Avient Corp: Form 10-K for the period ended Dec 31, 2024

Business Overview

We are an innovator of materials solutions to help our customers succeed, while enabling a sustainable world. Our products include specialty engineered materials, performance fibers, advanced composites and color and additive solutions. We are also a highly specialized developer and manufacturer of performance enhancing additives, liquid colorants and silicone colorants. When used in this Annual Report on Form 10-K, the terms “we,” “us,” “our," "Avient" and the “Company” mean Avient Corporation and its consolidated subsidiaries.

Avient was formed as PolyOne Corporation on August 31, 2000 from the consolidation of The Geon Company (Geon) and M.A. Hanna Company (Hanna). Through a series of acquisitions, divestitures, operational improvements and cultural shift, the Company has transformed to become an innovator of materials solutions. Effective June 30, 2020, the Company amended its existing Articles of Incorporation to change its name to Avient Corporation and changed its ticker symbol from “POL” to “AVNT”, effective at the start of trading on July 13, 2020.

Avient Corporation is incorporated in Ohio and headquartered in Avon Lake, Ohio. We currently have 102 manufacturing sites in North America, South America, Asia, Europe, the Middle East, and Africa (EMEA). In 2024, the Company had sales from continuing operations of $3.2 billion, approximately 60% of which were to customers outside the United States. Using formulation expertise, materials science and operational capabilities, we create an essential link between large chemical producers (our raw material suppliers) and designers, assemblers and processors of polymers (our customers). We believe that our role in the value chain continues to become more vital as our customers increasingly need reliable suppliers with a global reach, local touch, and highly effective materials-based solutions to help improve their products' performance, appeal, differentiation, profitability and competitive advantage. Our goal is to provide customers with innovative materials solutions through our global footprint, broad market knowledge, technical expertise, product breadth, manufacturing operations and raw materials procurement leverage. Our end markets include consumer, packaging, defense, healthcare, industrial, transportation, building and construction, telecommunications and energy.

Polymer Industry Overview

Avient is an innovator of materials solutions within the polymer industry. We have the scientific know-how in materials science required to bridge the large, commodity base resin producers and the companies who ultimately manufacture end products utilizing formulated polymer and composite materials.

Polymers are a class of organic materials that are generally produced by converting natural gas or crude oil derivatives into monomers, such as ethylene, propylene, and styrene. These monomers are then polymerized into chains called polymers, or plastic resin, such as polyethylene and polypropylene, in their most basic forms. Avient does not produce commodity base resins. Rather, Avient sources various resins, polymers and additives, then employs additional chemistry in formulating those materials into highly engineered, unique materials for a specific use.

Thermoplastic polymers are characterized by their ability to be reshaped repeatedly into new forms after heat and pressure are applied. Thermoplastics offer versatility and a wide range of applications. The major types of thermoplastics include polyethylene, polypropylene, polystyrene, polyester and a range of specialized engineering resins. Each type of thermoplastic has unique qualities and characteristics that make it appropriate for use in a particular application.

Thermoplastic composites include base resins, but are combined with a structural element such as glass, carbon or polymer fibers to enhance strength, rigidity and structure. Further performance can be delivered through an engineered thermoplastic sheet or thick film, which may incorporate more than one resin formulation or composite in multiple layers to impart additional properties, such as gas barrier, structural integrity and lightweighting.

Thermoplastics and polymer composites are found in a variety of end-use products and markets, including packaging, defense, building and construction, wire and cable, transportation, medical, furniture and furnishings, durable goods, outdoor high performance equipment, electrical and electronics, adhesives, inks and coatings and fiber. Each type of thermoplastic resin has to ultimately achieve unique characteristics (such as flexibility, strength or durability) suitable for use in a particular end-use application. The materials science and manufacturing processes required to achieve those characteristics is the specialty role that Avient plays.

The following are examples, by industry, where Avient materials solutions address specific market requirements or challenges. In the packaging industry, colorants and additives are used to lightweight, enhance consumer appeal, increase design freedom, improve recyclability, enable recycled content to be incorporated, and preserve and protect the packaging's contents. In wire and cable, thermoplastics and composites enhance performance and extend product life by providing electrical insulation, flame resistance, water resistance and strain resistance for highly engineered electrical and telecommunications wires, cables and connectors. In the defense industry, ultra-high molecular weight (UHMWPE) fiber is relied upon and incorporated into tactical vests, hard armor plates, shields, bomb suits, helmets, and military vehicles (air, sea and ground). In the transportation industry, plastic has proven to be durable, lightweight and corrosion resistant while offering fuel savings, design flexibility and high performance, often replacing traditional materials such as metal and glass. In the medical industry, plastics are used for a vast array of devices and equipment, including blood and intravenous bags, medical tubing, catheters, lead replacement for radiation shielding, clamps and connectors to bed frames, curtains and sheeting, electronic enclosures and equipment housings. In the outdoor high performance industry, plastic applications are used for components and colorants for all terrain vehicles, and reinforced polymers are used for various outdoor equipment and gear. In the electronics industry, plastic enclosures and connectors not only enhance safety through electrical insulation, but thermally and electrically conductive plastics provide heat transferring, cooling, anti-static, electrostatic discharge, and electromagnetic shielding performance for critical applications including integrated circuit chip packaging.

Various additives can also be formulated with a base resin and further engineered into a composite to provide them with greater versatility and performance. Polymer formulations and composites have advantages over metals, wood, rubber, glass and other traditional materials, which have resulted in the replacement of these materials across a wide spectrum of applications. These specialized polymers offer sustainability and performance advantages compared to traditional materials, including design freedom, processability, weight reduction, chemical resistance, flame retardance and lower cost. Plastics are renowned for their durability, aesthetics and ease of handling. Avient’s strategy and investments are aligned to enable these important benefits, now and in the future.

Avient Segments

We operate in two reportable segments: (1) Color, Additives and Inks and (2) Specialty Engineered Materials. Our segments are further detailed in Note 14, Segment Information, to the accompanying consolidated financial statements.

Competition

The manufacturing of custom and proprietary formulated thermoplastics, polymer composites, and color and additive solutions is highly competitive. Competition is based on service, performance, product innovation, product recognition, speed, delivery, quality and price. The relative importance of these factors varies among our products and services. Our competitors range from large international companies with broad product offerings to local independent custom producers whose focus is a specific market niche or product offering. Our strategic approach to differentiate, innovate and grow within this competitive environment is to intersect high-growth markets and secular trends with our technologies to create product platforms of scale.

Raw Materials

The primary raw materials used by our manufacturing operations are polyolefin and other thermoplastic resins, titanium dioxide, inorganic and organic pigments, specialty additives and ethylene, all of which we believe are currently in adequate supply. See the discussion of risks associated with raw material supply and costs in Item 1A, “Risk Factors."

Patents and Trademarks

We own and maintain a number of patents and trademarks in the United States and other key countries that contribute to our competitiveness in the markets we serve because they protect our inventions and product names against infringement by others. Patents may exist for 20 years from filing date, and trademarks may have an indefinite life based upon continued use. While we view our patents and trademarks to be valuable because of the broad scope of our products and services and brand recognition we enjoy, we do not believe that the loss or expiration of any single patent or trademark would have a material adverse effect on our results of operations, financial position or cash flows. Nevertheless, we have management processes designed to rigorously protect our inventions and trademarks.

Seasonality

Sales of our products and services are typically seasonal, as demand has historically been slower in the third and fourth quarters of the calendar year. In addition, our defense business is, in part, associated with tenders and project-based work, which can lead to inconsistent order patterns on a quarter over quarter basis.

Working Capital Practices

Our products are generally manufactured with a short turnaround time, and the scheduling of manufacturing activities from customer orders generally includes enough lead time to assure delivery of an adequate supply of raw materials. We agree to payment terms with our customers and suppliers that are competitive.

