<PAGE> 1
EXHIBIT 99.1
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[M.A. HANNA COMPANY LOGO] NEWS
RELEASE
M.A. HANNA COMPANY
200 Public Square
Suite 36-5000
Cleveland, Ohio 44114-2304
phone 216.589.4000
fax 216.589.4200
FOR IMMEDIATE RELEASE
Investor and media contact: Christopher Farage (216) 589-4085
M.A. HANNA REPORTS SECOND-QUARTER SALES OF $606.8 MILLION,
OPERATING EARNINGS OF 19 CENTS PER SHARE
CLEVELAND, July 26, 2000 - M.A. Hanna Company (NYSE: MAH:CHICAGO) today reported
second-quarter earnings, before one-time events, of 19 cents per share, a
decrease of 17 percent from second-quarter 1999 earnings of 23 cents per share.
The quarterly results are in line with estimates that M.A. Hanna made public on
July 10, when it cautioned investors that operating earnings would be within a
range of 18 to 20 cents per share. M.A. Hanna reported then that earnings were
impacted by higher raw material costs, start-up expenses for a new plant in
Mexico in excess of new business growth, a decline in tire tolling, and
performance of the company's Cadillac Plastic business that was below
expectations.
The company today reported the following second-quarter results:
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EXHIBIT 99.1
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- Sales of $606.8 million increased 2.1 percent compared with $594.3
million in the second quarter of 1999.
- Before one-time events, operating earnings were $22.6 million compared
with $25.7 million in 1999.
- The one-time events included an after-tax loss of $52.3 million
related to the pending Cadillac Plastic divestiture, and a $10.5
million reduction in income tax reserves related to a settlement of
examinations of previously filed tax returns.
- After these one-time events, the net loss was $33.3 million compared
with net income of $10.4 million in the 1999 quarter.
"As we made clear earlier this month, M.A. Hanna's second-quarter performance
fell short of our expectations," said Chairman and Chief Executive Officer
Phillip D. Ashkettle. "We understand what the problems were in the second
quarter, and have put into place actions and processes that will address these
problems and show benefits beginning in the third quarter. We also feel very
positive about the longer term as we work closely together with The Geon Company
to combine and form PolyOne(TM) Corporation, the world's largest polymer
services company."
The increase in M.A. Hanna's second-quarter sales can be attributed to the
following:
- Volume accounted for 3.8 percent of the year-over-year increase.
- Price/mix had a positive 2.6 percent impact.
- The combined impact from acquisitions and divestitures was a negative 1.9
percent.
- Currency exchange accounted for a negative 2.4 percent.
Gross margins were 17 percent compared with 18.1 percent in the same 1999
quarter. SG&A expenses of $76.5 million were 12.6 percent of sales, compared
with $76.1 million, or 12.8 percent of sales, in the 1999 quarter.
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EXHIBIT 99.1
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One-time, non-recurring events in the second quarter included a loss on the
pending sale of a portion of the Cadillac Plastic shapes distribution
businesses.
M.A. Hanna announced on May 11 that it had reached agreement to sell a
substantial component of Cadillac Plastic to GE Plastics. An after-tax loss of
$52.3 million, or $1.16 per share, is related to the write down of goodwill and
closing costs associated with the expected sale. After the divestiture of
Cadillac Plastic, M.A. Hanna expects to see a net improvement in operating
income as a percent of sales, as well as a reduction in selling, general and
administrative (SG&A) expenses and working capital.
Also during the second quarter, M.A. Hanna recorded a one-time reduction in
income tax reserves of $10.5 million related to the settlement of examinations
of previously filed tax returns.
Debt to capital was 47.1 percent at the end of the quarter compared with 43.5
percent at the end of the comparable 1999 quarter. The tax rate was 40.5 percent
on an operating basis.
SEGMENT ANALYSIS
Plastic Processing
This segment had second-quarter sales of $248 million, an increase of 6.4
percent over second-quarter 1999 sales of $233.2 million. Operating margin was
5.5 percent, compared with 6.9 percent in the second quarter of 1999.
The increase in sales for the segment can be attributed to the following:
- Volume increases accounted for 3.0 percent of the improvement.
- Acquisitions accounted for a 3.2 percent increase.
- Price/mix added 4.2 percentage points.
- Currency exchange had a negative 4 percent impact.
