Good morning, ladies and gentlemen, and welcome to the PolyOne Corporation First Quarter 2015 Conference Call. My name is Amanda, and I will 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 Eric Swanson, Director of Investor Relations. Please proceed.

Thank you, Amanda. 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 expectation, and involve a number of business risks, and uncertainties, any of which could cause actual results to differ materially from those expressed in, or implied by the forward-looking statements. Some of these risks and uncertainties can be found in the company's filings with the Securities and Exchange Commission, as well as in yesterday'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 GAAP financial measures. Operating results referenced during today's call will be comparing the first quarter of 2015 to the first quarter of 2014, unless otherwise stated. Joining me today on the call is our 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 Patterson.

Thanks, Eric, and good morning to everyone joining us on the call today. I am pleased to report record first quarter earnings per share of $0.46 and growth over the prior year, despite significantly unfavorable foreign exchange as well as unfavorable market dynamics in our industry. It was an extremely strong quarter for our established specialty segments, Color, Additives and Inks and Specialty Engineered Materials. With their growth, in fact, our earnings per share has expanded now for 22 consecutive quarters. While we didn't deliver double-digit EPS growth this quarter, which remains our expectations, I do not want to lose sight of what we have accomplished and we should be proud of delivering earnings growth under the circumstances. Like other multinational companies, we were impacted by a weaker euro, which reduced earnings per share by $0.023, when compared to last year. We don't report our results on a constant currency basis, but if we did, our EPS would have expanded by 10.5%. And lastly, the recent and significant decline in raw materials led to widespread inventory destocking in January and February, which we estimate the negative impact of, was about $0.04 a share. As we look to the balance of 2015, we are confident we will deliver double-digit EPS growth for the full year, led by Color and the Engineered Materials, who had a spectacular start to the year. They each delivered record first quarter operating income and return on sales. And I'm proud to say both are now above the high end of their 2015 target range we set for them back in 2012. These businesses clearly demonstrate the power of specialization. As we have upgraded their portfolios to value-added solutions and less cyclical end markets. I also want to point out that Engineered Materials delivered its most profitable…

Thanks, Brad. Exceptional growth in our established specialty businesses, indeed, overpowered short-term challenges of destocking, a weaker euro and Spartech integration. I'm pleased to report earnings growth for the quarter and, as I said, confident we'll deliver double-digit EPS growth for the full year in 2015. Now that's the short-term. But at PolyOne, you know we are always looking to the future. So let me tell you why I am more excited than ever and confident in our future. By leveraging the success and foundation of our past, we know that to continue growing at a double-digit pace we must invest in our business and in on our people to make that happen. A great example is our new Asia Innovation Center we are opening in Shanghai in June. This investment represents our commitment to upgrading facilities, enhancing research and development, and providing a world-class location for collaboration and innovation to support the significant growth potential in the region. It also shows a commitment to our customers, a commitment that PolyOne is the right partner for their specialty design, innovation solutions and service needs. Our new innovation center will provide our talented researchers and scientists with best-in-class tools and the collaborative space they need to facilitate cross-business unit collaboration. It will be a truly differentiating showplace within the region and one in which all customers and prospects will be encouraged to visit. Service is PolyOne's timeless differentiator, and an area in which we are unmatched. Let me share one recent example of exceptional service. One of our highly esteemed customers utilizes PolyOne technology to serve the outdoor industry with more durable, dependable and lighter weight products. They are a rapidly growing company, and their desire to keep up with customer demand has required rapid changes and expansion of their operations.…

Your first call comes from the line of Mike Sison from KeyBanc. Your line is open.

Hey, good morning, guys. Really nice quarter on the specialty side. Bob, when you think about the sustainability of the 16% operating margin for the two businesses, particularly as raw materials come down for the rest of the year, can you sort of talk about the cadence of how those margins will – how they get better or get worse, or is this really an area of a new territory for them?

I do believe that they've got opportunity for further improvement. Clearly we're going to highlight that at our Investor Day in May. If you remember, last year at the Innovation Day, we said we believe that our specialty businesses can achieve 20-plus percent return on sales. And I still believe that's the case and we'll reiterate that on the May 18. I believe you're going to see expanding margins through the course of this year. Some of that comes from the normal seasonality patterns that we see in the second quarter and third quarter, but also it just comes from the advancing portfolio and mix improvement. So it's going to be a good guy for us for the rest of the year.

