AVIENT CORP

Condensed Consolidated Statements of Income (Unaudited)

(In millions, except per share data)

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Consolidated Statements of Comprehensive Income (Unaudited)

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Condensed Consolidated Balance Sheets

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Condensed Consolidated Statements of Cash Flows (Unaudited)

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Consolidated Statements of Shareholders' Equity (Unaudited)

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1 — BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Form 10-Q instructions and in the opinion of management contain all adjustments, including those that are normal, recurring and necessary to present fairly the financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. These interim financial statements should be read in conjunction with the financial statements and accompanying notes included in the Annual Report on Form 10-K for the year ended December 31, 2023 of Avient Corporation. 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.

Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be attained in subsequent periods or for the year ending December 31, 2024.

Note 2 — GOODWILL AND INTANGIBLE ASSETS

Goodwill as of March 31, 2024 and December 31, 2023 and changes in the carrying amount of goodwill by segment were as follows:

Indefinite and finite-lived intangible assets consisted of the following:

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Note 3 —EMPLOYEE SEPARATION AND RESTRUCTURING COSTS

We are engaged in a restructuring program associated with our integration of Clariant Color. These actions are expected to enable us to better serve customers, improve efficiency and deliver cost savings. We expect that the full restructuring plan will be implemented by the end of 2025 and anticipate that we will incur approximately $75.0 million of charges in connection with the restructuring plan. As of March 31, 2024, $57.6 million had been incurred.

A summary of the Clariant Color integration restructuring is shown below:

Note 4 — INVENTORIES, NET

Components of Inventories, net are as follows:

Note 5 — PROPERTY, NET

Components of Property, netare as follows:

Note 6 — INCOME TAXES

During the three months ended March 31, 2024, the Company’s effective tax rate of 25.3% was above the U.S. federal statutory rate of 21.0% primarily due to foreign withholding tax, tax on global intangible low-taxed income (GILTI), non-deductible items, and an increase in foreign valuation allowances. These unfavorable items were partially offset by U.S. research and development credits.

During the three months ended March 31, 2023, the Company’s effective tax rate of 26.6% was above the U.S. federal statutory rate of 21.0% primarily due to foreign withholding tax, tax on GILTI, non-deductible items, and an increase in foreign valuation allowances. These unfavorable items were partially offset by U.S. research and development credits, favorable foreign earnings mix, and permanent items.

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Note 7 — FINANCING ARRANGEMENTS

Debt consists of the following instruments:

As of March 31, 2024, we hadno borrowings outstanding under our senior secured revolving credit facility due 2026 (Revolving Credit Facility), which had remaining availability of $250.5 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 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. As of March 31, 2024, we were in compliance with all covenants.

The estimated fair value of Avient’s debt instruments at March 31, 2024 and December 31, 2023 was $2,092.8 million and $2,113.7 million, respectively. The fair value of Avient’s debt instruments was estimated using prevailing market interest rates on debt with similar creditworthiness, terms and maturities and represent Level 2 measurements within the fair value hierarchy.

Note 8 — 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. We formally assess, designate and document, as a hedge of an underlying exposure, the qualifying derivative instrument that will be accounted for as an accounting hedge at inception. Additionally, we assess both at inception and at least quarterly thereafter, whether the financial instruments used in the hedging transaction are effective at offsetting changes in either the fair values or cash flows of the underlying exposures. In accordance with ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities(ASU 2017-12), that ongoing assessment will be done qualitatively for highly effective relationships.

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As a means of mitigating the impact of currency fluctuations on our euro investments in foreign entities, we have executed cross currency swaps, in which we pay fixed-rate interest in euros and receive fixed-rate interest in U.S. dollars related to our future obligations to exchange euros for U.S. dollars. These cross currency swaps effectively convert a portion of our U.S. dollar denominated fixed-rate debt to euro denominated fixed-rate debt.

We currently hold cross currency swaps with a combined notional amount of €1,467.2 million, maturing in May 2025 and €900.0 million maturing in August 2027. We designated the cross currency swaps as net investment hedges of our net investment in our European operations under ASU 2017-12 and applied the spot method to these hedges. The changes in fair value of the derivative instruments that are designated and qualify as hedges of net investments in foreign operations are recognized within Accumulated Other Comprehensive (Loss) Income(AOCI) to offset the changes in the values of the net investment being hedged. For the three months ended March 31, 2024, a gain of $35.3 million was recognized within translation adjustments in AOCI, net of tax, compared to losses of $29.5 million, net of tax, for the three months ended March 31, 2023. Included in Interest expense, net within the Condensed Consolidated Statements of Income are benefits of $9.7 million for the three months ended March 31, 2024 and 2023, associated with the cross currency swaps.

All of our derivative assets and liabilities measured at fair value are classified as Level 2 within the fair value hierarchy. We determine the fair value of our derivatives based on valuation methods, which project future cash flows and discount the future amounts to present value using market based observable inputs, including interest rate curves and foreign currency rates.

