Attached files
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10-K - FORM 10-K - AVIENT CORP | l41725e10vk.htm |
EX-23.1 - EX-23.1 - AVIENT CORP | l41725exv23w1.htm |
EX-23.2 - EX-23.2 - AVIENT CORP | l41725exv23w2.htm |
EX-32.2 - EX-32.2 - AVIENT CORP | l41725exv32w2.htm |
EX-31.2 - EX-31.2 - AVIENT CORP | l41725exv31w2.htm |
EX-31.1 - EX-31.1 - AVIENT CORP | l41725exv31w1.htm |
EX-21.1 - EX-21.1 - AVIENT CORP | l41725exv21w1.htm |
EX-32.1 - EX-32.1 - AVIENT CORP | l41725exv32w1.htm |
EX-10.20 - EX-10.20 - AVIENT CORP | l41725exv10w20.htm |
Exhibit 99.1
Audited Financial Statements
SunBelt Chlor Alkali Partnership
Years Ended December 31, 2010 and 2009
With Report of Independent Registered Public
Accounting Firm
Years Ended December 31, 2010 and 2009
With Report of Independent Registered Public
Accounting Firm
SunBelt Chlor Alkali Partnership
Audited Financial Statements
Years Ended December 31, 2010 and 2009
Contents
Report of Independent Registered Public Accounting Firm |
1 | |||
Audited Financial Statements |
||||
Balance Sheets |
2 | |||
Income Statements |
3 | |||
Statements of Changes in Partners Capital |
4 | |||
Statements of Cash Flows |
5 | |||
Notes to Financial Statements |
6 |
Report of Independent Registered Public Accounting Firm
The Partners
SunBelt Chlor Alkali Partnership
SunBelt Chlor Alkali Partnership
We have audited the accompanying balance sheets of SunBelt Chlor Alkali Partnership as of December
31, 2010 and 2009, and the related statements of income, partners capital and cash flows for each
of the three years in the period ended December 31, 2010. These financial statements are the
responsibility of the Partnerships management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. We
were not engaged to perform an audit of the Partnerships internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of SunBelt Chlor Alkali Partnership at December 31, 2010 and 2009,
and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2010, in conformity with U.S. generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Cleveland, Ohio
February 18, 2011
February 18, 2011
1
SunBelt Chlor Alkali Partnership
Balance Sheets
December 31 | ||||||||
2010 | 2009 | |||||||
Assets |
||||||||
Current assets: |
||||||||
Cash |
$ | 1,000 | $ | 1,772 | ||||
Receivable from OxyVinyls, LP |
4,902,240 | 5,867,957 | ||||||
Receivables from partners |
12,427,474 | 6,852,165 | ||||||
Inventories |
2,741,214 | 2,195,227 | ||||||
Prepaid expenses and other current assets |
1,109,384 | 1,214,626 | ||||||
Total current assets |
21,181,312 | 16,131,747 | ||||||
Property, plant and equipment, net |
78,103,299 | 93,476,246 | ||||||
Deferred financing costs, net |
561,035 | 641,183 | ||||||
Total assets |
$ | 99,845,646 | $ | 110,249,176 | ||||
Liabilities and partners capital |
||||||||
Current liabilities: |
||||||||
Amounts payable to partners |
$ | 9,124,623 | $ | 9,226,131 | ||||
Current portion of long-term debt |
12,187,500 | 12,187,500 | ||||||
Total current liabilities |
21,312,123 | 21,413,631 | ||||||
Long-term debt |
73,125,000 | 85,312,500 | ||||||
Partners capital |
5,408,523 | 3,523,045 | ||||||
Total liabilities and partners capital |
$ | 99,845,646 | $ | 110,249,176 | ||||
See accompanying notes
2
SunBelt Chlor Alkali Partnership
Income Statements
Year Ended December 31 | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Revenues |
$ | 157,281,096 | $ | 167,442,320 | $ | 173,019,093 | ||||||
Operating costs and expenses: |
||||||||||||
Cost of sales |
78,349,655 | 71,292,948 | 70,475,462 | |||||||||
Depreciation |
16,118,320 | 16,186,747 | 15,083,087 | |||||||||
Loss on disposal of assets |
115,816 | 397,166 | 2,125,117 | |||||||||
Administrative and general expenses |
11,544,676 | 11,906,084 | 11,663,995 | |||||||||
106,128,467 | 99,782,945 | 99,347,661 | ||||||||||
Operating income |
51,152,629 | 67,659,375 | 73,671,432 | |||||||||
Other income |
2,500,000 | | 372,631 | |||||||||
Interest expense, net |
(7,112,901 | ) | (7,966,219 | ) | (8,517,091 | ) | ||||||
