Avient Corp (AVNT) 2003 Q1 法說會逐字稿

Good afternoon. My name is Christi and I will be your conference facilitator. At this time I would like to welcome everyone to the PolyOne first quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question and answer period. If you would like to ask a question during this time, simply press star, then the number 1 our telephone key pad. If you would like to withdraw your question, press star then the number 2 on your telephone key pad.

I would like to introduce today's speakers, Mr. Dennis Cocco, Vice President of Investors Relations and Mr. Dave Wilson, Chief Financial Officer.

Thank you, Mr. Dennis Cocco, you may begin your conference.

Thank you, Christi. Good afternoon to everyone. I have to remind myself a number of times to say afternoon, not morning, because we do this always in the morning.

A number of opening remarks, keep them fairly brief as will Dave, because we will spend most time doing Q&A today.

First of all, we are broadcasting this live as we have in the past. And we will keep the conference call available on our web site for the next couple weeks. Relative to our press release and our supplement, both are posted on the web site, also 8-K and both available through the PolyOne.com web site if anyone would like to access those. Make sure everyone knows that.

Today we would like to keep the questions for analysts, media certainly is more than welcome to listen in on today's call. But we would ask that they hold their questions and they can contact me at a later date.

Also if for some reason you are not on our distribution list for information and would like to be, feel free to give my assistant Darlene a call at 216-589-4376 and she would be happy to put you on that list.

Relative to safe harbor, I would ask you to please reference the forward-looking statement we have included in our April 29th press release. In it we do attempt to detail out as many factors as we are presently aware of that could cause results to materially differ from what we have outlined in the press release or as we will discuss today on our call.

We ask all of us to keep this in mind as they consider any forward-look being statement that we might make.

Couple other remarks, relative to PolyOne's debt financing, refinancing. As you have seen from our present, recent press release, we are moving forward with our debt refinancing. However, and this is very important for you to understand, because of security laws considerations we cannot discuss any further details. We ask your indulgence in this matter today, as we go through our conference call.

Relative to other new debt financing facilities as you're aware from other press releases, PolyOne also engaged in putting in place a new bank revolver, new receivable facility, subject to the issuance of new long-term debt these facilities will replace existing facilities. We expect to conclude these also on may 6th at which time we will provide additional details. Therefore we're not going tone gauge in details on the facilities until they are concluded, intend to put out a press release at that time with additional details.

I know we have confused some of you as to why we kept moving both the earnings release announcement and the conference call time. I also appreciate unusual to have such a long period between the earnings release and the conference call. Hopefully you will understand the finance, treasury groups here at PolyOne trying to balance inside and outside needs around our debt refinancing and provide investors timely results.

Going forward it is our intent to resume our normal practice report being after the close of business followed by a conference call the next day.

And one last final point: I'm going to skip my normal opening remarks, other than to say I hope that as investors you're recognizing the strength that this team has in addressing issues. Through this fairly tough economic period I think we have demonstrated our resolve to do the right thing such as fixing North American assets, invest in global information systems and make numerous tough calls on cost. We have found even our better, we have even found a way to invest in important businesses like trans-color which we announced earlier this year.

We think we are better than we were 2 1/2 years ago in a think the first quarter is a clear sign that we are doing the right things for our investors.

So with that editorial, I want to turn it over to Dave Wilson.

Thank you, Dennis. Thank you, everyone, for listening in to our first quarter conference call this afternoon. The first quarter for us was a sign of encouragement. The top line growth of 8% as compared to a year ago represented a significant improvement as compared to other quarters.

Now, as we dive in to that 8%, as we have outlined in our release and supplement, that 8% breaks down between 2% from an acquisition, 2% for favorable exchange, the Euro is much stronger, and then about 4% volume. That volume grow of 4% compared to a market that may have grown at best 1%, is indicative of us being able to be aggressive in the marketplace and start to regain our market position.

What we have is capabilities that we didn't have in '01 and '02. We have them now because of the operation efficiencies and the fixes that we have embarked upon. So the first quarter clearly is not a trend yet, but it is an encouraging first step and we saw the growth in businesses where we have had an inability to compete as effectively as needed over the last two years.