Okay, great. And then I think you said that demand for PP&S and Distribution has perked up a little bit here in April as destocking has ended. Do you see those two businesses generating better growth and profitability as maybe even starting in 2Q and for the rest of the year?

Yeah. Absolutely. I mean we're going to see much better growth in the second quarter versus the first quarter. We're already seeing, I'd say, demand patterns stabilizing and returning to normal versus what we saw at the beginning of the year, again, which was primarily contained to January and February.

Okay, great. And then just – when you think about the double-digit growth outlook for 2015, can you maybe frame up – I mean, it does seem you could get – you should get back on that growth trend pretty quickly. Is this something that you can start back on in 2Q and then it accelerates, or is it more back-end loaded in terms of getting to that double-digits for the year?

Yeah. I think it's something that we can get back on for the second quarter. There is an opportunity for that to pick up as we get towards the end of the year, and specifically as our numbers start to improve in DSS.

Great. Thank you.

Thanks, Mike.

Thank you. And our second call line comes from the line of Bob Koort from Goldman Sachs. Your line is open. Ryan L. Berney - Goldman Sachs & Co.: Good morning. This is Ryan Berney on for Bob. Just wanted to jump into the DSS segment. If I'm reading you right, it sounds like you're going through a period where you're putting some additional investment in this business to kind of get it turned around, and get it up to the levels where you've talked about in the past, and I think it's around 8% to 10% target for the margin. Could you maybe provide a little bit of an update on when you might reach that target level. Is that something maybe we could see in 2016?

On the 8% to 10%? Ryan L. Berney - Goldman Sachs & Co.: Yeah.

That's your question, yeah, sorry, I just misheard the last part. I think we got a shot at getting there as we exit the year. I think with the first quarter performance that we've seen, the impact on destocking and these additional costs you referenced, it's going to be a challenge to deliver that for the full year, but we could hit that rate as we exit 2015 and feel pretty confident about doing that in 2016. Ryan L. Berney - Goldman Sachs & Co.: Great. Thanks. And then I was hoping maybe you could comment a little bit on the landscape for M&A that you're seeing. I know you made a comment on it in your prepared remarks, but just the level of opportunity that you're seeing come to market. Do you feel like there is a lot of opportunities out there that you might be interested in?

Well, there's certainly many opportunities that we continue to look at. I'd say the landscape's not significantly different from when we spoke on our last call, and that is that – what we find is that there are a number of specialty players in our market that are privately owned or family run, and what we've seen so far is that they want to continue to run in on those businesses. That doesn't preclude us from looking at other things, of course. I just want to reiterate that we're going to be prudent, we're going to seek out the right kind of deals that really help us to accelerate our specialty transformation and not rush into something just for the sake of doing a deal. Ryan L. Berney - Goldman Sachs & Co.: Okay, great. Thanks. And then lastly, within the kind of the first quarter results in the two specialty legacy businesses, could you quantify maybe how much, if any, benefit you've got there from lower raw materials and kind of whether or not you expect it to be able to keep hold of some of that through the rest of year?

We are seeing some benefit, but it's really limited in the first quarter. As we said in January, really we view lower raw material costs again as a long-term net positive, primarily for our specialty businesses, starting with end demand, which I think picks up simply as a result of lower cost. And I would say that for anyone who is modeling what raw material benefits would be and you look at broad-based hydrocarbon spend and that kind of thing, I just always caution people to be using big numbers with big percentages because I think the total opportunity that's out there is a net positive. But our hydrocarbon spend in the specialty businesses is increasingly getting smaller as the secret sauce ingredients get larger. So I know that's not a direct answer on specific numbers, but that's really the best guidance I can give at this point. Ryan L. Berney - Goldman Sachs & Co.: Great. Thank you very much.

Thank you. And our next call line comes from the line of Frank Mitsch from Wells Fargo Securities. Your line open.

Yes, hi. Good morning, folks. Hey, Bob, you talked about $0.04 negative impact in Q1 from destock. I guess, that implies that a destock is a delayed purchase. So at some point, that gets made up. Is that how you are thinking about it and is that something that we should be thinking about Q2, Q3 type of a timeframe?

I'm not looking at the $0.04 as a pure add to Q2 and not quite sure how that plays out over the course of the year from a catch-up standpoint. I'm saying that that's roughly $6 million of operating income sort of spread across POD, DSS and PP&S.

