TRINSEO S.A., 10-Q filed on 8/5/2021
Quarterly Report
v3.21.2
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2021
Aug. 02, 2021
Cover [Abstract]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Jun. 30, 2021  
Document Transition Report false  
Entity File Number 001-36473  
Entity Registrant Name Trinseo S.A.  
Entity Incorporation, State or Country Code N4  
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 $0.01 per share  
Trading Symbol TSE  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   38,827,828
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q2  
Entity Central Index Key 0001519061  
Current Fiscal Year End Date --12-31  
Amendment Flag false  
v3.21.2
Condensed Consolidated Balance Sheets - USD ($)
$ in Millions
Jun. 30, 2021
Dec. 31, 2020
Current assets    
Cash and cash equivalents $ 367.0 $ 588.7
Accounts receivable, net of allowance for doubtful accounts (June 30, 2021: $4.5; December 31, 2020: $5.6) 769.0 469.5
Inventories 562.9 324.1
Other current assets 30.2 14.5
Current assets held for sale 383.0 120.3
Total current assets 2,112.1 1,517.1
Investments in unconsolidated affiliates 253.2 240.1
Property, plant and equipment, net of accumulated depreciation (June 30, 2021: $546.9; December 31, 2020: $524.7) 641.3 431.1
Other assets    
Goodwill 623.5 62.1
Other intangible assets, net 649.4 162.6
Right of use assets - operating, net 81.2 77.8
Deferred income tax assets 78.5 90.2
Deferred charges and other assets 65.5 36.0
Noncurrent assets held for sale   228.2
Total other assets 1,498.1 656.9
Total assets 4,504.7 2,845.2
Current liabilities    
Short-term borrowings and current portion of long-term debt 19.1 12.2
Accounts payable 495.1 325.9
Current lease liabilities - operating 18.2 15.5
Income taxes payable 26.3 10.0
Accrued expenses and other current liabilities 168.9 127.5
Current liabilities held for sale 86.4 42.2
Total current liabilities 814.0 533.3
Noncurrent liabilities    
Long-term debt, net of unamortized deferred financing fees 2,310.1 1,158.1
Noncurrent lease liabilities - operating 65.5 65.5
Deferred income tax liabilities 90.7 60.7
Other noncurrent obligations 394.6 395.0
Noncurrent liabilities held for sale   42.3
Total noncurrent liabilities 2,860.9 1,721.6
Shareholders' equity    
Ordinary shares, $0.01 nominal value, 50,000.0 shares authorized (June 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 578.7 579.6
Treasury shares, at cost (June 30, 2021: 10.0 shares; December 31, 2020: 10.4 shares) (525.3) (542.9)
Retained earnings 955.8 739.2
Accumulated other comprehensive loss (179.9) (186.1)
Total shareholders' equity 829.8 590.3
Total liabilities and shareholders' equity $ 4,504.7 $ 2,845.2
v3.21.2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Millions
Jun. 30, 2021
Dec. 31, 2020
Condensed Consolidated Balance Sheets    
Allowance for doubtful accounts $ 4.5 $ 5.6
Accumulated depreciation $ 546.9 $ 524.7
Ordinary shares, nominal value $ 0.01 $ 0.01
Ordinary shares, shares authorized 50,000,000,000.0 50,000,000,000.0
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 6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Jun. 30, 2021
Jun. 30, 2020
Condensed Consolidated Statements of Operations        
Net sales $ 1,273.7 $ 534.3 $ 2,259.7 $ 1,297.3
Cost of sales 1,053.7 510.9 1,850.8 1,216.2
Gross profit (loss) 220.0 23.4 408.9 81.1
Selling, general and administrative expenses 97.3 52.9 153.8 125.7
Equity in earnings of unconsolidated affiliates 30.1 14.4 53.0 24.2
Impairment charges 1.8   1.8 10.3
Operating income (loss) 151.0 (15.1) 306.3 (30.7)
Interest expense, net 21.6 11.7 33.6 22.0
Acquisition purchase price hedge (gain) loss (33.0)   22.0  
Loss on extinguishment of long-term debt 0.5   0.5  
Other expense (income), net 5.6 0.4 8.0 1.7
