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|
|||
NOTE 1—BASIS OF PRESENTATION
The unaudited interim condensed consolidated financial statements of Trinseo S.A. and its subsidiaries (the “Company”) as of and for the periods ended March 31, 2017 and 2016 were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and reflect all adjustments, consisting only of normal recurring adjustments, which, in the opinion of management, are considered necessary for the fair statement of the results for the periods presented. Because they cover interim periods, the statements and related notes to the financial statements do not include all disclosures normally provided in annual financial statements and, therefore, these statements should be read in conjunction with the 2016 audited consolidated financial statements included within the Company’s Annual Report on Form 10-K (“Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on March 1, 2017.
The December 31, 2016 condensed consolidated balance sheet data presented herein was derived from the Company’s December 31, 2016 audited consolidated financial statements, but does not include all disclosures required by GAAP for annual periods.
Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications did not have a material impact on the Company’s financial position or results. Refer to Note 11 and Note 13 for further information.
|
|||
NOTE 2—RECENT ACCOUNTING GUIDANCE
In May 2014, the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) jointly issued guidance which clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP and International Financial Reporting Standards (“IFRS”). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, the FASB has issued certain clarifying updates to this guidance, which the Company will consider as part of our adoption. The Company expects to adopt this guidance for annual and interim periods beginning after December 31, 2017 by applying the modified retrospective transition approach. While our adoption efforts have progressed significantly, we have not yet reached a final conclusion on the expected impacts of adopting this new standard on our consolidated financial statements and disclosures, as well as on our underlying business processes and information technology systems.
In July 2015, the FASB issued guidance which simplifies the subsequent measurement of inventory by replacing the lower of cost or market test with a lower of cost or net realizable value (“NRV”) test. NRV is calculated as the estimated selling price less reasonably predictable costs of completion, disposal and transportation. The Company adopted this guidance effective January 1, 2017, and the adoption did not have a material impact to the Company’s financial position or results of operations.
In February 2016, the FASB issued guidance related to leases that outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new guidance requires lessees to recognize on the consolidated balance sheets lease liabilities and corresponding right-of-use assets for all leases with terms of greater than 12 months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. This new guidance is effective for public companies for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The new guidance must be adopted using a modified retrospective transition, and provides for certain practical expedients. The Company is in the process of assessing the impact on its consolidated financial statements from the adoption of the new guidance. However, as we are the lessee under various real estate, railcar, and other equipment leases, which we currently account for as operating leases, we anticipate an increase in the recognition of right-of-use assets and lease liabilities as a result of this adoption.
In August 2016, the FASB issued guidance that aims to eliminate diversity in practice for how certain cash receipts and payments are presented and classified in the consolidated statements of cash flows. This guidance is effective for public companies for annual and interim periods beginning after December 15, 2017, with early adoption permitted. This guidance must be adopted using a retrospective approach, and provides for certain practical expedients. Additionally, the FASB has issued further guidance related to the presentation of restricted cash on the consolidated statements of cash flows. The Company is currently assessing the timing and related impact of adopting this guidance on its consolidated statements of cash flows.
In January 2017, the FASB issued guidance that revises the definition of a business in order to assist in determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the new guidance, fewer transactions are expected to be accounted for as business combinations. The Company adopted this guidance effective January 1, 2017. We expect this adoption could affect conclusions reached for future transactions in several areas, including acquisitions and disposals.
In January 2017, the FASB issued guidance to simplify the accounting for goodwill impairment by removing Step 2 of the test, which requires a hypothetical purchase price allocation. As a result, a goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The Company adopted this guidance effective January 1, 2017, which did not have a material impact to the Company’s financial position or results of operations.
In March 2017, the FASB issued guidance that requires employers to present the service cost component of net periodic benefit cost in the same statement of operations line item as other employee compensation costs arising from services rendered during the period. The other components of net benefit cost are to be presented outside of any subtotal of operating income. This presentation amendment is relevant to the Company and will be applied on a retrospective basis. This guidance is effective for fiscal years and interim periods beginning after December 15, 2017, and early adoption is permitted. The Company is currently assessing the impact of adopting this guidance on its results of operations.
|
|||
NOTE 3—INVESTMENTS IN UNCONSOLIDATED AFFILIATES
During the first quarter of 2017, the Company had two joint ventures: Americas Styrenics LLC (“Americas Styrenics”, a styrene and polystyrene joint venture with Chevron Phillips Chemical Company LP) and Sumika Styron Polycarbonate Limited (“Sumika Styron Polycarbonate”, a polycarbonate joint venture with Sumitomo Chemical Company Limited). Investments held in the unconsolidated affiliates are accounted for by the equity method. The results of Americas Styrenics are included within its own reporting segment, and the results of Sumika Styron Polycarbonate were included within the Basic Plastics reporting segment until the Company sold its’ 50% share of the entity in January 2017. Refer to the discussion below for further information about the sale of the Company’s share in Sumika Styron Polycarbonate during the first quarter of 2017.
Both of the unconsolidated affiliates are privately held companies; therefore, quoted market prices for their stock are not available. The summarized financial information of the Company’s unconsolidated affiliates is shown below. This table includes summarized financial information for Sumika Styron Polycarbonate through the date of sale in January 2017.
|
|
|
Three Months Ended |
|
||||
|
|
|
March 31, |
|
||||
|
|
|
2017 |
|
2016 |
|
||
|
Sales |
|
$ |
433,946 |
|
$ |
376,253 |
|
|
Gross profit |
|
$ |
20,588 |
|
$ |
68,403 |
|
|
Net income |
|
$ |
6,328 |
|
$ |
52,796 |
|
Americas Styrenics
As of March 31, 2017 and December 31, 2016, respectively, the Company’s investment in Americas Styrenics was $160.6 million and $149.7 million, which was $55.1 million and $71.2 million less than the Company’s 50% share of the underlying net assets of Americas Styrenics. This amount represents the difference between the book value of assets contributed to the joint venture at the time of formation (May 1, 2008) and the Company’s 50% share of the total recorded value of the joint venture’s assets and certain adjustments to conform with the Company’s accounting policies. This difference is being amortized over a weighted average remaining useful life of the contributed assets of approximately 3.5 years as of March 31, 2017. The Company received dividends from Americas Styrenics of $7.5 million and $30.0 million during the three months ended March 31, 2017 and 2016, respectively.
Sumika Styron Polycarbonate
On January 31, 2017, the Company completed the sale of its 50% share in Sumika Styron Polycarbonate to Sumitomo Chemical Company Limited for total sales proceeds of approximately $42.1 million. As a result, the Company recorded a gain on sale of $9.3 million during the three months ended March 31, 2017, which was included within “Other expense (income), net” in the condensed consolidated statement of operations and was allocated entirely to the Basic Plastics segment. In addition, the parties have entered into a long-term agreement to continue sourcing polycarbonate resin from Sumika Styron Polycarbonate to the Company’s Performance Plastics segment.
As of December 31, 2016, the Company’s investment in Sumika Styron Polycarbonate was $41.8 million. Due to the sale in January 2017, the Company no longer has an investment in Sumika Styron Polycarbonate as of March 31, 2017. The Company received dividends from Sumika Styron Polycarbonate of $9.8 million and $6.2 million during the three months ended March 31, 2017 and 2016, respectively. The dividend received during the three months ended March 31, 2017 from Sumika Styron Polycarbonate related to the Company’s proportionate share of earnings from the year ended December 31, 2016.
|
|||
NOTE 4—INVENTORIES
Inventories consisted of the following:
|
|
|
March 31, |
|
December 31, |
|
||
|
|
|
2017 |
|
2016 |
|
||
|
Finished goods |
|
$ |
242,108 |
|
$ |
187,577 |
|
|
Raw materials and semi-finished goods |
|
|
209,030 |
|
|
168,804 |
|
|
Supplies |
|
|
29,974 |
|
|
28,964 |
|
|
Total |
|
$ |
481,112 |
|
$ |
385,345 |
|
|
|||
NOTE 5—DEBT
Refer to the Annual Report for definitions of capitalized terms not defined herein and further background on the Company’s debt facilities discussed below. The Company was in compliance with all debt related covenants as of March 31, 2017 and December 31, 2016.