Significant Customers

No customer accounted for more than 3% of our consolidated revenues in 2024.

Research and Development

One of our strategic drivers is to "Amplify Innovation," and we have substantial technology and development capabilities, powered by approximately 1,100 employees serving in technical capacities, approximately 120 of whom have PhD level educations. Our efforts are largely devoted to developing new materials solutions to address evolving market and sustainability needs. We do this by providing quality technical services to evaluate alternative raw materials, facilitating the continued success of our products for customer applications, providing technology to improve our products, processes and applications and providing support to our manufacturing plants for cost reduction, productivity and quality improvement programs. We operate research and development centers that support our commercial development activities and manufacturing operations. These facilities are equipped with state-of-the-art analytical, synthesis, polymer characterization and testing equipment, along with pilot plants and polymer manufacturing operations that simulate specific production processes. Our investment in product research and development was $98.7 million in 2024, $90.3 million in 2023, and $84.9 million in 2022.

Methods of Distribution

We sell products primarily through direct sales personnel, distributors, and commissioned sales agents. We primarily use truck carriers to transport our products to customers, although some customers pick up product at our manufacturing facilities or warehouses.

Human Capital Resources

The success and growth of our business depend in large part on our ability to attract, develop and retain a diverse population of talented and high-performing employees at all levels of our organization. We are committed to building additional capabilities within our organization to meet the changing needs of our customers and the dynamic macro environment in which we operate.

We have developed key recruitment and retention strategies, objectives and measures that guide our human capital management approach as part of the overall management of our business. These strategies, objectives and measures are advanced through a number of programs, policies and initiatives, as described below.

As of December 31, 2024, Avient employed approximately 9,200 people, 34% of which were located in the U.S. and Canada, 33% were located in EMEA, 26% were located in Asia, and 7% were located in Latin America.

Safety and Health

A top priority at Avient is the safety and health of our employees, and our ultimate goal is to operate injury free. Progress toward this goal is measured at the business unit and regional levels, communicated globally, and linked to a number of recognition programs. In 2024, we had our safest year ever with a recordable incident rate of 0.40 per 100 full-time workers per year, compared to the Plastics and Rubber Products Manufacturing industry (NAICS Code 326) average of 2.90 in 2023. Continuous improvement and preventative risk reductions are key focus areas, and in 2024, one of our annual incentive plan metrics measured the engagement of our employees in safety activities. We also continue to be recognized as an American Chemistry Counsel Responsible Care® company and set high standards for our operations as we strive to achieve our goal of zero recordable injuries.

Employee Recruitment

Avient’s success is driven by having the best talent in the right roles. We actively seek collaborative and innovative change-makers who are passionate about our strategy and values through numerous channels, including employee referrals, job fairs, talent networks, industry associations, and directly from universities. Our roles provide opportunities for personal and professional growth, while working in our organization where our purpose is to innovate materials solutions that help our customers succeed, while enabling a sustainable world.

As a key aspect of our talent pipeline, we partner with leading universities around the world to hire employees into full-time, co-op and internship opportunities. These roles include rotational development programs where individuals are able to gain experience in various departments and jobs within or across functions, contributing their skills while also building well-rounded knowledge of our Company and its many stakeholders. We leverage global processes and systems to create a positive candidate experience, with opportunities for both entry level and experienced hires.

Training and Development

We provide meaningful learning engagements and skill development opportunities to all global employees. Learning is ingrained in our culture and every Avient employee participates in training annually. We manage training and development through global programs and technology, to provide a consistent and high-quality experience for all. Each year, over 100,000 hours of training is completed through a variety of different training methods, which focus on leadership development, safety, Lean Six Sigma concepts, technical and operational skills, sustainability and ethics and compliance.

Our key development opportunities include nomination-based leadership programs, foundational leadership training for all current or aspiring people managers, and Lean Six Sigma training at a variety of levels, where individuals can be certified for job-specific Lean Six Sigma programs, up through Master Black Belt certification. We also focus on development for our production employees in aspects of Lean Six Sigma, safety, continuous improvement, and our ENGAGE program.

Continuous development drives employees to reach their full potential and we strive to fill at least half of all open manager roles and higher with internal promotions. This is completed through regular performance feedback, individual development plans, mentoring programs and nomination-based leadership development programs for key top talent.

Inclusion and Impact

We recognize the benefits that inclusion brings to our organization, including delivering better business outcomes. Our talented people leverage their diverse backgrounds across a myriad of aspects and skills toward a common goal: meeting the needs of the present without compromising the ability of future generations to do the same. This spirit of inclusive collaboration can be felt throughout our Company. It drives the innovation that earns us leadership positions in the markets we serve and underpins the high level of respect we show each other every day.

The vision that guides our collective efforts is consistent and unwavering: to be the Company of choice for all. We leverage Employee Resource Groups to help educate and inspire our global workforce and fortify strong business practices. Other initiatives, including Mentoring at Avient and campus partnerships, are vital for progress in our inclusion journey. We require equality of opportunity for all qualified individuals in accordance with applicable laws.

Decisions on hiring, promotion, development, compensation or advancement are based solely on a person’s qualifications, abilities, experience and performance, except where local law requires us take specific action. The Avient Ethics Hotline serves as a mechanism for employees to anonymously report any perceived concerns regarding these topics.

Compensation and Benefits Programs

We strive to remain competitive in the global marketplace and provide foundational rewards to attract and retain top talent. In general, our overall philosophy on compensation encompasses the following principles:

• provide all levels of employees with a compensation package that aligns Avient’s and the employees’ interests through the use of base and incentive or bonus programs;
• maintain a competitive pay program that serves to attract, retain, motivate and reward employees; and
• award individual pay commensurate with experience, level of responsibility, and marketability.

Employee Benefits: Awards and Recognition Programs

We celebrate, reward and share our employees’ great work through our recognition programs, including those that all employees can earn for their extra effort and impact, as well as those that are specific to a position or role in the Company, such as excellence in technology, sales, and manufacturing. In addition, we provide our employees an opportunity to support communities by giving each individual 16 hours of paid time off each year. In 2024, over 100 of our sites and 3,800 of our employees generously gave over 11,000 volunteer hours and $1.5 million in donations around the world.

A Great Place to Work®

Our ongoing employee feedback is highly valued, discussed, and most importantly, acted upon, to make improvements. In addition to holding action planning sessions, new manager assimilations, and 360 reviews, we also conduct annual employee engagement surveys. Last year, employees in over 40 countries, and more than 130 locations participated, providing actionable feedback to support our ongoing employee engagement efforts. We are proud that our employees feel we are a Great Place to Work®, and in 2024, we received our sixth certification. Understanding how our employees feel about their experiences at Avient and our culture is critical and helps us ensure that the right competencies and behaviors are developed across the organization.

Environmental, Health and Safety and Other Regulation

We are also subject to extensive and varied laws and regulations in the jurisdictions in which we operate, including those relating to anti‑corruption and trade, anti-money laundering, import and export compliance, antitrust, data security and privacy, employment, public health and safety, intellectual property, transportation, zoning, and fire codes. Our policies mandate compliance with all applicable laws and regulations, and we operate our business in accordance with standards and procedures designed to comply with these laws and regulations. We believe that we are in compliance with such laws and regulations in all material respects.

