TRINSEO PLC, 10-Q filed on 11/8/2021
Quarterly Report
v3.21.2
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2021
Nov. 04, 2021
Cover [Abstract]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 2021  
Document Transition Report false  
Entity File Number 001-36473  
Entity Registrant Name Trinseo PLC  
Entity Incorporation, State or Country Code L2  
Entity Tax Identification Number 00-0000000  
Entity Address, Address Line One 1000 Chesterbrook Boulevard  
Entity Address, Address Line Two Suite 300  
Entity Address, Address Line Three Berwyn  
Entity Address, City or Town Berwyn, PA 19312  
Entity Address, State or Province PA  
Entity Address, Postal Zip Code 19312  
City Area Code 610  
Local Phone Number 240-3200  
Title of 12(b) Security Ordinary Shares, par value $0.01 per share  
Trading Symbol TSE  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   38,837,083
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q3  
Entity Central Index Key 0001519061  
Current Fiscal Year End Date --12-31  
Amendment Flag false  
v3.21.2
Condensed Consolidated Balance Sheets - USD ($)
$ in Millions
Sep. 30, 2021
Dec. 31, 2020
Current assets    
Cash and cash equivalents $ 207.5 $ 588.7
Accounts receivable, net of allowance for doubtful accounts (September 30, 2021: $3.8; December 31, 2020: $5.6) 762.7 469.5
Inventories 617.3 324.1
Other current assets 40.0 14.5
Current assets held for sale 379.5 120.3
Total current assets 2,007.0 1,517.1
Investments in unconsolidated affiliates 250.3 240.1
Property, plant and equipment, net of accumulated depreciation (September 30, 2021: $560.6; December 31, 2020: $524.7) 717.0 431.1
Other assets    
Goodwill 719.9 62.1
Other intangible assets, net 841.2 162.6
Right of use assets - operating, net 78.5 77.8
Deferred income tax assets 84.9 90.2
Deferred charges and other assets 65.3 36.0
Noncurrent assets held for sale   228.2
Total other assets 1,789.8 656.9
Total assets 4,764.1 2,845.2
Current liabilities    
Short-term borrowings and current portion of long-term debt 149.1 12.2
Accounts payable 507.9 325.9
Current lease liabilities - operating 17.9 15.5
Income taxes payable 32.3 10.0
Accrued expenses and other current liabilities 216.6 127.5
Current liabilities held for sale 81.3 42.2
Total current liabilities 1,005.1 533.3
Noncurrent liabilities    
Long-term debt, net of unamortized deferred financing fees 2,307.9 1,158.1
Noncurrent lease liabilities - operating 62.9 65.5
Deferred income tax liabilities 100.5 60.7
Other noncurrent obligations 365.7 395.0
Noncurrent liabilities held for sale   42.3
Total noncurrent liabilities 2,837.0 1,721.6
Shareholders' equity    
Ordinary shares, $0.01 nominal value, 4,000.0 shares authorized (September 30, 2021: 48.8 shares issued and 38.8 shares outstanding; December 31, 2020: 48.8 shares issued and 38.4 shares outstanding) 0.5 0.5
Additional paid-in-capital 582.2 579.6
Treasury shares, at cost (September 30, 2021: 10.0 shares; December 31, 2020: 10.4 shares) (524.8) (542.9)
Retained earnings 1,036.4 739.2
Accumulated other comprehensive loss (172.3) (186.1)
Total shareholders' equity 922.0 590.3
Total liabilities and shareholders' equity $ 4,764.1 $ 2,845.2
v3.21.2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Millions
Sep. 30, 2021
Dec. 31, 2020
Condensed Consolidated Balance Sheets    
Allowance for doubtful accounts $ 3.8 $ 5.6
Accumulated depreciation $ 560.6 $ 524.7
Ordinary shares, nominal value $ 0.01 $ 0.01
Ordinary shares, shares authorized 4,000,000,000.0 4,000,000,000.0
Ordinary shares, shares issued 48,800,000 48,800,000
Ordinary shares, shares outstanding 38,800,000 38,400,000
Treasury stock, shares 10,000,000.0 10,400,000
v3.21.2
Condensed Consolidated Statements of Operations - USD ($)
shares in Millions, $ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2021
Sep. 30, 2020
Sep. 30, 2021
Sep. 30, 2020
Condensed Consolidated Statements of Operations        
Net sales $ 1,269.3 $ 679.2 $ 3,529.0 $ 1,976.5
Cost of sales 1,101.0 572.9 2,951.7 1,789.1
Gross profit 168.3 106.3 577.3 187.4
Selling, general and administrative expenses 76.4 46.3 230.4 171.8
Equity in earnings of unconsolidated affiliates 17.1 18.3 70.2 42.5
Impairment charges 1.2   3.0 10.3
Operating income 107.8 78.3 414.1 47.8
Interest expense, net 23.0 10.0 56.6 32.0
Acquisition purchase price hedge loss     22.0  
Other expense (income), net (0.1) 1.2 8.4 3.0
Income from continuing operations before income taxes 84.9 67.1 327.1 12.8
Provision for income taxes 5.5 26.9 48.9 16.2
Net income (loss) from continuing operations 79.4 40.2 278.2 (3.4)
Net income (loss) from discontinued operations, net of income taxes 13.7 65.6 38.0 (55.4)
Net income (loss) $ 93.1 $ 105.8 $ 316.2 $ (58.8)
Earnings Per Share        