As of March 31, 2017 and December 31, 2016, debt consisted of the following:
|
|
|
|
|
|
|
March 31, 2017 |
|
December 31, 2016 |
|
||||||||||||||
|
|
|
Interest Rate as of March 31, 2017 |
|
Maturity |
|
Carrying |
|
Unamortized |
|
Total Debt, |
|
Carrying |
|
Unamortized |
|
Total Debt, |
|
||||||
|
Senior Credit Facility |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 Revolving Facility(2) |
|
Various |
|
May 2020 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
2021 Term Loan B(3) |
|
4.250% |
|
November 2021 |
|
|
490,340 |
|
|
(8,731) |
|
|
481,609 |
|
|
491,545 |
|
|
(9,159) |
|
|
482,386 |
|
|
2022 Senior Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD Notes |
|
6.750% |
|
May 2022 |
|
|
300,000 |
|
|
(5,503) |
|
|
294,497 |
|
|
300,000 |
|
|
(5,726) |
|
|
294,274 |
|
|
Euro Notes |
|
6.375% |
|
May 2022 |
|
|
400,958 |
|
|
(6,876) |
|
|
394,082 |
|
|
394,275 |
|
|
(7,157) |
|
|
387,118 |
|
|
Accounts Receivable Securitization Facility(4) |
|
Various |
|
May 2019 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Other indebtedness |
|
Various |
|
Various |
|
|
1,562 |
|
|
— |
|
|
1,562 |
|
|
1,591 |
|
|
— |
|
|
1,591 |
|
|
Total debt |
|
|
|
|
|
$ |
1,192,860 |
|
$ |
(21,110) |
|
$ |
1,171,750 |
|
$ |
1,187,411 |
|
$ |
(22,042) |
|
$ |
1,165,369 |
|
|
Less: current portion |
|
|
|
|
|
|
|
|
|
|
|
|
(5,000) |
|
|
|
|
|
|
|
|
(5,000) |
|
|
Total long-term debt, net of unamortized deferred financing fees |
|
|
|
|
|
|
|
|
|
|
|
$ |
1,166,750 |
|
|
|
|
|
|
|
$ |
1,160,369 |
|
|
(1) |
This caption does not include deferred financing fees related to the Company’s revolving facilities, which are included within “Deferred charges and other assets” on the condensed consolidated balance sheets. |
|
(2) |
The Company had $309.1 million (net of $15.9 million outstanding letters of credit) of funds available for borrowing under this facility as of March 31, 2017. Additionally, the Borrowers were required to pay a quarterly commitment fee in respect of any unused commitments under this facility equal to 0.375% per annum. |
|
(3) |
Carrying amounts presented above are net of an original issue discount, which was 0.25% of the original $500.0 million facility. This facility bears an interest rate of LIBOR plus 3.25%, subject to a 1.00% LIBOR floor. As of March 31, 2017, $5.0 million of the scheduled future payments related to this facility were classified as current debt on the Company’s condensed consolidated balance sheet. |
|
(4) |
This facility has a borrowing capacity of $200.0 million. As of March 31, 2017, the Company had approximately $139.2 million of accounts receivable available to support this facility, based on the pool of eligible accounts receivable. In regards to outstanding borrowings, fixed interest charges are 2.6% plus variable commercial paper rates, while for available, but undrawn commitments, fixed interest charges are 1.4%. |
|
|||
NOTE 6—DERIVATIVE INSTRUMENTS
The Company’s ongoing business operations expose it to various risks, including fluctuating foreign exchange rates. To manage these risks, the Company periodically enters into derivative financial instruments such as foreign exchange forward contracts. The Company does not hold or enter into financial instruments for trading or speculative purposes. All derivatives are recorded on the condensed consolidated balance sheets at fair value.
Foreign Exchange Forward Contracts
Certain subsidiaries have assets and liabilities denominated in currencies other than their respective functional currencies, which creates foreign exchange risk. The Company’s principal strategy in managing its exposure to changes in foreign currency exchange rates is to naturally hedge the foreign currency-denominated liabilities on our balance sheet against corresponding assets of the same currency such that any changes in liabilities due to fluctuations in exchange rates are offset by changes in their corresponding foreign currency assets. In order to further reduce its exposure, the Company also uses foreign exchange forward contracts to economically hedge the impact of the variability in exchange rates on our assets and liabilities denominated in certain foreign currencies. These derivative contracts are not designated for hedge accounting treatment.
As of March 31, 2017, the Company had open foreign exchange forward contracts with a notional U.S. dollar equivalent absolute value of $222.2 million. The following table displays the notional amounts of the most significant net foreign exchange hedge positions outstanding as of March 31, 2017.
|
|
|
March 31, |
|
|
|
Buy / (Sell) |
|
2017 |
|
|
|
Chinese Yuan |
|
$ |
(79,985) |
|
|
Euro |
|
$ |
(63,617) |
|
|
Indonesian Rupiah |
|
$ |
(27,316) |
|
|
Swiss Franc |
|
$ |
19,083 |
|
|
Japanese Yen |
|
$ |
(10,163) |
|
|
Turkish Lira |
|
$ |
(7,349) |
|
Foreign Exchange Cash Flow Hedges
The Company also enters into forward contracts with the objective of managing the currency risk associated with forecasted U.S. dollar-denominated raw materials purchases by one of its subsidiaries whose functional currency is the euro. By entering into these forward contracts, which are designated as cash flow hedges, the Company buys a designated amount of U.S. dollars and sells euros at the prevailing market rate to mitigate the risk associated with the fluctuations in the euro-to-U.S. dollar foreign currency exchange rates. The qualifying hedge contracts are marked-to-market at each reporting date and any unrealized gains or losses are included in accumulated other comprehensive income/loss (“AOCI”) to the extent effective, and reclassified to cost of sales in the period during which the transaction affects earnings or it becomes probable that the forecasted transaction will not occur.
Open foreign exchange cash flow hedges as of March 31, 2017 have maturities occurring over a period of 9 months, and have a net notional U.S. dollar equivalent of $175.5 million.
Net Investment Hedge
The Company’s outstanding debt includes €375.0 million of Euro Notes (refer to Note 5 for details). As of March 31, 2017, the Company has designated a portion (€280 million) of the principal amount of these Euro Notes as a hedge of the foreign currency exposure of the Issuers’ net investment in certain European subsidiaries. As this debt was deemed to be a highly effective hedge, changes in the Euro Notes’ carrying value resulting from fluctuations in the euro exchange rate were recorded as cumulative foreign currency translation gain of $9.5 million within AOCI as of March 31, 2017.
Summary of Derivative Instruments
Information regarding changes in the fair value of the Company’s derivative instruments, net of tax, including those not designated for hedge accounting treatment, is as follows:
|
|
|
Gain (Loss) Recognized in |
|
Gain (Loss) Recognized in |
|
|
||||||||
|
|
|
AOCI on Balance Sheet |
|
Statement of Operations |
|
|
||||||||
|
|
|
Three Months Ended March 31, |
|
Statement of Operations |
||||||||||
|
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
Classification |
||||
|
Designated as Cash Flow Hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange cash flow hedges |
|
$ |
(4,810) |
|
$ |
(7,425) |
|
$ |
2,451 |
|
$ |
1,106 |
|
Cost of sales |
|
Total |
|
$ |
(4,810) |
|
$ |
(7,425) |
|
$ |
2,451 |
|
$ |
1,106 |
|
|
|
Net Investment Hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euro Notes |
|
$ |
(4,990) |
|
$ |
(6,285) |
|
$ |
— |
|
$ |
— |
|
Other expense (income), net |
|
Total |
|
$ |
(4,990) |
|
$ |
(6,285) |
|
$ |
— |
|
$ |
— |
|
|
|
Not Designated as Cash Flow Hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts |
|
$ |
— |
|
$ |
— |
|
$ |
(1,675) |
|
$ |
3,133 |
|
Other expense (income), net |
|
Total |
|
$ |
— |
|
$ |
— |
|
$ |
(1,675) |
|
$ |
3,133 |
|
|
The Company recorded losses of $1.7 million and gains of $3.1 million during the three months ended March 31, 2017 and 2016, respectively, from settlements and changes in the fair value of outstanding forward contracts (not designated as hedges). The losses and gains from these forward contracts offset net foreign exchange transaction gains of $0.6 million and losses of $5.0 million, respectively, during the three months ended March 31, 2017 and 2016 which resulted from the remeasurement of the Company’s foreign currency denominated assets and liabilities. The cash settlements of these foreign exchange forward contracts are included within operating activities in the condensed consolidated statement of cash flows.
As of March 31, 2017, the Company has no ineffectiveness related to its foreign exchange cash flow hedges. Further, the Company expects to reclassify in the next twelve months an approximate $6.3 million net gain from AOCI into earnings related to the Company’s outstanding cash flow hedges as of March 31, 2017 based on current foreign exchange rates.
