Avient Corp: Form 10-Q for the period ended Jun 30, 2025

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, we have manufacturing sites, research and development facilities, design centers and warehouses around the globe. 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. When used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” “Avient” and the “Company” mean Avient Corporation and its consolidated subsidiaries.

Results of Operations — The three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024:

(Dollars in millions, except per share data)

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Sales

Sales increased $16.8 million, or 2.0%, in the three months ended June 30, 2025 compared to the three months ended June 30, 2024. Favorable foreign currency impacts were 1.4%, while sales, excluding the impacts of foreign exchange, increased 0.6%. The sales increase was primarily within the defense and healthcare end markets, partially offset by declines in the consumer and industrial end markets.

Sales increased $14.4 million, or 0.9%, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. Unfavorable foreign currency impacts were 0.3%, while sales, excluding the impacts of foreign exchange, increased 1.2%. The sales increase was primarily within the packaging, defense and healthcare end markets, partially offset by declines in the consumer end market.

Gross Margin

Gross margin as a percentage of sales was 32.1% for the three months ended June 30, 2025 compared to 30.3% for the three months ended June 30, 2024. This increase was driven primarily by lower environmental remediation charges of $20.6 million, net of recoveries, partially offset by higher restructuring charges of $2.8 million.

Gross margin as a percentage of sales was 32.0% for the six months ended June 30, 2025 compared to 31.9% for the six months ended June 30, 2024. This increase was driven primarily by lower environmental remediation charges of $21.0 million, net of recoveries, partially offset by higher restructuring charges of $10.5 million.

Selling and administrative expense

Selling and administrative expense decreased $3.3 million for the three months ended June 30, 2025, primarily driven by lower compensation cost. Selling and administrative expense increased $75.0 million for the six months ended June 30, 2025, primarily driven by an impairment charge of $71.6 million associated with the Company's decision to cease development of the cloud-based enterprise resource planning system, S/4HANA, and charges of $14.7 million associated with unpaid contractual obligations for hosting fees. These charges were partially offset by lower compensation cost.

Interest expense, net

Interest expense, net decreased $1.9 million and $1.6 million for the three and six months ended June 30, 2025, respectively, primarily driven by the benefit of reduced interest rates resulting from previous refinancing activity.

Income taxes

During the three months ended June 30, 2025, the Company’s effective tax rate was 24.5% compared to 24.9% in the three months ended June 30, 2024. The lower effective tax rate for the three months ended June 30, 2025 was primarily driven by a decrease in the tax on global intangible low-taxed income (GILTI) partially offset by a reduction in favorable foreign permanent items. During the six months ended June 30, 2025, the Company's effective tax rate was 24.2% compared to 25.1% in the six months ended June 30, 2024. The lower effective tax rate for the six months ended June 30, 2025 was primarily driven by a decrease in GILTI tax and increased favorable permanent items. Partially offsetting these benefits was an increase in valuation allowances.

Refer to Note 6, Income Taxes, for further details.

SEGMENT INFORMATION

Avient has two reportable segments: (1) Color, Additives and Inks; and (2) Specialty Engineered Materials.

Operating income is the primary segment performance measure that is reported to our chief operating decision maker (CODM), which is the Company's chief executive officer, for purposes of allocating resources and assessing performance. Operating income at the segment level does not include corporate general and administrative expenses that are not allocated to segments, restructuring charges, share-based compensation costs, environmental remediation costs and associated recoveries, asset impairments, 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.

Sales and Operating Income — The three and six months ended June 30, 2025 compared to the three and six months ended June 30, 2024:

(Dollars in millions)

15 AVIENT CORPORATION

Color, Additives and Inks

Sales decreased $3.4 million, or 0.6%, in the three months ended June 30, 2025 compared to the three months ended June 30, 2024. Favorable foreign currency impacts were 1.4%, while sales, excluding the impacts of foreign exchange, decreased 2.0%. The sales decrease was primarily within the consumer and transportation end markets, partially offset by sales increases within the healthcare end market.

Sales increased $1.0 million, or 0.1%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. Unfavorable foreign currency impacts were 0.5%, while sales, excluding the impacts of foreign exchange, increased 0.6%. The sales increase was primarily within the packaging and healthcare end markets, partially offset by declines in the consumer and transportation end markets.

Operating income increased $4.2 million and $8.0 million for the three and six months ended June 30, 2025, respectively, primarily driven by improved mix and cost savings from productivity and restructuring actions.

Specialty Engineered Materials

Sales increased $21.6 million, or 7.0%, in the three months ended June 30, 2025 compared to the three months ended June 30, 2024. Favorable foreign currency impacts were 1.3%, while sales, excluding the impacts of foreign exchange, increased 5.7%. The sales increase was primarily within the defense and healthcare end markets, partially offset by declines in the consumer end market.