Income (loss) before income taxes 156.3 (27.2) 242.2 (54.4)
Provision for (benefit from) income taxes 23.3 (53.0) 43.4 (10.8)
Net income (loss) from continuing operations 133.0 25.8 198.8 (43.6)
Net income (loss) from discontinued operations, net of income taxes 18.6 (154.2) 24.3 (121.1)
Net income (loss) $ 151.6 $ (128.4) $ 223.1 $ (164.7)
Earnings Per Share        
Weighted average shares- basic 38.8 38.2 38.6 38.4
Net income (loss) per share- basic, continuing $ 3.43 $ 0.68 $ 5.15 $ (1.14)
Net income (loss) per share- basic, discontinued operations 0.48 (4.04) 0.62 (3.15)
Net income (loss) per share- basic $ 3.91 $ (3.36) $ 5.77 $ (4.29)
Weighted average shares- diluted 39.6 38.3 39.6 38.4
Net income (loss) per share- diluted, continuing $ 3.35 $ 0.67 $ 5.02 $ (1.14)
Net income (loss) per share- diluted, discontinued operations 0.47 (4.02) 0.61 (3.15)
Net income (loss) per share- diluted $ 3.82 $ (3.35) $ 5.63 $ (4.29)
v3.21.2
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Jun. 30, 2021
Jun. 30, 2020
Condensed Consolidated Statements of Comprehensive Income (Loss)        
Net income (loss) $ 151.6 $ (128.4) $ 223.1 $ (164.7)
Other comprehensive income (loss), net of tax        
Cumulative translation adjustments (0.7) (1.1) (0.3) 9.6
Net gain (loss) on cash flow hedges (0.2) (1.3) 4.4 (5.0)
Pension and other postretirement benefit plans:        
Net gain arising during period (net of tax of $0.0, $0.0, $0.0 and $0.1)       0.6
Amounts reclassified from accumulated other comprehensive income 1.0 0.5 2.1 1.1
Total other comprehensive income (loss), net of tax 0.1 (1.9) 6.2 6.3
Comprehensive income (loss) $ 151.7 $ (130.3) $ 229.3 $ (158.4)
v3.21.2
Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Jun. 30, 2021
Jun. 30, 2020
Condensed Consolidated Statements of Comprehensive Income (Loss)        
Net gain (loss) during period, tax (benefit) expense $ 0.0 $ 0.0 $ 0.0 $ (0.1)
v3.21.2
Condensed Consolidated Statements of Shareholders' Equity - USD ($)
shares in Millions, $ in Millions
Ordinary Shares
Additional Paid-In Capital
Treasury Shares
Accumulated Other Comprehensive Income (Loss)
Retained Earnings
Total
Balance at beginning of period at Dec. 31, 2019 $ 0.5 $ 574.7 $ (524.9) $ (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 (loss)         (36.3) (36.3)
Other comprehensive income (loss)       8.2   8.2
Share-based compensation   1.0 $ 1.7     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 $ 0.5 575.7 $ (548.2) (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 $ 0.5 574.7 $ (524.9) (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 (loss)           (164.7)
Other comprehensive income (loss)           6.3
Balance at end of period at Jun. 30, 2020 $ 0.5 576.3 $ (547.3) (156.1) 585.4 458.8
Balance at end of period, shares at Jun. 30, 2020 38.3   10.5      
Balance at beginning of period at Mar. 31, 2020 $ 0.5 575.7 $ (548.2) (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 (loss)         (128.4) (128.4)
Other comprehensive income (loss)       (1.9)   (1.9)
Share-based compensation   0.6 $ 0.9     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 $ 0.5 576.3 $ (547.3) (156.1) 585.4 458.8
Balance at end of period, shares at Jun. 30, 2020 38.3   10.5      
Balance at beginning of period at Dec. 31, 2020 $ 0.5 579.6 $ (542.9) (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 (loss)         71.5 $ 71.5
Other comprehensive income (loss)       6.1   6.1
Share-based compensation   (1.1) $ 12.9     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 $ 0.5 578.5 $ (530.0) (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 $ 0.5 579.6 $ (542.9) (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 (loss)           $ 223.1