The following table summarizes the net unrealized gains and losses and balance sheet classification of outstanding derivatives recorded in the condensed consolidated balance sheets:
|
|
|
March 31, 2017 |
|
December 31, 2016 |
|
||||||||||||||
|
|
|
Foreign |
|
Foreign |
|
|
|
Foreign |
|
Foreign |
|
|
|
||||||
|
|
|
Forward |
|
Cash Flow |
|
|
|
Forward |
|
Cash Flow |
|
|
|
||||||
|
Balance Sheet Classification |
|
Contracts |
|
Hedges |
|
Total |
|
Contracts |
|
Hedges |
|
Total |
|
||||||
|
Asset Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net of allowance |
|
$ |
1,236 |
|
$ |
6,302 |
|
$ |
7,538 |
|
$ |
1,664 |
|
$ |
11,018 |
|
$ |
12,682 |
|
|
Deferred charges and other assets |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Total asset derivatives |
|
$ |
1,236 |
|
$ |
6,302 |
|
$ |
7,538 |
|
$ |
1,664 |
|
$ |
11,018 |
|
$ |
12,682 |
|
|
Liability Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
512 |
|
$ |
— |
|
$ |
512 |
|
$ |
511 |
|
$ |
— |
|
$ |
511 |
|
|
Other noncurrent obligations |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Total liability derivatives |
|
$ |
512 |
|
$ |
— |
|
$ |
512 |
|
$ |
511 |
|
$ |
— |
|
$ |
511 |
|
Forward contracts are entered into with a limited number of counterparties, each of which allows for net settlement of all contracts through a single payment in a single currency in the event of a default on or termination of any one contract. As such, in accordance with the Company’s accounting policy, we record these foreign exchange forward contracts on a net basis by counterparty within the condensed consolidated balance sheet. Information regarding the gross amounts of the Company’s derivative instruments and the amounts offset in the condensed consolidated balance sheets is as follows:
|
|
|
Gross Amounts |
|
Gross Amounts |
|
Net Amounts |
|
|||
|
|
|
Recognized in the |
|
Offset in the |
|
Presented in the |
|
|||
|
|
|
Balance Sheet |
|
Balance Sheet |
|
Balance Sheet |
|
|||
|
Balance at March 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
Derivative assets |
|
$ |
14,511 |
|
$ |
(6,973) |
|
$ |
7,538 |
|
|
Derivative liabilities |
|
|
7,485 |
|
|
(6,973) |
|
|
512 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
Derivative assets |
|
$ |
23,401 |
|
$ |
(10,719) |
|
$ |
12,682 |
|
|
Derivative liabilities |
|
|
11,230 |
|
|
(10,719) |
|
|
511 |
|
Refer to Notes 7 and 15 of the condensed consolidated financial statements for further information regarding the fair value of the Company’s derivative instruments and the related changes in AOCI.
|
|||
NOTE 7—FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date.
Level 1—Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3—Valuation is based upon other unobservable inputs that are significant to the fair value measurement.
The following table summarizes the basis used to measure certain assets and liabilities at fair value on a recurring basis in the condensed consolidated balance sheets as of March 31, 2017 and December 31, 2016.
|
|
|
March 31, 2017 |
|
||||||||||
|
|
|
Quoted Prices in Active Markets for Identical Items |
|
Significant Other Observable Inputs |
|
Significant Unobservable Inputs |
|
|
|
|
|||
|
Assets (Liabilities) at Fair Value |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
Total |
|
||||
|
Foreign exchange forward contracts—Assets |
|
$ |
— |
|
$ |
1,236 |
|
$ |
— |
|
$ |
1,236 |
|
|
Foreign exchange forward contracts—(Liabilities) |
|
|
— |
|
|
(512) |
|
|
— |
|
|
(512) |
|
|
Foreign exchange cash flow hedges—Assets |
|
|
— |
|
|
6,302 |
|
|
— |
|
|
6,302 |
|
|
Total fair value |
|
$ |
— |
|
$ |
7,026 |
|
$ |
— |
|
$ |
7,026 |
|
|
|
|
December 31, 2016 |
|
||||||||||
|
|
|
Quoted Prices in Active Markets for Identical Items |
|
Significant Other Observable Inputs |
|
Significant Unobservable Inputs |
|
|
|
|
|||
|
Assets (Liabilities) at Fair Value |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
Total |
|
||||
|
Foreign exchange forward contracts—Assets |
|
$ |
— |
|
$ |
1,664 |
|
$ |
— |
|
$ |
1,664 |
|
|
Foreign exchange forward contracts—(Liabilities) |
|
|
— |
|
|
(511) |
|
|
— |
|
|
(511) |
|
|
Foreign exchange cash flow hedges—Assets |
|
|
— |
|
|
11,018 |
|
|
— |
|
|
11,018 |
|
|
Total fair value |
|
$ |
— |
|
$ |
12,171 |
|
$ |
— |
|
$ |
12,171 |
|
The Company uses an income approach to value its derivative instruments, utilizing discounted cash flow techniques, considering the terms of the contract and observable market information available as of the reporting date. Significant inputs to the valuation for foreign exchange forward contracts and foreign exchange cash flow hedges are obtained from broker quotations or from listed or over-the-counter market data, and are classified as Level 2 in the fair value hierarchy.
Fair Value of Debt Instruments
The following table presents the estimated fair value of the Company’s outstanding debt not carried at fair value as of March 31, 2017 and December 31, 2016, respectively:
|
|
|
As of |
|
As of |
|
||
|
|
|
March 31, 2017 |
|
December 31, 2016 |
|
||
|
2022 Senior Notes |
|
|
|
|
|
|
|
|
USD Notes |
|
$ |
316,875 |
|
$ |
315,000 |
|
|
Euro Notes |
|
|
429,013 |
|
|
424,437 |
|
|
2021 Term Loan B |
|
|
496,472 |
|
|
498,041 |
|
|
Total fair value |
|
$ |
1,242,360 |
|
$ |
1,237,478 |
|
The fair value of the Company’s Term Loan B, USD Notes, and Euro Notes (each Level 2 securities) is determined using over-the-counter market quotes and benchmark yields received from independent vendors.
There were no other significant financial instruments outstanding as of March 31, 2017 and December 31, 2016.
|
|||
NOTE 8—PROVISION FOR INCOME TAXES
|
|
|
Three Months Ended |
|
|
||||
|
|
|
March 31, |
|
|
||||
|
|
|
2017 |
|
2016 |
|
|
||
|
Effective income tax rate |
|
|
20.0 |
% |
|
22.2 |
% |
|
Provision for income taxes for the three months ended March 31, 2017 was $29.3 million, resulting in an effective tax rate of 20.0%. Provision for income taxes for the three months ended March 31, 2016 was $21.9 million, resulting in an effective tax rate of 22.2%.
The effective income tax rate was favorably impacted by the $9.3 million gain on sale of the Company’s 50% share in Sumika Styron Polycarbonate during the three months ended March 31, 2017, which was exempt from tax (refer to Note 3 for further information).
|
|||
NOTE 9—COMMITMENTS AND CONTINGENCIES
Environmental Matters
Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based on current law, existing technologies and other information. Pursuant to the terms of the agreement associated with the Company’s formation, the pre-closing environmental conditions were retained by Dow and Dow has agreed to indemnify the Company from and against all environmental liabilities incurred or relating to the predecessor periods. No environmental claims have been asserted or threatened against the Company, and the Company is not a potentially responsible party at any Superfund Sites. As of March 31, 2017 and December 31, 2016, the Company had no accrued obligations for environmental remediation and restoration costs.
Inherent uncertainties exist in the Company’s potential environmental liabilities primarily due to unknown conditions, whether future claims may fall outside the scope of the indemnity, changing governmental regulations and legal standards regarding liability, and evolving technologies for handling site remediation and restoration. In connection with the Company’s existing indemnification, the possibility is considered remote that environmental remediation costs will have a material adverse impact on the condensed consolidated financial statements.
Purchase Commitments
In the normal course of business, the Company has certain raw material purchase contracts where it is required to purchase certain minimum volumes at current market prices. These commitments range from 1 to 5 years. In certain raw material purchase contracts, the Company has the right to purchase less than the required minimums and pay a liquidated damages fee, or, in case of a permanent plant shutdown, to terminate the contracts. In such cases, these obligations would be less than the annual commitment as disclosed in the consolidated financial statements included in the Annual Report.
Litigation Matters
From time to time, the Company may be subject to various legal claims and proceedings incidental to the normal conduct of business, relating to such matters as product liability, antitrust/competition, past waste disposal practices and release of chemicals into the environment. While it is impossible at this time to determine with certainty the ultimate outcome of these routine claims, the Company does not believe that the ultimate resolution of these claims will have a material adverse effect on the Company’s results of operations, financial condition or cash flow. Legal costs, including those legal costs expected to be incurred in connection with a loss contingency, are expensed as incurred.
|
|||
NOTE 10—PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
The components of net periodic benefit costs for all significant plans were as follows:
|
|
|
Three Months Ended |
|
||||
|
|
|
March 31, |
|
||||
|
|
|
2017 |
|
2016 |
|
||
|
Defined Benefit Pension Plans |
|
|
|
|
|
|
|
|
Service cost |
|
$ |
4,584 |
|
$ |
4,071 |
|
|
Interest cost |
|
|
1,081 |
|
|
1,360 |
|
|
Expected return on plan assets |
|
|
(411) |
|
|
(483) |
|
|
Amortization of prior service credit |
|
|
(471) |
|
|
(478) |
|
|
Amortization of net loss |
|
|
1,357 |
|
|
1,038 |
|
|
Net settlement and curtailment loss(1) |
|
|
129 |
|
|
— |
|
|
Net periodic benefit cost |
|
$ |
6,269 |
|
$ |
5,508 |
|
|
(1) |
Represents a settlement loss of approximately $0.5 million triggered by benefit payments exceeding the sum of service and interest cost for one of the Company’s pension plans in Switzerland, partially offset by a curtailment gain of approximately $0.4 million related to a reduction in the number of participants in the Company’s pension plan in Japan. |
|
|
|
Three Months Ended |
|
||||
|
|
|
March 31, |
|
||||
|
|
|
2017 |
|
2016 |
|
||
|
Other Postretirement Plans |
|
|
|
|
|
|
|
|
Service cost |
|
$ |
54 |
|
$ |
63 |
|
|
Interest cost |
|
|
63 |
|
|
121 |
|
|
Amortization of prior service cost |
|
|
26 |
|
|
26 |
|
|
Amortization of net gain |
|
|
(11) |
|
|
(43) |
|
|
Net periodic benefit cost |
|
$ |
132 |
|
$ |
167 |
|
As of March 31, 2017 and December 31, 2016, the Company’s benefit obligations included primarily in “Other noncurrent obligations” in the condensed consolidated balance sheets were $199.2 million and $195.8 million, respectively. The net periodic benefit costs are recognized in the condensed consolidated statement of operations as “Cost of sales” and “Selling, general and administrative expenses.”
