Good morning, ladies and gentlemen, and welcome to the PolyOne Corporation’s First Quarter 2020 Conference Call. My name is Catherine, 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 Joe Di Salvo, Vice President, Treasurer, and Investor Relations. Please proceed.

Thank you, Catherine. Good morning and welcome to everyone joining us on the call today. Before beginning, we’d 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’re 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 statement. 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 for the most comparable GAAP financial measures. Unless otherwise stated, operating results referenced during today’s call will be comparing the first quarter of 2020 to the first quarter of 2019. Joining me today on the call is our Chairman, President and Chief Executive Officer, Bob Patterson; and Executive Vice President, and Chief Financial Officer, Brad Richardson. Now I will turn the call over to Bob.

Well, thanks, Joe, and good morning, everyone. I’d like to start the call with a special thank you. It’s to all the first responders, healthcare professionals, food service workers, infrastructure, and delivery employees who are tirelessly giving their time in the coronavirus response and recovery efforts. They and many others are keeping the world moving at a time we need them most. For those on the front lines, our world is especially grateful for you right now. The COVID-19 pandemic is having a significant impact on the world, and our first priority is the health and safety of our associates, customers, and all stakeholders. We are strictly adhering to government guidelines and protocols, as well as other preventive measures to help stop the spread of the virus. At the same time, we continue to serve our customers, many of whom need us now more than ever. We have just over 60 manufacturing facilities around the world, and all but two continue to operate as we are an essential source of supply related to the coronavirus support and recovery. These are certainly unprecedented times. As you know, on March 20, we held an investor call during which we commented on our first quarter expectations in light of the coronavirus pandemic. Now as we share our actual results, we are pleased to report we delivered adjusted EPS of $0.53, that’s a 23% increase over the prior-year first quarter and $0.05 better than we expected a month ago. Recall that to align with our initial guidance provided in January, these results exclude the impact of the additional shares we issued in February. If we included those shares, our adjusted EPS for the first quarter is $0.48. Much of the upside was driven by better-than-expected margin performance across all segments and regions, and an increase in orders in Asia late in the quarter as China recovered from the local impact of the coronavirus. When we spoke a month ago, we weren’t sure how fast China could get up and running, but they have certainly moved quickly and I believe this bodes well for us and the global economy. Our margin and mix story is an important one as I believe it differentiates our performance in these trying times. On a constant currency basis, sales declined 4% and nearly all of that was due to a decline in automotive demand. Some of this is likely pre-existing weakness we saw in the second half of last year, particularly in Europe, but we also started to see the impact of coronavirus-related shutdowns. Packaging, consumer, and healthcare markets all fared much better and they were either up or flat globally. Pockets of strength were seen in demand for colorants and additives, for food and beverage packaging as well as for composites. And we also saw an increase in demand for some of our materials in outdoor solutions. I’m sure none of this comes as a surprise to anyone when you consider what has unfolded in the last six weeks, with stay-at-home orders across the world and significant slowdowns and even shutdowns of certain industries. I’ll have some additional comments in a moment. But for now, I’ll turn the call over to Brad for some additional details on our performance for the first quarter.