Other comprehensive income (loss)           6.2
Balance at end of period at Jun. 30, 2021 $ 0.5 578.7 $ (525.3) (179.9) 955.8 $ 829.8
Balance at end of period, shares at Jun. 30, 2021 38.8   10.0     38.8
Balance at beginning of period at Mar. 31, 2021 $ 0.5 578.5 $ (530.0) (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 (loss)         151.6 151.6
Other comprehensive income (loss)       0.1   0.1
Share-based compensation   0.2 $ 4.7     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 $ 578.7 $ (525.3) $ (179.9) $ 955.8 $ 829.8
Balance at end of period, shares at Jun. 30, 2021 38.8   10.0     38.8
v3.21.2
Condensed Consolidated Statements of Shareholders' Equity (Parenthetical)) - $ / shares
3 Months Ended
Jun. 30, 2021
Mar. 31, 2021
Jun. 30, 2020
Mar. 31, 2020
Condensed Consolidated Statement of Stockholders' Equity        
Dividends on ordinary shares $ 0.08 $ 0.08 $ 0.40 $ 0.40
v3.21.2
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Millions
6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Cash flows from operating activities    
Net income (loss) $ 223.1 $ (164.7)
Net income (loss) from discontinued operations 24.3 (121.1)
Net income (loss) from continuing operations 198.8 (43.6)
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by (used in) operating activities - continuing operations    
Depreciation and amortization 61.2 48.6
Amortization of deferred financing fees, issuance discount, and excluded component of hedging instruments 3.2 1.6
Deferred income tax 3.6 (12.0)
Share-based compensation expense 7.0 6.1
Earnings of unconsolidated affiliates, net of dividends (13.1) (24.2)
Unrealized net gain on foreign exchange forward contracts (31.5) (2.0)
Acquisition purchase price hedge (gain) loss 22.0  
Loss on extinguishment of debt 0.5  
Gain on sale of businesses and other assets (0.2) (0.4)
Asset impairment charges or write-offs 1.8 10.3
Changes in assets and liabilities    
Accounts receivable (268.0) 87.8
Inventories (165.4) 112.2
Accounts payable and other current liabilities 196.5 (115.4)
Income taxes payable 16.2 54.0
Other assets, net (8.5) (7.9)
Other liabilities, net 20.2 3.3
Cash provided by operating activities, continuing operations 44.3 118.4
Cash used in operating activities, discontinued operations (14.3) (42.6)
Cash provided by operating activities 30.0 75.8
Cash flows from investing activities    
Capital expenditures (30.0) (38.2)
Cash received (paid) for asset and business acquisitions, net of cash acquired ($10.4) (1,358.6) 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 (1,403.1) 25.4
Cash used in investing activities, discontinued operations (2.4) (10.0)
Cash provided by (used in) investing activities (1,405.5) 15.4
Cash flows from financing activities    
Deferred financing fees (35.0)  
Short-term borrowings, net (6.2) (5.4)
Purchase of treasury shares   (25.0)
Dividends paid (6.4) (31.2)
Proceeds from exercise of option awards 10.5  
Withholding taxes paid on restricted share units (0.8) (0.6)
Net proceeds from issuance of Term Loan B 746.3  
Repayments of 2024 Term Loan B (3.5) (3.4)
Net proceeds from issuance of Senior Notes 450.0  
Proceeds from draw on 2022 Revolving Facility   100.0
Cash provided by financing activities 1,154.9 34.4
Effect of exchange rates on cash (1.1) (0.5)
Net change in cash, cash equivalents and restricted cash (221.7) 125.1
Cash, cash equivalents and restricted cash, beginning of period 588.7 457.4
Cash, cash equivalents and restricted cash, end of period 367.0 582.5
Restricted cash   (0.7)
Cash and cash equivalents, end of period 367.0 $ 581.8
Supplemental disclosure of cash flow information    
Net cash received $ 10.4  
v3.21.2
Basis of Presentation
6 Months Ended
Jun. 30, 2021
Basis of Presentation  
Basis of Presentation