The Company made cash contributions of approximately $5.2 million during the three months ended March 31, 2017. The Company expects to make additional cash contributions, including benefit payments to unfunded plans, of approximately $10.0 million to its defined benefit plans for the remainder of 2017.
|
|||
NOTE 11—STOCK-BASED COMPENSATION
Restricted Share Units (RSUs)
During the three months ended March 31, 2017, the Company granted 97,468 RSUs at a weighted-average grant date fair value per unit of $71.45. Total compensation expense recognized for all outstanding RSUs was $1.9 million and $0.9 million for the three months ended March 31, 2017 and 2016, respectively. As of March 31, 2017, there was $15.4 million of total unrecognized compensation cost related to outstanding RSUs, which is expected to be recognized over a weighted-average period of 2.2 years.
Option Awards
During the three months ended March 31, 2017, the Company granted 191,565 option awards at a weighted-average grant date fair value per option award of $20.61. The following are the weighted-average assumptions used within the Black-Scholes pricing model for these option awards:
|
|
|
Three Months Ended |
|
|
|
|
March 31, |
|
|
|
|
2017 |
|
|
Expected term (in years) |
|
5.50 |
|
|
Expected volatility |
|
35.00 |
% |
|
Risk-free interest rate |
|
2.19 |
% |
|
Dividend yield |
|
2.00 |
% |
Since the Company’s equity interests were privately held prior to its initial public offering (“IPO”) in June 2014, there is limited publicly traded history of the Company’s ordinary shares. Until such time that the Company can determine expected volatility based solely on the publicly traded history of its ordinary shares, expected volatility used in the Black-Scholes model for option awards granted is based on a combination of the Company’s historical volatility and similar companies’ stock that are publicly traded. The expected term of option awards represents the period of time that option awards granted are expected to be outstanding. For the option awards granted during the three months ended March 31, 2017 and 2016, the simplified method was used to calculate the expected term, given the Company’s limited historical exercise data. The risk-free interest rate for the periods within the expected term of option awards is based on the U.S. Treasury yield curve in effect at the time of grant. The dividend yield is estimated based on historical and expected dividend activity.
Total compensation expense for the option awards was $2.7 million and $3.4 million for the three months ended March 31, 2017 and 2016, respectively. As of March 31, 2017, there was $2.6 million of total unrecognized compensation cost related to the option awards, which is expected to be recognized over a weighted-average period of 1.7 years.
Performance Share Units (PSUs)
The Company granted PSUs for the first time during the three months ended March 31, 2017. The PSUs, which are granted to executives, cliff vest on the third anniversary of the date of grant, generally subject to the executive remaining continuously employed by the Company through the vesting date and achieving certain performance conditions. The number of the PSUs that vest upon completion of the service period can range from 0 to 200 percent of the original grant, subject to certain limitations, contingent upon the Company’s total shareholder return (“TSR”) during the performance period relative to a pre-defined set of industry peer companies. Upon a termination of employment due to the executive’s death or retirement, or termination in connection with a change in control or other factors prior to the vesting date, the PSUs will vest in full or in part, depending on the type of termination and the achievement of the performance conditions. Dividends equivalents will accumulate on PSUs during the vesting period, will be paid in cash upon vesting, and do not accrue interest. When PSUs vest, shares will be issued from the existing pool of treasury shares.
The fair value for PSU awards is computed using a Monte Carlo valuation model. During the three months ended March 31, 2017, the Company granted 50,937 PSUs at a weighted-average grant date fair value per award of $75.74. Total compensation expense recognized for PSUs was $0.2 million for the three months ended March 31, 2017. As of March 31, 2017, there was $3.7 million of total unrecognized compensation cost related to outstanding PSUs, which is expected to be recognized over a weighted-average period of 2.9 years.
Adoption of Accounting Standards Update
Effective April 1, 2016, the Company adopted new accounting guidance issued by the FASB that simplifies several aspects of accounting for share-based payments. Among other things, as part of this adoption, the Company made an accounting policy election to recognize forfeitures as incurred, rather than estimating the forfeitures in advance. The impact of this change was applied utilizing a modified retrospective approach, with an adjustment of $0.9 million recorded during the year ended December 31, 2016 to decrease opening retained earnings and increase opening additional paid-in-capital. All other impacts of this adoption were not material to the Company’s financial position and results of operations.
|
|||
NOTE 12—RELATED PARTY TRANSACTIONS
In March 2016, the former Parent sold 10,600,000 ordinary shares pursuant to the Company’s shelf registration statement filed with the SEC. In connection with this offering, and under the terms of the agreement associated with its formation, the Company incurred advisory, accounting, legal and printing expenses on behalf of the former Parent of $1.9 million during the three months ended March 31, 2016. These expenses were included within “Selling, general and administrative expenses” on the condensed consolidated statement of operations for the three months ended March 31, 2016. Due to the additional secondary offerings completed during the year ended December 31, 2016, the former Parent no longer has an ownership interest in the Company as of March 31, 2017. Refer to Note 16 for further information.
|
|||
NOTE 13—SEGMENTS
Effective October 1, 2016, the Company realigned its reporting segments to reflect the new model under which the business will be managed and results will be reviewed by the chief executive officer, who is the Company’s chief operating decision maker. This change in segments is being made to provide increased clarity and understanding around the drivers of profitability and cash flow of the Company. The previous Basic Plastics & Feedstocks segment was split into three new segments: Basic Plastics, which includes polystyrene, copolymers, and polycarbonate; Feedstocks, which represents the Company’s styrene monomer business; and Americas Styrenics, which reflects the equity earnings from its 50%-owned styrenics joint venture. In addition, certain highly differentiated acrylonitrile-butadiene-styrene, or ABS, supplied into Performance Plastics markets, which was previously included in the results of Basic Plastics & Feedstocks, is now included in Performance Plastics. Finally, the Latex segment was renamed to Latex Binders. In conjunction with the segment realignment, the Company also changed its primary measure of segment operating performance from EBITDA to Adjusted EBITDA. Refer to the discussion below for further information about Adjusted EBITDA.
The information in the tables below has been retroactively adjusted to reflect the changes in reporting segments and segment operating performance.
The Latex Binders segment produces styrene-butadiene latex, or SB latex, and other latex polymers and binders, primarily for coated paper and packaging board, carpet and artificial turf backings, as well as a number of performance latex binders applications, such as adhesive, building and construction and the technical textile paper market. The Synthetic Rubber segment produces synthetic rubber products used predominantly in high-performance tires, impact modifiers and technical rubber products, such as conveyer belts, hoses, seals and gaskets. The Performance Plastics segment produces highly engineered compounds and blends and some specialized ABS grades for automotive end markets, as well as consumer electronics, medical, electrical and lighting, collectively consumer essential markets, or CEM. The Basic Plastics segment produces styrenic polymers, including polystyrene, basic ABS, and styrene-acrylonitrile, or SAN, products, as well as polycarbonate, or PC, all of which are used as inputs in a variety of end use markets. The Basic Plastics segment also included the results of our previously 50%-owned joint venture, Sumika Styron Polycarbonate, until the Company sold its share in the entity in January 2017 (refer to Note 3 for further information). The Feedstocks segment includes the Company’s production and procurement of styrene monomer outside of North America, which is used as a key raw material in many of the Company’s products, including polystyrene, SB latex, ABS resins, solution styrene-butadiene rubber, or SSBR, etc. Lastly, the Americas Styrenics segment consists solely of the operations of our 50%-owned joint venture, Americas Styrenics, a producer of both styrene monomer and polystyrene in North America.