<PAGE> 4
EXHIBIT 99.1
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The decrease in operating margin for the plastic processing businesses was the
result of raw material cost increases that the company was unable to fully
offset with price increases. International plastic compounding and color and
additives operations, however, showed solid year-over-year sales growth and
improved profitability.
The company is also implementing customer equity analysis, which evaluates
customers according to profitability and focuses on growing business with
profitable customers, and is examining pricing stewardship procedures across all
customers. To address issues in the plastic processing segment, especially in
the domestic operations, M.A. Hanna has continued to target improvements in
manufacturing efficiencies and reductions in SG&A expenses.
In addition, the company is organizing a number of new, customer-focused
business teams to drive performance improvement.
Rubber Processing
Sales in this segment were $130.7 million compared with $131.6 million in second
quarter 1999, a decline of 0.7 percent. Operating margin decreased to 7.5
percent from 8.8 percent in the 1999 quarter.
The decline in segment sales can be attributed to the following:
- Volume accounted for a 0.7 percent increase.
- Price/mix was a negative 0.6 percent.
- Currency exchange was a negative 0.8 percent.
Overall, three factors were responsible for the disappointing performance in
rubber processing. First was the start-up of a new rubber compounding plant in
Mexico. The plant's revenue base has not yet matched operating expenses, but the
company expects it to break even in the third quarter.
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EXHIBIT 99.1
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Second, M.A. Hanna's tire tolling business - in which customers provide the raw
materials that are then processed for shipment back to customers - decreased in
step with the weakening tire market.
Finally, this segment also experienced margin pressure from raw material cost
increases. On July 1, M.A. Hanna implemented price increases for its long-term
automotive related customers. The company expects to see effects from this
increase in the third quarter.
Additional actions in the rubber compounding business include a focus on lean
manufacturing, a successful initiative that it launched a year ago to streamline
its manufacturing systems, improve customer service, and promote associate
training, involvement and innovation. The encouraging results so far of lean
manufacturing also include increased inventory turns.
Distribution
Sales in the distribution segment were $236.5 million, a 1.2 percent increase
over second-quarter 1999 sales of $233.7 million. Operating margin was 1.7
percent compared with 1.5 percent in the 1999 quarter.
The increase in sales for the segment can be attributed to the following:
- Volume accounted for 6.6 percent of increase.
- Price/mix contributed a 2.8 percent increase.
- Currency exchange was a negative 1.6 percent.
- A 1999 divestiture led to a negative 6.6 percent impact.
The resin distribution business maintained solid and consistent revenue, volume
and earnings growth. Excluding the July 1999 divestiture of a thermoset resin
distribution business, sales showed a double-digit gain. The growth in business
is attributable to
<PAGE> 6
EXHIBIT 99.1
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strong market demand for products, improved operational efficiencies and the
addition of trained sales associates.
Distribution of plastic shapes (sheet, rod, tube and film) is a non-core
business for M.A. Hanna. The shapes businesses, Cadillac Plastic, performed
below expectations, in part because an action plan intended to modify the
overall operating structure was put on hold as M.A. Hanna sought to divest this
business.
The pending sale of the largest portion of Cadillac Plastic to GE Plastics,
which was announced on May 11, 2000, is expected to close in the third quarter.
On July 19, M.A. Hanna announced that it had reached agreement to sell Richmond
Aircraft, another unit of Cadillac Plastic, to UMECO plc, Europe's leading
provider of value-added distribution services to the aerospace and defense
industries. M.A. Hanna expects a third-quarter gain on the sale of Richmond
Aircraft, which had revenues of $27 million in 1999.
M.A. Hanna is exploring strategic alternatives for the remaining Cadillac
Plastic interest, represented by a fifty-percent ownership in three European
joint ventures.
"The Cadillac Plastic and Richmond Aircraft divestitures are part of an effort
to focus our resources on our core businesses and on what we do best," said
Ashkettle. "Looking toward the future as PolyOne(TM) Corporation, we're
committed to excel as a polymer services provider, clearly focused on working
with our customers to find superior solutions to their polymer needs. Using the
collective ideas from the combined talent of both companies, we're acting on
very specific plans to improve all aspects of our business. We're very excited
at the ability we will have to enhance our top line and to carry through many
improvements that will contribute to substantial bottom-line growth. Our full
expectation is that we will outperform our peers and grow aggressively, both
organically and through targeted acquisitions."