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 June 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 June 30, 2021. However, actual results could differ from these estimates and assumptions.

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
6 Months Ended
Jun. 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
6 Months Ended
Jun. 30, 2021
Acquisitions  
Acquisitions

NOTE 3—ACQUISITIONS

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 S.A., (“Arkema”) through the purchase of 100% of the shares of certain subsidiaries of Arkema (the “Acquisition”). The 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 Acquisition:

    

Initial cash purchase price paid (1)

    

$

1,369.0

Known purchase price adjustment, not yet paid (2)

 

1.7

Total purchase price consideration

$

1,370.7

(1)The 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 is subject to customary working capital and other closing adjustments.

(2)Known purchase price adjustment not yet paid relates primarily to consideration for 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 second half of 2021.

The 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 Acquisition.

The Company accounted for the 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 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 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 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, which have been assessed as of the May 3, 2021 acquisition date:

May 3,

    

2021

Cash and cash equivalents

$

10.4

Accounts receivable

 

19.1

Inventories (1)

 

78.6

Other current assets

 

8.7

Property, plant and equipment

 

236.0

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

890.8

Accounts payable

(15.0)

Current lease liabilities - operating

 

(1.7)

Income taxes payable

(0.1)

Accrued expenses and other current liabilities

(11.7)

Noncurrent lease liabilities - operating

(2.5)

Deferred income tax liabilities

(34.3)

Other noncurrent obligations (3)

(22.5)

Total fair value of liabilities assumed

(87.8)

Net identifiable assets acquired

803.0

Purchase price consideration

1,370.7

Goodwill (4)

567.7

(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 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.

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information presents the condensed consolidated results of operations of the Company including the PMMA business for the three and six months ended June 30, 2021 and 2020, respectively, as if the Acquisition had occurred on January 1, 2020. The proforma results were calculated by combining the results of Trinseo with the PMMA business, but do not include adjustments related to cost savings or other synergies that are anticipated as a result of the Acquisition. 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 Acquisition had occurred as of January 1, 2020, nor are they indicative of future results of operations.

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2021

    

2020

    

2021

    

2020

Net sales

    

$

1,324.7

    

$

676.0

    

$

2,474.4

    

$

1,580.7

Net income (loss)

$

162.4

$

(126.2)

$

250.6

$

(177.9)

Income (loss) from continuing operations

$

143.8

$

28.0

$

226.3

$

(56.8)

Net sales and net loss of the PMMA business between the May 3, 2021 acquisition date and June 30, 2021 were $107.4 million and $3.8 million, respectively, and are recognized within the Company's condensed consolidated statements of operations for the three and six months ended June 30, 2021.

Transaction-related costs

Pursuant to GAAP, costs incurred to complete the Acquisition as well as costs incurred to integrate into our operations are expensed as incurred. The Company incurred $18.2 million and $19.8 million of transaction-related costs for the three and six months ended June 30, 2021, respectively. The amount was recorded within “Selling, general and administrative expenses” in the Company’s condensed consolidated statements of operations, and are reflected in the six months ended June 30, 2020 in the supplemental pro forma information above.

In connection with the 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.

Subsequent Event – Announced Agreement to Acquire Aristech Surfaces

On July 19, 2021, the Company entered into an agreement with SK AA Holdings, LLC, the sole member of Aristech Surfaces LLC (“Aristech Surfaces”), to acquire Aristech Surfaces, a leading North America manufacturer and global provider of PMMA continuous cast and solid surface sheets, serving the wellness, architectural, transportation and industrial markets, for a preliminary purchase price of $445.0 million, subject to customary working capital and other closing adjustments. 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 business will become part of the Company’s Engineered Materials segment. The transaction will be funded with cash on hand and existing credit facilities. The Company anticipates the transaction will close by year-end 2021 subject to customary closing conditions and regulatory approvals.

v3.21.2
Divestitures and Discontinued Operations
6 Months Ended
Jun. 30, 2021
Divestitures  
Divestitures and Discontinued Operations

