Good morning and welcome to the PolyOne third quarter 2009 earnings conference call. Before we begin, the company would like to remind you that statements made during this conference call, which are not historical facts maybe 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 to future events and are not guarantees of future performance. They’re 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 statements. Some of these risks and uncertainties can be found in the company’s filings with 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 PolyOne website where the company describes the non-GAAP measures and provides a reconciliation of them to the most comparable financial measures. Now, I will turn the call over to Mr. Bob Patterson, Senior Vice President and Chief Financial Officer.

Thank you, Michael and thank you to everyone who has joining us on the call this morning. As always we welcome the opportunity to speak to our investors and the analysts about the recent performance of PolyOne. Joining me today is our Chairman, President and Chief Executive Officer, Stephen Newlin. Before I begin, let me propose my comments by saying that unless other timeframes are specifically stated or referenced during today’s call, we will be comparing the operating results for the third quarter of 2009 to the third quarter of 2008. This morning we announced our results for the third quarter. Separately we filed a Universal Shelf Registration with the U.S. Securities and Exchange Commission and issued a separate release on that effect. I’ll provide comments shelf at the end of my planned remarks and we’ll leave time to answer any questions you may have about that as well as our results for the quarter. For the third quarter, we reported sales of $548 million and net income of $49.6 million or $0.53 per diluted share. Year-over-year top line comparisons continue to reflect the effects on recession on end market demand, which has impacted all of our businesses around the world. Third quarter sales fell 25% compared to last year driven by a 20% decline in volume, despite as earnings improved. Excluding special items and one time tax items as enumerated in our press release, we reported earnings of $0.14 per share versus $0.13 per share in the third quarter of 2008. Our headline story today, centers around the improvement in Specialty Platform earnings. Operating income from our specialty businesses increased to $19.5 million for the third quarter, a new record for PolyOne. All three of our specialty businesses reported a higher operating income and collectively specialty operating income as…

Thanks Bob and good morning everyone. I am going to cover Q3 from my perspective and try to add some color of Bob’s comments. Consolidated sales increased 10% versus the second quarter of this year driven by an 8% pickup in volume. Demand improved across all end markets and it’s encouraging that each of our platform reported earnings and growth compared to the second quarter of this year. Overall, demand is still well below where it was a year ago. The top line comparisons to 2008 have improved with each quarter of this year. I am particularly pleased to report the record selling results for our specialty platform this quarter. As Bob mentioned we achieved $19.5 million of specialty platform operating income. That’s the highest ever in PolyOne history, especially gross margins expanded to 24.8% and operating income reached 8.5% of sales also both records and further evidence that our transformational strategy is working. As pointed out in our press release, specialty operating income for the third quarter contributed 47% of total business unit operating income. When you consider at the end of 2005 PolyOne derived only 2% of business unit operating income from specialty businesses, you can begin to appreciate just how far we’ve come and while we are highly encourage by this progress, we’re far from being finished. Since 2007, we said publicly we aim to derive 50% of our business unit operating income from our specialty platform. I want you to know it’s not lost on us that the 47% current quarter contribution from specialty is held by currently depressed earnings from the housing and automotive markets as well as our SunBelt joint venture. As these markets recover, exceeding the 50% goal would be more challenge we view this as a good problem to manage. Housing and…

(Operator Instructions) Your first question comes from Frank Mitsch - BB&T Capital Markets. Frank Mitsch - BB&T Capital Markets: I wanted to ask about the shelf. I think you said Bob that the three areas that you would look to use it would be M&A, CapEx and debt pay down and, your net debt is the lowest level it’s been in years. CapEx in the quarter was very light so, I was wondering if you could comment on what you would look to do or hope to accomplish if you were going to go the M&A route?