Income before taxes |
46,539,728 | 59,693,156 | 65,526,972 | |||||||||
State income tax expense |
(387,472 | ) | (315,000 | ) | (435,000 | ) | ||||||
Net income |
$ | 46,152,256 | $ | 59,378,156 | $ | 65,091,972 | ||||||
See accompanying notes
3
SunBelt Chlor Alkali Partnership
Statements of Changes in Partners Capital
Partners | ||||||||||||
Olin SunBelt | 1997 Venture, | |||||||||||
Inc. | Inc. | Total | ||||||||||
Balance at December 31, 2007 |
$ | 3,341,542 | $ | 3,341,542 | $ | 6,683,085 | ||||||
Cash distributions to partners |
(29,404,793 | ) | (29,404,793 | ) | (58,809,586 | ) | ||||||
Net income |
32,545,986 | 32,545,986 | 65,091,972 | |||||||||
Balance at December 31, 2008 |
6,482,735 | 6,482,735 | 12,965,471 | |||||||||
Cash distributions to partners |
(34,410,291 | ) | (34,410,291 | ) | (68,820,582 | ) | ||||||
Net income |
29,689,078 | 29,689,078 | 59,378,156 | |||||||||
Balance at December 31, 2009 |
1,761,522 | 1,761,522 | 3,523,045 | |||||||||
Cash distributions to partners |
(22,133,389 | ) | (22,133,389 | ) | (44,266,778 | ) | ||||||
Net income |
23,076,128 | 23,076,128 | 46,152,256 | |||||||||
Balance at December 31, 2010 |
$ | 2,704,261 | $ | 2,704,261 | $ | 5,408,523 | ||||||
See accompanying notes
4
SunBelt Chlor Alkali Partnership
Statements of Cash Flows
Year Ended December 31 | ||||||||||||
2010 | 2009 | 2008 | ||||||||||
Operating activities |
||||||||||||
Net income |
$ | 46,152,256 | $ | 59,378,156 | $ | 65,091,972 | ||||||
Adjustments to reconcile net income to net cash
provided by operating activities: |
||||||||||||
Depreciation |
16,118,320 | 16,186,747 | 15,083,087 | |||||||||
Amortization |
80,148 | 80,148 | 80,148 | |||||||||
Loss on disposal of assets |
113,590 | 397,166 | 2,125,117 | |||||||||
Changes in assets and liabilities: |
||||||||||||
Receivables from Oxy Vinyls |
965,717 | (3,725,727 | ) | 3,884,544 | ||||||||
Receivables from partners |
(5,575,309 | ) | 10,499,451 | 1,455,519 | ||||||||
Inventories |
(545,987 | ) | (390,627 | ) | 9,047 | |||||||
Amounts payable to partners |
(101,508 | ) | 1,759,301 | (1,370,177 | ) | |||||||
Prepaid expenses and other |
90,377 | (84,018 | ) | 2,694 | ||||||||
Net cash provided by operating activities |
57,297,604 | 84,100,597 | 86,361,951 | |||||||||
Investing activities |
||||||||||||
Purchases of property, plant and equipment |
(858,963 | ) | (3,103,973 | ) | (15,352,635 | ) | ||||||
Purchases of marketable securities |
(15,715,135 | ) | | | ||||||||
Proceeds from maturity of marketable securities |
15,730,000 | | | |||||||||
Net cash used by investing activities |
(844,098 | ) | (3,103,973 | ) | (15,352,635 | ) | ||||||
Financing activities |
||||||||||||
Cash distributions to partners |
(44,266,778 | ) | (68,820,582 | ) | (58,809,586 | ) | ||||||
Principal payments on long-term debt |
(12,187,500 | ) | (12,187,500 | ) | (12,187,500 | ) | ||||||
Net cash provided by financing activities |
(56,454,278 | ) | (81,008,082 | ) | (70,997,086 | ) | ||||||
Net increase (decrease) in cash |
(772 | ) | (11,458 | ) | 12,230 | |||||||
Cash at beginning of year |
1,772 | 13,230 | 1,000 | |||||||||
Cash and cash equivalents at end of period |
$ | 1,000 | $ | 1,772 | $ | 13,230 | ||||||
See accompanying notes
5
SunBelt Chlor Alkali Partnership
Notes to Financial Statements
December 31, 2010 and 2009
1. Organization
SunBelt Chlor Alkali Partnership (the Partnership) was formed on August 23, 1996, under a
Partnership Agreement, between 1997 Chlor Alkali Venture, Inc. and Olin SunBelt Inc. (the
Partners). 1997 Chlor Alkali Venture, Inc. is a wholly owned subsidiary of PolyOne Corporation
(formerly The Geon Company) and Olin SunBelt Inc. is a wholly owned subsidiary of the Olin
Corporation. Each of the Partners has a 50% interest in the Partnership. The Partnership Agreement
provides that the capital investment of the Partners will be maintained and the Partnerships
income or loss will be allocated to the Partners based on their ownership interest percentages.