Weighted average shares- basic 38.8 38.3 38.7 38.4
Net income (loss) per share- basic, continuing $ 2.04 $ 1.05 $ 7.19 $ (0.09)
Net income (loss) per share- basic, discontinued operations 0.35 1.72 0.98 (1.44)
Net income (loss) per share- basic $ 2.39 $ 2.77 $ 8.17 $ (1.53)
Weighted average shares- diluted 39.5 38.4 39.6 38.4
Net income (loss) per share- diluted, continuing $ 2.01 $ 1.04 $ 7.03 $ (0.09)
Net income (loss) per share- diluted, discontinued operations 0.35 1.71 0.96 (1.44)
Net income (loss) per share- diluted $ 2.36 $ 2.75 $ 7.99 $ (1.53)
v3.21.2
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2021
Sep. 30, 2020
Sep. 30, 2021
Sep. 30, 2020
Condensed Consolidated Statements of Comprehensive Income (Loss)        
Net income $ 93.1 $ 105.8 $ 316.2 $ (58.8)
Other comprehensive income (loss), net of tax        
Cumulative translation adjustments (1.7) (6.7) (2.0) 2.9
Net gain (loss) on cash flow hedges 1.2 0.4 5.6 (4.6)
Pension and other postretirement benefit plans:        
Net gain arising during period (net of tax of $1.0, $0.0, $1.0 and $0.1) 9.3 0.1 9.3 0.7
Amounts reclassified from accumulated other comprehensive income (1.2) 1.6 0.9 2.7
Total other comprehensive income (loss), net of tax 7.6 (4.6) 13.8 1.7
Comprehensive income (loss) $ 100.7 $ 101.2 $ 330.0 $ (57.1)
v3.21.2
Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2021
Sep. 30, 2020
Sep. 30, 2021
Sep. 30, 2020
Condensed Consolidated Statements of Comprehensive Income (Loss)        
Net gain (loss) during period, tax (benefit) expense $ 1.0 $ 0.0 $ (1.0) $ (0.1)
v3.21.2
Condensed Consolidated Statements of Shareholders' Equity - USD ($)
shares in Millions, $ in Millions
Ordinary Shares
Treasury Shares
Additional Paid-In Capital [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Retained Earnings
Total
Balance at beginning of period at Dec. 31, 2019 $ 0.5 $ (524.9) $ 574.7 $ (162.4) $ 781.0 $ 668.9
Balance at beginning of period, shares at Dec. 31, 2019 39.0 9.8        
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net income         (36.3) (36.3)
Other comprehensive income (loss)       8.2   8.2
Share-based compensation   $ 1.7 1.0     2.7
Purchase of treasury shares   $ (25.0)       (25.0)
Purchase of treasury shares, shares (0.8) 0.8        
Dividends on ordinary shares         (15.5) (15.5)
Balance at end of period at Mar. 31, 2020 $ 0.5 $ (548.2) 575.7 (154.2) 729.2 603.0
Balance at end of period, shares at Mar. 31, 2020 38.2 10.6        
Balance at beginning of period at Dec. 31, 2019 $ 0.5 $ (524.9) 574.7 (162.4) 781.0 668.9
Balance at beginning of period, shares at Dec. 31, 2019 39.0 9.8        
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net income           (58.8)
Other comprehensive income (loss)           1.7
Balance at end of period at Sep. 30, 2020 $ 0.5 $ (546.5) 578.7 (160.7) 675.6 547.6
Balance at end of period, shares at Sep. 30, 2020 38.3 10.5        
Balance at beginning of period at Mar. 31, 2020 $ 0.5 $ (548.2) 575.7 (154.2) 729.2 603.0
Balance at beginning of period, shares at Mar. 31, 2020 38.2 10.6        
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net income         (128.4) (128.4)
Other comprehensive income (loss)       (1.9)   (1.9)
Share-based compensation   $ 0.9 0.6     1.5
Share-based compensation, shares 0.1 (0.1)        
Dividends on ordinary shares         (15.4) (15.4)
Balance at end of period at Jun. 30, 2020 $ 0.5 $ (547.3) 576.3 (156.1) 585.4 458.8
Balance at end of period, shares at Jun. 30, 2020 38.3 10.5        
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net income         105.8 105.8
Other comprehensive income (loss)       (4.6)   (4.6)
Share-based compensation   $ 0.8 2.4     3.2
Dividends on ordinary shares         (15.6) (15.6)
Balance at end of period at Sep. 30, 2020 $ 0.5 $ (546.5) 578.7 (160.7) 675.6 547.6
Balance at end of period, shares at Sep. 30, 2020 38.3 10.5        
Balance at beginning of period at Dec. 31, 2020 $ 0.5 $ (542.9) 579.6 (186.1) 739.2 $ 590.3
Balance at beginning of period, shares at Dec. 31, 2020 38.4 10.4       38.4
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net income         71.5 $ 71.5
Other comprehensive income (loss)       6.1   6.1
Share-based compensation   $ 12.9 (1.1)     11.8
Share-based compensation, shares 0.3 (0.3)        
Dividends on ordinary shares         (3.4) (3.4)
Balance at end of period at Mar. 31, 2021 $ 0.5 $ (530.0) 578.5 (180.0) 807.3 676.3
Balance at end of period, shares at Mar. 31, 2021 38.7 10.1        
Balance at beginning of period at Dec. 31, 2020 $ 0.5 $ (542.9) 579.6 (186.1) 739.2 $ 590.3
Balance at beginning of period, shares at Dec. 31, 2020 38.4 10.4       38.4
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net income           $ 316.2