The combination with Geon is expected to close in the third quarter.
<PAGE> 7
EXHIBIT 99.1
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M.A. Hanna Company, headquartered in Cleveland, is a $2.3 billion
international specialty polymers company focused on the plastics and rubber
industries through its operations in North America, Europe and Asia. Its primary
businesses are plastic compounding and color and additive systems, rubber
compounding and additives, and distribution of plastic resins and engineered
plastic shapes. On May 8, 2000, M.A. Hanna and The Geon Company (NYSE:GON)
announced an agreement to consolidate, forming PolyOne(TM) Corporation, the
world's largest polymer services company. Additional information about M.A.
Hanna can be found at www.mahanna.com.
Any forward-looking statements in this announcement are based on
current expectations, and actual results may differ materially depending on
business conditions and growth in the plastics and rubber industries, the
general economy, foreign political and economic developments, availability and
pricing of supplies and raw materials, changes in product mix, shifts in market
demand, the success of the company's lean manufacturing and supply chain
management initiatives, the continuing improvement in the domestic plastic
processing businesses, changes in prevailing interest rates, inability to pass
raw material cost increases through to customers, and unanticipated delays in
effecting divestitures.
-0-
<PAGE> 8
M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
----------------------------- -----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
(Dollars in thousands except per share data)
<S> <C> <C> <C> <C>
Net Sales $ 606,788 $ 594,263 $ 1,219,470 $ 1,174,822
Costs and Expenses
Cost of goods sold 503,764 486,987 1,008,029 962,465
Selling, general and administrative 76,527 76,079 155,592 154,796
Interest on debt 8,278 8,251 16,331 16,533
Amortization of intangibles 3,669 3,973 7,489 7,970
Other - net 45,571 1,518 45,895 2,593
------------ ------------ ------------ ------------
637,809 576,808 1,233,336 1,144,357
------------ ------------ ------------ ------------
Income(Loss) Before Income Taxes (31,021) 17,455 (13,866) 30,465
Income taxes 2,302 7,069 9,250 12,338
------------ ------------ ------------ ------------
Net Income(Loss) $ (33,323) $ 10,386 $ (23,116) $ 18,127
============ ============ ============ ============
Net Income(Loss) per Share
Basic $ (.74) $ .23 $ (.51) $ .41
============ ============ ============ ============
Diluted $ (.74) $ .23 $ (.51) $ .41
============ ============ ============ ============
Dividends per common share $ .125 $ .12 $ .25 $ .24
============ ============ ============ ============
Average number of common shares
Basic 44,943,169 44,577,005 44,946,516 44,530,611
Diluted 45,033,946 44,886,750 45,013,024 44,680,533
</TABLE>
<PAGE> 9
M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES
------------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(Unaudited)
<TABLE>
<CAPTION>
June December
30, 2000 31, 1999
---------- ----------
(Dollars in thousands)
<S> <C> <C>
Assets
------
Current Assets
Cash and cash equivalents $ 39,659 $ 40,937
Receivables 326,340 356,029
Inventories 205,849 252,051
Other 147,953 48,501
---------- ----------
Total current assets 719,801 697,518
Net Property, Plant and Equipment 316,446 333,908
Other Assets
Goodwill and other intangibles 377,974 432,576
Investments and other 128,779 126,556
---------- ----------
Total other assets 506,753 559,132
---------- ----------
$1,543,000 $1,590,558
========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities
Notes payable $ 6,146 $ 4,011
Trade payables and accrued expenses 349,684 404,293
Current portion of long-term debt 2,361 4,020
---------- ----------
Total current liabilities 358,191 412,324
Other Liabilities 206,087 205,031
Long-term Debt 460,789 423,689
Stockholders' Equity 517,933 549,514
---------- ----------
$1,543,000 $1,590,558
========== ==========
Long-term Debt/Total Capital 47.1% 43.5%
</TABLE>
<PAGE> 10
M.A. HANNA COMPANY AND CONSOLIDATED SUBSIDIARIES
------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30
---------------------
2000 1999