So going forward we anticipate that we should continue to see improvement in our overall market position. Following that improvement in sales you would have seen from our press release that our EBITDA before special charges, special items, is up over $20 million sequentially.

That in the face of a negative high leveraged variable calculation of around $9 million. Also importantly compared on to a year ago, our EBITDA is up over $3 million and this is in the face of fairly substantial unfavorable impact on the high leveraged variables, we're looking at about $14 million quarter over quarter.

And so, you know, as I say, we're very encouraged by what we saw in the first quarter. As we look to the second quarter as our release said, you know, the economy remains unclear. I would say that our customers are waiting to see signs of an economic recovery.

It would appear that just largely in a holding pattern and we would expect that second quarter sales would improve as compared to the first quarter, but this would be largely seasonal demand patterns and compare and contrast that to last year when we were starting to see the signs of what we had hoped to be a sustained economic recovery in the second quarter, but certainly in the second quarter we saw the economy strengthen versus the first.

We do not see that similar pattern as we look out today. The margin pressure that our operating businesses were under in the first quarter will continue in the second. You know, obviously the impact of the margin pressure will be mitigated based upon declines in raw materials, improvement in our selling prices.

We have announced sales, selling prices across just about everyone of our businesses and so it's important that we execute those successfully. You know, as we net everything down and in the press release we put in various other factors, you know, it is our expectation that the second quarter should see earnings per share no worse than last year, hopefully a little better, and what that would translate to because of higher interest costs this second quarter projection versus last year, is we would anticipate to see an improvement in our EBITDA.

And as I talk about EPS and EBITDA, I too often forget to say before special charges, but that's how I'm looking at it.

With that, I think we'll open it up for questions. Dennis?

Yes, let's do that. Go ahead, Christi

+++ q-and-a.

At this time I would like to remind everyone if you would like to ask a question, press star, then the number 1, on your telephone key pad.

We will pause for just a moment to compile the Q&A roster.

Your first question comes from Nancy Traub with CSFB.

Good afternoon.

Good afternoon, Nancy.

Would be able to run us through your cash flow, you know, starting from this point out for the next, well, through the end of this year and then in to '04? You know, the payments.

Well, you know, we can talk about various impacts, okay? .

Correct.

The one area that I would have difficulty doing is telling you how much we think our EBITDA would be on the top line. We have provided, in the past, that we know of the benefits from value capture initiatives, the January overhead reductions, and then some offsets from our costs and expectation that EBITDA would be up, I think the number was 57 to 77 million, which puts you in a 175 to $200 million range for the year. Then you think about other impacts and the high leveraged variables are year over year anticipated to be negative, largely driven by higher natural gas and ethylene, offset by improvements in PVC pricing.

And then there's also, you know, the question about margin recovery, how successful will we be at recovering our margins and how successful will we be at getting our prices up. As you know in our compound business we sell about a billion pounds. So one penny improvement would be $10 million on an annualized basis. In our e-last summer business, that would be 4 per penny, a little less than that.

A lot comes down to how successful you think we'll be in terms of capturing our margin. And also how successful will we be at sustaining top-line growth. And I would guess that as we look at 2003, the leverage factor that's we have talked about before of 25 to 30 cents per dollar sales change ought to be largely in place.

Going forward and then down the cash flow statement, working capital, as you know in the fourth quarter, as sales come down we see working capital liquidate. First quarter you saw that it built. I would anticipate that we would see somewhat of a further build in the second quarter as sales improve, probably flat now from the third and then come back down in the fourth.

The EBITDA that we have has got a pension charge in it close to what we would expect our cash contribution to be, so we don't want to double count that. We know capex, we have targeted $50 million, you saw that we're managing it to a much lower level. But if you look at 50 million for the year, that's probably a fair number for you. Interest expense will be up, cash taxes are about 20%, and restructuring will be in the 40, 45 million dollar range, cash restructuring charges, combination of the January announcement plus the final costs associated with plant closures, both this year and the end of last year.