We are strongly committed to safety as evidenced by our low injury incidence rate of 0.40 per 100 full-time workers per year in 2024 and 0.58 in 2023. The 2023 average injury incidence rate for our NAICS Code (326 Plastics and Rubber Products Manufacturing) was 2.90. We hold the American Chemistry Council's certification as a Responsible Care Management System® (RCMS) company. Certification was granted based on Avient's conformance to the RCMS's comprehensive environmental health, safety and security requirements. The RCMS certification affirms the importance Avient places on having strong environmental, health, safety and security performance. In our operations, we must comply with product-related governmental law and regulations affecting the plastics industry generally and also with content-specific law, regulations and non-governmental standards. We believe that compliance with current governmental laws and regulations and with non-governmental content-specific standards will not have a material adverse effect on our financial position, results of operations or cash flows. The risk of additional costs and liabilities, however, is inherent in certain plant operations and certain products produced at these plants, as is the case with other companies in the plastics industry. Therefore, we may incur additional costs or liabilities in the future. Other developments, such as increasingly strict environmental, safety and health laws, regulations and related enforcement policies, including those under the European Union Restriction of the Use of Certain Hazardous Substances Directive (RoHS), Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), the Dodd-Frank Wall Street Reform and Consumer Protection Act (covering Conflict Minerals), and the Consumer Product Safety Improvement Act, the implementation of additional content-specific standards, discovery of unknown conditions, and claims for damages to property, persons or natural resources resulting from plant emissions or products, could also result in additional costs or liabilities.

Refer to Note 11, Commitments and Contingencies, to the accompanying consolidated financial statements for discussion of environmental investigation and remediation matters and Item 1A, "Risk Factors" for discussion of matters pertaining to other regulation.

International Operations

Our international operations are subject to a variety of risks, including currency fluctuations and devaluations, exchange controls, import/export restrictions, currency restrictions and changes in local economic conditions. While the impact of these risks is difficult to predict, any one or more of them could adversely affect our future operations. For more information about the noted risks, see Item 1A, "Risk Factors." For more information about our international operations, see Note 14, Segment Information, to the accompanying consolidated financial statements.

Where You Can Find Additional Information

Our principal executive offices are located at 33587 Walker Road, Avon Lake, Ohio 44012, and our telephone number is +1 (440) 930-1000. We are subject to the information reporting requirements of the Securities Exchange Act of 1934 (the Exchange Act), and, in accordance with these requirements, we file annual, quarterly and other reports, proxy statements and other information with the SEC relating to our business, financial results and other matters.

Our internet address is www.avient.com (http://www.avient.com). Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available, free of charge, on our website (select Investors and then SEC Filings) or upon written request, as soon as reasonably practicable after we electronically file or furnish them to the SEC. The contents of our website are not part of this Annual Report on Form 10-K, and the reference to our website does not constitute incorporation by reference into this Form 10-K of the information contained at that site.

The following are certain risk factors that could affect our business, results of operations, financial position or cash flows. Although the risks are organized by headings and each risk is described separately, many of the risks are interrelated. These risk factors should be considered along with the forward-looking statements contained in this Annual Report on Form 10-K because these factors could cause our actual results or financial condition to differ materially from those projected in forward-looking statements. The following discussion is not an all-inclusive listing of risks, although we believe these are the more material risks that we face. If any of the following occur, our business, results of operations, financial position or cash flows could be adversely affected.

Global Operating Risks

Our operations have in the past been and could in the future be adversely affected by various risks inherent in conducting operations worldwide.

We conduct a substantial portion of our business outside the U.S., with approximately 60% of our sales outside the U.S. We also have many facilities located outside the U.S., as detailed in Item 2, “Properties.” Accordingly, our business is subject to risks related to the differing legal, political, social and regulatory requirements, and economic conditions of many jurisdictions. Risks inherent in international operations include, but are not limited to, the following:

• changes in local government regulations and policies including, but not limited to, duty or tariff restrictions, foreign currency exchange controls or monetary policy, repatriation of earnings, expropriation of property, investment limitations and tax policies;
• political and economic instability and disruptions, including labor unrest, withdrawal or renegotiation of trade agreements, natural disasters, major public health issues, pandemics, civil strife, acts of war, insurrection and terrorism;
• supply chain disruptions;
• compliance with international trade laws and regulations, including tariffs, export control and economic sanctions, and other trade barriers;
• legislation that regulates the use of chemicals;
• disadvantages of competing against companies from countries that are not subject to U.S. laws and regulations, including the Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act;
• difficulties in staffing and managing multi-national operations;
• limitations on our ability to enforce legal rights and remedies;
• reduced protection of intellectual property rights;
• other risks arising out of foreign sovereignty over the areas where our operations are conducted; and
• increasingly complex laws and regulations concerning privacy and data security, including, but not limited to, the European Union's General Data Protection Regulation.

We could be adversely affected by violations of the FCPA, UK Bribery Act and similar worldwide anti-bribery laws, as well as export controls and economic sanction laws. As a global company, we operate in many parts of the world that have experienced governmental corruption. While we have no basis to believe such actions are occurring, if we are found to be liable for FCPA, UK Bribery Act, export control or sanction violations, we could suffer from criminal or civil penalties or other sanctions, including loss of export privileges or authorization needed to conduct aspects of our international business, which could have a material adverse effect on our business. We have robust policies that require compliance with all laws and regulations and we strictly enforce those policies. It is always possible an employee's or agent's unlawful actions may avoid detection.

Any of these risks could have an adverse effect on our international operations by reducing demand for our products.

Business Risks

Demand for and supply of our products and services have in the past been, and may in the future be, adversely affected by several factors, some of which we cannot predict or control.

Several factors have in the past and may in the future affect the demand for and supply of our products and services, including:

• economic downturns, inflation or other volatility in the significant end markets that we serve;
• product obsolescence or technological changes that unfavorably alter the value/cost proposition of our products and services;
• competition from existing and unforeseen polymer and non-polymer based products;
• declines in general economic conditions or reductions in industrial production growth rates, both domestically and globally, which could impact customer demand and our customers’ ability to pay amounts owed to us;
• changes in environmental regulations that limit our ability to sell our products and services in specific markets;
• changes in demand for and laws and regulations regarding plastic materials; and
• inability to obtain raw materials or supply products to customers due to factors such as supplier work stoppages or insolvency, supply shortages, plant outages or regulatory changes that may limit or prohibit overland transportation of certain hazardous materials and exogenous factors, like severe weather.

If any of these events occur in the future, the demand for and supply of our products and services could suffer and potentially lead to asset impairment or otherwise adversely affect our results.

Our manufacturing operations are subject to hazards and other risks associated with specialty formulation and the related storage and transportation of raw materials, products and waste.

The occurrence of an operating problem at our facilities may have a material adverse effect on the productivity and profitability of a particular manufacturing facility or on our operations as a whole, during and after the period of these operating difficulties. Operating problems may cause personal injury and/or loss of life, customer attrition and severe damage to or destruction of property and equipment and environmental damage. We are subject to present claims and potential future claims with respect to workplace exposure, workers’ compensation and other matters. Our property and casualty insurance, which we believe are of the types and in the amounts that are customary for the industry, may not fully insure us against all potential hazards that are incident to our business or otherwise could occur.

Environmental, health and safety laws and regulations impact our operations and financial statements.

Our operations on, and ownership of, real property are subject to environmental, health and safety laws and regulations at the national, state and local governmental levels (including, but not limited to, the Restriction of Hazardous Substances (RoHS) and the Consumer Product Safety Improvement Act of 2008). The nature of our business exposes us to compliance costs and risks of liability under these laws and regulations due to the production, storage, transportation, recycling or disposal and/or sale of materials that can cause contamination and other harm to the environment or personal injury if they are improperly handled and released. Environmental compliance requirements imposed on us and our vendors may significantly increase the costs of these activities involving raw materials, energy, finished products and wastes. We may incur substantial costs, including fines, criminal or civil sanctions, damages, and remediation costs, or experience interruptions in our operations for violations of these laws.

Electricity, fuel, logistics and raw material availability and costs have in the past and could in the future cause volatility in our results.