Well, thank you, Bob and good morning, everyone. And let me first start with our GAAP earnings. We reported GAAP earnings per share from continuing operations of $0.38. Special items in the quarter resulted in a net after-tax charge of $8.6 million, compared to $11 million in the prior-year. Special items in the first quarter were primarily associated with acquisition-related costs. Adjusted EPS for the quarter was $0.53 as Bob said. This was driven by a 5% improvement in operating income as margins improved in all segments on slightly lower sales. We also benefited from lower interest expense. From a regional standpoint, sales in Europe were down 7% primarily due to weak demand in automotive applications and unfavorable foreign currencies. Foreign currencies negatively impacted the region’s overall sales by 3%. Asia sales were down 6% with weaker foreign currencies impacting sales by 3%. Sales, despite the slight top-line decline and COVID-19 implications, strong margin performance resulted in a 2% growth in operating income for the quarter. In North America, sales were down 4% primarily related to weaker demand in automotive end markets and lower average selling prices in distribution as underlying raw material prices are declining. In reviewing our segments for the first quarter, SEM grew operating income 9% on slightly lower revenue as strong performance in healthcare and consumer applications improved our overall mix. This segment also benefited from lower input costs and expanded operating margins of 130 basis points over the prior year first quarter. Continued strong performance from composites and healthcare sales offset unfavorable FX and demand weakness in the automotive end market. Weaker foreign currencies impacted EM sales by 2%. EM’s position in healthcare applications didn’t happen overnight. It’s been an important and deliberate journey for all of our segments at PolyOne. We made a commitment to invest in higher performance technologies for specialty applications in less cyclical end markets. We also hired and trained our commercial team to service customers in this very demanding market. Recall last year, I spoke about examples of new business wins in healthcare applications, such as medical devices and next-generation glucose monitors, formulations for new catheter extrusions, performance tubing required for the effective delivery of liquids and medications, and components and seals on masks used for continuous positive airway pressure therapy made possible by our Thermoplastic Elastomers. Healthcare and other end market diversification helped us deliver for our stakeholders last year and it’s doing so during this global healthcare crisis. In fact, EM’s healthcare sales grew over 10% in the first quarter. Healthcare also had a positive impact in our Color, Additives, and Ink segment. This was partially offset by automotive demand and weaker foreign currencies, as operating income grew 3% – on 3% lower revenue. And just like in food and beverage preservation, Color and Additives played a crucial role for healthcare products as well. For example, when certain pharma contents are UV sensitive and can degrade, it requires packaging with additives that protect the quality and integrity of the precious content inside. Our Additives portfolio offers that and more. Lastly, our PolyOne Distribution segment delivered sales up $290 million, a 9% decline versus the prior year. Over half of this was due to price deflations as volume declined 4% primarily due to weakening demand for automotive applications. Margins, however, expanded to a first quarter record of 6.7% as healthcare sales approached 30% of segment revenue. Now before I hand it back to Bob, I wanted to comment on our strong balance sheet and liquidity position. First, we ended the quarter with $1.28 billion in cash, slightly higher than we had initially projected. And this is a balance that exceeds our total debt obligation of $1.2 billion. We also have approximately $300 million of additional liquidity from our committed revolving line of credit, which is currently undrawn. Lastly, thanks to conservative planning, in the past years, our defined benefit plans here in the U.S. are overfunded at 108%. In short, the actions we have taken since the last recession to strengthen our portfolio and balance sheet have us well positioned to navigate the challenges that lie ahead. That concludes our segment and financial review. I’ll turn the call back to Bob.

