Document and Entity Information - shares |
3 Months Ended | |
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Mar. 31, 2018 |
May 01, 2018 |
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Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q1 | |
Entity Registrant Name | Trinseo S.A. | |
Entity Central Index Key | 0001519061 | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 43,177,966 |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions |
Mar. 31, 2018 |
Dec. 31, 2017 |
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Consolidated Balance Sheets | ||
Allowance for doubtful accounts | $ 5.1 | $ 5.6 |
Accumulated depreciation | $ 556.5 | $ 523.7 |
Ordinary shares, nominal value | $ 0.01 | $ 0.01 |
Ordinary shares, shares authorized | 50,000,000,000 | 50,000,000,000 |
Ordinary shares, shares issued | 48,800,000 | 48,800,000 |
Ordinary shares, shares outstanding | 43,400,000 | 43,400,000 |
Treasury stock, shares | 5,400,000 | 5,400,000 |
Consolidated Statements of Operations - USD ($) shares in Millions, $ in Millions |
3 Months Ended | |
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Mar. 31, 2018 |
Mar. 31, 2017 |
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Consolidated Statements of Operations | ||
Net sales | $ 1,121.6 | $ 1,104.5 |
Cost of sales | 946.4 | 905.5 |
Gross profit | 175.2 | 199.0 |
Selling, general and administrative expenses | 64.4 | 59.6 |
Equity in earnings of unconsolidated affiliates | 45.5 | 19.3 |
Operating income | 156.3 | 158.7 |
Interest expense, net | 14.9 | 18.2 |
Other income, net | (3.8) | (6.1) |
Income before income taxes | 145.2 | 146.6 |
Provision for income taxes | 24.9 | 29.3 |
Net income | $ 120.3 | $ 117.3 |
Weighted average shares- basic | 43.4 | 44.1 |
Net income per share- basic | $ 2.77 | $ 2.66 |
Weighted average shares- diluted | 44.4 | 45.3 |
Net income per share- diluted | $ 2.71 | $ 2.59 |
Dividends on ordinary shares | $ 0.36 | $ 0.30 |
Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Millions |
3 Months Ended | |
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Mar. 31, 2018 |
Mar. 31, 2017 |
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Consolidated Statements of Comprehensive Income (Loss) | ||
Net income | $ 120.3 | $ 117.3 |
Other comprehensive income (loss), net of tax | ||
Cumulative translation adjustments | (2.1) | 4.2 |
Net gain (loss) on cash flow hedges | 2.8 | (4.8) |
Amounts reclassified from accumulated other comprehensive income (loss) | 0.6 | 1.4 |
Total other comprehensive income (loss), net of tax | 1.3 | 0.8 |
Comprehensive income | $ 121.6 | $ 118.1 |
Consolidate Statements of Shareholders' Equity (Parenthetical)) - $ / shares |
3 Months Ended | |
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Mar. 31, 2018 |
Mar. 31, 2017 |
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Consolidated Statement of Stockholders' Equity | ||
Dividends on ordinary shares | $ 0.36 | $ 0.30 |
Basis of Presentation |
3 Months Ended |
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Mar. 31, 2018 | |
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 March 31, 2018 and 2017 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 2017 audited consolidated financial statements included within the Company’s Annual Report on Form 10-K (“Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on March 1, 2018. The December 31, 2017 condensed consolidated balance sheet data presented herein was derived from the Company’s December 31, 2017 audited consolidated financial statements, but does not include all disclosures required by GAAP for annual periods. Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications did not have a material impact on the Company’s financial position or results. Refer to Notes 2, 7, and 15 for further information.