Other comprehensive income (loss)           13.8
Balance at end of period at Sep. 30, 2021 $ 0.5 $ (524.8) 582.2 (172.3) 1,036.4 $ 922.0
Balance at end of period, shares at Sep. 30, 2021 38.8 10.0       38.8
Balance at beginning of period at Mar. 31, 2021 $ 0.5 $ (530.0) 578.5 (180.0) 807.3 $ 676.3
Balance at beginning of period, shares at Mar. 31, 2021 38.7 10.1        
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net income         151.6 151.6
Other comprehensive income (loss)       0.1   0.1
Share-based compensation   $ 4.7 0.2     4.9
Share-based compensation, shares 0.1 (0.1)        
Dividends on ordinary shares         (3.1) (3.1)
Balance at end of period at Jun. 30, 2021 $ 0.5 $ (525.3) 578.7 (179.9) 955.8 829.8
Balance at end of period, shares at Jun. 30, 2021 38.8 10.0        
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net income         93.1 93.1
Other comprehensive income (loss)       7.6   7.6
Share-based compensation   $ 0.5 3.5     4.0
Dividends on ordinary shares         (12.5) (12.5)
Balance at end of period at Sep. 30, 2021 $ 0.5 $ (524.8) $ 582.2 $ (172.3) $ 1,036.4 $ 922.0
Balance at end of period, shares at Sep. 30, 2021 38.8 10.0       38.8
v3.21.2
Condensed Consolidated Statements of Shareholders' Equity (Parenthetical)) - $ / shares
3 Months Ended
Sep. 30, 2021
Jun. 30, 2021
Mar. 31, 2021
Sep. 30, 2020
Jun. 30, 2020
Mar. 31, 2020
Condensed Consolidated Statement of Stockholders' Equity            
Dividends on ordinary shares $ 0.32 $ 0.08 $ 0.08 $ 0.40 $ 0.40 $ 0.40
v3.21.2
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Millions
9 Months Ended
Sep. 30, 2021
Sep. 30, 2020
Cash flows from operating activities    
Net income (loss) $ 316.2 $ (58.8)
Net income (loss) from discontinued operations 38.0 (55.4)
Net income (loss) from continuing operations 278.2 (3.4)
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by (used in) operating activities - continuing operations    
Depreciation and amortization 111.0 69.8
Amortization of deferred financing fees, issuance discount, and excluded component of hedging instruments 5.5 2.8
Deferred income tax 0.2 (0.3)
Share-based compensation expense 11.0 8.7
Earnings of unconsolidated affiliates, net of dividends (10.2) (42.5)
Unrealized net gain on foreign exchange forward contracts (25.2) (9.8)
Acquisition purchase price hedge loss 22.0  
Pension curtailment and settlement (gain) loss (2.1) 1.0
Asset impairment charges or write-offs 3.0 10.3
Changes in assets and liabilities    
Accounts receivable (253.1) 23.5
Inventories (196.7) 107.3
Accounts payable and other current liabilities 249.5 (51.2)
Income taxes payable 22.3 2.1
Other assets, net (9.0) (15.8)
Other liabilities, net 41.0 (11.3)
Cash provided by operating activities, continuing operations 247.4 91.2
Cash provided by (used in) operating activities, discontinued operations (9.2) 36.5
Cash provided by operating activities 238.2 127.7
Cash flows from investing activities    
Capital expenditures (64.7) (47.4)
Cash received (paid) for asset and business acquisitions, net of cash acquired ($12.1 and $0) (1,806.6) 0.1
Proceeds from the sale of businesses and other assets 0.2 11.9
Proceeds from (payments for) the settlement of hedging instruments (14.7) 51.6
Cash provided by (used in) investing activities, continuing operations (1,885.8) 16.2
Cash used in investing activities, discontinued operations (3.3) (13.5)
Cash provided by (used in) investing activities (1,889.1) 2.7
Cash flows from financing activities    
Deferred financing fees (35.0)  
Short-term borrowings, net (11.6) (8.2)
Purchase of treasury shares   (25.0)
Dividends paid (9.5) (46.5)
Proceeds from exercise of option awards 10.5 0.4
Withholding taxes paid on restricted share units (0.8) (0.6)
Net proceeds from issuance of Term Loan B 746.3  
Repayments of Term Loans (7.1) (5.2)
Net proceeds from issuance of Senior Notes 450.0  
Proceeds from draw on 2022 Revolving Facility   100.0
Repayments of Revolving Facility   (100.0)
Proceeds from draw on Accounts Receivable Securitization Facility 150.0  
Repayments of Accounts Receivable Securitization Facility (20.0)  
Cash provided by (used in) financing activities 1,272.8 (85.1)
Effect of exchange rates on cash (3.1) 1.3
Net change in cash, cash equivalents and restricted cash (381.2) 46.6
Cash, cash equivalents and restricted cash, beginning of period 588.7 457.4
Cash, cash equivalents and restricted cash, end of period 207.5 504.0
Restricted cash   (0.7)
Cash and cash equivalents, end of period 207.5 503.3
Supplemental disclosure of cash flow information    
Net cash received $ 12.1 $ 0.0
v3.21.2
Basis of Presentation
9 Months Ended
Sep. 30, 2021
Basis of Presentation  
Basis of Presentation