So, you know, it's our expectation, Nancy, that we will, you know, if you go through all those pieces, we should see cash flow improve year over year in excess of $100 million. Last year we didn't generate cash. This year we certainly expect to.

And what about '04?

My expectation, based on the nature of this business, not being terribly capital intensive, is that we should be generating cash in '04 as well.

Would you imagine the capital expenditures would be similar?

They won't be --they will certainly be between the 50 and the 75 DNA. I'm going to guess that it's going to be closer to the 50.

How about restructuring charges?

The 40 million dollars that we anticipate this year covers just about all of what we have announced so far. So to the extent that there's further restructuring announcements, you know, that will increase. But I think the number is probably about $5 million residual restructuring charges flowing in to '04 from our current announcements.

One last question as far as capital expenditures. If you per chance had to cut back to bare bones and just do maintenance, et cetera, how much would that be?

2020 to 25.

Thank you.

A question from Rosemarie Morbelli from Ingalls and Snyder.

Now you're getting away with not talking at all prior to the questions, making your life easier, uh? Could you touch on the likelihood of maintaining the selling price increases you have already put in place and adding some others in light of material costs coming down, at least the oil and natural gas coming down?

Yeah, Rosemarie, always the challenge in moving any product prices forward is by the time we put them in place and especially when there's a spike like we had in February, customers look at the gas pump and see the prices coming down on oil and natural gas and they say well, why do I still have to pay a price increase and not realize and understanding there's a lot of time there's a time lag in some of that cost to flow through the system. In some cases, you know, as I think we mentioned in the press release we have also tried to use surcharges as a way to cover some of those shorter term cost increases, some cases we're successful, some cases we were not.

It's also challenging in today's economy, obviously we're not sold out and neither are our customers sold out in any of their businesses. So it's really hard for them to accept prices and us to implement them.

But all I can tell you is, is that it's a very important, very concerted effort, starting with, you know, the involvement of everybody in this organization, including Tom Waltermire (ph) to try to get prices up to recover our margins going in to the second quarter. There's no way we can predict our success, but I think you know that, you know, we're going to do our best and in time if costs increases stay high, we normally do recover those costs. It's the spikes that are challenging for us and anybody in this industry.

Let's assume that it becomes, as you said, the industry has excess capacity and let's say that you can't pass those pricing additional selling price increases to capture them all and actually you continue to have some competitive pressure on pricing. Where do you stand in terms of the structure of the company and is there -- are you already looking at some additional restructuring? I mean do you think that in order to have a successful business you have to become yet smaller than what you are at the moment?

I wouldn't say we're looking to become smaller. First of all, you've got -- everybody knows that it's not a matter whether you recover the margins, it's him on a matter of when. I mean history has shown that even under tight and tough economic conditions, you know, cost increases eventually get passed through. Everybody under that and everybody recognizes that, even to the automobile industry.

So I'm confident it will happen. The question only becomes of when and how quickly. Relative to PolyOne and its cost structure, we have been very clear about what we intend to do relative to cost. We are not -- we have got more costs that we're working on this year, our value capture efforts are very integral part of that.

Obviously we haven't seen the full benefit even yet of the announcement from January and quite frankly, in this business we'll never be done reducing costs. It will be a part of our culture, part of our livelihood going forward, we will always be looking to reduce costs even if only to the point of to offset inflation. So, you know, while we think we have done, made tremendous steps in taking all that value and capture all that value that we have been working on for the last two years, it's something we will continue to move on forward with.

Well, I will agree to the fact that you have done a great job and we are seeing it in the results. I guess I could ask the question as follows: What is your achievable and reasonable net margin goal over the next few years?

I think that as we have looked at our businesses we won't come off, you know, a target EBITDA or to sales of between 10 and 14%, that would translate roughly to that 8 to 10% operating income to sales ratio. And looking at our businesses and distribution would be 4% as you know.

But for the manufacturing businesses, you know, an expectation of really doubling where we are should not be viewed out of bounds. We have seen the businesses, the international businesses recover in materials operate close to those levels.

