raw material costs.
Selling and administrative expense
Selling and administrative expense in the three months ended September 30, 2021 was comparable to the three months ended September 30, 2020. Selling and administrative expense increased $132.2 million during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, driven primarily by the Clariant Color Acquisition.
Interest expense, net
Interest expense, net decreased $10.7 million in the three months ended September 30, 2021 compared to the three months ended September 30, 2020 as we incurred committed financing fees in 2020 related to the Clariant Color Acquisition. Interest expense, net increased $2.5 million in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, due to higher interest expense related to our senior unsecured notes offering completed in May 2020, offset by reduction of committed financing associated with the Clariant Color Acquisition.
Income taxes
During the three and nine months ended September 30, 2021, the Company's effective tax rate was 14.1% and 20.5%, respectively, compared to 51.9% and 27.6% for the three and nine months ended September 30, 2020, respectively. The income tax rate decrease is primarily due to higher U.S. FDII tax benefits, lower tax rate impact on withholding tax associated with the repatriation of certain current and prior year foreign earnings, lower valuation allowance expense and favorable prior year U.S. return-to-provision adjustments. Partially offsetting these favorable effects was a more favorable foreign effective tax rate in 2020 compared to 2021 and a higher impact of state income taxes in 2021.
SEGMENT INFORMATION
Avient has three reportable segments: (1) Color, Additives and Inks; (2) Specialty Engineered Materials; and (3) Distribution. Operating income is the primary measure that is reported to our CODM for purposes of allocating resources to the segments and assessing their performance.


18 AVIENT CORPORATION

Sales and Operating Income - The three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020:
Three Months Ended September 30, Variances - Favorable
(Unfavorable)
Nine Months Ended September 30, Variances - Favorable
(Unfavorable)
(Dollars in millions) 2021 2020 Change % Change 2021 2020 Change % Change
Sales:
Color, Additives and Inks $ 586.6 $ 493.8 $ 92.8 19 % $ 1,820.3 $ 977.1 $ 843.2 86 %
Specialty Engineered Materials
233.6 174.1 59.5 34 % 690.7 518.2 172.5 33 %
Distribution 438.8 276.9 161.9 58 % 1,205.9 805.2 400.7 50 %
Corporate and eliminations (39.2) (20.3) (18.9) (93) % (99.6) (55.4) (44.2) (80) %
Total Sales $ 1,219.8 $ 924.5 $ 295.3 32 % $ 3,617.3 $ 2,245.1 $ 1,372.2 61 %
Operating income:
Color, Additives and Inks $ 66.8 $ 50.5 $ 16.3 32 % $ 241.9 $ 123.3 $ 118.6 96 %
Specialty Engineered Materials
31.7 24.7 7.0 28 % 103.2 64.0 39.2 61 %
Distribution 23.8 17.5 6.3 36 % 71.5 51.5 20.0 39 %
Corporate and eliminations (43.6) (59.2) 15.6 26 % (109.4) (114.5) 5.1 4 %
Total Operating Income $ 78.7 $ 33.5 $ 45.2 135 % $ 307.2 $ 124.3 $ 182.9 147 %
Operating income as a percentage of sales:
Color, Additives and Inks 11.4 % 10.2 % 1.2 % points 13.3 % 12.6 % 0.7 % points
Specialty Engineered Materials
13.6 % 14.2 % (0.6) % points 14.9 % 12.4 % 2.5 % points
Distribution 5.4 % 6.3 % (0.9) % points 5.9 % 6.4 % (0.5) % points
Total
6.5 % 3.6 % 2.9 % points 8.5 % 5.5 % 3.0 % points