That was negative, but at some time, it gets made up. That was the genesis of the question. I understand, it's not a Q2 phenomena, but are these sales lost forever?

I am not sure that we make up every dollar for dollar is what I'm trying to say is.

Okay. All right. That's fair.

Customers work down our inventory levels, I think they have just lower inventory (32:18) they're going to carry forward, particularly as they – look, I think raw material costs are stabilizing, that's a good guy, but I don't think they've gotten to a point where people feel comfortable to bring inventory levels back up to where they were in November, December before all this started to happen.

Well, Bob, you have to – thank you for the detailed explanation. You have to understand I am not a Michigan grad, so you have to – you stick figures to explain things to me. And then, obviously, DSS disappointing, it's been beaten to a dead horse here. But in terms of the synergies, you guys were expecting $65 million from the Spartech deal within three years, can you refresh us as to where we are in that process right now?

Sure. Look, I wouldn't use the term dead to describe the DSS business as you say it (33:10). But look, from a dollar standpoint, we hit the $65 million figure coming out of the third quarter that did not translate all the way to a $0.50 EPS number because we hadn't bought back all those shares. So when I look back and calibrate against what our expectations were at the time of the deal, I just want to remind everyone, look, our investment thesis around DSS and Spartech in particular has not changed. We always believe that longer term there are even more synergies to come beyond the $65 million with respect to commercial synergies, which includes putting together some of our specialty material solutions like ColorMatrix Additives to enhance the packaging applications or some of our Engineered Materials to enhance custom engineered structures. All those have yet to come. And the good news is, is that when they do come in, they help us to offset some of these additional costs that we're seeing right now around right-sizing the footprint of the business. So I feel very much confident about the synergy estimates that we had. Clearly, you can see that the first quarter results in DSS were disappointing, which means it's just going to take us some additional time to get back to that number.

All right. Great. And then lastly, what was the vitality index in Q1?

43%.

Thank you.

Yeah.

Thank you. Our next call comes from the line of Dmitry Silversteyn from Longbow Research. Your line is open.

Good morning, guys. Just wanted to follow up on a couple of questions that were asked earlier. You've sort of provided the foreign exchange headwind to revenues and you talked about kind of pricing coming down in some businesses. Can you maybe break that down a little bit more in detail not for business by business, but for the company overall, what were the components of price/volume mix that drove your fixed currency sales?

Well, first of all, I'd say that on the FX side, that's really entirely contained to Color and Engineered Materials.

Right.

If you think about the $0.023, a little bit more that was in Color than EM, but both of them have about a third of their revenues in Europe and were impacted by the euro, so that helps you out on the FX side. And then I'd just direct you to the 10-Q for the balance of the questions on what was really driving the rest of sales. If you got other questions after that, Dmitry, then just follow-up with us, if you would.

Fair enough, Bob. You had obviously a pretty steep decline in DSS business as was expected, sort of maybe more than expected, but we certainly expected to see a double-digit decline as you finish up the, I guess, the rightsizing of the business. Were you able to get as far as getting rid of sales that aren't profitable, are we sort of at the end of the major heavy lifting in this business and can we see better comps, maybe not positive comps yet because of various things, but better comps in the balance of the year? And then the second question for Engineered Materials, I believe there was a piece of Spartech that went in there that you guys were trading as well?

Yeah. I mean, the answer to that question is yes, we're there. And really on the upside what's exciting about, I guess, being at this point in time is that in our sales funnel I know we've got $60 million of business that I think can be directly added into the P&L as we get toward the end of this year, which is all upside opportunities from us. So not only have I believed and we're going to start lapping the actions from the previous year, but we'll start to see growth as that new business comes in.

Okay. So you would actually expect to see growth in DSS for the balance of the year and certainly looks like second half of the year?

Toward the end of the year without specifically defining the quarters, but toward the end of the year.

Got it. And then one final question, Bob. Your Distribution business actually held up fairly well, given the price pass-throughs that you were subjected to on – certainly on a profit margin line, it's almost the same year-over-year and sequentially. How should we think about the profitability of this business now that pricing seems to have stabilized and if you do get better volume activity as customers sort of get back into the market rather than waiting for further price declines. Is this a division that can finish with operating margins close to 7%?

Not for the full year. I think we're going to see improving margins starting as early as the second quarter. What I'd point out, though, is that the raw material price declines we experienced didn't just happen at the end of December and stayed flat through the first quarter, they actually continued to come down. We saw a little bit still in April. So as long as they're coming down, that's still a little bit of a headwind for POD, but certainly getting to be a much smaller effect. And I think as soon as Q2, we see a little bit better operating margins as a result.