NOTE 4—DIVESTITURES AND DISCONTINUED OPERATIONS

On May 21, 2021, the Company and Synthos S.A. and certain of its subsidiaries (together, “Synthos”) entered into an Asset Purchase Agreement (the “Purchase Agreement”), pursuant to which the Company has agreed to sell its Synthetic Rubber business to Synthos in an all-cash transaction for an aggregate price of $449.4 million, which reflects a reduction of approximately $41.6 million for the assumption of pension liabilities by Synthos, subject to certain adjustments related to working capital and the exercise of certain option rights related to equity investments held by the Company. This sale is expected to close in the first half of 2022, subject to customary closing conditions and regulatory approvals. As a result of entering into the Purchase Agreement, the assets and liabilities of the Company’s Synthetic Rubber business were classified as held-for-sale during 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 June 30, 2021 and December 31, 2020:

June 30, 

December 31, 

    

2021

2020

Assets

    

    

Current assets

Accounts receivable, net of allowance

$

85.7

$

59.7

Inventories and other current assets

 

89.2

 

60.6

Total current assets

 

174.9

 

120.3

Property, plant and equipment, net

154.6

170.3

Other assets

Goodwill

 

11.7

 

12.1

Other intangible assets, net

 

17.9

 

20.2

Deferred charges and other assets

 

23.9

 

25.6

Total other assets

 

53.5

 

57.9

Total assets held-for-sale (1)

$

383.0

$

348.5

Liabilities

Current liabilities

Accounts payable

 

33.7

 

29.5

Accrued expenses and other current liabilities

10.3

12.7

Total current liabilities

 

44.0

 

42.2

Noncurrent liabilities

Other noncurrent obligations

 

42.4

 

42.3

Total noncurrent liabilities

 

42.4

 

42.3

Total liabilities held-for-sale (1)

$

86.4

$

84.5

(1)All balance sheet amounts as of June 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 six months ended June 30, 2021 and 2020, which are reflected as discontinued operations in the Company’s condensed consolidated statements of operations:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2021

    

2020

    

2021

    

2020

Net sales

    

$

135.7

    

$

36.4

    

$

259.9

    

$

138.1

Cost of sales

 

108.2

 

66.9

 

219.3

 

156.5

Gross profit (loss)

 

27.5

 

(30.5)

 

40.6

 

(18.4)

Selling, general and administrative expenses

 

5.6

 

5.4

 

11.8

 

10.3

Impairment charges

28.0

Operating income (loss)

 

21.9

 

(35.9)

 

28.8

 

(56.7)

Other expense, net

0.8

0.6

1.0

0.8

Income (loss) from discontinued operations before income taxes

 

21.1

 

(36.5)

 

27.8

 

(57.5)

Provision for income taxes

 

2.5

 

117.7

 

3.5

 

63.6

Net income (loss) from discontinued operations

$

18.6

$

(154.2)

$

24.3

$

(121.1)

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
6 Months Ended
Jun. 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 six months ended June 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

 

June 30, 2021

United States

$

74.1

$

60.9

$

71.6

$

$

3.3

$

209.9

Europe

 

160.5

 

80.3

 

253.8

 

199.8

 

68.0

 

762.4

Asia-Pacific

 

74.3

 

37.8

 

51.9

 

113.5

 

 

277.5

Rest of World

 

2.3

 

2.0

 

19.6

 

 

 

23.9

Total

$

311.2

$

181.0

$

396.9

$

313.3

$

71.3

$

1,273.7

June 30, 2020

United States

$

50.9

$

7.4

$

30.0

$

$

1.3

$

89.6

Europe

 

72.3

 

8.7

89.1

 

95.1

 

21.6

 

286.8

Asia-Pacific

 

40.4

 

21.3

26.8

 

60.7

 

1.7

150.9

Rest of World

 

1.3

 

0.1

5.6

 

 

 

7.0

Total

$

164.9

$

37.5

$

151.5

$

155.8

$

24.6

$

534.3

Placeholder

Latex

Engineered

Base

 