Well, at present and just to comment on the shelf generally, we made statements in our press release and really just want to reiterate those that we filed the shelf today. As a matter of prudence and to give us additional flexibility feature should the opportunities arise to do a deal and/or possibly exchange debt we don’t have any immediate plans for either of the following. As we think about M&A, I would say we, important in flexibility point for the company and that as you said, we have the lowest net debt level in a long time and that gives us a lot more flexibility than we had a long time and so we are starting to look at our M&A opportunities. At present I would say the only things that are out there in the near term might be smaller in nature and ultimately those could probably be funded with cash to the extent that we decided to move forward in any event. So that’s really the best observations I can make about the shelf again just to reiterate it was done out of prudence and to give us further financial flexibility. Frank Mitsch - BB&T Capital Markets: I guess we shouldn’t read too much into that, then?

Shouldn’t read anything into it. Frank Mitsch - BB&T Capital Markets: Steve, when you’re commenting about the fourth quarter, you seem to make the case that perhaps it’s not going to be as debt as part at the right work, but decline would probably not be as bad as you’re hearing from some of the customers given that inventory levels are low. Here we are, the first week of November. Can you comment on the pace of business quarter to-date?

Frank, I mean it’s really the last part of the quarter that concerns us, and it’s really the anecdotal stories that we hear from our customers and we know that we listen very carefully to them and right now they are nervous about their business environment at year end and winding down inventories and we heard some customers say basically from Thanksgiving forward. Things will be difficult or may even take extended shutdowns. Now it’s not across the Board and there are some very good things going on. It looks like auto is doing better than we had anticipated. It’s just, here we are again and it’s been a year of this inability to visualize and understand where the business is headed and I don’t think our business is different than many others. It’s just harder and harder for us to forecast, because we’re coming out of a bad situation. We didn’t know who’s going to get as deep as it did and we still don’t know the full breadth of the recovery. So it’s more about uncertainty and listening very carefully to our customers and making sure that we plan for the worst. So we don’t have to deal with surprises in sort of need reactions that aren’t very value additive, that’s really all about I can say about it, Frank. Frank Mitsch - BB&T Capital Markets: I mean there are some folks who are commenting more positively about auto builds in the fourth quarter being at similar levels if not better than the third quarter. At this point you feel it’s more prudent to at least plan the potential exist that the third month of this quarter could be more endure than that expectation. Is that kind of what you’re saying?

I’d say that sums it up pretty well. I think on the housing front, we’re still not seeing recovery in housing and that as you well know, that’s more influential to our income than anything else, but I think your analysis of the auto market is, it is continues to improve modestly and that would help us, but it extends across many of the end markets, we’re just in arrow of caution by a lot of our customers. I know Bob would like to add a comment there.

I was just going to make one observation about auto and that is when you look at the third quarter sales increase just over 10% versus the second quarter. About 3.5% of that actually came from auto. Some of that may have been tied to cash for clunkers. It’s hard to make a direct correlation between the two, but we have continued to see auto improve through the course of October and as Steve mentioned, it’s more of a concern about what might happen at the very end of the year, specifically the month of December that probably has us concerned the most.

Your next question comes from Rosemarie Morbelli - Ingalls & Snyder. Rosemarie Morbelli - Ingalls & Snyder: Why was distribution so strong? Do you think that it was mostly inventory build up at your customers or was the product actually going out the door?

There are two things, if you mean versus the second quarter of this year? Rosemarie Morbelli - Ingalls & Snyder: Yes.

The first observation I would make is that we did see some level of inflation. So as you look at the sales increase you need to take that into consideration. Purely from a volume standpoint, the distribution business increased to 11% in the third quarter versus the second quarter. Some of that was driven we believe by auto and some of that has been driven by new business gains, and we specifically mentioned the DuPont agreement, which we announced on our call in connection with the second quarter. I would say those two things more than anything else are driving distribution Q3 over Q2. Rosemarie Morbelli - Ingalls & Snyder: So you don’t feel that your previous customers aren’t just rebuilding their inventories and they are going to be using them throughout the fourth quarter and therefore sequentially, I mean I know it will be down, but it would not falloff a cliff?

No. I don’t think that’s the case. I don’t think there’s anything that would falloff the cliff in the fourth quarter. As we said before, we’re concerned about what might happen in the month of December, but generally things are trending positively and that’s why we feel positively about 2010 once we get past Q4.