The cost of our electricity, fuel, logistics and raw materials may not correlate with changes in the prices we receive for our products, either in the direction of the price change or in absolute magnitude. Electricity and raw materials costs represent a substantial part of our manufacturing costs. Most of the raw materials we use are commodities and the price of each can fluctuate widely for a variety of reasons, including changes in availability because of major capacity additions or reductions or significant facility operating problems. Other external factors beyond our control, including, but not limited to, trade barriers due to geopolitical tensions, can also cause fluctuations in raw materials prices, which could negatively impact demand for our products and cause volatility in our results.

Increased competition can negatively impact sales, earnings and cash flow performance.

We encounter competition in price, payment terms, delivery, service, performance, product innovation, product recognition and quality, depending on the product involved. Avient's operating results depend, in part, on continued successful research, development, and marketing of new products, and some of such efforts may not come to fruition or may be delayed.

We expect that our competitors will continue to develop and introduce new and enhanced products, which could cause a decline in the market acceptance of our products. In addition, our competitors could cause a reduction in the selling prices of some of our products as a result of intensified price competition. Competitive pressures could also result in the loss of customers.

Cybersecurity breaches, global information systems security threats and computer crime pose a risk to our systems, networks and products, which could harm our business.

We depend on integrated information systems to conduct our business, including communicating with employees and customers, ordering and managing materials from suppliers, shipping products to customers, and analyzing and reporting results of operations. In addition, some of our systems, tools and resources use, integrate, or will integrate some form of artificial intelligence, which has the potential to result in bias, miscalculations, data errors, intellectual property infringement and other unintended consequences. Further, we store sensitive data, including proprietary business information, intellectual property and confidential employee or other personal data, on our servers and databases. Cybersecurity breaches, global information systems security threats and more sophisticated and targeted computer crime pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data and communications. We continue to update our infrastructure, security tools, employee training and processes to protect against security incidents, including both external and internal threats, and to prevent their recurrence; however, our systems, networks and products may nevertheless be vulnerable to advanced persistent threats or other types of system failures. Depending on their nature and scope, such threats and system failures could lead to the compromising of confidential information and communications, improper use of our systems and networks, manipulation and destruction of data, defective products, production downtimes and operational disruptions, which in turn could cause customers to cancel orders or otherwise adversely affect our reputation, competitiveness and results of operations. We have experienced targeted and non-targeted cybersecurity attacks in the past and we could experience similar incidents in the future. To date, no cybersecurity incident or attack has had a material impact on our business or consolidated financial statements.

We are subject to risks associated with climate change and potential climate change legislation, regulation and international agreements.

Carbon emissions have become the subject of an increasing amount of state and local, regional, national, and international attention. Growing concerns about climate change have resulted and may continue to result in the imposition of additional regulations or restrictions to which we may become subject. These regulatory developments related to climate change and climate disclosure and diligence, including the Corporate Sustainability Reporting Directive, could increase our operating and compliance costs, thereby impacting our business and consolidated financial statements.

From time to time, we establish strategies and expectations related to climate change and other environmental matters. Our ability to achieve any such strategies or expectations is subject to numerous factors and conditions, many of which are outside of our control. Examples of such factors include, but are not limited to, evolving legal, regulatory, and other standards, processes, and assumptions, the pace of scientific and technological developments, increased costs, the availability of requisite financing, and changes in carbon markets. Failures or delays (whether actual or perceived) in achieving our strategies or expectations related to climate change and other environmental matters could adversely affect our business, operations, and reputation, and increase risk of litigation.

Capital and Credit Risks

Fluctuation of foreign currency exchange rates may adversely impact our financial results.

We conduct business in various regions throughout the world and are therefore exposed to fluctuations in foreign currency exchange rates in relation to the U.S. dollar. Any significant change in the value of the currencies of the countries in which we do business against the U.S. dollar, whether precipitated by governmental monetary policy or otherwise, could affect our ability to sell products competitively and control our cost structure, which could have a material adverse effect on our business, financial condition and results of operations. Further, because our Consolidated Financial Statements are presented in U.S. dollars, increases or decreases in the value of the U.S. dollar relative to other currencies in which we conduct business have in the past and could in the future adversely impact our financial results. For additional detail related to this risk, see Item 7A, "Quantitative and Qualitative Disclosures About Market Risk."

Disruptions in the global credit, financial and/or currency markets could limit our access to credit or otherwise harm our financial results, which could have a material adverse impact on our business.

Global credit and financial markets experience volatility, including volatility in security prices, liquidity and credit availability, declining valuations of certain investments and significant changes in the capital and organizational structures of certain financial institutions. Market conditions may limit our ability to access the capital necessary to grow and maintain our business. Accordingly, we may be forced to delay raising capital, issue debt with shorter tenors than we prefer or pay unattractive interest rates, which could increase our interest expense, decrease our profitability and significantly reduce our financial flexibility.

The agreements governing our debt, including our revolving credit facility, term loan and other debt instruments, contain various covenants that limit our ability to take certain actions and in certain circumstances require us to meet financial maintenance tests, failure to comply with which could have a material adverse effect on us.

The agreements governing our senior secured revolving credit facility and our senior secured term loan, and the indentures and credit agreements governing our other debt, contain a number of customary restrictive covenants that, among other things, limit our ability to: sell or otherwise transfer assets, including in a spin-off, 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.

In addition, depending on our level of borrowing, our revolving credit facility requires us to comply under certain circumstances with specific financial tests, under which we are required to achieve certain or specific financial and operating results. Our ability to comply with these provisions may be affected by events beyond our control. A breach of any of these covenants would result in a default under such agreements and instruments, which in certain circumstances could be a default under all of these agreements and instruments. In the event of any default, our lenders could elect to declare all amounts borrowed under the agreements, together with accrued interest thereon, to be due and payable. In such event, we cannot assure that we would have sufficient assets to pay debt then outstanding under the agreements governing our debt.

Furthermore, certain of these agreements condition our ability to obtain additional borrowing capacity, engage in certain transactions or take certain other actions, on our achievement of certain or specific financial and operating results, although our failure to achieve such results would not result in a default under such agreements. Any future refinancing of our senior secured revolving credit facility or other debt may contain similar restrictive covenants.

Our ability to service long-term indebtedness requires cash.

Our ability to pay interest on our debt and to satisfy our other debt obligations depends in part upon our future financial and operating performance and that of our subsidiaries, and upon our ability to renew or refinance borrowings. Prevailing economic conditions and financial, business, competitive, legislative, regulatory and other factors, many of which are beyond our control, affect our ability to make these payments. While we believe that cash flow from our current level of operations, available cash and available borrowings under our revolving credit facility provide adequate sources of liquidity, a significant drop in operating cash flow resulting from economic conditions, competition or other uncertainties beyond our control could create the need for alternative sources of liquidity. If we are unable to generate sufficient cash flow to meet our debt service obligations, we will have to pursue one or more alternatives, such as reducing or delaying capital or other expenditures, refinancing debt, selling assets, or raising equity capital.

We have a significant amount of goodwill, and any future goodwill impairment charges could adversely impact our results of operations.

As of December 31, 2024, we had goodwill of $1,659.7 million. The future occurrence of a potential indicator of impairment, such as a significant adverse change in business climate, an adverse action or assessment by a regulator, unanticipated competition, a material negative change in relationships with customers, strategic decisions made in response to economic or competitive conditions could result in goodwill impairment charges, which could adversely impact our results of operations. For additional information on the results of our annual impairment testing, see Note 3, Goodwill and Intangible Assets, to the accompanying consolidated financial statements and “Critical Accounting Policies and Estimates” included in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Risk Management and Strategy

We have a global cybersecurity program designed to identify, protect, detect, respond to and recover from cybersecurity risks and threats. We regularly assess risks from cybersecurity and technology threats and monitor our information systems for potential vulnerabilities. We use a widely-adopted risk quantification model to identify, measure and prioritize cybersecurity and technology risks and develop related security controls and safeguards. We conduct regular reviews and tests of our cybersecurity program and also leverage audits by our internal audit team, penetration and vulnerability testing and other exercises to evaluate the effectiveness of our cybersecurity program and improve our security measures and planning.