Well, thanks, Brad. Again, I’m very proud of our team’s accomplishments this quarter. Initially navigating the coronavirus pandemic in Asia and now seeing how we’re managing through the effects on our customers in Europe and the Americas. Brad gave some great examples of how so many of our products are essential, and like many companies, we are working hard to serve our customers during this challenging time. Although our bottom line results for the first quarter exceeded our expectations as well as the prior year, we expect that the coronavirus impact on demand to be greater in the second quarter. Market conditions have remained challenged as most of the world outside of China remains under stay-at-home orders. While our business is essential in the supply chain for many customers, we are adjusting to and expecting reduced demand in the coming months, most notably for transportation and consumer discretionary items. As Brad pointed out, the actions we have taken in the past to strengthen our portfolio and our balance sheet have us well-positioned. But that being said, and as a matter of prudence, we are already taking actions to reduce discretionary spending and administrative costs as you would expect. We have also created a plan to reduce CapEx from $65 million to $40 million if and when needed and depending on when we start to see a recovery. Unfortunately, we cannot predict the length of time we will experience this weakness in demand, or when or how fast the recovery will occur. Accordingly, and as we said in our release this morning, we are not providing specific guidance related to sales, or EPS for the coming quarter or year. As investors, we can appreciate the desire for transparency along with better and more frequent communication. To this end, we expect to provide a mid-quarter update to provide more clarity around what we are seeing in the markets and how that will translate to the bottom line, as we did in March. We will also provide an update on the Clariant acquisition. At this time, there isn't any new information to provide other than to convey to you that like us, the Clariant Masterbatch team is working hard to serve their customers. With over 70% of their sales in the packaging, consumer, and healthcare end markets, their products are essential and I expect their business to fare well through the coronavirus pandemic. And this will serve as a reminder of what attracted us to this acquisition in the first place. They have market-leading technology in specialty, less cyclical end markets, and they have almost no automotive or construction-related sales. Just like us, Clariant has a high commitment to innovating materials that enable sustainability. This includes technologies to facilitate the use of recycled content, increase recyclability, conserve energy and water, just to name a few. Their commercial presence is strong and they have an excellent key account organization that provides an exemplary model for how to serve multinational OEMs. And from a regional standpoint, the Clariant Masterbatch business increases our presence outside the United States, adding complementary presence in high growth regions like Southeast Asia and India. I used to say we are a U.S. company doing business around the world, but with this acquisition, I believe we will be a truly global specialty organization. And that is what we have been all about for over 10 years. From the day my predecessor first introduced our four-pillar strategy in 2006, we’ve taken actions to become more specialized. These included divesting commodity businesses and significantly reducing our exposure to cyclical end markets like North America housing and automotive. Last year’s divestiture of PP&S stands out as our most recent step in this regard. And this is huge when you think about where we are today. Simultaneously, we have increased our presence in other less cyclical and highly specialized technologies, like composites, barrier technologies and healthcare-related materials. These are proving to have staying power in more volatile times like we are experiencing right now. Consider this: in the last few weeks we have been rushing orders to support production for ventilators and masks that use our thermoplastic elastomers. We’re supplying high strength, composite material orders for hospital bed components. And we’re also involved in fulfilling high demand for COVID-19 test kits. Our materials are a key component in the supply chain that will allow for food, beverage and personal care products to continue to be produced, packaged, shipped, and used. In addition, our materials allow for infrastructure, telecommunication, and technology to function. And they must continue to do so, especially now. Ten years ago, I don’t think we could have done this, or said this. In fact, in 2009 we were at the bottom of the greatest recession most living generations have ever seen. I’m telling you this because this management team has led through a lot of adversity and we will do so again. Last year we launched our new branding campaign and this is called Challenge Accepted. We built that around our ability to solve our customers’ biggest challenges, that’s who we are and what we do. Now in the current pandemic and the related challenges we’re facing as a global community, this new brand and this promise we make has taken on an even greater meaning. I hope China serves as an example of how the early steps of recovery can take place and how the coming demand declines we expect in Europe and the Americas too shall pass soon. For now, we will continue to take care of our associates and serve our customers as we have always done. That concludes our prepared comments for today’s call. We’ll now open the line up for questions.

Thank you. The call lines are now open. Our first question comes from Ben Kallo with Baird. Your line is open.

Hey thank you. Good morning. We’ve just started. Bob, just kind of – not a lot of visibility, but if you could walk us through what you are seeing through April by geography how we keep the decline in demand. And then maybe could you just remind us about raws and the current oil environment and how we should factor that in as well?

Yes, maybe I will take the last one first if I can. One thing I just remind everyone on the call, sometimes we have a tendency to look at major indices of polypropylene or polyethylene. And certainly those are raw materials that we use. But they’re really only about 10% of our spend when you look at color and engineered materials. In total, we had a raw material benefit of about $5.5 million, $6 million in the first quarter, Ben. So hopefully that kind of puts things in perspective of what we have seen so far. That likely carries into the second quarter as well. April orders, just to put that in perspective, are down and they’re down about 15% from where we were last year. And that’s almost entirely driven by a decline that we’re seeing in automotive demand as well as what I’d describe as consumer discretionary items.

And then maybe I’ll sneak one more, Brad. Could you just talk about the debt markets and plans around financing the acquisition there? If you can give us an update there?

Yes. Ben, we’re watching the markets obviously very closely. The last couple of weeks have been good for the debt markets since the Federal Reserve has stepped in. And so we haven’t set timing, but I can tell you that the markets now in the non-investment grade markets that we would be issuing into are open. There are issues – issuance being completed, but we’re watching it closely at this point. And certainly again, the fed action has improved the market. So we’ll just watch it here over the next several weeks.

Great. Thank you.

Thank you. Our next question comes from Mike Sison with Wells Fargo. Your line is open.

Hey, guys, nice start to the year. When you think about the last downturn your portfolio was much different. I think I recall volumes being down 20%. Can you maybe talk about the differences now in this downturn? And I know you just noted what you thought April orders would be, but if you think about the last downturn and this downturn, maybe differences in your portfolio and how this business could perform heading into this recession.