Asset, capital expenditure, and intersegment sales information is not reviewed or included with the Company’s reporting to the chief operating decision maker. Therefore, the Company has not disclosed this information for each reportable segment.
|
|
|
Performance Materials |
|
Basic Plastics & Feedstocks |
|
|
|
|
|
|
|
||||||||||||||
|
|
|
Latex |
|
Synthetic |
|
Performance |
|
Basic |
|
|
|
Americas |
|
Corporate |
|
|
|
|
|||||||
|
Three Months Ended |
|
Binders |
|
Rubber |
|
Plastics |
|
Plastics |
|
Feedstocks |
|
Styrenics |
|
Unallocated |
|
Total |
|
||||||||
|
March 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales to external customers |
|
$ |
288,931 |
|
$ |
163,361 |
|
$ |
184,551 |
|
$ |
380,751 |
|
$ |
86,896 |
|
$ |
— |
|
$ |
— |
|
$ |
1,104,490 |
|
|
Equity in earnings (losses) of unconsolidated affiliates |
|
|
— |
|
|
— |
|
|
— |
|
|
810 |
|
|
— |
|
|
18,485 |
|
|
— |
|
|
19,295 |
|
|
Adjusted EBITDA(1) |
|
|
36,815 |
|
|
46,270 |
|
|
26,875 |
|
|
38,861 |
|
|
41,896 |
|
|
18,485 |
|
|
|
|
|
|
|
|
Investment in unconsolidated affiliates |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
160,649 |
|
|
— |
|
|
160,649 |
|
|
Depreciation and amortization |
|
|
5,663 |
|
|
8,379 |
|
|
2,378 |
|
|
3,690 |
|
|
2,477 |
|
|
— |
|
|
2,133 |
|
|
24,720 |
|
|
March 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales to external customers |
|
$ |
209,481 |
|
$ |
102,197 |
|
$ |
168,629 |
|
$ |
342,629 |
|
$ |
71,148 |
|
$ |
— |
|
$ |
— |
|
$ |
894,084 |
|
|
Equity in earnings (losses) of unconsolidated affiliates |
|
|
— |
|
|
— |
|
|
— |
|
|
2,093 |
|
|
— |
|
|
32,933 |
|
|
— |
|
|
35,026 |
|
|
Adjusted EBITDA(1) |
|
|
18,767 |
|
|
23,079 |
|
|
35,086 |
|
|
37,767 |
|
|
20,810 |
|
|
32,933 |
|
|
|
|
|
|
|
|
Investment in unconsolidated affiliates |
|
|
— |
|
|
— |
|
|
— |
|
|
34,915 |
|
|
— |
|
|
146,796 |
|
|
— |
|
|
181,711 |
|
|
Depreciation and amortization |
|
|
6,280 |
|
|
8,043 |
|
|
1,544 |
|
|
3,583 |
|
|
2,866 |
|
|
— |
|
|
804 |
|
|
23,120 |
|
(1)The Company’s primary measure of segment operating performance is Adjusted EBITDA, which is defined as income from continuing operations before interest expense, net; provision for income taxes; depreciation and amortization expense; loss on extinguishment of long-term debt; asset impairment charges; gains or losses on the dispositions of businesses and assets; restructuring and other items. Adjusted EBITDA is a key metric that is used by management to evaluate business performance in comparison to budgets, forecasts, and prior year financial results, providing a measure that management believes reflects core operating performance by removing the impact of transactions and events that would not be considered a part of core operations. Adjusted EBITDA is useful for analytical purposes; however, it should not be considered an alternative to the Company’s reported GAAP results, as there are limitations in using such financial measures. Other companies in the industry may define Adjusted EBITDA differently than the Company, and as a result, it may be difficult to use Adjusted EBITDA, or similarly named financial measures, that other companies may use to compare the performance of those companies to the Company’s segment performance.
The reconciliation of income before income taxes to Segment Adjusted EBITDA is as follows:
|
|
|
March 31, |
|
||||
|
|
|
2017 |
|
2016 |
|
||
|
Income before income taxes |
|
$ |
146,594 |
|
$ |
98,647 |
|
|
Interest expense, net |
|
|
18,200 |
|
|
18,896 |
|
|
Depreciation and amortization |
|
|
24,720 |
|
|
23,120 |
|
|
Corporate Unallocated(2) |
|
|
27,465 |
|
|
25,217 |
|
|
Adjusted EBITDA Addbacks(3) |
|
|
(7,777) |
|
|
2,562 |
|
|
Segment Adjusted EBITDA |
|
$ |
209,202 |
|
$ |
168,442 |
|
(2)Corporate unallocated includes corporate overhead costs and certain other income and expenses.
(3)Adjusted EBITDA addbacks for the three months ended March 31, 2017 and 2016 are as follows:
|
|
|
March 31, |
|
||||
|
(in millions) |
|
2017 |
|
2016 |
|
||
|
Net gain on disposition of businesses and assets (Note 3) |
|
$ |
(9.9) |
|
$ |
— |
|
|
Restructuring and other charges (Note 14) |
|
|
2.1 |
|
|
0.7 |
|
|
Other items(a) |
|
|
— |
|
|
1.8 |
|
|
Total Adjusted EBITDA Addbacks |
|
$ |
(7.8) |
|
$ |
2.5 |
|
|
(a) |
For the three months ended March 31, 2016, other items includes $1.8 million of fees incurred in conjunction with the Company’s secondary offering completed in March 2016. Refer to Note 12 for further information. |
|
|||
NOTE 14—RESTRUCTURING
Terneuzen Compounding Restructuring
In March 2017, the Company announced plans to upgrade its production capability for compounded resins with the construction of a new state-of-the art manufacturing facility to replace its existing facility in Terneuzen, The Netherlands. The new facility is expected to start up in the first half of 2018, with substantive production at the existing facility expected to cease by June 2018, followed by decommissioning activities through the end of 2018.
For the three months ended March 31, 2017, the Company recorded $0.6 million of accelerated depreciation charges on assets at the existing facility and $0.6 million of contract termination charges. These charges were included within “Selling, general and administrative expenses” in the condensed consolidated statement of operations and allocated entirely to the Performance Plastics segment. Contract termination charges are recorded within “Accrued expenses and other current liabilities” in the condensed consolidated balance sheet.
The Company expects to incur incremental accelerated depreciation charges of $2.8 million and estimated decommissioning and other charges of approximately $1.5 million throughout 2017 and 2018, the majority of which are expected to be paid in 2018.
Livorno Plant Restructuring
In August 2016, the Company announced its plan to cease manufacturing activities at its latex binders manufacturing facility in Livorno, Italy. This is a result of declining demand for graphical paper and is expected to provide improved asset utilization, as well as cost reductions within the Company’s European latex binders business. Production at the facility ceased in October 2016, followed by decommissioning activities which began in the fourth quarter of 2016.
For the three months ended March 31, 2017, the Company recorded restructuring charges of $0.2 million related to employee termination benefit charges and $0.6 million of decommissioning and other charges. No charges were incurred during the three months ended March 31, 2016. These charges were included in “Selling, general and administrative expenses” in the condensed consolidated statement of operations and were allocated entirely to the Latex Binders segment. Employee and contract termination benefits charges are recorded within “Accrued expenses and other current liabilities” in the condensed consolidated balance sheet as of March 31, 2017.
The following table provides a rollforward of the liability balances associated with the Livorno plant restructuring for the three months ended March 31, 2017:
|
|
|
Balance at |
|
|
|
|
|
|
|
Balance at |
|
||
|
|
|
December 31, 2016 |
|
Expenses |
|
Deductions |
|
March 31, 2017 |
|
||||
|
Employee termination benefit charges |
|
$ |
4,632 |
|
$ |
152 |
|
$ |
(4,313) |
|
$ |
471 |
|
|
Contract termination charges |
|
|
269 |
|
|
— |
|
|
— |
|
|
269 |
|
|
Other(1) |
|
|
— |
|
|
584 |
|
|
(584) |
|
|
— |
|
|
Total |
|
$ |
4,901 |
|
$ |
736 |
|
$ |
(4,897) |
|
$ |
740 |
|
(1)Includes decommissioning charges incurred, primarily related to labor and third party service costs.
The Company expects to incur incremental employee termination benefit charges of $0.6 million throughout 2017, which are expected to be paid in early 2018. Lastly, the Company also expects to incur additional decommissioning costs associated with this plant shutdown in 2017, the cost of which will be expensed as incurred, within the Latex Binders segment.