Cybersecurity education is a priority for our employees and business partners. Employees complete cybersecurity training to help identify and respond to potential cybersecurity risks and reinforce safe behaviors. We also impose security requirements upon our third-party services and software providers, including: maintaining an effective security management program; abiding by information handling and asset management requirements; and notifying us in the event of any known or suspected cyber incident; however, we rely on such third parties to implement security programs commensurate with their risk, and their efforts may not be successful.

We have experienced targeted and non-targeted cybersecurity attacks and incidents in the past and we could in the future experience similar attacks. To date, no cybersecurity incident or attack, or any risk from cybersecurity threats, has materially affected or has been determined to be reasonably likely to materially affect the Company or our business strategy, results of operations, or financial condition.

Governance

The Chief Information Security Officer (CISO), who reports to the Chief Information Officer (CIO), is generally responsible for management of cybersecurity risk and the protection and defense of our networks and systems. Our CISO is informed about and monitors prevention, detection, mitigation, and remediation efforts through regular communication and reporting from professionals on the information security team, and through the use of technological tools and software and results from third-party audits. The CISO has a clear escalation path to senior management for cyber-related events.

The CISO manages a team of cybersecurity professionals with broad experience and expertise, including in cybersecurity threat assessments and detection, mitigation technologies, cybersecurity training, incident response, cyber forensics, insider threats and regulatory compliance. Our CISO and cybersecurity teams hold relevant certifications, including, but not limited to, Security+ Certification, Factor Analysis for Information Risk Analyst, Certified Information Systems Auditor, Security Systems Certified Practitioner or Certified Federal Information Security Management Act Compliance Practitioner. We also supplement our cybersecurity program with third-party experts, who provide assessments of our program, testing of our environment, monitoring support, as well as insights into evolving trends in this space.

The Board oversees our annual enterprise risk assessment, where we assess key risks within the company, including security and technology risks and cybersecurity threats. The Audit Committee of the Board has been delegated specific risk oversight responsibilities related to cybersecurity and data protection. The Audit Committee receives regular updates from the CIO or CISO regarding the Company's material risks from cybersecurity threats, cybersecurity defense and detection capabilities, incident response plans and employee training activities.

Further, Avient has a Cyber and Data Incident Response Team (CDIRT), which is a cross-functional group established to provide a quick, effective and orderly response to cyber and data related events. The CDIRT's mission is to prevent a material loss of profits, public confidence, or information assets by providing an immediate, effective, and skillful response to any unexpected event in which there is an unauthorized release or access of sensitive information.

Headquartered in Avon Lake, Ohio, we operate globally with principal locations consisting of 102 manufacturing sites in North America, South America, Asia, Europe, the Middle East, and Africa. We own the majority of our manufacturing sites. We believe that the quality and production capacity of our facilities is sufficient to maintain our competitive position for the foreseeable future. The following table identifies the principal facilities of our segments:

(a) Facility is not included in manufacturing plants total as it is also included as part of another segment.

(b) Facility is not included in manufacturing plants total as it is a design center/lab.

(c) There are two manufacturing plants located in Shanghai, China.

(d) Location also includes a design center/lab.

Information regarding certain legal proceedings can be found in Note 11, Commitments and Contingencies, to the accompanying consolidated financial statements and is incorporated by reference herein.

Overview

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide information that is supplemental to, and should be read together with, our consolidated financial statements and the accompanying notes contained in this Annual Report on Form 10-K. Information in this Item 7 is intended to assist the reader in obtaining an understanding of our consolidated financial statements, the changes in certain key items in those financial statements from year to year, the primary factors that accounted for those changes, and any known trends or uncertainties that we are aware of that may have a material effect on our future performance, as well as how certain accounting principles affect our consolidated financial statements. Unless otherwise noted, the discussion that follows includes a comparison of our results of operations, liquidity and capital resources, and cash flows for fiscal years 2024 and 2023. For a discussion of changes from fiscal year 2023 to fiscal year 2022, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 20, 2024.

The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in “Cautionary Note on Forward-Looking Statements” and Item 1A, “Risk Factors.”

Our Business

We are an innovator of materials solutions to help our customers succeed, while enabling a sustainable world. Our products include specialty engineered materials, performance fibers, advanced composites, and color and additive solutions. We are also a highly specialized developer and manufacturer of performance enhancing additives, liquid colorants and silicone colorants. Headquartered in Avon Lake, Ohio, with 2024 sales of $3.2 billion from continuing operations, we have manufacturing and warehouses around the globe, with 60% of our sales to customers outside the United States. We provide value to our customers through our ability to link our knowledge of polymers and materials science with our manufacturing and supply chain capabilities to provide value-added solutions to designers, assemblers and processors of materials.

Strategy and Key Trends

In 2024, we developed a refined strategy for the Avient of the future. It begins with our purpose: to be an innovator of materials solutions to help our customers succeed, while enabling a sustainable world. We have a two-pronged strategic approach, where we seek to intersect high-growth markets and secular trends with our technologies to 1) build new platforms of scale by playing bigger and bolder in high growth markets, and 2) catalyze the core of our business, maximizing the impact of what we have. Our strategy utilizes four supporting strategic drivers: Portfolio Prioritization; Amplify Innovation; Digital for Operational Excellence and Growth; and Leadership, Talent and Culture for the Avient of the Future. All of this is underpinned by the established foundational strengths of Avient, which have been built and refined over the 25-year history of the company.

We maintain a strong commitment to sustainability. Like all that we do, we start by putting the safety of our employees and needs of our customers first, then look inward to make a difference. We offer a broad portfolio of technologies that are designed to help our customers succeed, while enabling a sustainable world. Through our design expertise and materials science, we seek to positively contribute to our customers’ products in many end markets. We have three overarching ways we help our customers meet their sustainability goals: Renew, Reduce, and Preserve. Examples include developing unique technologies that improve the recyclability of products and allow recycled content to be incorporated in products, thus advancing a more circular economy; light-weighting solutions that replace heavier traditional materials like metal, glass and wood, which can improve fuel efficiency in all modes of transportation and reduce the carbon footprint; and infrastructure solutions that are designed to increase energy efficiency, renewable energy, and natural resource conservation.

Long-term trends that currently provide opportunities to leverage our strategy include improving health and wellness, protecting the environment, and increasing need for power and electricity.

Operationally, we will continue our enterprise-wide Lean Six Sigma program directed at improving margin, profitability and cash flow by applying proven management techniques and strategies to key areas of the business, such as pricing, supply chain and operations management, productivity and quality.

Subsequent Events

In the first quarter of 2025, the Company completed a review of the cloud-based enterprise resource planning system, S/4HANA, including updated project timelines, cost incurred to date, required internal resources and expected costs to complete the initial site implementations, and the evolution of options that could provide better returns for shareholders. As a result of this review, the Company determined it would cease the ongoing development of S/4HANA and re-allocate capital to other projects which will support the Company’s new strategy.

As a result of this decision, the Company will recognize a non-cash, pre-tax impairment charge of approximately $71 million, associated with capitalized implementation costs. The Company will also recognize pre-tax charges of approximately $15 million associated with unpaid contractual obligations for hosting fees within its Consolidated Statements of Income in the first quarter of 2025.

(Dollars in millions, except per share data)

nm - not meaningful

Sales

Sales increased $97.6 million, or 3.1%, in 2024 compared to 2023, primarily driven by increased demand of 4.0%, partially offset by unfavorable foreign currency impacts of 0.9%. Increased demand was driven by strength in the consumer, defense, building and construction, packaging and healthcare end markets, partially offset by weakness in the telecommunications and transportation end markets.