Yes. Well, let’s first just talk about end market differences. Obviously, if you went back in time to 2008, 2009, well over half of our sales came from building and construction or automotive related end markets principally in North America. And maybe just to provide some more context around the size of those end markets today. Building and constructions are actually quite small now at about 6% of sales. But maybe from an automotive standpoint, because I think that’s probably the industry that’s going to see the most significant reduction in demand here in the near-term, Mike. We actually – if you were to add up everything that’s directly automotive related or wired cable that goes into automotive, last year we had about $125 million in revenue dedicated to those end markets. So that was about, let’s say, 15%, 16% of our sales last year in the second quarter. Again, maybe the second market would be around consumer discretionary items, and that approximated about $60 million in revenue last year. I mean, these are the two areas that we expect to see the most significant declines in demand in the coming months. But as you can tell, we’re talking about 18% of our sales. So that’s obviously far different and much smaller than where it was in 2008 or 2009.

Got it. And then as a follow-up, when you think about the Clariant transaction, given the difficult time to predict anything. But if you think about the deal closing, how do you think about synergy now? How do you think about accretion now? What’s sort of your base case if the transaction does go through?

Yes. So first of all, I really expect on a relative basis that the Clariant Masterbatch business will perform relatively well during this time because over 70% of their sales are into packaging, consumer, and healthcare. Again, an underlying thesis for why we have always liked this acquisition. I don’t believe the current market conditions change our perspective on the long-term strategy of this deal. So that’s important for us to remember. There is no change relative to what we think we can accomplish from a synergy standpoint relative to sourcing or back-office consolidation and those types of things, albeit that they could take place a little bit further out into the future depending on when that deal actually happens. So our base case really hasn’t changed with respect to our underlying assumptions about putting these two organizations together. We are still waiting for regulatory approval in a couple of jurisdictions that again may still take some time and may potentially even be delayed as a result of coronavirus. So hopefully that answers your questions, Mike.

Thank you.

Thank you. We have a question from Frank Mitsch with Fermium Research. Your line is open.

Hey, good morning, folks. And Bob, I appreciate the commitment to do a mid-quarter update. If I could just follow on to your comments about regulatory approvals, where specifically are you still awaiting approvals and you suggested that that might be delayed due to the coronavirus? So, with that as a backdrop where – how far it delayed, do you think? What’s your current thinking on when and if that deal may close?

Right, so two locations are Morocco and Russia. Those approvals could come, obviously in the next few weeks or later in May. The earliest we could close is really unchanged from what we said before, which was June 2. But there are a number of other conditions to closing that needed to take place that we’re still working toward as well. So there’s still some, I’d say, timing things that still need to work out. And so the earliest we could do anything would be June 2.

And you offered the 70% of their businesses are more attractive markets. I assume that you’ve been tracking their results since you signed the document, etc. How would you describe Clariant’s results and outlook relative to expectations?

Well, I don’t have their final numbers for the – I don’t have first quarter numbers then as we prepare to actually go out and do a debt issuance, at some point, we do need to refresh the financial projections. So at this point, I really can’t comment on their first quarter results. I know they’re going to have a call, I’m sure, in a couple of weeks’ time and they’ll probably provide some better details on that. So I’ll leave that to them to cover.

Got you. And with respect to the debt offering, given how positive your timing was – how good your timing was on the equity offering, everybody’s going to be watching as to when you perfectly cherry pick the debt offering. Thanks so much.

Thank you. Our next question comes from Laurence Alexander with Jefferies. Your line is open.

Good morning. I had two questions. One, can you discuss how the adaptation to this environment is affecting your technical sales, some of the run rate costs, how you think about the sales cycle, the amount of customer interaction? And secondly, just to clarify, so the 15% decline that’s year-over-year, correct, rather than sequentially. And can you give any sense for how unusual the surge that you’re seeing on the healthcare and packaging orders may be? I mean, because some companies are tossing out early eye-popping one month order book, but if you think about a more realistic run rate, any visibility you can get there?