The fair value of derivative financial instruments recognized in the Condensed Consolidated Balance Sheetsis as follows:

Note 9 — SEGMENT INFORMATION

Avient hastwo reportable segments: (1) Color, Additives and Inks and (2) Specialty Engineered Materials. 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 expenses that are not allocated to segments; intersegment sales and profit eliminations; charges related to specific strategic initiatives, such as the consolidation of operations; restructuring activities, including employee separation costs resulting from personnel reduction programs, plant closure and phase-in costs; costs incurred directly in relation to acquisitions or divestitures; integration costs; executive separation agreements; share-based compensation costs; asset impairments; environmental remediation costs, along with related gains from insurance recoveries, and other liabilities for facilities no longer owned or closed in prior years; actuarial gains and losses associated with our pension and other post-retirement benefit plans; 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.

Financial information by reportable segment is as follows:

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Note 10 — COMMITMENTS AND CONTINGENCIES

We have been notified by federal and state environmental agencies and by private parties that we may be a potentially responsible party (PRP) in connection with the environmental investigation and remediation of certain sites. While government agencies frequently assert that PRPs are jointly and severally liable at these sites, in our experience, the interim and final allocations of liability costs are generally made based on the relative contribution of waste. We may also initiate corrective and preventive environmental projects of our own to support safe and lawful activities at our operations. We believe that compliance with current governmental regulations at all levels will not have a material adverse effect on our financial position, results of operations or cash flows.

In September 2007, the United States District Court for the Western District of Kentucky (Court) in the case of Westlake Vinyls, Inc. v. Goodrich Corporation, et al., held that Avient must pay the remediation costs at the former Goodrich Corporation Calvert City facility (now largely owned and operated by Westlake Vinyls, Inc. (Westlake Vinyls)), together with certain defense costs of Goodrich Corporation. The rulings also provided that Avient can seek indemnification for contamination attributable to Westlake Vinyls.

Following the rulings, the parties to the litigation agreed to settle all claims regarding past environmental costs incurred at the site. The settlement agreement provides a mechanism to pursue allocation of future remediation costs at the Calvert City site to Westlake Vinyls. We continue to pursue available insurance coverage related to this matter and are in current litigation to recover previously incurred costs. It is reasonably possible that insurance recoveries could result in a material benefit to our Condensed Consolidated Statements of Income in a future period, though the amounts, if any, nor the timing are currently known.

The environmental obligation at the site arose as a result of an agreement between The B.F. Goodrich Company (n/k/a Goodrich Corporation) and our predecessor, The Geon Company, at the time of the initial public offering in 1993. Under the agreement, The Geon Company agreed to indemnify Goodrich Corporation for certain environmental costs at the site. Neither Avient nor The Geon Company ever operated the facility.

Since 2009, Avient, along with respondents Westlake Vinyls, and Goodrich Corporation, has worked with the United States Environmental Protection Agency (USEPA) to address the remedial activities at the site. The USEPA issued its Record of Decision (ROD) in September 2018. In April 2019, the respondents signed an Administrative Settlement Agreement and Order on Consent with the USEPA to conduct the remedial actions at the site. In February 2020, three companies signed the agreed Consent Decree and remedial action Work Plan, which received Federal Court approval in January 2021. In August 2023, the Company received construction bids for components of the remedial action and we updated our accruals to align to the selected bid costs. We are currently in the process of remedial action for a portion of the site, while continuing to progress through remedial design for other portions of the site. As we have progressed through remedial design and action, additional charges have been recognized to reflect the actual costs of completion. As of March 31, 2024, we had accrued $143.7 million for this matter.

Total environmental accruals of $151.7 million and $157.2 million are reflected within Accrued expenses and other current liabilities and Other non-current liabilities in our Condensed Consolidated Balance Sheetsas of March 31, 2024 and December 31, 2023, respectively. These undiscounted accruals represent our best estimate of probable future costs that we can reasonably estimate, based upon currently available information and technology and how the remedy will be implemented. It is reasonably possible that we could incur additional costs in excess of the amount accrued, which could be material to our Condensed Consolidated Statements of Income. However, such additional costs cannot be currently estimated as they are dependent upon the results of future testing and findings during the execution of remedial design and remedial action, the ultimate remedial action undertaken, changes in regulations, technology development, new information, newly discovered conditions and other factors that are not currently known.

During the three months ended March 31, 2024, Avient recognized $4.0 million related to environmental remediation costs, compared to $1.4 million recognized during the three months ended March 31, 2023. These costs are recognized in Cost of Sales within the Condensed Consolidated Statements of Income.

Avient is subject to a broad range of claims, administrative and legal proceedings such as lawsuits that relate to contractual allegations, tax audits, product claims, personal injuries, and employment related matters. Although it is not possible to predict with certainty the outcome or cost of these matters, the Company believes our current reserves are appropriate and these matters will not have a material adverse effect on the condensed consolidated financial statements.

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Note 11 — SUBSEQUENT EVENTS

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 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 other terms and conditions, including the maturity date, that apply to the amended term loan are substantially the same as the terms and conditions that applied to the existing term loans under the credit agreement immediately prior to the Term Loan Amendment.

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