Avient Corporation

Good morning, ladies and gentlemen, and welcome to the Poly1 Corporation fourth quarter 2018 conference call. My name is Crystal, and I'll be your operator for today. At this time, all participants are in a listen-only mode. We will have a question-and-answer session at the end of the conference. As a reminder, this conference is being recorded for replay purposes. At this time, I would like to turn the call over to Joe DiSalvo, Vice President, Investor Relations. Please proceed.

Thank you, Crystal. Good morning, and welcome to everyone joining us on the call today. Before beginning, we would like to remind you that statements made during this conference call may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements will give current expectations or forecasts of future events and are not guarantees of future performance. They are based on management's expectations and involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed and or implied by the forward-looking statement. Some of these risks and uncertainties can be found in the company's filings for the Securities and Exchange Commission, as well as in today's press release. During the discussion today, the company will use both GAAP and non-GAAP financial measures. Please refer to the earnings release posted on the Poly1 website where the company describes the non-GAAP measures and provides a reconciliation from the most comparable GAAP financial measures. Operating results referenced during today's call will be comparing the fourth quarter of 2018 to the fourth quarter of 2017 or the full fiscal year of 2018 to the full fiscal year of 2017, unless otherwise stated. Joining me today on the call is our Chairman, President, and Chief Executive Officer, Bob Patterson, and Executive Vice President and Chief Financial Officer, Brad Richardson. Now I will turn the call over to Bob.

Well, thanks, Joe, and good morning to everyone joining us on the call today. I am pleased to report full year record adjusted earnings per share of $2.43 for 2018, And that's a 10% increase over last year, and it marks our ninth consecutive year of adjusted EPS growth. Investments in our commercial team since 2014 have made performance like this possible. Excluding acquisitions this year, we increased our sales, marketing, R&D resources again by an additional 6%, which helped to fuel our organic revenue growth. In addition to leveraging these new hires, we also continue to pursue complementary technologies and businesses through acquisition, closing two deals in 2018, eCap and PlastiComp. And we are excited to kick off 2019 by welcoming yet another specialty company to our family. FiberLine is a global leader in custom engineered fibers and composite materials that serves the fiber optic cable, oil and gas, industrial, and consumer industries. Its customer-first specialty culture and innovative product portfolio make it a perfect fit with Poly1. I'll talk about this and FiberLine a bit more later. And as many of you know, at our Investor Day last May, I discussed our historic past and inspired future with a goal to creating a world-class sustainable organization. I emphasized the four cornerstones of our sustainability endeavors, people, products, planet, and performance, the four Ps. And as we reflect back on last year, it's clear we made some great contributions in each of these areas. We started the year with the announcement of becoming an American Chemistry Council Responsible Care Company, and that is a direct reflection of our Safety First culture. And in 2018, we achieved the safest year in Poly1's history, with 19% fewer injuries than in 2017. In fact, nearly 80% of our facilities were completely injury-free. Our focus on people also requires that we build a high-performing, diverse, and inclusive company. Lead by Women is one associate resource group. that sponsored numerous leadership development training sessions in 2018. Further, we expanded our leadership development and training, and these are rotational programs where new associates collaborate and contribute in various roles within the company. The breadth of global experience they receive forms highly effective and diverse skill sets, bolstering our talent pipeline from the bottom up. And we also continue to invest in our in-house leadership with over 250 of our associates graduating from NextGen and PolyMasters, helping us to truly build tomorrow's leaders today. And as a result of these and many other efforts, and for the first time in our history, we were honored to be recognized as a great place to work in the U.S. by the Great Place to Work Institute. It is a significant milestone in our ongoing journey to become a top workplace. Great Places to Work not only take care of their associates, but also advance all four cornerstones of sustainability. Two weeks ago, we announced that we joined the Alliance to End Plastic Waste as a founding member and appointed Walter Ripple to Vice President of Sustainability. Walter joined Poly One in 2008 with the GLS acquisition, and he has won our General Manager of the Year award twice. He's a trusted technical and customer-focused leader who will advance our sustainability initiatives while coordinating our efforts with the Alliance to take better care of our planet. And performance is the fourth cornerstone in our sustainability commitment, and we view it as both an enabler and a result of the other three. As I said, 2018 marked the ninth consecutive year of adjusted EPS growth that Poly won, with record EPS of $2.43. That's an impressive accomplishment that we worked tirelessly to achieve and build upon each year. And we overcame some significant industry dynamics last year, including raw material inflation, rapidly increasing logistics costs, and more recently, a slowdown in demand in certain end markets and geographies in the second half of the year, with the fourth quarter being the most challenging of all. Recall from our third quarter statements that we said in September we saw weakening foreign currencies, demand slowdown in Asia, and softening in certain North America end markets, namely building and construction and appliance. And we projected that if we continued to see these same trends, adjusted EPS would be flat in the fourth quarter, and that's where we ended at 41 cents a share. You know, if we go back to our comments in October, we expected the fourth quarter to be difficult for our performance products and solutions segment, in particular due to the weakness in demand for appliance in building and construction, and that really played out as we thought. But we also experienced a decline in demand in Europe And Asia growth slowed as well, particularly in the consumer market space. And these two factors specifically impacted our specialty engineering materials segment, which reported a year-over-year decline in operating income. To put the European impact into perspective, in Q1 and Q2 of this year, sales were up 23% and 13% respectively. Third quarter growth slowed to 5%. And in the fourth quarter, European sales actually contracted by 5%. Now, some of this was certainly currency-related, as the dollar strengthened over the course of the year. But even so, we did see European weakness towards the second half, and this weighed on color and engineered materials. Now, again, as we go back to our comments in October, we did have some things play out to the upside, where we had better-than-expected performance. Distribution finished the year very strong as we got traction on freight surcharges and related pricing, and operating income increased 13% for the fourth quarter. Composites had a very strong quarter and did very well, and so did markets such as healthcare and packaging, which held up well despite the previously mentioned geographic weakness. And I'll have some more comments in a moment about what we think all this means as we head into 2019. But for now, it's time to call over to Brad for some more specific comments on the fourth quarter and full year.