Yes. So I think you got three questions there, Laurence, let me take them here. First of all, the comment relative to April orders being down 15%, you are correct that is compared to April of last year, sequentially, that would be about 10% below what we saw in the first quarter of this year. Your question related to healthcare, if you look in total, for us, healthcare sales were actually flat for the first quarter or maybe up about 1%. What we saw was there were certain sub-segments of healthcare that were actually up by 50%. So if I look at certain areas of medical equipment in those that we think really are very much connected to the coronavirus response were up significantly. But it’s been offset to a certain extent by things like elective surgeries being postponed and then reduced demand for drug delivery devices, surgical devices, and labware things that are general to that. So healthcare is up a little bit in the first quarter, but there are two things going on there that result in that. And I believe your first question was around just how maybe the pandemic is sort of impacting technical sales. Well, as you can imagine, I mean face-to-face sales calls just are taking place right now. But I’ve really been amazed by the amount and volume of interaction taking place between us and our customers still on technology-related items. And I just had a conversation a day or so ago with our Head of Technology, who just said, you just is amazing how much inbound is still taking place. And in fact, you’re even seeing, perhaps some people looking beyond the pandemic at things that are longer term from that. And maybe that’s because they are at home and got time to do that or whatever it might be I can only conjecture. But clearly, there’s a huge focus on the here and now, and handling the supply chain, and getting materials out to support the response and recovery, that’s the priority. But it really doesn’t seem to have dampened the enthusiasm that customers still have for next generation products.

Okay, great. Thank you.

Thank you. Our next question comes from Colin Rusch with Oppenheimer. Your line is open.

Thanks so much. Can you guys speak to inventory levels that are in the channel right now? And how you see that moving at this point?

How do we see inventory movement, where?

I am sorry. So where are inventory levels in the channel, downstream from you guys? And how quickly are those things moving? If orders are pretty strong and inventory levels aren’t overly excessive, it seems like there’s maybe a decent environment for you guys as we’re trying to get after.

Well, what I think really remains to be seen is just what happens to demand here in April and May. And then, that will probably put inventory levels into perspective. I think we’re already feeling the pullback in auto certainly at the end of March and in April. There wasn’t anything that I would have pointed to or even standing here right now that I would say was out of the ordinary, unusual about inventory to comment on of any real substance, Colin. So I mean, if something changes, maybe in our mid-quarter update, we get some more color on that. But right now, I don’t really think there was anything will remain or different.

Okay. And then in terms of the factories that are up and running, can you give us a sense of where utilization is at this point?

Yes. I mean, that really does vary. We have India, for example, that’s been as low as about 10%, maybe closer to 20% now, just based on certain jurisdictional requirements on what can be made in our facilities. Many of our plants are actually between 75% and 85% utilization. And so, continuing to really run. But it really is a spectrum depending on location. There are only two that are closed, one is in Italy, and the other is in Peru.

Perfect. Thanks so much.

Thank you. Our next question comes from Bob Koort with Goldman Sachs. Your line is open.

Good morning. This is Dylan Campbell on for Bob. A good question here in the first quarter, it was pretty impressive margin growth on a year-over-year basis, particularly in Color where I think you previously commented that you don’t expect year-over-year margin improvement until the second quarter of 2020. And I’m curious kind of what drove that earlier than expected margin growth on a year-over-year basis than your previous expectations?

Yes, I mean, I really think it is a combination of some raw material benefit. I do think mix has helped us. I mean, when I look at the sales decline in Color, it is almost entirely automotive related. While auto is small, it is where we saw the decline in the first quarter and where that was – had some still upside yet. And from an end market standpoint, really it was around packaging and healthcare. So mix is certainly a part of that. But there was some raw material benefit as well. And then if you look year-over-year, about $1 million of sales, general and administrative costs, which are down and some of that’s just a result of administrative actions we took last year. But we’ve also just not replaced personnel as we’ve had normal attrition over the course of the last six months.

Yes, that’s helpful. In terms of the raw material benefit, how long do you expect to be able to hold on to price to kind of capture the raw material benefit? Or how much historically have you been able to hold on to pricing relative to the deflationary raw material environment?

Well, I think both the Color and Engineered Materials businesses have done a really good job of managing in both deflationary and inflationary environments and being able to hold on to that. As I said, I think in response to one of the very first questions about raw materials is that if you just look at headline things like polyethylene and polypropylene, it’s just such a small part of our spend, that it’s really a much broader, larger basket of raw materials. And I think, as a result of that, that helps us to preserve those benefits when we see them. And it also helps us, I think, to communicate on pricing changes in the future when we see inflation. So, it’s not index-based business so there’s no formula to this. It says we’re going to give it all back in three months. That’s not how it works.

Got it. Thank you.