Got you. Thank you very much.

Thanks, Dmitry.

Thank you. Our next call comes from the line of Laurence Alexander from Jefferies. Your line is open.

Hi. This is Dan Rizzo in for Laurence.

Hi, Dan.

Just in terms of geographic mix, I mean, how is demand trend shaping up in Europe?

For us, what we saw – if you remember from our comments last year, we saw a really strong first half of the year and then talked about how much that changed dramatically in the second half. So to put that in perspective, in the second half of the year, we saw volumes down about 5% and they were down about 2.5% in the first quarter. So I'm hoping that's a positive sign. We're seeing a little bit of a recovery there, at least a pickup in Europe vis-à-vis what we saw last year.

Just for my knowledge, what are the main end markets in Europe, is it auto?

Packaging and transportation are two of the larger markets we serve.

I mean, so transportation is still – I mean, it's improving a little bit, but it's still showing some sluggishness, is that accurate?

That's true. I think it's a fair comment, and we saw some growth in our other industries. I would say that when I referenced our own volume statistics, they can, of course, and our influence by our own new business gains not necessarily just directly what happened with end market statistics.

Okay. Thanks, guys.

Yeah, thanks.

Thank you. Our next call comes from the line of Jason Freuchtel from SunTrust. Your line is open.

Hey, good morning. Is the CapEx on 1Q 2015 a level we should expect each quarter going forward or will spending associated with additional realignment efforts pick up? Bradley C. Richardson - Chief Financial Officer & Executive Vice President: Yeah. I mean, it's really – I think what you should expect for the full year is that we'll spend right at about $85 million. And I think what's encouraging about that amount is that over 70% of it is really associated with our growth investment. So that's how I would characterize the capital for the full year.

Okay, great. Are the growth investments in DSS? Bradley C. Richardson - Chief Financial Officer & Executive Vice President: Well, it's really throughout our specialty businesses.

There are some opportunities that we are looking at right now that would be new machinery and equipment. Candidly just as an observation about DSS and some of the challenges we face right now from a cost standpoint is the age of this equipment. And what we've learned here in the last six months is that we can make some pretty massive improvements in productivity, efficiency and quality with new equipment. And so my sense is we're going to see an uptick, it's not going be a big number, but we're going to see an uptick here with some spending on DSS to accomplish that.

Okay. Great. Thanks for your time.

Thanks, Jason.

Thank you. Our next call comes from Jason Rodgers from Great Lakes Review. Your line is open.

Hi. Good morning.

Good morning.

Most of my questions were asked. Just wanted to follow up on Europe, if you'd be able to provide the actual volume and operating performance for the quarter?

We don't split that out by region. Now that we've globalized our businesses, and that goes back to our segment formation, we just keep those comments to the segment level.

And you talked last quarter about high valuations as far as looking for acquisitions, any change in those thoughts?

No, I think we're still seeing the same dynamics, really unchanged from our comments in January. It doesn't mean that there aren't going to be deals out there. We keep looking. We keep having conversations about things. And I'm optimistic there is certainly stuff that's out there, but just not perhaps as many deals as people might have thought, let's say, four or five years ago.

Thank you.

Yeah.

Thank you. Our next call line comes from line of Rosemarie Morbelli from Gabelli & Company [G.research]. Your line is open.

Thank you. Good morning, everyone. Bradley C. Richardson - Chief Financial Officer & Executive Vice President: Hi, Rosemarie.

Good morning.

Bob, looking at the PP&S business, I understand that there was destocking and so on, on the side of your customers. Could you talk a little bit about the markets served? If you exclude the destocking, what is the underlying demand really doing?

Well, I mean, the destocking effect that we saw again was primarily contained to January and February. And I would say that there was a heavy component of that really associated with construction and industrial in those first two months, which is part of where we're seeing that pickup in demand in March and now in April. And I'd say probably that's pretty consistent with what people would have expected there. I don't have any other specific demand observations that were either plus or minus for that business to point out. That was the most significant impact we saw in the quarter, and I think probably going to be one of the bigger drivers of having a better second quarter.

And when we look at that volume coming back, is it coming back at lower prices as customers have demanded to share in the lower raw material costs?