Color, Additives and Inks
Sales increased $92.8 million in the three months ended September 30, 2021 compared to the three months ended September 30, 2020 due to growth in nearly all end markets and regions and price increases associated with raw material inflation. Sales increased $843.2 million in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to the Clariant Color Acquisition, as well as growth in nearly all end markets and regions and price increases associated with raw material inflation.
On a pro forma basis to include Clariant Color in all periods, sales increased by $302.7 million, or 20%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 as a result of growth in nearly all end markets and regions, particularly consumer, transportation, and industrial, as well as price increases. Favorable foreign exchange also contributed 4%.
Operating income increased $16.3 million in the three months ended September 30, 2021 compared to the three months ended September 30, 2020 due to growth in nearly all end markets and regions. Operating income increased $118.6 million in the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020 primarily due to the Clariant Color Acquisition, as well as growth in nearly all end markets and price increases associated with raw material inflation.
On a pro forma basis to include Clariant Color in all periods, operating income increased by 43% in the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020, respectively, as a result of the sales growth discussed above and capture of integration synergies, partially offset by raw material and conversion cost inflation.
Specialty Engineered Materials
Sales increased $59.5 million and $172.5 million in the three and nine months ended September 30, 2021 compared to the three and nine months ended September 30, 2020, respectively, largely driven by high demand for composite materials and growth in many end markets.
Operating income increased $7.0 million and $39.2 million in the three and nine months ended September 30, 2021 as compared to the three and nine months ended September 30, 2020, respectively, due to increased sales and continued growth of higher margin specialty and composite solutions.

19 AVIENT CORPORATION


Distribution
Sales increased $161.9 million and $400.7 million in the three and nine months ended September 30, 2021, respectively, as compared to the three and nine months ended September 30, 2020, driven by increased demand as well as higher average selling prices.
Operating income increased $6.3 million and $20.0 million in the three and nine months ended September 30, 2021 as compared to the three and nine months ended September 30, 2020, respectively as a result of the sales growth discussed above, partially offset by raw material cost inflation.
Corporate and Eliminations
Costs declined $15.6 million, or 26%, in the three months ended September 30, 2021 as compared to the three months ended September 30, 2020 and $5.1 million, or 4%, in the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020 due to lower environmental remediation costs and lower acquisition related expense.
Liquidity and Capital Resources
Our objective is to finance our business through operating cash flow and an appropriate mix of debt and equity. By laddering the maturity structure, we avoid concentrations of debt maturities, reducing liquidity risk. We may from time to time seek to retire or purchase our outstanding debt with cash and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. We may also seek to repurchase our outstanding common shares. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved have been and may continue to be material.
The following table summarizes our liquidity as of September 30, 2021 and December 31, 2020:
(In millions) As of September 30, 2021 As of December 31, 2020
Cash and cash equivalents $ 545.2 $ 649.5
Revolving credit availability 407.0 279.9
Liquidity $ 952.2 $ 929.4

As of September 30, 2021, approximately 72% of the Company's cash and cash equivalents resided outside the United States.
Expected sources of cash needed to satisfy cash requirements for the remainder 2021 include our cash on hand, cash from operations and available liquidity under our revolving credit facility, if needed. Expected uses of cash for the remainder of 2021 include integration costs related to the Clariant Color Acquisition, interest payments, cash taxes, dividend payments, share repurchases, environmental remediation costs, capital expenditures and debt repayment.
Cash Flows
The following describes the significant components of cash flows from operating, investing and financing activities for the nine months ended September 30, 2021 and 2020.
Operating Activities- In the nine months ended September 30, 2021, net cash provided by operating activities was $110.0 million as compared to net cash provided by operating activities of $68.7 million for the nine months ended September 30, 2020, driven by increased earnings in 2021 and no taxes paid associated with the gain on divestiture and no earnout liabilities paid, partially offset by increased working capital requirements to meet demand.
Investing Activities- Net cash used by investing activities during the nine months ended September 30, 2021 of $112.3 million primarily reflects capital expenditures of $62.7 million and $47.6 million related to the Magna Colours acquisition.
Net cash used by investing activities during the nine months ended September 30, 2020 of $1,369.0 million primarily reflects $1,342.7 million related to the Clariant Color Acquisition, and capital expenditures of $38.6 million.
Financing Activities- Net cash used by financing activities for the nine months ended September 30, 2021 of $91.5 million primarily reflects $58.2 million of dividends paid, repayment of debt of $16.5 million, repurchases of our outstanding common shares of $4.2 million, and the payment of withholding tax on share awards of $9.1 million.