Six Months Ended

Binders

Materials

Plastics

Polystyrene

Feedstocks

Total

 

June 30, 2021

United States

$

141.9

$

71.1

$

134.2

$

$

6.7

$

353.9

Europe

 

278.1

 

101.4

 

451.7

 

349.0

 

138.1

 

1,318.3

Asia-Pacific

 

138.1

 

72.1

 

100.6

 

231.1

 

 

541.9

Rest of World

 

4.1

 

2.2

 

39.3

 

 

 

45.6

Total

$

562.2

$

246.8

$

725.8

$

580.1

$

144.8

$

2,259.7

June 30, 2020

United States

$

113.1

$

17.4

$

90.7

$

$

3.9

$

225.1

Europe

 

174.2

 

23.6

239.2

 

204.9

 

61.8

 

703.7

Asia-Pacific

 

92.8

 

44.2

53.6

 

133.7

 

14.8

339.1

Rest of World

 

3.9

 

0.1

25.4

 

 

 

29.4

Total

$

384.0

$

85.3

$

408.9

$

338.6

$

80.5

$

1,297.3

v3.21.2
Investments in Unconsolidated Affiliates
6 Months Ended
Jun. 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

Six Months Ended

June 30, 

June 30, 

    

2021

    

2020

    

2021

    

2020

    

Sales

    

$

495.6

    

$

225.4

    

$

918.5

    

$

547.5

Gross profit

$

74.5

$

31.3

$

139.9

$

38.4

Net income

$

63.6

$

20.1

$

114.6

$

11.8

As of June 30, 2021 and December 31, 2020, the Company’s investment in Americas Styrenics was $253.2 million and $240.1 million, respectively, which was $12.0 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 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 the weighted average remaining useful life of the contributed assets of

approximately 2.8 years as of June 30, 2021. The Company received dividends of $25.0 million and $40.0 million from Americas Styrenics during the three and six months ended June 30, 2021, respectively, while no dividends were received during the three and six months ended June 30, 2020.

v3.21.2
Inventories
6 Months Ended
Jun. 30, 2021
Inventories  
Inventories

NOTE 7—INVENTORIES

Inventories consisted of the following:

June 30, 

December 31,

    

2021

2020

Finished goods

    

$

262.3

    

$

132.9

Raw materials and semi-finished goods

 

262.8

 

161.7

Supplies

 

37.8

 

29.5

Total

$

562.9

$

324.1

v3.21.2
Debt
6 Months Ended
Jun. 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 June 30, 2021 and December 31, 2020.

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

June 30, 2021

December 31, 2020

   

Interest Rate as of
June 30, 2021

   

Maturity Date

   

Carrying Amount

   

Unamortized Deferred Financing Fees (1)

    

Total Debt, Less Unamortized Deferred Financing Fees

   

Carrying Amount

   

Unamortized Deferred Financing Fees (1)

   

Total Debt, Less
Unamortized Deferred
Financing Fees

Senior Credit Facility

2024 Term Loan B

2.104%

September 2024

$

673.9

$

(9.5)

$

664.4

$

677.3

$

(10.8)

$

666.5

2028 Term Loan B

2.604%

May 2028

746.3

(18.3)

728.0

2026 Revolving Facility(2)

Various

May 2026

2029 Senior Notes

5.125%

April 2029

450.0

(15.5)

434.5

2025 Senior Notes

5.375%

September 2025

500.0

(5.6)

494.4

500.0

(6.2)

493.8

Accounts Receivable Securitization Facility(3)

Various

September 2021

Other indebtedness

Various

Various

7.9

7.9

10.0

10.0

Total debt

$

2,378.1

$

(48.9)

$

2,329.2

$

1,187.3

$

(17.0)

$

1,170.3

Less: current portion(4)

(19.1)

(12.2)