NOTE 1—BASIS OF PRESENTATION

The unaudited interim condensed consolidated financial statements of Trinseo PLC and its subsidiaries (the “Company”) as of and for the periods ended September 30, 2021 and 2020 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 2020 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 February 22, 2021. The Company’s condensed consolidated financial statements presented herein reflect the latest estimates and assumptions made by management that affect the reported amounts and related disclosures as of and for the period ended September 30, 2021. However, actual results could differ from these estimates and assumptions.

On October 8, 2021, the Company completed a cross-border merger transaction, pursuant to which its former publicly-traded parent entity, Trinseo S.A., a Luxembourg limited liability company, was merged with and into Trinseo PLC, an Irish public limited company, with Trinseo PLC as the surviving entity (the “Redomiciliation”). The Redomiciliation was completed pursuant to an agreement between the parties entitled the Common Draft Terms of Merger dated as of April 23, 2021 and was approved by shareholders at Trinseo S.A.’s 2021 annual general meeting on June 14, 2021. As a result of the Redomiciliation, all of Trinseo S.A.’s outstanding ordinary shares, par value $0.01 per share, excluding treasury shares, were exchanged on a one-for-one basis for newly issued ordinary shares, par value $0.01 per share, of Trinseo PLC. The treasury shares of Trinseo S.A. were cancelled in conjunction with the Redomiciliation. All references herein to “Trinseo” or the “Company” refer to Trinseo S.A. and its subsidiaries through the effective date of the Redomiciliation, and thereafter refer to Trinseo PLC and its subsidiaries. As the Redomiciliation was completed subsequent to September 30, 2021, amounts presented herein represent the results of Trinseo S.A. as of and for the periods ended September 30, 2021 and have not been adjusted for the equity transactions completed in connection with the Redomiciliation on October 8, 2021.

The December 31, 2020 condensed consolidated balance sheet data presented herein was derived from the Company’s December 31, 2020 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 year presentation. These reclassifications pertain primarily to the Company’s entry into an agreement during the second quarter of 2021 to sell its Synthetic Rubber business, as a result of which the Company reclassified its Synthetic Rubber assets and liabilities as held-for-sale and reclassified the operating results of its Synthetic Rubber business, net of taxes, as discontinued operations for all periods presented. Refer to Note 4 for further information. Throughout this Quarterly Report, unless otherwise indicated, amounts and activity are presented on a continuing operations basis. Additionally, the condensed consolidated financial statements herein reflect reclassifications related to the Company’s resegmentation effective October 1, 2020, as described in Note 16.

v3.21.2
Recent Accounting Guidance
9 Months Ended
Sep. 30, 2021
Recent Accounting Guidance  
Recent Accounting Guidance

NOTE 2—RECENT ACCOUNTING GUIDANCE

In December 2019, the FASB issued guidance that simplifies the accounting for income taxes. The amended guidance includes removal of certain exceptions to the general principles of Accounting Standards Codification (“ASC”) 740, Income Taxes, and simplification in several other areas such as accounting for a franchise tax (or similar tax) that is partially based on income. The Company adopted the guidance effective January 1, 2021, noting that adoption did not have a material impact on its condensed consolidated financial statements.

v3.21.2
Acquisitions
9 Months Ended
Sep. 30, 2021
Acquisitions  
Acquisitions

NOTE 3—ACQUISITIONS

Acquisition of Aristech Surfaces

On September 1, 2021, the Company completed its previously announced acquisition of Aristech Surfaces LLC (“Aristech Surfaces”) from SK AA Holdings LLC (“SK AA Holdings”), the sole member of Aristech Surfaces, through purchase of 100% membership interest and intellectual property (the “Aristech Surfaces Acquisition”). Aristech Surfaces is a leading North America manufacturer and global provider of PMMA continuous cast and solid surface sheets, serving the wellness, architectural, transportation and industrial markets, which the Company believes will pair well with its existing Engineered Materials business, inclusive of the PMMA Acquisition completed earlier in 2021, discussed further below. Aristech Surfaces’ products are used for a variety of applications, including the construction of hot tubs, swim spas, counter tops, signage, bath products and recreational vehicles.

The preliminary purchase price consideration for the Aristech Surfaces Acquisition amounted to $449.7 million, subject to customary working capital and other closing adjustments, and was funded using the Company’s available cash and existing credit facilities. Refer to Note 8 for further information on the existing credit facilities used to fund the Aristech Surfaces Acquisition.

The Company accounted for the Aristech Surfaces Acquisition as a business combination pursuant to ASC 805. In accordance with ASC 805, fair values are assigned to tangible and identifiable intangible assets acquired and liabilities assumed at the acquisition date based on the information that was available as of the acquisition date. The Company believes that the information available provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed for the acquisition, however, preliminary measurements of fair value, including, but not limited to, inventory, intangible assets, property, plant and equipment, contingent liabilities, and such changes could be material. During the measurement period, if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in revised estimated values of those assets or liabilities as of that date we will revise the preliminary purchase price allocation. The effect of measurement period adjustments to the estimated fair values will be reflected as if the adjustments had been completed on the acquisition date. The impact of all changes that do not qualify as measurement period adjustments will be included in current period earnings.