Sales increased $15.6 million, or 2.5%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. Unfavorable foreign currency impacts were 0.1%, while sales, excluding the impacts of foreign exchange, increased 2.6%. The sales increase was primarily within the defense and healthcare end markets, partially offset by declines in the consumer and industrial end markets.

Operating income decreased $2.6 million and $8.9 million for the three and six months ended June 30, 2025, respectively, driven by higher operating costs, primarily associated with planned maintenance, and investments in the Company's growth vectors.

Corporate

Corporate costs decreased $22.0 million for the three months ended June 30, 2025, primarily driven by lower environmental costs of $20.6 million, net of recoveries.

Corporate costs increased $68.8 million for the six months ended June 30, 2025, primarily driven by an impairment charge of $71.6 million associated with the Company's decision to cease development of the cloud-based enterprise resource planning system, S/4HANA, charges of $14.7 million associated with unpaid contractual obligations for hosting fees, and higher restructuring costs of $17.3 million. Partially offsetting these charges was lower environmental remediation charges of $21.0 million, net of recoveries, and lower compensation cost.

Liquidity and Capital Resources

Our objective is to finance our business through operating cash flow and an appropriate mix of debt and equity. By laddering the maturity structure, we avoid concentrations of debt maturities, reducing liquidity risk. We may from time to time seek to retire or purchase our outstanding debt with cash and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. We may also seek to repurchase our outstanding common shares. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved have been and may continue to be material.

The following table summarizes our liquidity as of June 30, 2025 and December 31, 2024:

(In millions)

As of June 30, 2025, approximately 73% of the Company’s cash and cash equivalents resided outside the United States.

Expected sources of cash needed to satisfy cash requirements for 2025 include our cash on hand, cash from operations and available liquidity under our revolving credit facility, if necessary. We believe that these sources will also provide sufficient liquidity to satisfy our expected uses of cash for at least the next twelve months and the foreseeable future thereafter. Expected uses of cash for 2025 include debt payments, interest payments, cash taxes, dividend payments, environmental remediation payments and capital expenditures.

Cash Flows

The following describes the significant components of cash flows from operating, investing and financing activities for the six months ended June 30, 2025 and 2024.

Operating Activities — Net cash provided by operating activities decreased $1.4 million during the six months ended June 30, 2025 compared to the six months ended June 30, 2024, driven primarily by higher incentive compensation payments and increased working capital, partially offset by insurance proceeds of $34.0 million for previously incurred losses at the Calvert City site.

Investing Activities — Net cash used by investing activities during the six months ended June 30, 2025 and 2024 of $39.5 million and $54.5 million, respectively, primarily reflects the impact of capital expenditures.

Financing Activities — Net cash used by financing activities for the six months ended June 30, 2025 of $106.4 million primarily reflects payment on long-term borrowings of $50.2 million and $49.4 million of dividends paid.

Net cash used by financing activities for the six months ended June 30, 2024 of $54.8 million primarily reflects $47.0 million of dividends paid.

Debt

As of June 30, 2025, aggregate maturities of the principal amount of debt for the current year, next four years and thereafter, are as follows:

(In millions)

On March 12, 2025, 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 rate per annum by 25 basis points, which now is either (i) Adjusted Term SOFR (as defined in the Term Loan Amendment) plus 1.75%, or (ii) a Base Rate (as defined in the Term Loan Amendment) plus 0.75%. 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.

In the second quarter of 2025, the Company made a voluntary prepayment of $50.0 million on its senior secured term loan, which was applied to the principal installments in direct order of maturity. This prepayment was made without penalty or premium.

On June 12, 2025, the Company entered into a revolving credit agreement (the Revolving Credit Agreement) with various financial institutions as lenders, and JPMorgan Chase Bank, N.A., as administrative agent, which replaced our previous credit agreement. The Revolving Credit Agreement provides for a senior secured revolving credit facility of up to $500.0 million, which may be increased by up to $250.0 million, subject to certain conditions. Loans under the Revolving Credit Agreement will mature on June 12, 2030. The Revolving Credit Agreement contains representations and warranties, affirmative covenants, negative covenants and events of default that are substantially similar to those contained in the Company's existing term loan credit agreement.

As of June 30, 2025, we were in compliance with all financial and restrictive covenants pertaining to our debt. For additional information regarding our debt, please see Note 7, Financing Arrangements, to the accompanying condensed consolidated financial statements.