The Partnership was formed for the purpose of construction and operation of a Chlor-Alkali
facility. The facility, which is located in McIntosh, Alabama produces chlorine, caustic soda and
hydrogen.
2. Significant Accounting Policies
Cash and Cash Equivalents
The Partnership considers all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents. There were no cash equivalents held by the Partnership
as of December 31, 2010 and 2009.
Marketable Securities
Marketable securities are composed of available-for-sale securities and are reported at fair value.
During 2010, the Partnership purchased a US Treasury bond for $15,715,135. Proceeds in the amount
of $15,730,000 were received upon maturity, resulting in a realized gain of $14,865.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined by the first-in,
first-out (FIFO) method.
6
SunBelt Chlor Alkali Partnership
Notes to Financial Statements (continued)
2. Significant Accounting Policies (continued)
Property, Plant and Equipment and Depreciation
Property, plant and equipment are carried at cost. Major renewals and betterments are capitalized.
Maintenance and repair expenditures which do not improve or extend the life of the respective
assets are expensed as incurred. Depreciation for all plant and equipment is computed using the
straight-line method over their estimated useful lives. The ranges of estimated useful lives are as
follows:
Land improvements |
20 years | |||
Buildings |
20 years | |||
Machinery and equipment |
520 years |
Long-lived assets are assessed for impairment when operating profits for the related business or a
significant change in the use of an asset indicate that their carrying value may not be
recoverable.
Deferred Financing Costs
Costs incurred by the Partnership in obtaining its long-term debt are deferred and amortized over
the term of the debt.
Financial Instruments
The carrying values of cash, accounts receivable and accounts payable approximate fair values due
to the short-term maturities of these instruments. The fair value of our long-term debt was
estimated based on current market rates for debt of similar risk and maturities. At December 31,
2010 and 2009, the estimated fair value of debt was approximately $88,000,000 and $97,300,000,
which compares to debt recorded on the balance sheet of $85,312,500 and $97,500,000 at December 31,
2010 and 2009, respectively.
Revenue Recognition
The Partnership recognizes revenues upon passage of title which is based on shipping terms.
Shipping and Handling Costs
Shipping and handling costs are reflected in costs of sales.
7
SunBelt Chlor Alkali Partnership
Notes to Financial Statements (continued)
2. Significant Accounting Policies (continued)
Income Taxes
No provision is made for income taxes other than the Texas state gross margin tax as the
Partnerships results of operations are includable in the tax returns of the Partners. The
Partnership paid taxes of $324,472 in 2010, $317,193 in 2009 and $435,000 in 2008.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and the accompanying notes. Actual results could differ from
those estimates.
Risks and Uncertainties
Since the Partnerships major products are commodities, significant changes in the prices of
chemical products could have a significant impact on the results of operations for any particular
period. The Partnership had one major chlorine customer, OxyVinyls LP, during the periods
presented, which accounted for 47%, 38%, and 31% of total revenues for the years ended December 31,
2010, 2009 and 2008, respectively.