The Company allocated the purchase price of the acquisition to identifiable assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The excess of the purchase price over the aggregate fair values was recorded as goodwill. The Company calculated the fair value of the assets acquired using the income and cost approaches (or a combination thereof). Fair values were determined based on various inputs including estimated future cash flows, discount rates, royalty rates, growth rates, sales projections, retention rates and terminal values, all of which require significant management judgment.

The table below summarizes the purchase price allocation for the assets acquired and liabilities assumed, based on their relative fair values, which have been assessed as of the September 1, 2021 acquisition date:

September 1,

    

2021

Cash and cash equivalents

$

1.7

Accounts receivable

 

26.9

Inventories (1)

 

30.3

Other current assets

 

1.9

Property, plant and equipment

 

75.3

Other intangible assets (2)

Customer relationships

 

145.0

Developed technology

 

52.5

Tradenames

10.0

Other amortizable intangible assets

0.3

Right-of-use assets - operating

 

2.0

Deferred charges and other assets

0.8

Total fair value of assets acquired

346.7

Accounts payable

(13.8)

Current lease liabilities - operating

 

(0.4)

Accrued expenses and other current liabilities

(3.1)

Noncurrent lease liabilities - operating

(1.6)

Other noncurrent obligations

(1.4)

Total fair value of liabilities assumed

(20.3)

Net identifiable assets acquired

326.4

Purchase price consideration

449.7

Goodwill (3)

$

123.3

(1)Fair value of work-in-process and finished goods inventory acquired included a step-up in the value of approximately $6.9 million, out of which $3.5 million was amortized during the third quarter of 2021 within "Cost of sales" on the condensed consolidated statements of operations as the related inventory was sold to customers.
(2)The expected weighted average useful life of the acquired intangible assets are 13 years for customer relationships, 11 years for developed technology, and 10 years for tradenames and 1-5 years for other amortizable intangible assets.
(3)Goodwill largely consists of strategic and synergistic opportunities resulting from combining Aristech Surfaces with the Company’s existing businesses and is allocated entirely to the Engineered Materials segment. All of the goodwill related to this acquisition will be deductible for income tax purposes.

Net sales and net loss of Aristech Surfaces between the September 1, 2021 acquisition date and September 30, 2021 were $14.8 million and $3.1 million, respectively, and are recognized within the Company's condensed consolidated statements of operations for the three and nine months ended September 30, 2021.

Transaction-related costs

Pursuant to GAAP, costs incurred to complete the Aristech Surfaces Acquisition as well as costs incurred to integrate into our operations are expensed as incurred. The Company incurred $3.1 million and $3.4 million of transaction-related costs for the three and nine months ended September 30, 2021, respectively. The amounts were recorded within “Selling, general and administrative expenses” in the Company’s condensed consolidated statements of

operations, and are reflected in the nine months ended September 30, 2020 in the supplemental pro forma information below.

Acquisition of the Arkema PMMA Business

On May 3, 2021, the Company completed its previously-announced acquisition of the polymethyl methacrylates (“PMMA”) and activated methyl methacrylates (“MMA”) business (together, the “PMMA business”) from Arkema PLC, (“Arkema”) through the purchase of 100% of the shares of certain subsidiaries of Arkema (the “PMMA Acquisition”). The PMMA Acquisition was completed pursuant to the Share Purchase Agreement, dated March 19, 2021 (the “SPA”), by and between the Company and Arkema. PMMA is a transparent and rigid plastic with a wide range of end uses, and is an attractive adjacent chemistry which complements Trinseo’s existing offerings across several end markets including automotive, building & construction, medical and consumer electronics.

The following table illustrates each component of the purchase price consideration related to the PMMA Acquisition:

    

Initial cash purchase price paid (1)

    

$

1,369.0

Known purchase price adjustment, not yet settled (2)

 

(4.1)

Total purchase price consideration

$

1,364.9

(1)The PMMA Acquisition had an initial purchase price consideration of $1,370.7 million, of which $1,369.0 million was paid during the second quarter of 2021. This initial purchase price consideration remains subject to customary working capital and other closing adjustments.
(2)Known purchase price adjustment not yet paid relates primarily to consideration for estimated working capital adjustments and certain assets at the Porto Marghera, Italy manufacturing site which will be legally transferred to Trinseo at a later date due to local transfer restrictions; however, the Company has the benefits and risks of ownership during the period from May 3, 2021 until the site legally transfers. This purchase price consideration is expected to be paid in the fourth quarter of 2021.

The PMMA Acquisition was funded using the net proceeds from the Company’s new financing arrangements, including $450.0 million from its 2029 Senior Notes issued on March 24, 2021 and $750.0 million of incremental borrowings under the 2028 Term Loan B entered into in conjunction with closing of the transaction, as well as available cash. Refer to Note 8 for further information on the financing arrangements used to fund the PMMA Acquisition.

The Company accounted for the PMMA Acquisition as a business combination pursuant to ASC 805. In accordance with ASC 805, fair values are assigned to tangible and identifiable intangible assets acquired and liabilities assumed at the acquisition date based on the information that was available as of that date. The Company believes that the information available provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed for the PMMA Acquisition; however, preliminary measurements of fair value, including, but not limited to, inventory, intangible assets, property, plant and equipment, pension and postretirement obligations, contingent liabilities, including environmental remediation obligations, and deferred tax assets and liabilities are subject to change during the measurement period, and such changes could be material. The Company expects to finalize the valuation and accounting for the PMMA Acquisition as soon as practicable, but no later than one year after the acquisition date. During the measurement period, if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in revised estimated values of those assets or liabilities as of that date, the Company will revise the preliminary purchase price allocation. The effect of measurement period adjustments to the estimated fair values will be reflected as if the adjustments had been completed on the acquisition date. The impact of all changes that do not qualify as measurement period adjustments will be included in current period earnings.