Gross Margin

Gross margin increased to 32.6% from 28.4% in 2024 compared to 2023, primarily driven by the benefits of raw material deflation, mix improvement, lower environmental remediation costs of $34.6 million, and lower restructuring charges of $12.9 million. Further, in 2024, Avient recognized a gain from insurance recoveries associated with previously incurred environmental remediation costs of $34.7 million as compared to a gain of $1.7 million in 2023.

Selling and administrative expense

These costs include selling, technology, administrative functions, amortization of intangible assets, corporate and general expenses. Selling and administrative expense in 2024 increased $31.7 million compared to 2023, primarily due to higher employee related costs, partially offset by lower restructuring costs of $9.0 million.

Interest expense, net

Interest expense, net decreased $9.7 million in 2024 as compared to 2023, primarily due to the refinancing of our senior secured term loans in April 2024 and August 2023, which included a partial principal repayment of $102.3 million during the third quarter of 2023.

Other income (expense), net

Other income (expense), net decreased $4.7 million in 2024 as compared to 2023, primarily associated with $6.3 million in amortization of prior service credits associated with the phase out of certain post-employment benefits in 2023.

Income taxes

A reconciliation of the applicable U.S. federal statutory tax rate to the consolidated effective income tax rate from continuing operations along with a description of significant or other reconciling items is included below.

(In millions)

The consolidated effective income tax rate from continuing operations was 24.1%, which was higher than the U.S. federal rate of 21%. This higher rate was primarily driven by U.S. permanent items of 2.1%, international rate differential of 1.7% and tax associated with foreign income repatriation of 1.6%. These items were partially offset by credits associated with research and development of 1.7% and changes in uncertain tax position which resulted in a net benefit of 1.1%.

The 2023 consolidated effective income tax rate from continuing operations was 12.6%, which was lower than the U.S. federal rate of 21%. This lower rate was primarily driven by the recognition of tax benefits of 7.5% associated with tax impairments of investments in affiliates, driven in part from European restructuring actions. Further, we recognized a 5.4% tax benefit from federal and state capital losses associated with an international affiliate's tax status change in 2022. Finally, we recognized tax benefits from the reduction of uncertain tax positions as well as the U.S. R&D tax credit, which reduced the tax rate, 5.3% and 3.7%, respectively. Partially offsetting these benefits were non-deductible foreign interest, 5.3%, tax associated with foreign income repatriation, 3.9%, and an increase of our valuation allowance which impacted the rate 3.6%.

Segment Information

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. Operating income at the segment level does not include corporate general and administrative costs that are not allocated to segments, restructuring charges, environmental remediation obligations and associated recoveries, acquisition-related charges, mark-to-market adjustments on pension and other post-retirement obligations, and certain other items that are not included in the measure of segment profit or loss that is reported to and reviewed by our CODM. These costs are included in Corporate.

Avient has two reportable segments: (1) Color, Additives and Inks and (2) Specialty Engineered Materials. Our segments are further discussed in Note 14, Segment Information, to the accompanying consolidated financial statements.

Sales and Operating Income

(Dollars in millions)

Color, Additives and Inks

Sales increased $39.1 million, or 1.9%, in 2024 compared to 2023, primarily driven by increased demand of 2.9%, partially offset by unfavorable foreign currency impacts of 0.9%. Increased demand was driven by strength in the packaging, consumer, healthcare and building and construction end markets, partially offset by weakness in the transportation end market.

Operating income increased $36.3 million, or 14.0%, in 2024 compared to 2023, primarily driven by increased sales and benefits from raw material deflation, which occurred in the first half of 2024, partially offset by higher employee related costs and unfavorable foreign currency impacts.

Specialty Engineered Materials

Sales increased by $58.6 million, or 5.1%, in 2024 compared to 2023, primarily driven by increased demand of 6.1%, partially offset by an unfavorable foreign currency impact of 0.7%. Increased demand was driven by strength in the defense, building and construction, consumer and healthcare end markets, partially offset by weakness in the telecommunications end market.

Operating income increased by $24.7 million, or 17.3%, in 2024 compared to 2023, primarily driven by increased sales, benefits from raw material deflation, which occurred in the first half of 2024, and favorable product mix, partially offset by higher employee related costs and unfavorable foreign currency impacts.

Corporate

Costs decreased $71.5 million, or 34.8%, in 2024 compared to 2023, primarily driven by $34.6 million of lower environmental remediation costs in 2024 compared to 2023, while gains from insurance recoveries associated with previously incurred environmental remediation costs were $33.0 million higher in 2024 compared to 2023. Further, lower restructuring costs of $21.9 million in 2024 more than offset higher employee related costs in 2024.

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 on hand 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 December 31, 2024:

(In millions)

As of December 31, 2024, 64% of the Company’s cash and cash equivalents resided outside the United States.

Based on current projections, we believe that we will be able to continue to manage and control working capital, discretionary spending and capital expenditures and that cash provided by operating activities, along with available borrowing capacity under our revolving credit facilities, will allow us to maintain adequate levels of available capital to fund our operations, meet debt service obligations, continue paying dividends, and opportunistically repurchase outstanding common shares for at least twelve months and the foreseeable future thereafter.

Expected sources of cash needed to satisfy cash requirements in 2025 include our cash on hand, cash from operations, the receipt of $34.0 million of insurance recoveries, as described in Note 11, Commitments and Contingencies, and available liquidity under our revolving credit facility, if necessary. Expected uses of cash in 2025 include interest payments, cash taxes, dividend payments, share repurchases, environmental remediation payments and capital expenditures. Capital expenditures are currently estimated to be approximately $120 million in 2025, primarily to support organic sales growth and other strategic investments.

Cash Flows

The following table summarizes our cash flows from operating, investing and financing activities:

(In millions)

Operating Activities

Net cash provided by operating activities increased to $256.8 million in 2024, as compared to $201.6 million in 2023, driven primarily by higher earnings and lower tax payments as 2023 included tax payments of $104.1 million associated with the gain on sale of our Distribution business. This was partially offset by an increase in working capital of $28.6 million as compared to a decrease of $40.7 million in 2023, a $15.4 million increase in environmental remediation payments, and $21.1 million of higher benefit payments associated with executive retirements.

Investing Activities

Net cash used by investing activities during 2024 of $120.6 million primarily reflects the impact of capital expenditures.

Financing Activities

Net cash used by financing activities of $120.9 million in 2024 primarily reflects repayment on long-term borrowings of $660.9 million, $94.0 million of dividends paid and $9.6 million of debt financing costs, partially offset by $650.0 million of proceeds received from long-term borrowings.

Total Debt

The following table summarizes debt as of December 31, 2024 and 2023.

(In millions)

On April 9, 2024, the Company refinanced its senior secured term loan by amending the credit agreement governing such term loan (the Term Loan Amendment). The Term Loan Amendment reduced the interest rates per annum by 50 basis points, which are now either (i) Adjusted Term SOFR (as defined in the Term Loan Amendment) plus 2.00%, or (ii) a Base Rate (as defined in the Term Loan Amendment) plus 1.00%. The maturity date and other terms and conditions are substantially the same as the terms and conditions under the credit agreement immediately prior to the Term Loan Amendment.

On September 19, 2024, the Company completed the issuance of $650.0 million aggregate principal amount of 6.250% Senior Notes which will mature on November 1, 2031 (the 2031 Notes). The Company received proceeds of $641.9 million, net of financing costs, related to the issuance. Interest on the 2031 Notes is payable semi-annually in arrears on May 1 and November 1 of each year, commencing on May 1, 2025. The 2031 Notes were sold in a private offering and are senior unsecured obligations of the Company.