|
|||
NOTE 15—ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The components of AOCI, net of income taxes, consisted of:
|
|
|
Cumulative |
|
Pension & Other |
|
Foreign Exchange |
|
|
|
|
|||
|
|
|
Translation |
|
Postretirement Benefit |
|
Cash Flow |
|
|
|
|
|||
|
Three Months Ended March 31, 2017 and 2016 |
|
Adjustments |
|
Plans, Net |
|
Hedges, Net |
|
Total |
|
||||
|
Balance as of December 31, 2016 |
|
$ |
(118,922) |
|
$ |
(63,504) |
|
$ |
12,272 |
|
$ |
(170,154) |
|
|
Other comprehensive income (loss) |
|
|
4,201 |
|
|
— |
|
|
(2,359) |
|
|
1,842 |
|
|
Amounts reclassified from AOCI to net income (1) |
|
|
— |
|
|
1,376 |
|
|
(2,451) |
|
|
(1,075) |
|
|
Balance as of March 31, 2017 |
|
$ |
(114,721) |
|
$ |
(62,128) |
|
$ |
7,462 |
|
$ |
(169,387) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2015 |
|
$ |
(109,120) |
|
$ |
(46,166) |
|
$ |
5,569 |
|
$ |
(149,717) |
|
|
Other comprehensive income (loss) |
|
|
13,423 |
|
|
(800) |
|
|
(6,319) |
|
|
6,304 |
|
|
Amounts reclassified from AOCI to net income (1) |
|
|
— |
|
|
540 |
|
|
(1,106) |
|
|
(566) |
|
|
Balance as of March 31, 2016 |
|
$ |
(95,697) |
|
$ |
(46,426) |
|
$ |
(1,856) |
|
$ |
(143,979) |
|
|
(1) |
The following is a summary of amounts reclassified from AOCI to net income for the three months ended March 31, 2017 and 2016, respectively: |
|
|
|
Amount Reclassified from AOCI |
|
|
|
||||
|
AOCI Components |
|
Three Months Ended March 31, |
|
Statement of Operations |
|
||||
|
|
|
2017 |
|
2016 |
|
Classification |
|
||
|
Cash flow hedging items |
|
|
|
|
|
|
|
|
|
|
Foreign exchange cash flow hedges |
|
$ |
(2,451) |
|
$ |
(1,106) |
|
Cost of sales |
|
|
Total before tax |
|
|
(2,451) |
|
|
(1,106) |
|
|
|
|
Tax effect |
|
|
— |
|
|
— |
|
Provision for income taxes |
|
|
Total, net of tax |
|
$ |
(2,451) |
|
$ |
(1,106) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of pension and other postretirement benefit plan items |
|
|
|
|
|
|
|
|
|
|
Prior service credit |
|
$ |
(446) |
|
$ |
(452) |
|
(a) |
|
|
Net actuarial loss |
|
|
1,576 |
|
|
1,254 |
|
(a) |
|
|
Net settlement and curtailment loss |
|
|
648 |
|
|
— |
|
(a) |
|
|
Total before tax |
|
|
1,778 |
|
|
802 |
|
|
|
|
Tax effect |
|
|
(402) |
|
|
(262) |
|
Provision for income taxes |
|
|
Total, net of tax |
|
$ |
1,376 |
|
$ |
540 |
|
|
|
|
(a) |
These AOCI components are included in the computation of net periodic benefit costs (see Note 10). |
|
|||
The unaudited interim condensed consolidated financial statements of Trinseo S.A. and its subsidiaries (the “Company”) as of and for the periods ended March 31, 2017 and 2016 were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and reflect all adjustments, consisting only of normal recurring adjustments, which, in the opinion of management, are considered necessary for the fair statement of the results for the periods presented. Because they cover interim periods, the statements and related notes to the financial statements do not include all disclosures normally provided in annual financial statements and, therefore, these statements should be read in conjunction with the 2016 audited consolidated financial statements included within the Company’s Annual Report on Form 10-K (“Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on March 1, 2017.
The December 31, 2016 condensed consolidated balance sheet data presented herein was derived from the Company’s December 31, 2016 audited consolidated financial statements, but does not include all disclosures required by GAAP for annual periods.
Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications did not have a material impact on the Company’s financial position or results. Refer to Note 11 and Note 13 for further information.
In May 2014, the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) jointly issued guidance which clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP and International Financial Reporting Standards (“IFRS”). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, the FASB has issued certain clarifying updates to this guidance, which the Company will consider as part of our adoption. The Company expects to adopt this guidance for annual and interim periods beginning after December 31, 2017 by applying the modified retrospective transition approach. While our adoption efforts have progressed significantly, we have not yet reached a final conclusion on the expected impacts of adopting this new standard on our consolidated financial statements and disclosures, as well as on our underlying business processes and information technology systems.
In July 2015, the FASB issued guidance which simplifies the subsequent measurement of inventory by replacing the lower of cost or market test with a lower of cost or net realizable value (“NRV”) test. NRV is calculated as the estimated selling price less reasonably predictable costs of completion, disposal and transportation. The Company adopted this guidance effective January 1, 2017, and the adoption did not have a material impact to the Company’s financial position or results of operations.
In February 2016, the FASB issued guidance related to leases that outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new guidance requires lessees to recognize on the consolidated balance sheets lease liabilities and corresponding right-of-use assets for all leases with terms of greater than 12 months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. This new guidance is effective for public companies for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The new guidance must be adopted using a modified retrospective transition, and provides for certain practical expedients. The Company is in the process of assessing the impact on its consolidated financial statements from the adoption of the new guidance. However, as we are the lessee under various real estate, railcar, and other equipment leases, which we currently account for as operating leases, we anticipate an increase in the recognition of right-of-use assets and lease liabilities as a result of this adoption.
In August 2016, the FASB issued guidance that aims to eliminate diversity in practice for how certain cash receipts and payments are presented and classified in the consolidated statements of cash flows. This guidance is effective for public companies for annual and interim periods beginning after December 15, 2017, with early adoption permitted. This guidance must be adopted using a retrospective approach, and provides for certain practical expedients. Additionally, the FASB has issued further guidance related to the presentation of restricted cash on the consolidated statements of cash flows. The Company is currently assessing the timing and related impact of adopting this guidance on its consolidated statements of cash flows.
In January 2017, the FASB issued guidance that revises the definition of a business in order to assist in determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the new guidance, fewer transactions are expected to be accounted for as business combinations. The Company adopted this guidance effective January 1, 2017. We expect this adoption could affect conclusions reached for future transactions in several areas, including acquisitions and disposals.
In January 2017, the FASB issued guidance to simplify the accounting for goodwill impairment by removing Step 2 of the test, which requires a hypothetical purchase price allocation. As a result, a goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The Company adopted this guidance effective January 1, 2017, which did not have a material impact to the Company’s financial position or results of operations.
In March 2017, the FASB issued guidance that requires employers to present the service cost component of net periodic benefit cost in the same statement of operations line item as other employee compensation costs arising from services rendered during the period. The other components of net benefit cost are to be presented outside of any subtotal of operating income. This presentation amendment is relevant to the Company and will be applied on a retrospective basis. This guidance is effective for fiscal years and interim periods beginning after December 15, 2017, and early adoption is permitted. The Company is currently assessing the impact of adopting this guidance on its results of operations.