Reclassifications
Certain prior year amounts have been reclassified to conform with current year presentations.
3. Inventories
Inventories are comprised as follows:
December 31 | ||||||||
2010 | 2009 | |||||||
Finished goods |
$ | 1,744,944 | $ | 1,230,161 | ||||
Production parts |
996,270 | 965,066 | ||||||
$ | 2,741,214 | $ | 2,195,227 | |||||
8
SunBelt Chlor Alkali Partnership
Notes to Financial Statements (continued)
4. Property, Plant and Equipment, net
Property, plant and equipment, net are comprised as follows:
December 31 | ||||||||
2010 | 2009 | |||||||
Land and land improvements |
$ | 4,862,826 | $ | 4,862,826 | ||||
Building |
4,084,254 | 4,084,254 | ||||||
Machinery and equipment |
239,638,514 | 239,096,069 | ||||||
Construction-in-process |
755,208 | 843,473 | ||||||
249,340,802 | 248,886,622 | |||||||
Less allowance for depreciation |
171,237,503 | 155,410,376 | ||||||
$ | 78,103,299 | $ | 93,476,246 | |||||
5. Transactions With Affiliates
The Partnership has various management service agreements, dated August 23, 1996, with the Olin
Corporation. These agreements, which include compensation for managing the facility, an asset
utilization fee, a fleet fee and a distribution fee, have terms from five to ten years with five
year price adjustment renewals. Charges for these services were $8,960,571, $8,412,847, and
$8,150,580 for 2010, 2009 and 2008, respectively, and are included in administrative and general
expenses in the income statements.
The Partnerships cash policy prohibits distributions to the Partners until the cash balance is
sufficient to cover both the debt principal payments and interest expense for the year. The
Partnership made distributions to the Partners totaling $44,266,778, $68,820,582 and $58,809,586 in
2010, 2009 and 2008, respectively.
In accordance with the Partnership Operating Agreement, the majority of chlorine produced by the
Partnership is sold to OxyVinyls LP. The remaining chlorine and all of the caustic soda produced by
the Partnership is marketed and distributed by the Olin Corporation.
9
SunBelt Chlor Alkali Partnership
Notes to Financial Statements (continued)
6. Long-Term Debt
On December 23, 1997, the Partnership borrowed $195,000,000 in a private placement of debt. The
debt is secured by the property, plant, equipment and inventory of the Partnership. The term of the
loan is 20 years at an interest rate of 7.23%. The first principal payment of $12,187,500 was paid
on December 22, 2002, with equal annual payments due through December 22, 2017. Interest is payable
semi-annually in arrears on June 22 and December 22. Interest payments totaled $7,049,250,
$7,930,406, and $8,811,563 in 2010, 2009 and 2008, respectively. The debt is guaranteed by the
Partners.
7. Leases
The Partnership has operating leases for certain property, machinery and equipment. At December 31,
2010, future minimum lease payments under noncancelable operating leases are as follows:
2011 |
$ | 2,107,826 | ||
2012 |
2,107,826 | |||
2013 |
2,107,826 | |||
2014 |
1,840,451 | |||
2015 |
1,600,462 | |||
Thereafter |
124,479 | |||
Total minimum future lease payments |
$ | 9,888,871 | ||
Rent expense was $2,060,414, $1,879,007 and $1,743,882 for the years ended December 31, 2010, 2009
and 2008, respectively.
10
SunBelt Chlor Alkali Partnership
Notes to Financial Statements (continued)
8. Commitments and Contingencies
The Partnership is subject to legal proceedings and claims that arise in the ordinary course of its
business. Management evaluates each claim and provides for any potential loss when the loss is
probable and reasonably estimable. In the opinion of management, the ultimate liability with
respect to these actions will not materially affect the financial condition, results of operations,
or cash flows of the Partnership.
Hurricane Ike caused a business interruption related to the Partnerships operations from September
17, 2008 to October 1, 2008. The Partnership maintains business interruption insurance to partially
mitigate any losses incurred. The Partnership recognizes insurance recoveries in the period they
are realized. In June 2010, the Partnership received $2,500,000 in business interruption proceeds
relating to Hurricane Ike, which was recorded as other income on the income statement for the year
ended December 31, 2010.
11