The good news on that same front, Rosemarie, we are really just getting wrapped up with this DuPont agreement transition and we only saw really a sliver of that in the third quarter. So we’re counting on and expecting some good progress on that front, but as far as if you look at this, I’d like to refer to this same store sale meaning existing customers and what they use in consumption rates are, we’re not seeing any kind of substantial pickup on that front. Rosemarie Morbelli - Ingalls & Snyder: While we are expecting sales to be seasonally down in Q4 versus Q3, should we expect gross margin to be above the 18.1% in Q3 as you benefit some more from your restructuring step?

No, the restructuring savings, we hit a run rate in the third quarter. So we’re not expecting any further margin expansion as a result of those savings and then I would assume that gross margins would likely actually decline in the fourth quarter due to our expectations for lower volume as much as anything else.

Your next question comes from Dmitry Silversteyn - Longbow Research.

A couple of questions, first of all, I was interested in your comment on the ECU pricing in your SunBelt joint venture. You talk first quarter of 2010 as being a period, where you going to see some benefit of higher prices in the ECU. My recollection was that first quarter of this year still saw fairly high cost prices although on the way down. Now do you expect the cost of pricing to recover to first quarter of 2009 levels, by the first quarter of 2010 or is it chlorine pricing that’s going to be meaningfully higher?

I want to clarify that statement. I was referencing that we think we can see some sequential quarterly improvement in operating income. So comparing the first quarter of 2010 versus the fourth quarter of 2009 by no means do I think our operating income in Q1 of ‘10 will get to where it was in Q1 of ‘09.

Dmitry, you are correct and that our view is that the chlorine pricing will be higher, but we don’t in anyway expect cost to return to where it was in Q1 of ‘09.

Then to follow-up just a little bit more detail on your housing and automotive exposure. When you talk about housing, do you really mean residential housing or it is general construction, light industrial, commercial, or is your focus in the market so tight that it is just the housing market that’s important to you?

It’s overwhelming housing. There’s a little bit of commercial, but it’s a tiny sliver of our entire revenue into building and construction space. For us, it’s new housing and of course even remodels can, if the activity around remodels and refurbishments picks up, that’s another opportunity for us.

Then on the automotive exposure, I know it’s not as big as housing, but it is still fairly significant. Is that particular area of concentration in terms of geography or manufacture that you are exposed to or are you really broad across the automotive sector?

We’re highly exposed to big three and we’re working on penetrating further the Japanese and European OEMs and making some progress, but clearly our base business is primarily across the big three.

I would add one other observation on auto just to put it in perspective, Dmitry. Following on my comment to Frank, we think auto bottomed in the second quarter and from a combined revenue standpoint, that was about 8.3% of our total revenues and third quarter got to 10.8%. So auto has been obviously a significant influence in the third quarter in terms of increasing top line.

Then final question, you talk about volumes, when you discussed individual business segments in the company overall and you given us some foreign exchange information. Can you let us know what’s happening with pricing? Is the pricing coming down faster or slower than the raw material prices decline? Obviously, the distribution business though do or died, but more so in your specialty business, where does pricing currently stand on a year-over-year and sequential levels and what’s the market outlook like, I mean is there a lot of pricing pressure right now from customers or competitors or is everybody still focusing on maintaining pricing and improving the margins?

First of all a statement about raw material cost and they are not falling anymore they seeing to be coming up and we saw that sort of at the end of the second quarter and believe that’s been the case and third quarter so it could be more pressure on price now than probably ever. In terms of our own performance with respect to price, I think we’ve done a better job this year of managing price in a deflationary environment than we did last year in an inflationary environment and so I continue to assume that we’ll manage that through the course of this year but thing it is will become more and more difficult to achieve that level of performance simply the result of inflation and competitive pressures.

I want to add that I think that the organizational readiness to deal with cost increase on raw material side, we have done a great job of taking a lot cost out of the manufacturing side, things that we can control and manage, but it’s our job and it’s our obligation and our sales forces obligation to sell pricing so that we are appropriately rewarded for our efforts and are getting much better at this and there are a lot of reasons it’s training in the sales forces, it’s education and working with our customers, it’s differentiation. It’s having uniqueness that enables us to be viewed as a valuable partner to the customers. Although things coming to play and I think we’re certainly fairing much better than we ever had in the past and should we get some accelerated raw material increases, there could be a brief lag between catering those costs and recovering those with margin from customers, but I think we’ll be able to execute and I’m not particularly worried about this issue.