|
|||
|
|
|
Three Months Ended |
|
||||
|
|
|
March 31, |
|
||||
|
|
|
2017 |
|
2016 |
|
||
|
Sales |
|
$ |
433,946 |
|
$ |
376,253 |
|
|
Gross profit |
|
$ |
20,588 |
|
$ |
68,403 |
|
|
Net income |
|
$ |
6,328 |
|
$ |
52,796 |
|
|
|||
|
|
|
March 31, |
|
December 31, |
|
||
|
|
|
2017 |
|
2016 |
|
||
|
Finished goods |
|
$ |
242,108 |
|
$ |
187,577 |
|
|
Raw materials and semi-finished goods |
|
|
209,030 |
|
|
168,804 |
|
|
Supplies |
|
|
29,974 |
|
|
28,964 |
|
|
Total |
|
$ |
481,112 |
|
$ |
385,345 |
|
|
|||
|
|
|
|
|
|
|
March 31, 2017 |
|
December 31, 2016 |
|
||||||||||||||
|
|
|
Interest Rate as of March 31, 2017 |
|
Maturity |
|
Carrying |
|
Unamortized |
|
Total Debt, |
|
Carrying |
|
Unamortized |
|
Total Debt, |
|
||||||
|
Senior Credit Facility |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 Revolving Facility(2) |
|
Various |
|
May 2020 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
|
2021 Term Loan B(3) |
|
4.250% |
|
November 2021 |
|
|
490,340 |
|
|
(8,731) |
|
|
481,609 |
|
|
491,545 |
|
|
(9,159) |
|
|
482,386 |
|
|
2022 Senior Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD Notes |
|
6.750% |
|
May 2022 |
|
|
300,000 |
|
|
(5,503) |
|
|
294,497 |
|
|
300,000 |
|
|
(5,726) |
|
|
294,274 |
|
|
Euro Notes |
|
6.375% |
|
May 2022 |
|
|
400,958 |
|
|
(6,876) |
|
|
394,082 |
|
|
394,275 |
|
|
(7,157) |
|
|
387,118 |
|
|
Accounts Receivable Securitization Facility(4) |
|
Various |
|
May 2019 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Other indebtedness |
|
Various |
|
Various |
|
|
1,562 |
|
|
— |
|
|
1,562 |
|
|
1,591 |
|
|
— |
|
|
1,591 |
|
|
Total debt |
|
|
|
|
|
$ |
1,192,860 |
|
$ |
(21,110) |
|
$ |
1,171,750 |
|
$ |
1,187,411 |
|
$ |
(22,042) |
|
$ |
1,165,369 |
|
|
Less: current portion |
|
|
|
|
|
|
|
|
|
|
|
|
(5,000) |
|
|
|
|
|
|
|
|
(5,000) |
|
|
Total long-term debt, net of unamortized deferred financing fees |
|
|
|
|
|
|
|
|
|
|
|
$ |
1,166,750 |
|
|
|
|
|
|
|
$ |
1,160,369 |
|
|
(1) |
This caption does not include deferred financing fees related to the Company’s revolving facilities, which are included within “Deferred charges and other assets” on the condensed consolidated balance sheets. |
|
(2) |
The Company had $309.1 million (net of $15.9 million outstanding letters of credit) of funds available for borrowing under this facility as of March 31, 2017. Additionally, the Borrowers were required to pay a quarterly commitment fee in respect of any unused commitments under this facility equal to 0.375% per annum. |
|
(3) |
Carrying amounts presented above are net of an original issue discount, which was 0.25% of the original $500.0 million facility. This facility bears an interest rate of LIBOR plus 3.25%, subject to a 1.00% LIBOR floor. As of March 31, 2017, $5.0 million of the scheduled future payments related to this facility were classified as current debt on the Company’s condensed consolidated balance sheet. |
|
(4) |
This facility has a borrowing capacity of $200.0 million. As of March 31, 2017, the Company had approximately $139.2 million of accounts receivable available to support this facility, based on the pool of eligible accounts receivable. In regards to outstanding borrowings, fixed interest charges are 2.6% plus variable commercial paper rates, while for available, but undrawn commitments, fixed interest charges are 1.4%. |
|
|||
|
|
|
March 31, |
|
|
|
Buy / (Sell) |
|
2017 |
|
|
|
Chinese Yuan |
|
$ |
(79,985) |
|
|
Euro |
|
$ |
(63,617) |
|
|
Indonesian Rupiah |
|
$ |
(27,316) |
|
|
Swiss Franc |
|
$ |
19,083 |
|
|
Japanese Yen |
|
$ |
(10,163) |
|
|
Turkish Lira |
|
$ |
(7,349) |
|
|
|
|
Gain (Loss) Recognized in |
|
Gain (Loss) Recognized in |
|
|
||||||||
|
|
|
AOCI on Balance Sheet |
|
Statement of Operations |
|
|
||||||||
|
|
|
Three Months Ended March 31, |
|
Statement of Operations |
||||||||||
|
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
Classification |
||||
|
Designated as Cash Flow Hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange cash flow hedges |
|
$ |
(4,810) |
|
$ |
(7,425) |
|
$ |
2,451 |
|
$ |
1,106 |
|
Cost of sales |
|
Total |
|
$ |
(4,810) |
|
$ |
(7,425) |
|
$ |
2,451 |
|
$ |
1,106 |
|
|
|
Net Investment Hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euro Notes |
|
$ |
(4,990) |
|
$ |
(6,285) |
|
$ |
— |
|
$ |
— |
|
Other expense (income), net |
|
Total |
|
$ |
(4,990) |
|
$ |
(6,285) |
|
$ |
— |
|
$ |
— |
|
|
|
Not Designated as Cash Flow Hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts |
|
$ |
— |
|
$ |
— |
|
$ |
(1,675) |
|
$ |
3,133 |
|
Other expense (income), net |
|
Total |
|
$ |
— |
|
$ |
— |
|
$ |
(1,675) |
|
$ |
3,133 |
|
|
|
|
|
March 31, 2017 |
|
December 31, 2016 |
|
||||||||||||||
|
|
|
Foreign |
|
Foreign |
|
|
|
Foreign |
|
Foreign |
|
|
|
||||||
|
|
|
Forward |
|
Cash Flow |
|
|
|
Forward |
|
Cash Flow |
|
|
|
||||||
|
Balance Sheet Classification |
|
Contracts |
|
Hedges |
|
Total |
|
Contracts |
|
Hedges |
|
Total |
|
||||||
|
Asset Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net of allowance |
|
$ |
1,236 |
|
$ |
6,302 |
|
$ |
7,538 |
|
$ |
1,664 |
|
$ |
11,018 |
|
$ |
12,682 |
|
|
Deferred charges and other assets |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Total asset derivatives |
|
$ |
1,236 |
|
$ |
6,302 |
|
$ |
7,538 |
|
$ |
1,664 |
|
$ |
11,018 |
|
$ |
12,682 |
|
|
Liability Derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
512 |
|
$ |
— |
|
$ |
512 |
|
$ |
511 |
|
$ |
— |
|
$ |
511 |
|
|
Other noncurrent obligations |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Total liability derivatives |
|
$ |
512 |
|
$ |
— |
|
$ |
512 |
|
$ |
511 |
|
$ |
— |
|
$ |
511 |
|
|
|
|
Gross Amounts |
|
Gross Amounts |
|
Net Amounts |
|
|||
|
|
|
Recognized in the |
|
Offset in the |
|
Presented in the |
|
|||
|
|
|
Balance Sheet |
|
Balance Sheet |
|
Balance Sheet |
|
|||
|
Balance at March 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
Derivative assets |
|
$ |
14,511 |
|
$ |
(6,973) |
|
$ |
7,538 |
|
|
Derivative liabilities |
|
|
7,485 |
|
|
(6,973) |
|
|
512 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
Derivative assets |
|
$ |
23,401 |
|
$ |
(10,719) |
|
$ |
12,682 |
|
|
Derivative liabilities |
|
|
11,230 |
|
|
(10,719) |
|
|
511 |
|
|
|||
|
|
|
March 31, 2017 |
|
||||||||||
|
|
|
Quoted Prices in Active Markets for Identical Items |
|
Significant Other Observable Inputs |
|
Significant Unobservable Inputs |
|
|
|
|
|||
|
Assets (Liabilities) at Fair Value |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
Total |
|
||||
|
Foreign exchange forward contracts—Assets |
|
$ |
— |
|
$ |
1,236 |
|
$ |
— |
|
$ |
1,236 |
|
|
Foreign exchange forward contracts—(Liabilities) |
|
|
— |
|
|
(512) |
|
|
— |
|
|
(512) |
|
|
Foreign exchange cash flow hedges—Assets |
|
|
— |
|
|
6,302 |
|
|
— |
|
|
6,302 |
|
|
Total fair value |
|
$ |
— |
|
$ |
7,026 |
|
$ |
— |
|
$ |
7,026 |
|
|
|
|
December 31, 2016 |
|
||||||||||
|
|
|
Quoted Prices in Active Markets for Identical Items |
|
Significant Other Observable Inputs |
|
Significant Unobservable Inputs |
|
|
|
|
|||
|
Assets (Liabilities) at Fair Value |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
Total |
|
||||
|
Foreign exchange forward contracts—Assets |
|
$ |
— |
|
$ |
1,664 |
|
$ |
— |
|
$ |
1,664 |
|
|
Foreign exchange forward contracts—(Liabilities) |
|
|
— |
|
|
(511) |
|
|
— |
|
|
(511) |
|
|
Foreign exchange cash flow hedges—Assets |
|
|
— |
|
|
11,018 |
|
|
— |
|
|
11,018 |
|
|
Total fair value |
|
$ |
— |
|
$ |
12,171 |
|
$ |
— |
|
$ |
12,171 |
|
|
|
|
As of |
|
As of |
|
||
|
|
|
March 31, 2017 |
|
December 31, 2016 |
|
||
|
2022 Senior Notes |
|
|
|
|
|
|
|
|
USD Notes |
|
$ |
316,875 |
|
$ |
315,000 |
|
|
Euro Notes |
|
|
429,013 |
|
|
424,437 |
|
|
2021 Term Loan B |
|
|
496,472 |
|
|
498,041 |
|
|
Total fair value |
|
$ |
1,242,360 |
|
$ |
1,237,478 |
|
|
|||
|
|
|
Three Months Ended |
|
|
||||
|
|
|
March 31, |
|
|
||||
|
|
|
2017 |
|
2016 |
|
|
||
|
Effective income tax rate |
|
|
20.0 |
% |
|
22.2 |
% |
|
|
|||
|
|
|
Three Months Ended |
|
||||
|
|
|
March 31, |
|
||||
|
|
|
2017 |
|
2016 |
|
||
|
Defined Benefit Pension Plans |
|
|
|
|
|
|
|
|
Service cost |
|
$ |
4,584 |
|
$ |
4,071 |
|
|
Interest cost |
|
|
1,081 |
|
|
1,360 |
|
|