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Net cash provided by financing activities for the nine months ended September 30, 2020 of $1,011.5 million primarily reflects $496.1 million of net proceeds received from the issuance of common shares in an underwritten public offering that we completed in February 2020, and $640.5 million of net proceeds from the senior secured notes offering completed in May 2020, offset by $52.8 million of dividends paid, repurchases of our outstanding common shares of $13.6 million, and the payment of acquisition date earnout liabilities of $50.8 million.
Debt
As of September 30, 2021, our principal amount of debt totaled $1,875.3 million. Aggregate maturities of the principal amount of debt for the current year, next four years and thereafter, are as follows:
(In millions)
2021 $ 2.0
2022 8.5
2023 608.6
2024 8.6
2025 658.7
Thereafter 588.9
Aggregate maturities $ 1,875.3

As of September 30, 2021, we were in compliance with all financial and restrictive covenants pertaining to our debt. For additional information regarding our debt, please see Note 8, Financing Arrangements to the accompanying condensed consolidated financial statements.
Derivatives and Hedging
We are exposed to market risks, such as changes in foreign currency exchange rates and interest rates. To manage the volatility related to these exposures we may enter into various derivative transactions. For additional information regarding our derivative instruments, please see Note 11, Derivatives and Hedging to the accompanying condensed consolidated financial statements.
Contractual Obligations
We have future obligations under various contracts relating to debt and interest payments, operating leases, pension and post-retirement benefit plans and purchase obligations. During the nine months ended September 30, 2021, there were no material changes to these obligations as reported in our Annual Report on Form 10-K for the year ended December 31, 2020.


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CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS
In this Quarterly Report on Form 10-Q, 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 forecasts of future events and are not guarantees of future performance. They are based on management's expectations that involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. You can identify these statements by the fact that they do not relate strictly to historic or current facts. They use words such as "will," "anticipate," "estimate," "expect," "project," "intend," "plan," "believe" and other words and terms of similar meaning in connection with any discussion of future operating or financial condition, performance and/or sales. In particular, these include statements relating to future actions; prospective changes in raw material costs, product pricing or product demand; future performance; estimated capital expenditures; results of current and anticipated market conditions and market strategies; sales efforts; expenses; the outcome of contingencies such as legal proceedings and environmental liabilities; and financial results. Factors that could cause actual results to differ materially from those implied by these forward-looking statements include, but are not limited to:
disruptions, uncertainty or volatility in the credit markets that could adversely impact the availability of credit already arranged and the availability and cost of credit in the future;
the effect on foreign operations of currency fluctuations, tariffs and other political, economic and regulatory risks;
the current and potential future impact of the COVID-19 pandemic on our business, results of operations, financial position or cash flows, including without limitation, any supply chain and logistics issues;
changes in polymer consumption growth rates and laws and regulations regarding plastics in jurisdictions where we conduct business;
fluctuations in raw material prices, quality and supply, and in energy prices and supply;
production outages or material costs associated with scheduled or unscheduled maintenance programs;
unanticipated developments that could occur with respect to contingencies such as litigation and environmental matters;
an inability to achieve the anticipated financial benefit from initiatives related to acquisition and integration working capital reductions, cost reductions and employee productivity goals;
our ability to pay regular quarterly cash dividends and the amounts and timing of any future dividends;
information systems failures and cyberattacks;
our ability to consummate and successfully integrate acquisitions;
amounts for cash and non-cash charges related to restructuring plans that may differ from original estimates, including because of timing changes associated with the underlying actions; and
other factors described in our Annual Report on Form 10-K for the year ended December 31, 2020 under Item 1A, "Risk Factors."
We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties and assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law. You are advised, however, to consult any further disclosures we make on related subjects in our reports on Forms 10-Q, 8-K and 10-K filed with the Securities and Exchange Commission. You should understand that it is not possible to predict or identify all risk factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to exposures to market risk as reported in our Annual Report on Form 10-K for the year ended December 31, 2020.