Your next question comes from Christopher Butler - Sidoti & Co.

I wanted to go back to the question of demand, understanding that your customers are relatively cautious of the some of them looking out to the fourth quarter and I think a fairly comment story is that nobody is looking too far into the future as far as forecasting their demand and their purchases. Could you give us an idea of what the indicators that you guys are looking at that give you a more cautiously optimistic viewpoint on 2010? Is there anything different than what we are seeing to sort of big picture issue?

Chris let me give you a couple of data points it might be helpful with this. As we look at the consensus forecast for automotive, let me begin with that. The latest estimate for 2009 is 10.2 million builds and that range has been between 9/6 and 10/6 and settled on 10.2. For 2010, the low is 10/4 better than ‘09 in the highest 13/1, with the mean at 11.5 million units. So that alone is 14% increase in automotive if nothing else happens not to mention we worked through some inventory. So to me 2010 with automotive, it looks pretty good relative, not relative to the ‘04, ‘05 ‘06, ‘07 years were we build 16 to 17 million units, but certainly relative to ‘09. Let me sort of shift gears now and move it over to housing which has it’s more impact on us. A number of builds estimated for 2009 is a low of 560,000 to a high of 610,000 pretty tight range a mean of 580,000 units and we’re kind right in their with that mean number. For 2010, the mean is 810,000 units. That is a very substantial increase in housing builds and when you overlay that with potential mix of houses in that lower cost housing, smaller homes, lower cost per square foot homes tend to favor PolyOne because there’s more vinyl and more plastic this used in those applications. That’s what gives us where in the execution that we’ve seen give us a lot of encouragement for future. So, I don’t know if that’s what you are looking but those are specific data points in facts that might be helpful.

Looking at the third quarter, the strength in the specialty, I know that most people when they’re looking at say, the GDP number for the third quarter are trying to ex out stimulus and rebates and all this other stuffs that’s going on. If we’re looking at your results, is there anything in there that would be more third quarter one time in nature or are we looking at just straight up improvement of your specialty segments?

The only thing that I would consider as a potential one timer is the LIFO benefit of $1.7 million. Obviously, LIFO is not a one time event it’s how we account for our costs. So you’ll see that in the fourth quarter as well as we’ve cautioned we think that benefit could diminish.

Could you remind me what the benefit would have been through the first nine months of the year?

For specialty?

Yes.

For specialty, all in LIFO benefit I think was about $3.5 million and I can confirm that.

So all in for specialty was $3.7 million.

Your next question comes from Chuck Peterson - Morgan Stanley.

You talked a little bit about acquisition earlier. What size of acquisitions would you consider at this point?

I guess, we’re clearly in recent months, we’ve imposed some constraints on ourselves just because we were nervous and trying to work on some internal matters and we kind of abandoned at least temporarily our M&A strategy. What our strategy was before that I’ll start it was kind of two-fold. Certainly looking at leverageable strategic platforms, primarily if not absolutely specialty in nature that we could find opportunities to leverage just as we’ve done with GLS. I think GLS is a great example and it’s probably on the larger side, there are not a lot of GLSs out there to obtain, but there are a lot of $10 million, $20 million opportunities for us, and we’re going after those opportunities with renewed vigor. On a couple of fronts, one we can do it now and we also have confidence that we can accomplish this, but also the evaluations have dropped on these and there are some terrific opportunities, if we can rope them in and get them under the right circumstances and they all make sense to us. That said, I think this management team has the capacity and the capability to take on a major transformational acquisition if the right opportunity were to arise and that would be all I’ll comment on that. We don’t have any other comments on our sights on anything, but we’re always out there looking each and everyday to find ways to create shareholder. If that comes in a small package, we’ll go after it and it becomes in a large package, but it makes sense for us, we’d also be willing to give that the utmost consideration.