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Recent Accounting Guidance |
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Mar. 31, 2018 | |
Recent Accounting Guidance | |
Recent Accounting Guidance | NOTE 2—RECENT ACCOUNTING GUIDANCE In May 2014, the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) jointly issued guidance (“Topic 606”) which clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP and International Financial Reporting Standards (“IFRS”). The core principle of the guidance, which the FASB issued certain clarifying updates for, is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted Topic 606 effective January 1, 2018, electing to apply the modified retrospective approach only to contracts that were not completed as of the date of initial application at the individual contract level, rather than applying the portfolio approach. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts have not been adjusted and continue to be reported in accordance with historical accounting standards (“Topic 605”). As a result of our implementation procedures, we have determined that the cumulative effect to retained earnings from initially applying Topic 606 was immaterial and therefore, no adjustment was recorded. Furthermore, based on current contracts with customers, we do not expect the adoption of the new revenue standard to have a material impact to our financial statements on an ongoing basis. Refer to Note 3 for new disclosure requirements in effect as a result of this adoption. In February 2016, the FASB issued guidance related to leases that outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new guidance requires lessees to recognize on the consolidated balance sheets lease liabilities and corresponding right-of-use assets for all leases with terms of greater than 12 months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. This new guidance is effective for public companies for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The new guidance must be adopted using a modified retrospective transition, and provides for certain practical expedients. The Company is in the process of assessing the impact on its consolidated financial statements from the adoption of the new guidance. However, as we are the lessee under various real estate, railcar, and other equipment leases, which we currently account for as operating leases, we anticipate an increase in the recognition of right-of-use assets and lease liabilities as a result of this adoption. In March 2017, the FASB issued guidance that requires employers to present the service cost component of net periodic benefit cost in the same statement of operations line item as other employee compensation costs arising from services rendered during the period. The other components of net periodic benefit cost are to be presented outside of any subtotal of operating income. This guidance also requires employers to prospectively only consider the service cost component of net periodic benefit cost for potential capitalization into assets, with all other components of net periodic benefit cost being ineligible for capitalization. The Company adopted this guidance effective January 1, 2018 on a retrospective basis. As a result of this adoption, for the three months ended March 31, 2017, the Company reclassified net periodic benefit cost of $1.2 million from “Cost of sales” and $0.8 million from “Selling, general and administrative expenses” to “Other income, net” within the condensed consolidated statements of operations. The change related to capitalization guidance is not expected to have a material impact on the Company’s consolidated financial statements. In August 2017, the FASB issued significant amendments to its existing hedge accounting guidance. Among other things, this guidance will make more financial and nonfinancial hedging strategies eligible for hedge accounting, amend presentation and disclosure requirements, and change how companies assess effectiveness. This guidance is required for public companies for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The Company will adopt this guidance effective April 1, 2018, and is in the process of evaluating the ongoing impact to the Company’s consolidated financial statements. In February 2018, the FASB issued guidance to address certain stranded income tax effects in accumulated other comprehensive income/loss (“AOCI”) resulting from the enactment of the U.S. “Tax Cuts and Jobs Act” signed into law on December 22, 2017. The amendment provides financial statement preparers with an option to reclassify stranded tax effects within AOCI, resulting from the reduction of the U.S. federal corporate income tax rate, to retained earnings. The amendment also includes disclosure requirements regarding the Company’s accounting policy for releasing income tax effects from AOCI. The amendment is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted, and the provisions of the amendment should be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. While the Company is still evaluating the provisions of this amendment, should the Company choose to adopt this guidance, it is not expected to have a material impact on the Company’s consolidated financial statements. |
Net Sales |
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Net Sales | NOTE 3 — NET SALES As discussed in Note 2, effective January 1, 2018, the Company adopted accounting guidance, Topic 606, issued by the FASB related to the recognition of revenue from contracts with customers. The Company’s accounting policy and practical expedient elections related to revenue recognition, including those elected as a result of the adoption of Topic 606, are summarized as follows. Sales are recognized at a point when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services, and when the Company’s related performance obligation is satisfied under the terms of the contract. Standard terms of delivery are included in contracts of sale, order confirmation documents, and invoices. Sales and other taxes that the Company collects concurrent with sales-producing activities are excluded from “Net sales” and included as a component of “Cost of sales” in the condensed consolidated statements of operations. Additionally, freight and any directly related costs of transporting finished products to customers are accounted for as fulfilment costs and are also included within “Cost of sales”. The amount of net sales recognized varies with changes in returns, rebates, cash sales incentives, and other allowances offered to customers based on the Company's experience. The Company has elected to apply the following practical expedients as allowed under Topic 606:
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 months ended March 31, 2018 and 2017, respectively:
For all material contracts with customers, control is transferred and sales are recognized at a point in time, when the Company satisfies the performance obligations according to the terms of the contract, and when title and the risk of loss is passed to the customer. Title and risk of loss varies by region and customer and is determined based upon the purchase order received from the customer and the applicable contractual terms or jurisdictional standards. The Company receives cash equal to the invoice price for most product sales, subject to cash sales incentives with certain customers, with payment terms generally ranging from 10 to 90 days (with an approximate weighted average of 50 days as of March 31, 2018), also varying by segment and region. Certain of the Company’s contracts with customers contain multiple performance obligations, most commonly due to the sale of multiple distinct products. The transaction price within these contracts is allocated between these separate and distinct products based on their stand-alone selling prices, as defined within the contract. The Company’s products are typically sold at observable stand-alone sales values, which are used to determine the estimated stand-alone selling price. The stand-alone selling prices of the Company’s products are generally based, in part, on the current or forecasted costs of key raw materials, but are often subject to a predetermined lag period for the pass through of these costs. As such, contracts with customers typically include provisions that allow for the changes in stand-alone selling prices to reflect the pass through of changes in raw material costs, often using pricing formulas that utilize commodity indices. In cases where the Company’s transaction price is considered variable at the point of revenue recognition, the ‘most likely amount’ method is used to estimate the effect of any related uncertainty. In formulating this estimate, the Company considers all historical, current, and forecasted information that is reasonably available to identify a reasonable number of possible consideration amounts. Once the transaction price, including impacts of variable consideration, is estimated, revenue is recognized only to the extent that it is probable that a subsequent change in the estimate would not result in a significant revenue reversal. Furthermore, if the Company is not able to rely on observable stand-alone selling prices, the ‘expected cost plus a margin approach’ is utilized to estimate the stand-alone selling price of each performance obligation, primarily utilizing historical experience. During the three months ended March 31, 2018, the impact of recognizing changes in selling prices related to prior periods was immaterial. |
Investments in Unconsolidated Affiliates |
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Investments in Unconsolidated Affiliates | NOTE 4—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). Previously, the Company also had a 50% share in Sumika Styron Polycarbonate Limited (“Sumika Styron Polycarbonate”, a polycarbonate, or PC, joint venture with Sumitomo Chemical Company Limited), until the sale of the Company’s investment in the joint venture during the first quarter of 2017 (refer to discussion below for further information). Investments held in unconsolidated affiliates are accounted for by the equity method. The results of Americas Styrenics are included within its own reporting segment. The results of Sumika Styron Polycarbonate were included within the Performance Plastics reporting segment (as recast due to the segment realignment effective January 1, 2018 discussed further in Note 15) until the Company sold its share of the entity during the first quarter of 2017. Both of the unconsolidated affiliates are privately held companies; therefore, quoted market prices for their stock are not available. The summarized financial information of the Company’s unconsolidated affiliates is shown below. This table includes summarized financial information for Sumika Styron Polycarbonate through the date of sale in January 2017.
Americas Styrenics As of March 31, 2018 and December 31, 2017, respectively, the Company’s investment in Americas Styrenics was $168.1 million and $152.5 million, which was $43.8 million and $46.4 million less than the Company’s 50% share of the underlying net assets of Americas Styrenics. This amount represents the difference between the book value of assets contributed to the joint venture at the time of formation (May 1, 2008) and the Company’s 50% share of the total recorded value of the joint venture’s assets and certain adjustments to conform with the Company’s accounting policies. This difference is being amortized over a weighted average remaining useful life of the contributed assets of approximately 2.6 years as of March 31, 2018. The Company received dividends from Americas Styrenics of $30.0 million and $7.5 million during the three months ended March 31, 2018 and 2017, respectively. Sumika Styron Polycarbonate On January 31, 2017, the Company completed the sale of its 50% share in Sumika Styron Polycarbonate to Sumitomo Chemical Company Limited for total sales proceeds of approximately $42.1 million. As a result, the Company recorded a gain on sale of $9.3 million during the three months ended March 31, 2017, which was included within “Other income, net” in the condensed consolidated statement of operations and was allocated entirely to the Performance Plastics segment (as recast under the segment realignment discussed further in Note 15). In addition, the parties entered into a long-term agreement to continue sourcing PC resin from Sumika Styron Polycarbonate to the Company’s Performance Plastics segment. Due to the sale in January 2017, the Company no longer had an investment in Sumika Styron Polycarbonate as of December 31, 2017. The Company received dividends from Sumika Styron Polycarbonate of $9.8 million during the three months ended March 31, 2017 related to the Company’s proportionate share of earnings from the year ended December 31, 2016. |
Inventories |
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Inventories | NOTE 5—INVENTORIES Inventories consisted of the following:
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Debt |
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Debt | NOTE 6—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 March 31, 2018 and December 31, 2017. As of March 31, 2018 and December 31, 2017, debt consisted of the following:
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Goodwill and Intangible Assets |
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Goodwill and Intangible Assets | NOTE 7—GOODWILL The following table shows changes in the carrying amount of goodwill, by segment, from December 31, 2017 to March 31, 2018. Prior period balances in this table have been recast in conjunction with the segment realignment that occurred during the first quarter of 2018. Refer to Note 15 for further information.