Proceeds from the 2031 Notes and cash on hand were used to fully redeem the $650.0 million aggregate principal amount outstanding of the Company's 5.750% Senior Notes due May 15, 2025. The notes were redeemed at a redemption price equal to 100.0% of the principal amount.

The Company maintains a senior secured revolving credit facility (the Revolving Credit Facility), which matures on October 26, 2026 and provides a maximum borrowing facility size of $500.0 million, subject to a borrowing base with advances against certain U.S. and international accounts receivable, inventory and other assets as specified in the agreement. As of December 31, 2024, we had no borrowings outstanding under our Revolving Credit Facility, which had remaining availability of $211.4 million.

The agreements governing our Revolving Credit Facility and our senior secured term loan, and the indentures and credit agreements governing other debt contain a number of customary financial and restrictive covenants. As of December 31, 2024, we were in compliance with all customary financial and restrictive covenants pertaining to our debt.

For additional information regarding our debt, please see Note 5, Financing Arrangements to the accompanying consolidated financial statements.

Letters of Credit

Our Revolving Credit Facility provides up to $50.0 million for the issuance of letters of credit, $12.9 million of which was used at December 31, 2024. These letters of credit are issued by the bank in favor of third parties and are mainly related to required insurance programs.

Material Cash Requirements

We have future obligations under various contracts relating to debt and interest payments, operating leases, pension and post-retirement benefit plans, purchase obligations and environmental remediation obligations. The following table summarizes our obligations as of December 31, 2024 that are expected to impact liquidity and cash flow in future periods. See Liquidity and Capital Resources for additional discussion of our ability to generate and access cash to meet requirements as well as plans for use of cash in both the short-term and long-term.

(In millions)

(1) Represents estimated contractual interest payments for all outstanding debt. Excludes cash receipts from cross-currency swaps as described in Note 15, Derivatives and Hedging.

(2) This represents estimates related to the funding obligations of our pension and other post retirement plans. These contributions are based on actuarial estimates of future assumed payments based upon retirement and payment patterns for a 10-year period. The estimates in the table may differ materially from actual future payments due to uncertainties regarding the assumptions involved in estimating future required contributions to our pension and non-pension post retirement benefit plans, including (i) interest rate levels (ii) the amount and timing of asset returns and (iii) what, if any, changes may occur in pension funding legislation.

(3) Purchase obligations are primarily comprised of service agreements related to telecommunication, information technology, utilities and other manufacturing plant services and certain capital commitments.

Critical Accounting Policies and Estimates

Significant accounting policies are described more fully in Note 1, Description of Business and Summary of Significant Accounting Policies, to the accompanying consolidated financial statements. The preparation of financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires us to make estimates and assumptions about future events that affect the amounts reported in our consolidated financial statements and accompanying notes. We base our estimates on historical experience and assumptions that we believe are reasonable considering the related facts and circumstances. The application of these critical accounting policies involves the exercise of judgment and use of assumptions for future uncertainties. Accordingly, actual results could differ significantly from these estimates. We believe that the following discussion addresses our most critical accounting policies, which are those that are the most important to the portrayal of our financial condition and results of operations and require our most difficult, subjective and complex judgments.

Revenue Recognition

Sales are recognized when control of promised goods or services are transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Control is transferred when the customer has the ability to direct the use of and obtain benefits from the goods or services, which is typically when products are shipped from our facilities. The majority of the Company’s sales agreements contain performance obligations satisfied at a point in time when control is transferred to the customer. Avient records reductions to sales for customer incentives, primarily comprised of rebates, at the time of the initial sale. Rebates are estimated based on sales terms, historical experience along with annual sales projections. Rebate programs offered are typically credited to customers for achieving defined volume levels.

Environmental Liabilities

We are a party to a Consent Decree related to remedial actions at the former Goodrich Corporation Calvert City site and will incur environmental remediation costs related to this matter. We recognize an estimate of environmental liabilities on an undiscounted basis for probable future environmental expenditures. Any such provision is recognized using the Company's best estimate of the amount of loss incurred, or at the lower end of an estimated range, when a single best estimate is not determinable. In some cases, the Company recovers a portion of the costs relating to these obligations from insurers or other third parties, and the recovery is recognized when realization of the proceeds is deemed as probable.

Environmental liabilities represents our best estimate of the remaining probable costs based upon information and technology currently available. Depending upon the results of future testing, the ultimate remediation alternatives undertaken, changes in regulations, new information, newly discovered conditions and other factors, it is reasonably possible that we could incur additional costs in excess of the amount accrued. However, such additional costs, if any, cannot currently be estimated. Our estimate of this liability may be revised as new regulations or technologies are developed or additional information is obtained. As we progress through remedial design and remedial action related to the Goodrich Corporation Calvert City site, additional information will become available that may require an adjustment to our existing accrual. Adjustments have been material to our financial statements in the past and it is reasonably possible that they could be in the future.

Additional information related to the accounting for environmental liabilities is found in Note 11, Commitments and Contingencies.

Acquisitions of Businesses

The acquisition of a business is accounted for using the acquisition method of accounting which requires assets and liabilities to be recognized at their fair values on the acquisition date. The initial fair value of assets acquired and liabilities assumed may be revised based on the final determination of fair value during the measurement period of 12 months from the acquisition date. The Company generally determines the fair value of intangible assets acquired using third-party valuations that are prepared using discounted cash flow models that rely on the Company's estimates. These estimates can require judgement of future revenue growth rates, future margins, applicable royalty rates, customer retention and the applicable weighted-average cost of capital used to discount those estimated cash flows. Sensitivity analyses are performed around certain of these assumptions in order to assess the reasonableness of the assumptions and the resulting estimated fair values.

Pension and Other Post-retirement Benefit Plans

The measurement of liabilities related to pension plans and other post-retirement benefits plans is based on assumptions related to future events including interest rates, return on plan assets, and mortality assumptions. We immediately recognize actuarial gains and losses in our operating results in the year in which the gains or losses occur.

Asset returns and interest rates significantly affect the value of assets and liabilities related to our pension and post-retirement plans and therefore the funded status of our plans. It is difficult to predict these factors due to the volatility of market conditions. To develop our discount rate, we consider the yields of high-quality corporate bonds with maturities that correspond to the timing of our benefit obligations, referred to as the bond matching approach. To develop our expected long-term return on plan assets, we consider forward looking long-term asset returns and the expected investment portfolio mix of plan assets. Life expectancy is another significant assumption that impacts our pension and other post-retirement benefits obligation, which is based on mortality data and improvement scales issued by the Society of Actuaries.

Additional information related to the accounting for pension and other post-retirement benefits is found in Note 10, Employee Benefit Plans.

Income Taxes

We account for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. In addition, deferred tax assets are also recorded with respect to net operating losses and other tax attribute carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when realization of the benefit of deferred tax assets is not deemed to be more likely than not. The utilization of certain deferred tax assets is dependent on the amount and timing of taxable income that we will ultimately generate in the future and other factors, such as changes in tax laws.

We recognize net tax benefits under the recognition and measurement criteria, which prescribes requirements and other guidance for financial statement recognition and measurement of positions taken or expected to be taken on tax returns. We recognize an income tax benefit from an uncertain tax position only if it is more likely than not that the benefit would be sustained upon examination by taxing authorities, based on the technical merits of the position. The Company evaluates and adjusts the amount of unrecognized income tax benefits based on changes in law, facts and circumstances. We record interest and penalties related to uncertain tax positions as a component of income tax expense. The ultimate resolution of unrecognized income tax benefits is often dependent upon uncontrollable factors such as the timing of finalizing resolutions of audit disputes through reaching settlement agreements, or changes in law.

Additional information related to the accounting for income taxes is found in Note 12, Income Taxes.