As of the end of the third quarter, I’m coming up with if we include your share of the SunBelt I’m coming up with a shade under two times net that’s EBITDA. With that as a base, for the right acquisition, how high would you be willing to take that number?

Actually, before we got into the economic crisis last fall, we used to get the same question and at that time we were about 3X. So we would take it up one turn higher than that if the right opportunity presented itself. I’d say that we’d probably still feel the same way about our capital structure going forward.

Your next question comes from Tarek Hamid - JP Morgan.

Can you talk a little bit about strength in the automotive segment sequentially from 2Q to 3Q? Any other end markets that helped drive the improvements in the Specialty Platform?

Well, first of all, the comments that we made about auto are principally driving the PP&S, the segment revenue, so as you looked at, there are sequential increase of volume of about 7.8%. A decent chunk of that was from auto. The other areas if you just are referencing Q2 do Q3, is that right? Is it Q2 to Q3 is be to confirm that?

Yes.

We did see a pickup of about a percentage point in consumer, and that probably was the most significant move in the specialty platform that we saw from Q2 to Q3.

Healthcare was up 10% sequentially.

Generally pretty broad based?

Yes.

Then following off on the last question, you are sitting on liquidity of $344 million. Any thought as to what sort of the right level liquidity to hold in the businesses longer term with markets generally a little bit more stable?

I guess the best observation that I can make about our comfort level with the capital structure is in reference to debt to EBITDA and would make the same observation that I did for the last caller. The way our debt is trading right now, our senior notes are the most substantial level of maturity, we have coming due in 2012. They’re trading at 101. There’s a make-whole premium to take those out early, and they have a relatively attractive rate at this point and we think if we were to refinance, we’d pay a little higher today. So I really wouldn’t say there’s any anticipation of paying down debt in advance of its scheduled maturities. So to the extent that we continue to generate free cash flow that’s going to without cash in the immediate term. To the extent that something becomes a good opportunity for us on the M&A front. As Steve mentioned, that’s an area where we can see future cash expenditures, but beyond that we don’t have any further plans.

One final question from me, on the working capital side, you’ve done a great job year-to-date, but any additional targets you had, sort of any number that you want to get down to during 2010 on working cap?

We’re going to continue to drive working capital, specifically as we think about that internally. We focused on all three areas of trading capital, but collectively we’re looking and trying to reduce working capital as a percentage of sales and we’re going to be trying to do that on an annualized basis going forward, but we don’t have a specific target that we would share with the public today.

I mentioned that we had a Lean Six Sigma initiative for around sales and operations planning and this is also aimed at reducing working capital. While making sure that we continue to be world class in our on-time delivery performance. So I’m going to push this saying so far that the wheels come off here and we end up losing this advantage we have with regard to customer on-time delivery performance. So that’s the balance we strive, but we think we have improvement to go.

Your next question comes from Bill Hoffman - RBC Capital Markets.

Steve, I wonder just one last sort of focus on the experiment side of the business. What I’m curious is the geographic mix of your specialty business, whether it’s more Europe versus U.S., and trying to get to a sense of what you see as sort of the ultimate revenue opportunities in that business.

So if you look at it collectively, in ‘08, and this is all down this year because volumes and revenues are down, but in ‘08 we had about $1 billion of specialty income. As you know, our European and Asian business is overwhelming specialty, color additives innings as well as our specially engineered materials. So it’s a big opportunity for us. We define our total market as a $30 billion plus market. I would say that you can count on specialty being at least a third of that, and we keep redefining the market opportunity. We haven’t changed our public stand, but we keep finding new niches and opportunities to grow in the specialty market. So yet it’s not undefined, but it’s certainly expandable. So I think if we look at this and understand that we got our strong investment in Asia. We like our position there. We want to do better in Japan. We have a lot of opportunity to grow in India and continue to grow at double digits in China. We are well positioned there and that’s almost all specialties. I would say 90% of that business is specialty business. For Europe, I would say it’s a similar number. The overwhelming majority of our business in Europe is specialty. In place we have a whole, I mentioned this in my remarks, is in Latin America. We had a little bit of business down there, really driven by customers asking us to serve, and we either have to import into that market or tool manufacture with people that they help us take care of some customers there and we see a quite a growing opportunity. Brazil alone, to give you an example has a $1 billion worth of specialty potential that we know of today. So it’s a opportunity rich environment and it’s up to us to just get after it, execute and win the business. That’s why we’re spending so much time, energy and effort on training the sales force on developing new products that differentiate and that’s was really all about.