The engineer film business at that level, we have seen the vinyl business at that level. So as you go through our portfolio, the last summer business as well, we need to, you know, continue to improve. Now, obviously getting that kind of operating margin improvement is going to be a combination of continued cost reduction and then leveraging volume across largely a fixed cost base and so to achieve it, you know, we have got to continue to bring our costs down, but we have also got to demonstrate that we can grow the business.

And lastly, if I may, could you give us some color as to what has been happening in the color business this past quarter, how much progress and how the guys are being insentized?

The sales team incentive is on volume improvements and frankly in the color business, I was commenting in my earlier remarks that we're demonstrating capabilities in the marketplace that we didn't have in '01 and '02 and that was largely directed at the success we had in the first quarter in the color business.

Though, you know, as we have said before, you know, watch PolyOne in the first and second quarter for its color business, for that business to start to show a good turnaround and first quarter, as I said earlier, is not a trend yet but certainly is an encouraging first step.

And incentive is not based totally solely on volume, am assuming that profitability is in to those numbers as well?

Yes, there's linkages.

They cannot take it away?

The business team, you go outside the sales team directly and the incentive plans really across all PolyOne are based upon business unit earnings, plus a component for total company EBITDA.

Okay, thank you.

Clearly, incentives get paid on making money.

Okay. Good to hear. Thank you.

You have a question from Kunal Bannerjee with Goldman Sachs.

Good afternoon.

Good afternoon, Kunal.

I had a question on the joint venture that you recently formed with Bayer (ph) and Urethane systems. Could you talk about the scope? I know it's not American, but as an exclusive and what are the two partners bringing to the table? And if you could just kind of guesstimate the revenue opportunity out of that.

Probably won't be able to address the revenue opportunity at this point, Kunal, as we move forward hopefully it's just the beginning. But understand a couple things. You know, this -- Bayer is a huge polyurethane company in North America and quite well respected. Where PolyOne's experience has been in that is that, you know, we sold in our formulators group, urethane systems.

We were compounding Urethane for liquid coating systems and actually had a very nice business and I think we have talked in the past about the importance of that in some of our, that was one of the things that we looked forward to growing.

This is a way to link Bayer's technology with formulating know how and to help us reach more and market. It goes back to what we have been talking about, quite frankly for the last couple years, also in that this is -- we have great linkages now. Bayer is not only a joint venture alliance with us, they are also a customer in the respect that we, through our distribution business, sell a number of the Bayer products and also we use a number of their products in some of our compounding operation, so a supplier of us. So this is another one of those important linkages but I can't give you specific sales numbers at this point in time.

So are they more on the technology end of the spectrum and you're doing a lot more of the manufacturing and formulation here?

Yeah, we're going to use their formulation, their base material, we're going to use our formulation know how and marketing know-how and I believe joint venture sales are pegged at around 45 to $50 million as we have now learned.

And is this -- this is not an exclusive agreement, is it? Is all of Bayer's Urethane systems volume in North America?

No, this is just a very small part of the Urethane business.

And is it expandable in to Europe?

I believe it's just the U.S. and Canada, U.S. and Canada.

Okay. .

Got a lot of help here, as you can tell.

Right, right. I was a little concerned about one of the things that, you know, you talked about the films business and how that's been impacted a little bit by changes in your platform mix. And this would be the auto films.

Yes.

If I recall last year, you had stated that you were actually going to win some platforms and net-net have additional platforms going forward in '03. So is what you're referring to there a mix issue or did you lose some platforms net net? i.e., did you -

No, we're actually gaining platforms. Performance of those particular platforms is what we're actually seeing in our sales and we have got more platforms, gains coming in later in the year as we go throughout the year.

Okay. So I was a little confused, because you kind of attributed the lower 2003 first quarter sales to some sort of platform changes and I wasn't very sure what that was.