Derivatives and Hedging

We are exposed to market risks, such as changes in foreign currency exchange rates and interest rates. To manage the volatility related to these exposures we may enter into various derivative transactions. For additional information regarding our derivative instruments, please see Note 8, Derivatives and Hedging, to the accompanying condensed consolidated financial statements.

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. During the six months ended June 30, 2025, we refinanced our senior secured term loan, which reduced the interest rate per annum by 25 basis points, and made a voluntary prepayment of $50.0 million, refer to Note 9, Financing Arrangements. There were no other material changes to these obligations as reported in our Annual Report on Form 10-K for the year ended December 31, 2024.

CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS

In this Quarterly Report on Form 10-Q, statements that are not reported financial results or other historical information are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give current expectations or forecasts of future events and are not guarantees of future performance. They are based on management’s expectations that involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. You can identify these statements by the fact that they do not relate strictly to historic or current facts. They use words such as "will," “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning in connection with any discussion of future operating or financial condition, performance and/or sales. In particular, these include statements relating to future actions; prospective changes in raw material costs, product pricing or product demand; future performance; estimated capital expenditures; results of current and anticipated market conditions and market strategies; sales efforts; expenses; the outcome of contingencies such as legal proceedings and environmental liabilities; and financial results. Factors that could cause actual results to differ materially from those implied by these forward-looking statements include, but are not limited to:

• disruptions, uncertainty or volatility in the credit markets that could adversely impact the availability of credit already arranged and the availability and cost of credit in the future;
• the effect on foreign operations of currency fluctuations, tariffs and other political, economic and regulatory risks;
• disruptions or inefficiencies in our supply chain, logistics, or operations;
• changes in laws and regulations in jurisdictions where we conduct business, including with respect to plastics and climate change;
• fluctuations in raw material prices, quality and supply, and in energy prices and supply;
• demand for our products and services;
• production outages or material costs associated with scheduled or unscheduled maintenance programs;
• unanticipated developments that could occur with respect to contingencies such as litigation and environmental matters;
• our ability to pay regular quarterly cash dividends and the amounts and timing of any future dividends;
• information systems failures and cyberattacks;
• our ability to service our indebtedness and restrictions on our current and future operations due to our indebtedness;
• amounts for cash and non-cash charges related to restructuring plans that may differ from original estimates, including because of timing changes associated with the underlying actions;
• other factors affecting our business beyond our control, including without limitation, changes in the general economy, changes in interest rates, changes in the rate of inflation, geopolitical conflicts, tariffs and any recessionary conditions; and
• other factors described in our Annual Report on Form 10-K for the year ended December 31, 2024 under Item 1A, “Risk Factors.”

We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties and assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law. You are advised, however, to consult any further disclosures we make on related subjects in our reports on Forms 10-Q, 8-K and 10-K filed with the Securities and Exchange Commission. You should understand that it is not possible to predict or identify all risk factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

There have been no material changes to exposures to market risk as reported in our Annual Report on Form 10-K for the year ended December 31, 2024.

Disclosure controls and procedures

Avient’s management, under the supervision of and with the participation of its Chief Executive Officer and its Chief Financial Officer, has evaluated the effectiveness of the design and operation of Avient’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the period covered by this Quarterly Report. Based upon this evaluation, Avient’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report, its disclosure controls and procedures were effective.

Changes in internal control over financial reporting

There were no changes in Avient’s internal control over financial reporting during the quarter ended June 30, 2025 that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

We face a number of risks that could adversely affect our business, results of operations, financial position or cash flows. A discussion of our risk factors can be found in Item 1A, Risk factors, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. Except for below, as of June 30, 2025, there have been no material changes to the risk factors that were previously disclosed.

Changes to foreign trade policy, including new or increased tariffs and changing import/export regulations, could adversely affect our operating results, and the impacts could be material.

Changes in foreign trade policy, regulatory or economic conditions or in laws governing international trade could materially adversely affect our business. The U.S. has instituted certain changes, and may propose additional changes, in trade policies that include the negotiation or termination of trade agreements, the imposition of higher tariffs on goods exported from the U.S. or imported into the U.S., and other government regulations affecting trade between the U.S. and other countries (such as Canada, Mexico, China, and the European Union) where we conduct our business. Global trade disruption or significant introduction of trade barriers, together with any future downturns in the global economy, could further materially and adversely affect our financial performance.

As a result of policy changes and government proposals, there may be greater restrictions and economic disincentives on international trade. The new tariffs and other changes in U.S. trade policy have triggered retaliatory actions by affected countries, and foreign governments have instituted or are considering imposing tariffs and trade sanctions. Such changes have the potential to adversely impact the global economy, our industry and the global demand for our products, and as a result, could have a negative impact on our business, financial condition and results of operations.