-------- --------
(Dollars in thousands)
<S> <C> <C>
Cash Provided from (Used for) Operating Activities
Net income(loss) $(23,116) $ 18,127
Depreciation and amortization 33,377 32,594
Companies carried at equity
Income (2,134) (2,385)
Dividends received 728 1,400
Changes in operating assets and liabilities
Receivables (42,199) (35,291)
Inventories (16,215) 2,751
Prepaid expenses (703) (889)
Trade payables and accrued expenses (9,565) 18,357
Restructuring payments (3,225) (4,643)
Provisional loss from pending sale of assets 45,350 --
Other 12,531 13,553
-------- --------
Net operating activities (5,171) 43,574
Cash Provided from (Used for) Investing Activities
Capital expenditures (24,261) (23,440)
Acquisitions of businesses, less cash acquired (10,743) (9,423)
Acquisition payments (185) (233)
Sales of assets 6,985 2,197
Investments in associated and other companies -- (391)
Return of cash from associated and other companies 1,008 512
Other (120) 6,303
-------- --------
Net investing activities (27,316) (24,475)
Cash Provided from (Used for) Financing Activities
Cash dividends paid (11,210) (10,657)
Proceeds from the sale of common stock 340 674
Increase in debt 91,031 54,699
Reduction in debt (47,937) (56,798)
-------- --------
Net financing activities 32,224 (12,082)
Effect of exchange rate changes on cash (1,015) 284
-------- --------
Cash and Cash Equivalents
Increase (decrease) (1,278) 7,301
Beginning of period 40,937 32,322
-------- --------
End of period $ 39,659 $ 39,623
======== ========
Cash paid during period
Interest $ 16,471 $ 15,691
Income taxes 8,681 302
</TABLE>
<PAGE> 11
M.A. HANNA COMPANY
------------------
SALES AND OPERATING PROFITS BY BUSINESS AREA
--------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
First Quarter
----------------------------------------------------------------------------------------
2000 1999
-------------------------------------------- ------------------------------------------
Operating % Operating %
Sales Profits Of Sales Sales Profits Of Sales
------------- ------------ ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Rubber Processing $139.1 $12.6 9.1% $130.9 $11.4 8.7%
Plastic Processing 247.4 14.5 5.8% 230.8 13.9 6.0%
Distribution 230.9 3.8 1.7% 223.0 2.5 1.1%
Other 4.4 (0.1) -2.7% 3.6 .2 6.5%
Sales Eliminations (9.1) - (7.7) -
Corporate and Other - (5.6) - (6.7)
------------- ------------ ------------- ------------
$612.7 $25.2 4.1% $580.6 $21.3 3.7%
============= ============ ============= ============= ============ =============
</TABLE>
<TABLE>
<CAPTION>
Second Quarter
----------------------------------------------------------------------------------------
2000 1999
-------------------------------------------- ------------------------------------------
Operating % Operating %
Sales Profits Of Sales Sales Profits Of Sales
------------- ------------ ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Rubber Processing $ 130.7 $ 9.8 7.5% $131.6 $11.5 8.8%
Plastic Processing 248.0 13.6 5.5% 233.2 16.0 6.9%
Distribution 236.5 4.0 (a) 1.7% 233.7 3.6 1.5%
Other 0.2 - 0.0% 3.7 .4 9.3%
Sales Eliminations (8.6) (7.9) -
Corporate and Other (4.8) - (5.8)
------------- ------------ ------------- ------------
$ 606.8 $ 22.6 3.7% $594.3 $25.7 4.3%
============= ============ ============= ============= ============ =============
</TABLE>
<TABLE>
<CAPTION>
First Six Months
----------------------------------------------------------------------------------------
2000 1999
-------------------------------------------- ------------------------------------------
Operating % Operating %
Sales Profits Of Sales Sales Profits Of Sales
------------- ------------ ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Rubber processing $269.8 $22.4 8.3% $262.5 $22.9 8.7%
Plastic processing 495.4 28.1 5.7% 464.0 29.9 6.5%
Distribution 467.4 7.8 (a) 1.7% 456.6 6.1 1.3%
Other 4.6 (0.1) -4.0% 7.3 .6 7.9%
Sales eliminations (17.7) (15.6) -
Corporate and other (10.4) - (12.5)
------------- ------------ ------------- ------------
$ 1,219.5 $ 47.8 3.9% $1,174.8 $47.0 4.0%
============= ============ ============= ============= ============ =============
</TABLE>
(a) Does not include $45.4 charge for pending sale of assets