Second half of last year, some platform, I think about half a dozen platforms ended production and then it's a question of how rapidly we ramp up new platforms and I think there were some delays in the first quarter from our expectations and -- but, you know, we are capturing, we believe, more than our fair share of new platform opportunities and so the dip in our automotive sales as a result of not getting our fair share in '99 and 2000 is slowly moving by. '03 will be somewhat the last year for, that but the last two years we have had good capture and that will be reflective somewhat in '03, but also in '04 and '05.

And I would only add as we have talked in the past relative to that, that final component about that business is what's obviously happening. There's more interest, renewed interest in vinyl-based instrument panel and obviously they're looking to PolyOne as a source for that.

Okay. And then on Sunbelt, I was looking through your cash flow statement. It looks like you only got about a million dollars out of, you know, in cash distributions from your JVs. I also notice that your Sunbelt debt, your portion of the Sunbelt debt went down about 6 million. Did you use the cash flow out of Sunbelt to pay down the debt? Or what's going on, you know, what's your strategy there? Are you going to be taking cash out of there or plowing it back to de-lever Sunbelt?

Well, Sunbelt's debt, we started to take it down by about $6 million per schedule in December of last year.

Is that the mandatory amortization?

Yes.

Okay.

And this year we'll see a similar reduction in December. It's our expectation that Sunbelt's performance this year will generate sufficient cash to take that down by itself, plus generate more cash than that for ourselves and Olan (ph).

And what levels of revolveable earnings do you have to get down to enable you to stop guaranteeing the Sunbelt debt?

It's a structural guarantee, Kunal. We will guarantee that debt until it's repaid or until somebody takes that guarantee away from us. There is no earnings trigger associated with it. There is, on the other hand, with the OxyVinyls guarantee, there was a cumulative EBITDA top threshold that the $42 million guarantee would go away once we hit it and based on --.

You have hit that, right?

We are expecting to hit that in may.

Okay.

It ought to be a second quarter event.

Okay. And then finally, you know, last quarter on the conference call you talked about the high yield, being the last resort to kind of get past this 90 million maturity. Would it be fair to assume that, you know, you did shore up your assets around but there wasn't good value to be had?

No, I don't think you can make that assumption you.

Didn't go down that route?

And as Dennis said, I am hamstrung to really go in to that. But your assumption is not right, okay? .

Okay. Thanks, thanks a lot.

You have a question from John Roberts with Buckingham research.

Good afternoon, John.

John?

John? Hello, John.

Can you hear me now?

You did that on purpose, didn't you? .

The polyethylene guys seem confident they can reduce terms 60 days down to 30 days, I would assume you're in that 60 day or more in terms of delay in price increases hitting you on polyethylene. Can you live with that if they're successful in bringing it down to 30 days? Do you have to do something to your customers to live in that environment?

John, we are, as you know, one of the things that we have been working on for the last couple years, is obviously improving cash flow and one of the things do you is try to reduce terms. And quite frankly, we have done quite well,. I think our ability to keep managed with our customers has been quite good. Quite frankly I don't know whether the ethylene guys will be successful or not. It obviously, that business flows in to OxyVinyls, not to us directly. So I can't answer that. I don't think we're going to be able to move our customers any further than we could, whether they move it or not.

I would say polyethylene guys.

John, I think probably our biggest exposure to polyethylene is going to be in our distribution business and I don't think we see any delays. I think we see the impact of price increases as, you know, as our suppliers put them in to the market. We get them right then. So distribution business on the engineering materials business, it's our polyethylene consumption is very low. I don't think it will have a material impact.

Thank you.

You have a question from David Courier (ph) with CSFB.

Hi. I appreciate the detailed discussion on the cash flow analysis, but I guess I must have missed something. Missed a major component. Using your upper end of EBITDA, of say 200 and work with round numbers, interest of 65, cash of, sorry, capex of 50, restructuring of 40, I just threw in cash taxes of 10. That is only about $35 million of free cash flow, obviously one of the components I could be missing is working capital would be a major source for the full-year. Am I missing a component to get up to that, above $100 million of free cash flow?

The $100 million was an improvement over 2002.

Okay.

So last year, you know, I think frankly your numbers work out pretty well if you compare what you've got with last year's actual cash flow.

