PolyOne Announces Steps to Reduce Cost Structure

15-Jan-2003

PolyOne Corporation announced actions designed to improve profitability by reducing the Company's cost structure and strengthening its competitive position with customers.

As part of the restructuring, the Company will eliminate approximately 400 salaried positions, primarily in administrative functions. PolyOne projects that this reduction will lower selling and administrative (S&A) costs, as classified on its income statement, between $30 million and $35 million pre tax annually, effective with the second quarter of 2003. In addition, PolyOne will implement approximately $5 million to $10 million in reductions of non-personnel costs.

"The actions we are taking help us to achieve a position of low-cost competitiveness within our industry," said Thomas A. Waltermire, PolyOne chairman and chief executive officer. "Moreover, these actions are designed to enable us to focus intensely on winning and supporting targeted customers and their markets. We have taken great care to ensure that our customers get the fast, reliable and cost-competitive service they require."

PolyOne is committed to reducing its selling and administrative costs to less than 10 percent of sales from the current 12 percent. PolyOne's 2002 sales are estimated to be $2.6 billion.

Most of the staff reductions result from simplifying processes and eliminating low-value activities throughout the organization. Additional savings will come from further centralization of certain functional areas in North America such as human resources, information technology, sourcing and finance, and from the elimination of outside professional services. The reductions are worldwide in scope, although nearly 90 percent of the affected employees are in North America.

These actions will build upon PolyOne's previously announced initiatives to reduce costs. In fact, the reductions announced today will complement the program to consolidate and upgrade the Company's North American manufacturing assets, resulting in further reductions in manufacturing costs and improvements in product quality and service. Begun nearly two years ago, this project is nearing completion.

PolyOne expects nearly all staff reductions to occur in the first quarter of 2003. The Company projects that the total pre-tax first-quarter 2003 earnings charge from the job eliminations will be approximately $22 million.

Cash flows associated with termination benefits will be spread over the year. The Company estimates that in the first quarter of 2003, these cash payments will exceed cost savings from the terminations by approximately $2 million to $3 million. In subsequent quarters, however, these actions should result in improved cash flows as net cost savings exceed termination benefits.

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