I mean, look, in our PP&S business, there's some portion of that business is index-based and so prices do reset, which means automatically that's going to happen as raw material costs come down. So, as a broad statement for PP&S, if you looked at average selling prices in Q2, yeah, they'd be somewhat lower just based on that indexing, but it varies depending on the other products we have. And what's very different about this business from where it was six, seven, or eight years ago in the peak housing times was that how much of this business now is going into applications like medical device housings. And these are products that are all really value-based solutions and not traditional solutions that we might have had again when we were in those peak housing years. So improving mix is a big part of our growth strategy in that business as well.

Aren't the products for medical devices in your specialty businesses as opposed to PP&S?

We have medical devices in PP&S as well. And look, when you look at sort of broadly how the segments are defined historically, it's really by product family in terms of polymer designation. So we certainly have a growing and large presence in healthcare in our specialty businesses, but we also service healthcare in PP&S and Distribution. In fact, healthcare is 20% of Distribution sales.

That is very helpful. Thank you. And just one last question regarding the margin. And I think you touched on it, but I did not catch it all on your two high-performing operations, the Engineered Materials and Color and Additives. Is that margin sustainable? Or as the year unfolds, you are going to have to give up some of your benefit on the raw materials side?

I think the margins are going to improve through the course of the year, and some of that's just due to seasonality as the second and third quarters are strongest of the year. So I don't have any expectation on margins going backwards from where they are right now.

So they will improve due to higher volume, but pricing will remain flat with the first quarter, or do you think you will have to drop it a little bit?

Look, our specialty businesses really are value-oriented, and that's how the pricing is determined. It's specific to each application, but I'm not expecting that we see any kind of material impact on pricing going into the second quarter.

Thank you very much.

Yeah. Thank you. We've got time for one more call.

Thank you. Our next call comes from the line of Mike Harrison, Global Hunter Securities. Your line is open.

Hi. Good morning.

Hi, Mike. Good morning.

Was hoping that maybe you could give just a little more detail on what drove the step-change in gross margin in the Engineered Materials business. And I notice that that's kind of similar to what happened last Q1. Is there something that happens January 1 that allows the big increase? Is that when contracts roll over or something like that?

I mean, look, we don't have really long-term contracts or index pricing or anything like that in our Engineered Materials business. And what you've seen here from a margin expansion standpoint really is driven by ongoing mix improvement. We had really strong performance in our composites materials as well as our soft touch TPEs and some recovery in wire and cable markets, which were weak last year. So all of those things really blended together to help deliver strong operating margins. This is not a one-time phenomenon. This is really just part of our ongoing trajectory to get to 20% and beyond.

And then within the DSS business, can you talk a little bit more about any operational issues you were having? I understand if there was a volume issue around destocking that that's going to impact your operational efficiency. But historically, Spartech had issues where they had cut too deep, lost the people who knew how to control costs within the plant, had some quality issues. Was anything like that going on during the quarter that was sort of an unusually big headwind?

I mean, look, certainly volume has played a role from an absorption standpoint in terms of the footprint we have in place today. I believe that gets better over time. Most notably, as I mentioned earlier on the call, we've got $60 million of business in the funnel that I believe starts to come back in this year and gets us past that. But, look, the real drivers here on the cost side are what it takes to align those assets, improve quality and operational efficiency. We're very focused on improving on-time delivery and our customer forward-facing metrics. You don't watch in the same way the PolyOne was seven or eight years ago.

All right. And then last one from me is, I'm curious about the service example that you gave in your prepared remarks. When you provide consulting services on customer operations like that, is it something that you're charging them for or do you make it up as they're able to run harder and grow faster?

Look, I view this just as part of the relationship with PolyOne and how we provide service to our customers. So when we have a conversation about dedicated resources to them or offering them lines of help or assistance, certainly I believe that that's going to benefit us in the long run through additional orders or improving mix, but not something that we have a specific contract on, unless for some reason that was the way the customer wanted to do that or handle it, in which case we'd be open to it.

Got it. Thank you very much.

All right. Thanks, Mike.

And thanks, again, for everybody who is able to join us on the call today. Just once again, I want to reiterate the great performance that we saw from Color and Engineered Materials and how that highlights our specialty strategy and why it's working. We look forward to seeing hopefully all of you at our Investor Day on May 18 when we're going to have much more to say about that as well as our Platinum Vision for 2020. Thanks, again. Have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may now disconnect. Everyone, have a great day.