Total long-term debt, net of unamortized deferred financing fees

$

2,310.1

$

1,158.1

(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)On May 3, 2021, in conjunction with the Acquisition, the Company extended its Revolving Facility (previously the “2022 Revolving Facility,” now the “2026 Revolving Facility”), originally maturing in September 2022, to May 2026, as described further below. As of June 30, 2021, under the 2026 Revolving Facility, the Company had a capacity of $375.0 million and funds available for borrowing of $360.4 million (net of $14.6 million outstanding letters of credit). Additionally, the Company is required to pay a quarterly commitment fee in respect of any unused commitments under this facility equal to 0.375% per annum.
(3)As of June 30, 2021, this facility had a borrowing capacity of $150.0 million, and the Company had approximately $150.0 million of accounts receivable available to support this facility, based on the pool of eligible accounts receivable. In regard to outstanding borrowings, fixed interest charges are 1.95% plus variable commercial paper rates, while for available, but undrawn commitments, fixed interest charges are 1.00%.
(4)As of June 30, 2021, the current portion of long-term debt was primarily related to $14.5 million of the scheduled future principal payments on both the 2024 Term Loan B and 2028 Term Loan B. As of December 31, 2020, the current portion of long-term debt was primarily related to $7.0 million of the scheduled future principal payments on the 2024 Term Loan B.

2029 Senior Notes

On March 24, 2021, Trinseo Materials Operating S.C.A. and Trinseo Materials Finance, Inc. (together, the “Issuers”), each an indirect, wholly-owned subsidiary of the Company, executed an indenture pursuant to which they issued $450.0 million aggregate principal amount of 5.125% senior notes due 2029 (the “2029 Senior Notes”) in a 144A private transaction exempt from the registration requirements of the Securities Act of 1933, as amended. Interest on the 2029 Senior Notes is payable semi-annually on February 15 and August 15 of each year, commencing on August 15, 2021. The 2029 Senior Notes mature on April 1, 2029. The net proceeds from the 2029 Senior Notes offering were used as a portion of the funding needed for the Acquisition, in addition to fees and expenses related to the offering and the Acquisition. The gross proceeds from the 2029 Senior Notes offering were released upon satisfaction of certain escrow release conditions, including closing of the Acquisition, which was completed on May 3, 2021. 

At any time prior to April 1, 2024, the Issuers may redeem the 2029 Senior Notes in whole or in part, at their option, at a redemption price equal to 100% of the principal amount of such notes plus the relevant applicable premium as of, and accrued and unpaid interest to, but not including, the redemption date. At any time and from time to time after April 1, 2024, the Issuers may redeem the 2029 Senior Notes, in whole or in part, at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interest, if any, on the notes redeemed to, but not including, the redemption date:

12-month period commencing April 1 in Year 

Percentage

2024

 

102.563

%  

2025

 

101.281

%  

2026 and thereafter

 

100.000

%  

At any time prior to April 1, 2024, the Issuers may redeem up to 40% of the aggregate principal amount of the 2029 Senior Notes at a redemption price equal to 105.125%, plus accrued and unpaid interest to, but not including, the redemption date, with the aggregate gross proceeds from certain equity offerings. 

The 2029 Senior Notes are the Issuers’ senior unsecured obligations and rank equally in right of payment with all of the Issuers’ existing and future indebtedness that is not expressly subordinated in right of payment thereto. The 2029 Senior Notes will be senior in right of payment to any future indebtedness that is expressly subordinated in right of payment thereto and effectively junior to (a) the Issuers’ existing and future secured indebtedness, including the Company’s accounts receivable facility and the Issuers’ Credit Facility, to the extent of the value of the collateral securing such indebtedness and (b) all existing and future liabilities of the Issuers’ non-guarantor subsidiaries. 