What I’m trying to get to is as of the sales dollars today, how much of that is in the international market just if you took specialty segments since we…

It’s 50/50. The way we actually have organized our three reportable segments in specialty, we actually have separately reported our international businesses, and that’s the easiest way to think about the breakdown of the platform. It’s the international what this really will represents about 50% of the platform sales. A little bit higher in Q3, but from year-to-date it’s above 50%.

The second question is, the SunBelt JV, we always got to ask, the strategy with it currently now we’re cycle trove for nine months ago we were cycle peak. We talked about potentially monetizing that. Any change in view right now?

We continue to view our SunBelt JV as non-core. We said the same thing now for a number of quarters. We think with that obviously with pricing dropping in the third quarter, that we’re going to continue to see some improved earnings there. So obviously, from a valuation standpoint things should improve. I would also point out recent proposed legislation related to Mercury and all in references on their call, the House Committee on Energy and Commerce passed a bill that would require producers using Mercury technology to decide by June 30 of 2012 whether they will convert or shut down facilities. There are three grades of caustic mercury, membrane and diaphragm. The SunBelt JV is membrane all in operates two facilities that utilize mercury cell technology or about 18% of its capacity and this is all from their call. So I think going forward, that’s probably beneficial to us since we have membrane technology, and that venture has additional capacity that could be expanded to meet us needs going forward.

Your next question comes from Rosemarie Morbelli - Ingalls Snyder.

SG&A at 13.8% further news was particularly low. Is that ratio sustainable going forward? Was anything special in the adjusted number, eliminations that will come back next quarter or next year? Could you give us a better feel for that?

Well to go right off to GAAP financial statements, the SG&A just under $155 million. There are special items totaling 19.5%.

I took those out and I am looking at the clean ratio of 13.8%, which is very low for SG&A for you guys.

Well, I think it’s pretty comparable to where it was in the second quarter. The percentage obviously improved because sales bumped up 10%. From a dollar standpoint, I’ve continued to reiterate the expectation that, we should be running around that sort of $70 million to $75 million per quarter, and it will be higher in the second and third quarters. Just based on timing of certain expenses but beyond that I wouldn’t have any further comments to say about SG&A no other one timers. We did, as you know announced changes to our retiree medical plan and that will reduce SG&A going forward both in fourth quarter and the balance of the next three years as those benefits are faced out.

How about incentive on performance? What are we looking at this year? Do you have them in and if not, what could be the difference next year compared to this year?

Could you repeat that?

Usually if you do well, you have incentive compensation, which I think show up in SG&A. Did you have any this year? Are you going to catch up in the fourth quarter if you did better than you anticipated for the year, the beginning of the year and what should we expect for next year?

We’ve recorded our incentive compensation pro rata on operating income as it’s earned and that’s one of the reasons why I said that second and third quarter SG&A is typically higher than the first and fourth because generally our earnings are higher in those quarters. So you should see that trend down in the fourth quarter and then in terms of total expenses this year, 50% of our annual incentive compensation is based on cash flow specifically working capital as a percentage of sales and we have done very well at that. So in terms of how over doing this year, we are doing better than target, and obviously as we set our objectives for next year they will be more aggressive and in terms of what our target compensation would be, that could ultimately be lower if next year we hit target versus where we are this year.

Could you give us, we know that for the quarter the 25.5% decline in revenues was due to a certain degree to 20% decline in volume. Could you speak at the currency impact in the price mix?

Currency is about 3% and so the balance is price and mix.

So currency was not 3% just for the specialty business. It was for the company as a whole?

Correct. Thanks for the last question and thank you for everyone who was able to join us today.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a great day.