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ITEM 4. CONTROLS AND PROCEDURES
Disclosure controls and procedures
Avient's management, under the supervision of and with the participation of its Chief Executive Officer and its Chief Financial Officer, has evaluated the effectiveness of the design and operation of Avient's disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the period covered by this Quarterly Report. Based upon this evaluation, Avient's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report, its disclosure controls and procedures were effective.
Changes in internal control over financial reporting
There were no changes in Avient's internal control over financial reporting during the quarter ended September 30, 2021 that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information regarding certain legal proceedings can be found in Note 10, Commitments and Contingenciesto the accompanying condensed consolidated financial statements and is incorporated by reference herein.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The table below sets forth information regarding the repurchase of shares of our common shares during the period indicated.
Period Total Number of Shares Purchased Weighted Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program
Maximum Number of Shares that May Yet be Purchased Under the Program(1)
July 1 to July 31 - $ - - 5,757,472
August 1 to August 31 - - - 5,757,472
September 1 to September 30 - - - 5,757,472
Total - $ - -
(1) Our Board of Directors approved a common share repurchase program authorizing Avient to purchase its common shares in August 2008, which share repurchase authorization has been subsequently increased from time to time. On December 9, 2020, we announced that we would increase our share buyback by an additional 5 million shares. As of September 30, 2021, approximately 5.8 million shares remained available for purchase under these authorizations, which have no expiration. Purchases of common shares may be made by open market purchases or privately negotiated transactions and may be made pursuant to Rule 10b5-1 plans and accelerated share repurchases.
ITEM 5. OTHER INFORMATION
On October 26, 2021, the Company and certain of its subsidiaries entered into the First Amendment to the Third Amended and Restated Credit Agreement (the ABL Amendment) with Wells Fargo Capital Finance, LLC, as administrative agent (in such capacity, Administrative Agent) and the various lenders and other agents party thereto. The ABL Amendment amends the Third Amended and Restated Credit Agreement, dated June 28, 2019 (the ABL Credit Agreement), by and among the Company and certain subsidiaries of the Company party thereto, Wells Fargo Capital Finance, LLC, as administrative agent, and the various lenders and other agents party thereto.
The ABL Amendment, which includes customary representations and warranties, among other things, (i) increases the Company's total revolving credit line to $500 million (which may be increased by up to $150 million subject to the Company meeting certain requirements and obtaining commitments for such increase) (the Revolving Credit Facility), subject to the borrowing base limitations, (ii) extends the maturity date of the Revolving Credit Facility to October 26, 2026 (subject to certain exceptions), (iii) modifies the borrowing base to include qualified cash subject to certain limitations, (iv) modifies the applicable margin and the unused line fee to be based on availability, and (v) modifies certain negative covenants to provide additional flexibility.
The foregoing summary description of the ABL Amendment does not purport to be complete and is qualified in its entirety by reference to, and should be read in conjunction with, the full text of the ABL Amendment, which is filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q and incorporated herein by reference.

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ITEM 6. EXHIBITS
EXHIBIT INDEX
Exhibit No. Exhibit Description
3.1
3.2
10.1+
Avient Corporation Deferred Compensation Plan for Non-Employee Directors (As Amended and Restated Effective July 15, 2021)
10.2
First Amendment to Third Amended and Restated Credit Agreement, dated as of October 26, 2021, by and among the lenders party thereto, Wells Fargo Capital Finance, LLC, as administrative agent for the lenders, Avient Corporation, NEU Specialty Engineered Materials, LLC, Avient Canada ULC, and PolyOne S.à r.l.
31.1
Certification of Robert M. Patterson, Chairman, President and Chief Executive Officer, pursuant to SEC Rules 13a-14(a) and 15d-14(a), adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of Jamie A. Beggs, Senior Vice President and Chief Financial Officer, pursuant to SEC Rules 13a-14(a) and 15d-14(a), adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification pursuant to 18 U.S.C. § 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as signed by Robert M. Patterson, Chairman, President and Chief Executive Officer
32.2
Certification pursuant to 18 U.S.C. § 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as signed by Jamie A. Beggs, Senior Vice President and Chief Financial Officer
101.INS Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
+ Indicates management contract or compensatory plan, contract or arrangement in which one or more directors or executive officers of the Registrant may be participants.



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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
October 28, 2021 AVIENT CORPORATION
/s/ Jamie A. Beggs
Jamie A. Beggs
Senior Vice President and Chief Financial Officer


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