ANALYST: Okay. I misheard, I apologize. Then on working capital, it looks like it was about a 40 or 45 use in the first quarter, if you -- second quarter is also a use but less than that. I could be after the second and third quarter, you know, use of, say, 50 to 60. How much would you expect would be reversed in the fourth quarter?

It's going to be a function of our sales. sales. Obviously, usually, you know, we have seen a 40 to 60 million dollar reversal. I would also caution you on -- I guess the networking capital went up that much. What we saw in the first quarter was a market increase in our receivables and there, add back the increase to our receivable facility drawings to get the operating receivable level change. But, you know, it's purely a reflection of a much stronger February, March sales period as compared to November, December.

You know, we look at May, June, we would expect seasonal improvement versus basically the February period. The end of the year, if we're on a track, it's conceivable that our fourth quarter sales could be 60-plus million dollars higher than they were last fourth quarter if we continue to move on, you know, a bit of improvement in our market position, couple that with maybe a little bit of economic improvement by the end of the year, so that we don't see the precipitous falloff that we saw this past fourth quarter.

So as we think about our point to point working capital, which is I think we all would agree is not optimal in terms of understanding our cash flows, but the point to point 1231 to 12-31 could in fact show, you know, an increase basically because our fourth quarter versus fourth quarter last year ought to be a lot stronger.

Okay. Second question, you know, you used the term EBITDA or we used the term EBITDA in this calculation. Would it be more precise to say, you know, kind of the cash flow? I guess my primary concern is equity income from affiliates, I guess should not be considered a cash item but there will be cash distributions coming up. Is this 200 a cash EBITDA? And I know it's a range, 175 to 200, but is that expectation for a cash EBITDA number?

Yes, because my expectation is that the OxyVinyls and Sunbelt equity pickup that we have will be close to the cash expectations over, you know, over the past three, four years, as these ventures have been in place, that's been a good proxy. Now, there are dislocations between quarters and so, you know, it's conceivable there could be a dislocation between the years. But my expectation is, is that by the end of the year the equity earnings we have from sunbelt and OxyVinyls will largely be equal to the cash generated.

Okay. And then one last question. There was about a 20, $22 million decline in accrued expenses between the end of the year and the March quarter.

Yes. That was primarily restructuring and incentives.

Okay. Okay. Thank you.

You have a question from Tim Schultz (ph) with D L Babbson.

Good afternoon. I was wondering if you could just break out Sunbelt's revenues and EBITDA for this quarter versus same quarter last year and then just kind of talk about what your expectations are for that moving through the rest of this year.

We don't really break it -- you know, I don't have the sales number. But I can tell you and what we said last year was that Sunbelt was losing money in the first quarter and this year it's making money. ))

Okay.

You know, the (inaudible) is up markedly as compared to the first quarter last year. We have seen about 180 or so, roughly $180 a ton increase in chlorine, plus, you know, 25 to $30 increase in caustic. So, you know, the ECU is up $200 and, you know, it moved from unprofitable to profitable and as I said earlier, our expectation for Sunbelt this year and I think probably everybody in the industry shares the view that the ECU is going to stay strong and that that will drive good cash flows, cash flows sufficient to be able to amortize the $6 million in debt, plus generate more than that.

Okay. Okay. Thank you.

You have a question from Pamela Dier (ph) with Sumitomo Corporation of America.

Yes, hi. .

How you doing, Pamela? .

Good, thank you. I would like to know, I have heard from several source that's PolyOne was considering closing their Diersburg (ph) plant, if that's true do you plan to centralizing to another location or something where you will maybe sell-off?

I can't imagine where the rumor would start. One, we won't comment on rumors. But I would tell you that that one has no basis in fact.

Okay. Okay. Thank you.

You have a question from Welmont Kid (ph) with Central Securities Corporation.

I see on your quarter end balance sheet you have about $625 million of short-term debt, current portion of long-term debt and long-term debt.

Okay

Is that right? And is there receivable financing on top of that that's netted?

Yes, if you're looking at our balance sheet and you have a receivables balance of 204 million dollars.