The Company allocated the purchase price of the PMMA Acquisition to identifiable assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The excess of the purchase price over the aggregate fair values was recorded as goodwill. The Company calculated the fair value of the assets acquired using the income and cost approaches (or a combination thereof). Fair values were determined based on various inputs including estimated future cash flows, discount rates, royalty rates, growth rates, sales projections, customer retention rates and

terminal values. The fair value of pension liabilities assumed was determined in accordance with ASC 715 using key inputs including, but not limited to, discount rates, expected rates of return on plan assets, and future compensation growth rates. The various inputs used in the asset and pension valuations require significant management judgment.

The table below summarizes the preliminary purchase price allocation for the assets acquired and liabilities assumed, based on their relative fair values. In the third quarter of 2021, the Company recorded certain measurement period adjustments to reflect facts and circumstances in existence as of the May 3, 2021 acquisition date. These adjustments included a $19.4 million increase to property, plant and equipment, a $5.0 million increase to deferred income tax liabilities, a $5.8 million decrease to purchase price consideration, and a resulting $20.1 million decrease to goodwill.

May 3,

    

2021

Cash and cash equivalents

$

10.4

Accounts receivable

 

19.1

Inventories (1)

 

78.9

Other current assets

 

8.7

Property, plant and equipment

 

255.4

Other intangible assets (2)

Customer relationships

 

326.6

Developed technology

 

133.0

Tradenames

46.0

Other amortizable intangible assets

0.4

Right-of-use assets - operating

 

4.1

Deferred charges and other assets

27.9

Total fair value of assets acquired

910.5

Accounts payable

(15.0)

Current lease liabilities - operating

 

(1.7)

Income taxes payable

(0.3)

Accrued expenses and other current liabilities

(11.3)

Noncurrent lease liabilities - operating

(2.5)

Deferred income tax liabilities

(39.3)

Other noncurrent obligations (3)

(23.1)

Total fair value of liabilities assumed

(93.2)

Net identifiable assets acquired

817.3

Purchase price consideration

1,364.9

Goodwill (4)

$

547.6

(1)Fair value of finished goods inventory acquired included a step-up in the value of approximately $10.1 million, which was fully amortized during the second quarter of 2021 within "Cost of sales" on the condensed consolidated statements of operations as the related inventory was sold to customers.
(2)The expected weighted average useful life of the acquired intangible assets are 13 years for customer relationships, 10 years for developed technology, 16 years for tradenames, and 1-5 years for other amortizable intangible assets.
(3)Includes $18.2 million of net pension and other employee benefits assumed as part of the PMMA Acquisition.
(4)Goodwill largely consists of strategic and synergistic opportunities resulting from combining the PMMA business with the Company’s existing businesses and is allocated entirely to the Engineered Materials segment. Approximately $310.0 million of goodwill related to this acquisition will be deductible for income tax purposes based on the preliminary purchase price.

The results of the PMMA business are recognized within the Company's condensed consolidated statements of operations since the closing of the acquisition on May 3, 2021. The PMMA business contributed net sales and net loss of $224.6 million and $1.6 million, respectively, to the Company’s results for the three months ended September 30, 2021.

The PMMA business acquisition contributed net sales and net loss of $332.1 million and $5.4 million, respectively, to the Company’s results for the period from May 3, 2021 to September 30, 2021.

Transaction-related costs

Pursuant to GAAP, costs incurred to complete the PMMA Acquisition as well as costs incurred to integrate into our operations are expensed as incurred. The Company incurred $0.2 million and $20.0 million of transaction-related costs for the three and nine months ended September 30, 2021, respectively. The amounts were recorded within “Selling, general and administrative expenses” in the Company’s condensed consolidated statements of operations, and are reflected in the nine months ended September 30, 2020 in the supplemental pro forma information below.

In connection with the PMMA Acquisition, the Company entered into certain customary transitional services agreements with Arkema to provide for the orderly separation and transition of various functions and processes. These services will be provided by Arkema to the Company for up to 18 months after closing, with certain extension options available. These services include information technology, accounting and finance, procurement, supply chain, and other services, while we assume the operations of the PMMA business.

Additionally, the Company paid Arkema $10.6 million for certain information technology separation costs in order to support the transition services agreements entered into at the time of close. These payments have not been included as a component of consideration transferred, and instead have been capitalized as prepaid assets within “Other current assets” on the condensed consolidated balance sheets. The cost will be recognized as expense over the period in which the services are expected to be rendered under the transition services agreements.

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information presents the condensed consolidated results of operations of the Company with the PMMA business and Aristech Surfaces for the three and nine months ended September 30, 2021 and 2020, respectively, as if these acquisitions had occurred on January l, 2020. The proforma results were calculated by combining the results of Trinseo with the PMMA business and Aristech Surfaces but do not include adjustments related to cost savings or other synergies that are anticipated as a result of these acquisitions. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations would have been if the acquisitions had occurred as of January 1, 2020, nor are they indicative of future results of operations.