Expected return on plan assets |
|
|
(411) |
|
|
(483) |
|
|
Amortization of prior service credit |
|
|
(471) |
|
|
(478) |
|
|
Amortization of net loss |
|
|
1,357 |
|
|
1,038 |
|
|
Net settlement and curtailment loss(1) |
|
|
129 |
|
|
— |
|
|
Net periodic benefit cost |
|
$ |
6,269 |
|
$ |
5,508 |
|
|
(1) |
Represents a settlement loss of approximately $0.5 million triggered by benefit payments exceeding the sum of service and interest cost for one of the Company’s pension plans in Switzerland, partially offset by a curtailment gain of approximately $0.4 million related to a reduction in the number of participants in the Company’s pension plan in Japan. |
|
|
|
Three Months Ended |
|
||||
|
|
|
March 31, |
|
||||
|
|
|
2017 |
|
2016 |
|
||
|
Other Postretirement Plans |
|
|
|
|
|
|
|
|
Service cost |
|
$ |
54 |
|
$ |
63 |
|
|
Interest cost |
|
|
63 |
|
|
121 |
|
|
Amortization of prior service cost |
|
|
26 |
|
|
26 |
|
|
Amortization of net gain |
|
|
(11) |
|
|
(43) |
|
|
Net periodic benefit cost |
|
$ |
132 |
|
$ |
167 |
|
|
|||
|
|
|
Three Months Ended |
|
|
|
|
March 31, |
|
|
|
|
2017 |
|
|
Expected term (in years) |
|
5.50 |
|
|
Expected volatility |
|
35.00 |
% |
|
Risk-free interest rate |
|
2.19 |
% |
|
Dividend yield |
|
2.00 |
% |
|
|||
|
|
|
Performance Materials |
|
Basic Plastics & Feedstocks |
|
|
|
|
|
|
|
||||||||||||||
|
|
|
Latex |
|
Synthetic |
|
Performance |
|
Basic |
|
|
|
Americas |
|
Corporate |
|
|
|
|
|||||||
|
Three Months Ended |
|
Binders |
|
Rubber |
|
Plastics |
|
Plastics |
|
Feedstocks |
|
Styrenics |
|
Unallocated |
|
Total |
|
||||||||
|
March 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales to external customers |
|
$ |
288,931 |
|
$ |
163,361 |
|
$ |
184,551 |
|
$ |
380,751 |
|
$ |
86,896 |
|
$ |
— |
|
$ |
— |
|
$ |
1,104,490 |
|
|
Equity in earnings (losses) of unconsolidated affiliates |
|
|
— |
|
|
— |
|
|
— |
|
|
810 |
|
|
— |
|
|
18,485 |
|
|
— |
|
|
19,295 |
|
|
Adjusted EBITDA(1) |
|
|
36,815 |
|
|
46,270 |
|
|
26,875 |
|
|
38,861 |
|
|
41,896 |
|
|
18,485 |
|
|
|
|
|
|
|
|
Investment in unconsolidated affiliates |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
160,649 |
|
|
— |
|
|
160,649 |
|
|
Depreciation and amortization |
|
|
5,663 |
|
|
8,379 |
|
|
2,378 |
|
|
3,690 |
|
|
2,477 |
|
|
— |
|
|
2,133 |
|
|
24,720 |
|
|
March 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales to external customers |
|
$ |
209,481 |
|
$ |
102,197 |
|
$ |
168,629 |
|
$ |
342,629 |
|
$ |
71,148 |
|
$ |
— |
|
$ |
— |
|
$ |
894,084 |
|
|
Equity in earnings (losses) of unconsolidated affiliates |
|
|
— |
|
|
— |
|
|
— |
|
|
2,093 |
|
|
— |
|
|
32,933 |
|
|
— |
|
|
35,026 |
|
|
Adjusted EBITDA(1) |
|
|
18,767 |
|
|
23,079 |
|
|
35,086 |
|
|
37,767 |
|
|
20,810 |
|
|
32,933 |
|
|
|
|
|
|
|
|
Investment in unconsolidated affiliates |
|
|
— |
|
|
— |
|
|
— |
|
|
34,915 |
|
|
— |
|
|
146,796 |
|
|
— |
|
|
181,711 |
|
|
Depreciation and amortization |
|
|
6,280 |
|
|
8,043 |
|
|
1,544 |
|
|
3,583 |
|
|
2,866 |
|
|
— |
|
|
804 |
|
|
23,120 |
|
(1)The Company’s primary measure of segment operating performance is Adjusted EBITDA, which is defined as income from continuing operations before interest expense, net; provision for income taxes; depreciation and amortization expense; loss on extinguishment of long-term debt; asset impairment charges; gains or losses on the dispositions of businesses and assets; restructuring and other items. Adjusted EBITDA is a key metric that is used by management to evaluate business performance in comparison to budgets, forecasts, and prior year financial results, providing a measure that management believes reflects core operating performance by removing the impact of transactions and events that would not be considered a part of core operations. Adjusted EBITDA is useful for analytical purposes; however, it should not be considered an alternative to the Company’s reported GAAP results, as there are limitations in using such financial measures. Other companies in the industry may define Adjusted EBITDA differently than the Company, and as a result, it may be difficult to use Adjusted EBITDA, or similarly named financial measures, that other companies may use to compare the performance of those companies to the Company’s segment performance.
|
|
|
March 31, |
|
||||
|
|
|
2017 |
|
2016 |
|
||
|
Income before income taxes |
|
$ |
146,594 |
|
$ |
98,647 |
|
|
Interest expense, net |
|
|
18,200 |
|
|
18,896 |
|
|
Depreciation and amortization |
|
|
24,720 |
|
|
23,120 |
|
|
Corporate Unallocated(2) |
|
|
27,465 |
|
|
25,217 |
|
|
Adjusted EBITDA Addbacks(3) |
|
|
(7,777) |
|
|
2,562 |
|
|
Segment Adjusted EBITDA |
|
$ |
209,202 |
|
$ |
168,442 |
|
(2)Corporate unallocated includes corporate overhead costs and certain other income and expenses.
(3)Adjusted EBITDA addbacks for the three months ended March 31, 2017 and 2016 are as follows:
|
|
|
March 31, |
|
||||
|
(in millions) |
|
2017 |
|
2016 |
|
||
|
Net gain on disposition of businesses and assets (Note 3) |
|
$ |
(9.9) |
|
$ |
— |
|
|
Restructuring and other charges (Note 14) |
|
|
2.1 |
|
|
0.7 |
|
|
Other items(a) |
|
|
— |
|
|
1.8 |
|
|
Total Adjusted EBITDA Addbacks |
|
$ |
(7.8) |
|
$ |
2.5 |
|
|
(a) |
For the three months ended March 31, 2016, other items includes $1.8 million of fees incurred in conjunction with the Company’s secondary offering completed in March 2016. Refer to Note 12 for further information. |
|
|||
|
|
|
Balance at |
|
|
|
|
|
|
|
Balance at |
|
||
|
|
|
December 31, 2016 |
|
Expenses |
|
Deductions |
|
March 31, 2017 |
|
||||
|
Employee termination benefit charges |
|
$ |
4,632 |
|
$ |
152 |
|
$ |
(4,313) |
|
$ |
471 |
|
|
Contract termination charges |
|
|
269 |
|
|
— |
|
|
— |
|
|
269 |
|
|
Other(1) |
|
|
— |
|
|
584 |
|
|
(584) |
|
|
— |
|
|
Total |
|
$ |
4,901 |
|
$ |
736 |
|
$ |
(4,897) |
|
$ |
740 |
|
(1)Includes decommissioning charges incurred, primarily related to labor and third party service costs.
|
|||
|
|
|
Cumulative |
|
Pension & Other |
|
Foreign Exchange |
|
|
|
|
|||
|
|
|
Translation |
|
Postretirement Benefit |
|
Cash Flow |
|
|
|
|
|||
|
Three Months Ended March 31, 2017 and 2016 |
|
Adjustments |
|
Plans, Net |
|
Hedges, Net |
|
Total |
|
||||
|
Balance as of December 31, 2016 |
|
$ |
(118,922) |
|
$ |
(63,504) |
|
$ |
12,272 |
|
$ |
(170,154) |
|
|
Other comprehensive income (loss) |
|
|
4,201 |
|
|
— |
|
|
(2,359) |
|
|
1,842 |
|
|
Amounts reclassified from AOCI to net income (1) |
|
|
— |
|
|
1,376 |
|
|
(2,451) |
|
|
(1,075) |
|
|
Balance as of March 31, 2017 |
|
$ |
(114,721) |
|
$ |
(62,128) |
|
$ |
7,462 |
|
$ |
(169,387) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2015 |
|
$ |
(109,120) |
|
$ |
(46,166) |
|
$ |
5,569 |
|
$ |
(149,717) |
|
|
Other comprehensive income (loss) |
|
|
13,423 |
|
|
(800) |
|
|
(6,319) |
|
|
6,304 |
|
|
Amounts reclassified from AOCI to net income (1) |
|
|
— |
|
|
540 |
|
|
(1,106) |
|
|
(566) |
|
|
Balance as of March 31, 2016 |
|
$ |
(95,697) |
|
$ |
(46,426) |
|
$ |
(1,856) |
|
$ |
(143,979) |
|
|
(1) |
The following is a summary of amounts reclassified from AOCI to net income for the three months ended March 31, 2017 and 2016, respectively: |
|
|
|
Amount Reclassified from AOCI |
|
|
|
||||
|
AOCI Components |
|
Three Months Ended March 31, |
|
Statement of Operations |
|
||||
|
|
|
2017 |
|
2016 |
|
Classification |
|
||
|
Cash flow hedging items |
|
|
|
|
|
|
|
|
|
|
Foreign exchange cash flow hedges |
|
$ |
(2,451) |
|
$ |
(1,106) |
|
Cost of sales |
|
|
Total before tax |
|
|
(2,451) |
|
|
(1,106) |
|
|
|
|
Tax effect |
|
|
— |
|
|
— |
|
Provision for income taxes |
|
|
Total, net of tax |
|
$ |
(2,451) |
|
$ |
(1,106) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of pension and other postretirement benefit plan items |
|
|
|
|
|
|
|
|
|
|
Prior service credit |
|
$ |
(446) |
|
$ |
(452) |
|
(a) |
|
|
Net actuarial loss |
|
|
1,576 |
|
|
1,254 |
|
(a) |
|
|
Net settlement and curtailment loss |
|
|
648 |
|
|
— |
|
(a) |
|
|
Total before tax |
|
|
1,778 |
|
|
802 |
|
|
|
|
Tax effect |
|
|
(402) |
|
|
(262) |
|
Provision for income taxes |
|
|
Total, net of tax |
|
$ |
1,376 |
|
$ |
540 |
|
|
|
|
(a) |
These AOCI components are included in the computation of net periodic benefit costs (see Note 10). |
|
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