Yes.

There's $196 million of receivable financing on top of that.

196?

Yes. So the three categories that you mentioned, you find debt three places on our balance sheet, short-term, current portion and long-term. Then you have the receivable facility as well.

And so the total is 821.6? Roughly?

Yes, yes.

And is there any debt on the JVs outside that you don't show on your balance sheet?

Yes.

Can you tell me how much that is?

$91 million that we guarantee is on Sunbelt's balance sheet, on OxyVinyls there's some inter-company debt but it's largely, it's largely immaterial.

So in addition to the 821 there's another 91?

That we guarantee, yes. And until, until OxyVinyls hits the one target there's another 42, but as I said earlier we expect that to occur in the second quarter.

Thank you very much.

Okay. You're welcome.

Again, if would you like to ask a question, press star, then the number 1 on your telephone key pad.

You have a question from Rosemarie Morbelli with Ingalls and Snyder.

Could you give us a feel as to what is in that corporate and other of 32 million? And if I am correct, compares to 22 million last year. Why did it jump? And is that a new level?

Is this sales elimination that you're looking at? .

It is corporate and other, in your segment.

Yep, yep, it's a sales elimination and it's primarily reflecting a full first quarter of our vinyl compound going through our distribution business, whereas last year it was just starting to ramp up and so that 32, I'm going to guess ought to be fairly, fairly constant through the course -- through the course of the year. I don't have access to -- well, I do have access to the fourth quarter.

It was 23.7.

And it was 23.7, yes.

So for the year, for last year, was about $100 million. .

Well, the fourth quarter was down substantially because business was down, but I would guess at this level of sales, we would anticipate to see about the same number.

Okay. So this is linked to sales.

Yes.

Not to specifically corporate expenses, which would have jumped.

No, no. This is sales. Now, when you look at "other" under EBITDA or operating income, that would be non-distributed corporate expenses, but we're watching those so that they don't jump.

Right. And those are actually down versus -- no -- yes, they are down versus last year, 2.9 million versus 3.8. And I guess ask the same question, is this a new level or does it fluctuate from one quarter to the other?

Yeah, it fluctuates around that 3, 3 1/2 million a quarter.

2.9 was a wrong number. Yes, 3.3.

Yes.

Okay. And what is the tax rate you are looking for for the balance of the year?

For book purposes we continue to use 38, 39%. For cash taxes we usually, for our modeling purposes, we cut it in half.

All right. And one last question on the colors. The progress which have been made in terms of growth in revenues, are they new accounts which you got or more business with existing accounts whose level of business has improved?

It's going to be a bit of both, but remember in the color business, it's applications that churn often. So, you know, it may be new applications with known accounts or with old accounts or with new accounts.

Okay. So you cannot really tell how much of those accounts you'll have lost to actually getting back?

Truth of the matter is, we may be losing accounts and those that we lost may never come back, but we're actually going after others too. There are other people out there that we never had that we're now selling. So it's a lot of moving parts there, Rosemarie.

Okay. Good enough. Thanks. Good luck.

Thank you.

Thank you.

You have a follow-up question from Welmont Kid from Central Securities Corporation.

Yes. Did you guys do a good will reevaluation at the end of the quarter? Is that something you do quarterly?

No, our target is that do that in the third quarter.

You don't have to do it quarterly? Once a year?

Once a year, full assessment. I mean obviously if we had a view that something was impaired, we would, you know, that would trigger a review. We don't have that review -- we don't have that view, so we will go through our comprehensive assessment really starting in July.

Great. Thank you very much.

You're welcome.

And there are no further questions at this time, sir.

All right, thanks, Christi. Well, listen, folks, it's a Friday afternoon and I know you've all had a very, very long earnings season. We're nearing the end of it. I appreciate you participating today and would also like to publicly thank the team that we have here, who help Dave and I look smart. So thanks to them and thank you and if you have any follow-up, feel free to give me or Dave a call. Take care. .

Thank you. .

This concludes today's PolyOne first quarter earnings conference call. You may now disconnect