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2021

    

2020

    

2021

    

2020

Net sales

    

$

1,300.2

    

$

862.0

    

$

3,863.8

    

$

2,499.7

Net income (loss)

$

94.1

$

104.0

$

355.1

$

(96.7)

Income (loss) from continuing operations

$

80.4

$

38.4

$

317.1

$

(41.3)

v3.21.2
Divestitures and Discontinued Operations
9 Months Ended
Sep. 30, 2021
Divestitures  
Divestitures and Discontinued Operations

NOTE 4—DIVESTITURES AND DISCONTINUED OPERATIONS

On May 21, 2021, the Company and Synthos PLC and certain of its subsidiaries (together, “Synthos”) entered into an Asset Purchase Agreement (the “Purchase Agreement”), pursuant to which the Company agreed to sell its Synthetic Rubber business to Synthos in an all-cash transaction with an initial aggregate price of $449.4 million, which reflects a reduction of approximately $41.6 million for the assumption of pension liabilities by Synthos. This initial aggregate purchase price included a working capital target (excluding inventory) of $47.0 million, which was subject to adjustment based on actual amounts conveyed at closing.

On October 21, 2021, the Company and Synthos entered into an amendment to the Purchase Agreement (the “Amended Purchase Agreement”), whereby net working capital (excluding inventory) will not transfer with the sale of the Synthetic Rubber business and, in exchange, the working capital target of $47.0 million will be removed from the

purchase price. This will result in an amended purchase price of $402.4 million, subject to certain adjustments related to inventory and the exercise of certain option rights related to equity investments held by the Company.

This sale is expected to close in December 2021, subject to customary closing conditions. As a result of the above agreements, the assets and liabilities of the Company’s Synthetic Rubber business were classified as held-for-sale starting in the second quarter of 2021 in the condensed consolidated balance sheets and the associated operating results of the Synthetic Rubber business, net of income tax, have been classified as discontinued operations in the condensed consolidated statements of operations and statements of cash flows for all periods presented, in accordance with the guidance in ASC 205-20, Discontinued Operations.

The following table summarizes the assets and liabilities classified as held-for-sale at September 30, 2021 and December 31, 2020:

September 30, 

December 31, 

    

2021

2020

Assets

    

    

Current assets

Accounts receivable, net of allowance

$

83.5

$

59.7

Inventories and other current assets

 

89.2

 

60.6

Total current assets

 

172.7

 

120.3

Property, plant and equipment, net

152.3

170.3

Other assets

Goodwill

 

11.4

 

12.1

Other intangible assets, net

 

17.5

 

20.2

Deferred charges and other assets

 

25.6

 

25.6

Total other assets

 

54.5

 

57.9

Total assets held-for-sale (1)

$

379.5

$

348.5

Liabilities

Current liabilities

Accounts payable

 

27.6

 

29.5

Accrued expenses and other current liabilities

11.3

12.7

Total current liabilities

 

38.9

 

42.2

Noncurrent liabilities

Other noncurrent obligations

 

42.4

 

42.3

Total noncurrent liabilities

 

42.4

 

42.3

Total liabilities held-for-sale (1)

$

81.3

$

84.5

(1)All balance sheet amounts as of September 30, 2021 have been classified as current within the condensed consolidated balance sheets, as the sale is expected to occur within one year of the balance sheet date.

The following table summarizes the results of the Synthetic Rubber business for the three and nine months ended September 30, 2021 and 2020, which are reflected as discontinued operations in the Company’s condensed consolidated statements of operations:

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2021

    

2020

    

2021

    

2020

Net sales

    

$

122.3

    

$

79.5

    

$

382.2

    

$

217.5

Cost of sales

 

101.9

 

82.5

 

321.2

 

238.9

Gross profit (loss)

 

20.4

 

(3.0)

 

61.0

 

(21.4)

Selling, general and administrative expenses

 

4.9

 

7.4

 

16.7

 

17.8

Impairment charges

28.0

Operating income (loss)

 

15.5

 

(10.4)

 

44.3

 

(67.2)

Other expense, net

0.2

0.4

1.2

1.1

Income (loss) from discontinued operations before income taxes

 

15.3

 

(10.8)

 

43.1

 

(68.3)

Provision for (benefit from) income taxes

 

1.6

 

(76.4)

 

5.1

 

(12.9)

Net income (loss) from discontinued operations

$

13.7

$

65.6

$

38.0

$

(55.4)

Amounts for operating net sales and costs of sales which had previously been eliminated in consolidation related to intercompany sales of styrene monomer to the Synthetic Rubber business are now reflected on a gross basis as a component of net sales and costs of sales from continuing operations for all periods presented. The Company has recast these amounts because upon completion of the sale of the Synthetic Rubber business, the Company will continue to have these ongoing transactions with Synthos, under a supply agreement executed in conjunction with the divestiture. Refer to Note 5 for recast segment net sales reflecting this adjustment.

Additionally, the Company previously allocated certain corporate management overhead costs to the former Synthetic Rubber segment which may no longer be allocated to discontinued operations under the relevant authoritative accounting guidance. Accordingly, the Company has recast its segment reporting results to reflect the reattribution of these expenses in all periods presented. Refer to Note 16 for recast segment results reflecting this adjustment.

v3.21.2
Net Sales
9 Months Ended
Sep. 30, 2021
Revenue from Contract with Customer [Abstract]  
Net Sales

NOTE 5—NET SALES

Refer to the Annual Report for information on the Company's accounting policies and further background related to its net sales.