Goodwill

Goodwill is evaluated annually for impairment as of October 1 using either a quantitative or qualitative analysis. Goodwill is tested for impairment at the reporting unit level, and is based on the net assets for each reporting unit, including goodwill and intangible assets. The Company’s reporting units are at a level below the Company’s reportable operating segments. Goodwill is assigned to each reporting unit, as this represents the lowest level that constitutes a business and is the level at which management regularly reviews the operating results.

Additionally, goodwill is evaluated for impairment whenever an event occurs or circumstances change that would indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Events or circumstances that may result in an impairment review include changes in macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, other relevant entity-specific events, specific events affecting the reporting unit or sustained decrease in share price.

Quantitative analyses are performed by estimating the fair value for each reporting unit using a discounted cash flow model. These analyses include estimates of future cash flows, future growth rates, terminal value amounts, and the applicable weighted-average cost of capital used to discount estimated cash flows. The future cash flows are based on the Company's long-term strategic plan, and a terminal value is used to estimate the reporting unit's cash flows beyond the period covered by the strategic plan. The weighted-average cost of capital is an estimate of the overall after-tax rate of return required by equity and debt market holders of a business enterprise. These analyses require the exercise of judgments, including judgments about appropriate discount rates, revenue growth, operating margins, and long-term growth rates.

A qualitative analysis is performed by assessing certain trends and factors, including projected market outlook and growth rates, forecasted and actual sales and operating profit margins, discount rates, industry data, and other relevant qualitative factors. These trends and factors are compared to, and based on, the assumptions used in the most recent quantitative analysis performed for each reporting unit.

In 2023, the annual goodwill impairment test was performed using a quantitative approach. In 2024, the Company performed a qualitative approach, including assessing certain trends and factors, including projected market outlook and growth rates, forecasted and actual sales and operating profit margins, discount rates, industry data and other relevant qualitative factors. These trends and factors were compared to the assumptions used in the 2023 quantitative analysis for each reporting unit. The results of the qualitative assessment did not indicate a need to perform a quantitative analysis.

Based on the results of our impairment analysis, the Company concluded the fair value of its reporting units continued to exceed their respective carrying value.

Indefinite-lived Trade Names

Indefinite-lived trade names are evaluated annually for impairment as of October 1 using either a quantitative or qualitative analysis to determine whether their fair values exceed their respective carrying amounts. Additionally, indefinite-lived trade names are evaluated for impairment whenever an event occurs or circumstances change that would indicate that it is more likely than not that the asset is impaired. Events or circumstances that may result in an impairment review include changes in industry and market considerations, cost factors, financial performance, and other relevant entity-specific events that could affect inputs used to determine the respective fair values of the indefinite-lived intangible assets.

Quantitative analyses are performed by estimating the fair value for each indefinite-lived trade name using a royalty relief methodology. These analyses include estimates of future cash flows that are based on the Company's long-term strategic plan and the applicable weighted-average cost of capital used to discount estimated cash flows. The primary inputs to these estimates require the exercise of judgements, including judgements about appropriate discount rates, revenue growth, royalty rates, and long-term growth rates.

A qualitative analysis is performed by assessing certain trends and factors, including projected market outlook and growth rates, forecasted and actual sales, discount rates, industry data, and other relevant qualitative factors. These trends and factors are compared to, and based on, the assumptions used in the most recent quantitative analysis performed for each indefinite-lived trade name.

In 2023, the indefinite-lived intangible asset impairment tests were performed using a quantitative approach. In 2024, the Company performed both qualitative and quantitative approaches. The qualitative approach includes assessing certain trends and factors, including projected market outlook and growth rates, forecasted and actual sales, discount rates, other relevant qualitative factors. These trends and factors were compared to the assumptions used in the 2023 quantitative analysis. The quantitative analysis was performed by estimating the fair value of the indefinite-lived trade name using a royalty relief methodology. This analysis includes estimates of future cash flows that are based on the Company's long-term strategic plan and the applicable weighted-average cost of capital used to discount estimated cash flows.

Based on the results of our impairment analysis, the Company concluded the fair value of its trade names continued to exceed their respective carrying value.

For additional information about goodwill and intangible assets see Note 3, Goodwill and Intangible Assets.

Recent and Future Adoption of Accounting Standards

Information regarding recent and future adoption of accounting standards can be found in Note 1, Description of Business and Summary of Significant Accounting Policies, to the accompanying consolidated financial statements and is incorporated by reference herein.

We are exposed to certain market risks as part of our ongoing business operations, including risks from changes in interest rates on debt obligations and foreign currency exchange rates that could impact our financial condition, results of operations and cash flows. We manage our exposure to these and other market risks through regular operating and financing activities, including the use of derivative financial instruments. We intend to use these derivative financial instruments as risk management tools and not for speculative investment purposes.

Interest rate exposure — Interest on our Revolving Credit Facility and senior secured term loan is based upon a Base Rate or Adjusted Term SOFR, plus a margin. There would be no material impact on our interest expense or cash flows from either a 100 basis point increase or decrease in market rates of interest on our outstanding variable rate debt as of December 31, 2024.

Foreign currency exposure — We have exposure from both third-party and intercompany transactions that are denominated in various foreign currencies and are subject to financial exposure from foreign exchange rate movements. To mitigate this risk, we may enter into foreign exchange forward contracts and derivative instruments. Gains and losses on these contracts generally offset gains and losses on the assets and liabilities being hedged.

We also face translation risks related to the changes in foreign currency exchange rates. Amounts invested in our foreign operations are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. The resulting translation adjustments are recorded as a component of Accumulated other comprehensive income (loss) in the Shareholders’ equity section of the accompanying Consolidated Balance Sheets. To mitigate a portion of this risk, we may enter into cross-currency swaps. Gains and losses on these contracts generally offset gains and losses on the Euro denominated investment in our foreign entities. Net sales and expenses in our foreign operations’ foreign currencies are translated into varying amounts of U.S. dollars depending upon whether the U.S. dollar weakens or strengthens against other currencies. Therefore, changes in exchange rates may either positively or negatively affect our net sales and expenses from foreign operations as expressed in U.S. dollars.

Disclosure controls and procedures

Avient’s management, with the participation of the Chief Executive Officer and the 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 Exchange Act) as of December 31, 2024. Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2024.

Management’s Annual Report On Internal Control Over Financial Reporting

The following report is provided by management in respect of Avient’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act):

1. Avient’s management is responsible for establishing and maintaining adequate internal control over financial reporting.

2. Under the supervision of and with participation of Avient’s management, including the Chief Executive Officer and the Chief Financial Officer, we conducted an evaluation of the effectiveness of internal control over financial reporting as of December 31, 2024 based on the guidelines established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (2013 Framework). Management believes that the 2013 Framework is a suitable framework for its evaluation of financial reporting because it is free from bias, permits reasonably consistent qualitative and quantitative measurements of Avient’s internal control over financial reporting, is sufficiently complete so that those relevant factors that would alter a conclusion about the effectiveness of Avient’s internal control over financial reporting are not omitted and is relevant to an evaluation of internal control over financial reporting.

3. Based on the results of our evaluation, management has concluded that such internal control over financial reporting was effective as of December 31, 2024. There were no material weaknesses in internal control over financial reporting identified by management. The results of management's assessment were reviewed with our Audit Committee.

4. Ernst & Young LLP, who audited the consolidated financial statements of Avient for the year ended December 31, 2024, also issued an attestation report on Avient’s internal control over financial reporting under Auditing Standard No. 2201 of the Public Company Accounting Oversight Board. This attestation report is set forth on page 30 of this Annual Report on Form 10-K and is incorporated by reference into this Item 9A.

Changes in internal control over financial reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Limitations in internal control over financial reporting

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.