Thank you. And our next question comes from Jim Sheehan with SunTrust. Your line is open.

Thank you. Good morning.

Good morning.

Can you talk about your wire and cable business, fiber line and your sales into 5G? Is that some of the stuff that did well in the first quarter? And if so, did that continue into April or did that slow down? How does your order book look in the fiber line business?

Yes, so if you take the entire wire and cable portfolio that we have, we did start to see a pullback for our business that relates to transportation. There’s also a slight decline as a result of wire and cable that goes into oil and gas applications, which you could imagine right now. The quarter was relatively flat from an infrastructure build-out if you will around technology. But we actually expect that that will pick back up again in the later part of this year. So for the most part, what we had in fiber line is actually doing just fine, really what we saw a decline in there, just to be specific about fiber line, really it was around the oil and gas market in Europe.

And regarding your near-term liquidity, it looks like your cash is a bit higher than expected at the end of the quarter. What kind of flexibility do you have with respect to the balance sheet during this recession? And could you provide some detail on any debt covenants you have? And you’ve mentioned the revolver. Do you have plans to tap that revolver?

Well, we don’t have any plans to tap the revolver. One thing I’d say about – Brad mentioned this, I think, already, so I might be redundant here. But in a downturn, we are going to see some benefit from working capital. We actually expect our cash flow this year to be equal to last year, even with sort of a projection of sales being lower. So I think that’s all positive and maybe Brad can talk on covenants we don’t really have any, so it’s a short conversation.

Yes, Jim, and just last year we generated $160 million of free cash flow. And again, as Bob said, I think we will be at or even slightly better because of the release of working capital that Bob just mentioned. In terms of the covenants, it really is a very short conversation. We have no financial covenants, so there are no EBITDA-to-interest or debt-to-EBITDA or any kind of things like that, that we have to comply with. So we have a very covenant-light debt structure. And again, nothing matures until 2023.

Thank you.

Thank you. And we had a question from Rosemarie Morbelli with G. Research. Your line is open.

Thank you. Good morning, everyone. Bob, I was wondering if you could give us a better feel for the raw materials that you are using outside of polyethylene and polypropylene and what are the trends in those particular categories?

Yes. So you could think about Kevlar, carbon, and glass, as important inputs for the composites business. They’re actually up year-over-year. Nylon 6 and Nylon 66 is another important raw material for, again, the EM business. And they’re down a little bit year-over-year, it’s kind of a push if I look at the total spend there. And then maybe shifting gears to look at Color, the two largest areas of spend are TiO2 and pigments, and they were down just slightly in the first quarter.

Okay. Thank you. Outside of SG&A, what are the – I mean, cost control. What are the actions can you do to – can you take in order to offset what is going to be well, looks like a pretty small second quarter in terms of global demand overall. I am not talking just PolyOne, and we don’t know how long that is going to last. So what else can you do?

Yes. I mean I think it’s important to look from a manufacturing or operational standpoint. We can flex our workforce to manage and meet demand. I will say that it’s challenging in this environment as some things get rushed and move forward or faster. We actually need to have an even more flexible workforce and I’m really proud of our team for being in that regard. So it really is around administrative costs. Obviously, things like travel or just not traveling. And so those costs are going to be way down this year. But we will flex the plant spending as we need to match demand.

Okay. And if I may sneak one in, one more, you said that healthcare represented about 30% of distribution. Did I hear that properly?

Yes, correct.

And so is your distribution business the higher-margin due to the fact that they are selling more of your in-house products, if I can call them that, as opposed to repackaging basic within that you buy elsewhere in bulk?

The margin expansion we saw on distribution really wasn’t a result of selling more PolyOne materials, but it is a result of mix. So that was to your first point I think around healthcare, which was the bigger impact. But a lot of that of course is material that we provide from our other suppliers. So it’s a mix if you will, but healthcare was driving that. Again, I wouldn’t point to the stuff that we’re selling on behalf of us as being a major mover of their margins in Q1.

Okay. Thank you.

All right, thanks. We appreciate your questions. Everyone that concludes our call today. We’ll obviously have more to say here as we get through the quarter. As I said in my prepared remarks, we certainly appreciate the investor’s desire for transparency and more frequent communication, and we’ll look to provide an update sometime during the second quarter. Thanks, everybody.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect. Everyone have a great day.