The following table provides disclosure of net sales to external customers by primary geographical market (based on the location where sales originated), by segment for the three and nine months ended September 30, 2021 and 2020. Prior period balances in this table have been recast to reflect current period presentation, as described in Notes 1 and 4, including updates for the classification of the Company’s former Synthetic Rubber segment as discontinued operations and the Company’s prior year resegmentation.

Latex

Engineered

Base

 

Three Months Ended

Binders

Materials

Plastics

Polystyrene

Feedstocks

Total

 

September 30, 2021

United States

$

86.3

$

102.4

$

82.3

$

$

4.0

$

275.0

Europe

 

153.5

 

89.6

 

247.3

 

162.6

 

50.8

 

703.8

Asia-Pacific

 

73.0

 

35.9

 

43.9

 

112.2

 

 

265.0

Rest of World

 

2.8

 

2.9

 

19.8

 

 

 

25.5

Total

$

315.6

$

230.8

$

393.3

$

274.8

$

54.8

$

1,269.3

September 30, 2020

United States

$

54.1

$

8.0

$

52.8

$

$

2.0

$

116.9

Europe

 

79.7

 

13.8

126.8

 

96.9

 

31.7

 

348.9

Asia-Pacific

 

48.1

 

28.1

40.9

 

70.4

 

4.9

192.4

Rest of World

 

1.3

 

0.1

19.6

 

 

 

21.0

Total

$

183.2

$

50.0

$

240.1

$

167.3

$

38.6

$

679.2

Latex

Engineered

Base

 

Nine Months Ended

Binders

Materials

Plastics

Polystyrene

Feedstocks

Total

 

September 30, 2021

United States

$

228.2

$

174.1

$

216.5

$

$

10.7

$

629.5

Europe

 

431.4

 

190.8

 

699.2

 

511.7

 

188.9

 

2,022.0

Asia-Pacific

 

211.1

 

108.1

 

144.5

 

343.3

 

 

807.0

Rest of World

 

6.9

 

4.5

 

59.1

 

 

 

70.5

Total

$

877.6

$

477.5

$

1,119.3

$

855.0

$

199.6

$

3,529.0

September 30, 2020

United States

$

167.2

$

25.3

$

143.5

$

$

5.9

$

341.9

Europe

 

254.0

 

37.4

366.1

 

301.8

 

93.4

 

1,052.7

Asia-Pacific

 

140.9

 

72.3

94.5

 

204.1

 

19.7

531.5

Rest of World

 

5.2

 

0.2

45.0

 

 

 

50.4

Total

$

567.3

$

135.2

$

649.1

$

505.9

$

119.0

$

1,976.5

v3.21.2
Investments in Unconsolidated Affiliates
9 Months Ended
Sep. 30, 2021
Investments in Unconsolidated Affiliates  
Investments in Unconsolidated Affiliates

NOTE 6—INVESTMENTS IN UNCONSOLIDATED AFFILIATES

The Company is currently supplemented by one joint venture, Americas Styrenics LLC (“Americas Styrenics,” a styrene and polystyrene joint venture with Chevron Phillips Chemical Company LP), which is accounted for using the equity method. The results of Americas Styrenics are included within its own reporting segment.

Americas Styrenics is a privately held company; therefore, a quoted market price for its equity interests is not available. The summarized financial information of the Company’s unconsolidated affiliate is shown below.

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2021

    

2020

    

2021

    

2020

    

Sales

    

$

433.4

    

$

269.7

    

$

1,351.9

    

$

817.3

Gross profit

$

49.3

$

39.6

$

189.2

$

78.1

Net income

$

37.2

$

27.5

$

151.8

$

39.3

As of September 30, 2021 and December 31, 2020, the Company’s investment in Americas Styrenics was $250.3 million and $240.1 million, respectively, which was $10.6 million and $16.3 million greater than the Company’s 50% share of the underlying net assets of Americas Styrenics, respectively. This amount represents the difference between the book value of assets held by the joint venture and the Company’s 50% share of the total recorded value of the joint venture’s assets, inclusive of certain adjustments to conform with the Company’s accounting policies. This difference is being amortized over a weighted average remaining useful life of approximately 2.6 years as of September 30, 2021. The Company received dividends of $20.0 million and $60.0 million from Americas Styrenics during the three and nine months ended September 30, 2021, respectively, while no dividends were received during the three and nine months ended September 30, 2020.

v3.21.2
Inventories
9 Months Ended
Sep. 30, 2021
Inventories  
Inventories

NOTE 7—INVENTORIES

Inventories consisted of the following:

September 30, 

December 31,

    

2021

2020

Finished goods

    

$

314.0

    

$

132.9

Raw materials and semi-finished goods

 

265.5

 

161.7

Supplies

 

37.8

 

29.5

Total

$

617.3

$

324.1

v3.21.2
Debt
9 Months Ended
Sep. 30, 2021
Debt  
Debt

NOTE 8—DEBT

Refer to the Annual Report for definitions of capitalized terms not included herein and further background on the Company’s debt structure discussed below. The Company was in compliance with all debt related covenants as of September 30, 2021 and December 31, 2020.

As of September 30, 2021 and December 31, 2020, debt consisted of the following:

September 30, 2021

December 31, 2020

   

Interest Rate as of
September 30, 2021

   

Maturity Date

   

Carrying Amount

   

Unamortized Deferred Financing Fees (1)

    

Total Debt, Less Unamortized Deferred Financing Fees