The Indenture contains customary covenants, including restrictions on the Issuers’ and certain of its subsidiaries’ ability to incur additional indebtedness and guarantee indebtedness; pay dividends on, redeem or repurchase capital stock; make investments; prepay certain indebtedness; create liens; enter into transactions with the Issuers’ affiliates; designate the Issuers’ subsidiaries as Unrestricted Subsidiaries (as defined in the Indenture); and consolidate, merge, or transfer all or substantially all of the Issuers’ assets. The covenants are subject to a number of exceptions and qualifications. Certain of these covenants, excluding without limitation those relating to transactions with the Issuers’ affiliates and consolidation, merger, or transfer of all or substantially all of the Issuers’ assets, will be suspended during any period of time that (1) the 2029 Senior Notes have Investment Grade Status (as defined in the Indenture) and (2) no default has occurred and is continuing under the Indenture. In the event that the 2029 Senior Notes are downgraded to below an Investment Grade Status, the Issuers and certain subsidiaries will again be subject to the suspended covenants with respect to future events. As of June 30, 2021, the Company was in compliance with all debt covenant requirements under the Indenture.

Total fees incurred in connection with the issuance of the 2029 Senior Notes were $15.9 million, which were capitalized and recorded within “Long-term debt, net of unamortized deferred financing fees” on the condensed

consolidated balance sheet, and are being amortized into “Interest expense, net” in the condensed consolidated statements of operations over their eight-year term using the effective interest method.

Senior Credit Facility

On May 3, 2021, the Issuers entered into (i) an amendment to the existing credit agreement dated as of September 6, 2017 in which the Issuers borrowed a new tranche of term loans in an aggregate amount of $750.0 million senior secured term loan B facility maturing in May 2028 (the “2028 Term Loan B”), used to finance a portion of the purchase price of the Acquisition, and (ii) an amendment to the existing credit agreement, pursuant to which the existing revolving credit facility has been refinanced with a new revolving credit facility in an aggregate amount of $375.0 million, with a $25.0 million swingline subfacility and a $35.0 million letter of credit subfacility, maturing in May 2026. Amounts under the 2026 Revolving Facility are available in U.S. dollars and euros. The terms under the 2026 Revolving Facility are substantially unchanged from the 2022 Revolving Facility. Refer to the Annual Report for the terms of the 2022 Revolving Facility. As a result of amending the revolving credit facility, during the three and six months ended June 30, 2021, the Company recognized a $0.5 million loss on extinguishment of long-term debt related to the write-off of a portion of the existing unamortized deferred financing fees.

The 2028 Term Loan B bears an interest rate of LIBOR plus 2.50%, subject to a 0.00% LIBOR floor, and was issued at a 0.5% original issue discount. Further, the 2028 Term Loan B requires scheduled quarterly payments in amounts equal to 0.25% of the original principal amount of the 2028 Term Loan B, with the balance to be paid at maturity.

The 2026 Revolving Facility contains a financial covenant that requires compliance with a springing first lien net leverage ratio test. If the outstanding balance under the 2026 Revolving Facility exceeds 30% of the $375.0 million borrowing capacity (excluding undrawn letters of credit up to $10.0 million and cash collateralized letters of credit) at a quarter end, then the Borrowers’ first lien net leverage ratio may not exceed 3.50 to 1.00. As of June 30, 2021, the Company was in compliance with all debt covenant requirements under the Senior Credit Facility.

Fees incurred in connection with the issuance of the 2028 Term Loan B were $18.7 million, which were capitalized and recorded within “Long-term debt, net of unamortized deferred financing fees” on the condensed consolidated balance sheet, and are being amortized into “Interest expense, net” in the condensed consolidated statements of operations over their seven-year term using the effective interest method.

Fees incurred in connection with the 2026 Revolving Facility were $0.4 million, which were capitalized and recorded within “Deferred charges and other assets” on the condensed consolidated balance sheet, and are being amortized along with the remaining $0.8 million of unamortized deferred financing fees from the Company’s former revolving credit facility (“2022 Revolving Facility”) into “Interest expense, net” in the condensed consolidated statements of operations over the five-year term of the facility using the straight-line method.

v3.21.2
Goodwill
6 Months Ended
Jun. 30, 2021
Goodwill.  
Goodwill

NOTE 9—GOODWILL

The following table shows changes in the carrying amount of goodwill, by segment, from December 31, 2020 to June 30, 2021:

Latex

Engineered

Base

Americas

 

    

Binders

Materials

    

Plastics

    

Polystyrene

    

Feedstocks

    

Styrenics

    

Total

 

Balance at December 31, 2020

$