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Derivative Instruments |
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Derivative Instruments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments | NOTE 8—DERIVATIVE INSTRUMENTS The Company’s ongoing business operations expose it to various risks, including fluctuating foreign exchange rates and interest rate risk. To manage these risks, the Company periodically enters into derivative financial instruments, such as foreign exchange forward contracts and interest rate swap agreements. The Company does not hold or enter into financial instruments for trading or speculative purposes. All derivatives are recorded on the condensed consolidated balance sheets at fair value. Refer to Note 9 for fair value disclosures related to these instruments. Foreign Exchange Forward Contracts Certain subsidiaries have assets and liabilities denominated in currencies other than their respective functional currencies, which creates foreign exchange risk. The Company’s principal strategy in managing its exposure to changes in foreign currency exchange rates is to naturally hedge the foreign currency-denominated liabilities on our balance sheet against corresponding assets of the same currency such that any changes in liabilities due to fluctuations in exchange rates are offset by changes in their corresponding foreign currency assets. In order to further reduce this exposure, the Company also uses foreign exchange forward contracts to economically hedge the impact of the variability in exchange rates on assets and liabilities denominated in certain foreign currencies. These derivative contracts are not designated for hedge accounting treatment. As of March 31, 2018, the Company had open foreign exchange forward contracts with a notional U.S. dollar equivalent absolute value of $334.7 million. The following table displays the notional amounts of the most significant net foreign exchange hedge positions outstanding as of March 31, 2018:
Open foreign exchange forward contracts as of March 31, 2018 had maturities occurring over a period of two months. Foreign Exchange Cash Flow Hedges The Company also enters into forward contracts with the objective of managing the currency risk associated with forecasted U.S. dollar-denominated raw materials purchases by one of its subsidiaries whose functional currency is the euro. By entering into these forward contracts, which are designated as cash flow hedges, the Company buys a designated amount of U.S. dollars and sells euros at the prevailing market rate to mitigate the risk associated with the fluctuations in the euro-to-U.S. dollar foreign currency exchange rates. The qualifying hedge contracts are marked-to-market at each reporting date and any unrealized gains or losses are included in AOCI to the extent effective, and reclassified to cost of sales in the period during which the transaction affects earnings or it becomes probable that the forecasted transaction will not occur. Open foreign exchange cash flow hedges as of March 31, 2018 had maturities occurring over a period of nine months, and had a net notional U.S. dollar equivalent of $162.0 million. Interest Rate Swaps On September 6, 2017, the Company issued the 2024 Term Loan B, which bears an interest rate of LIBOR plus 2.50%, subject to a 0.00% LIBOR floor. In order to reduce the variability in interest payments associated with the Company’s variable rate debt, during the third quarter of 2017, the Company entered into certain interest rate swap agreements to convert a portion of these variable rate borrowings into a fixed rate obligation. These interest rate swap agreements are designated as cash flow hedges, and as such, the contracts are marked-to-market at each reporting date and any unrealized gains or losses are included in AOCI to the extent effective, and reclassified to interest expense in the period during which the transaction affects earnings or it becomes probable that the forecasted transaction will not occur. As of March 31, 2018, the Company had open interest rate swap agreements with a net notional U.S. dollar equivalent of $200.0 million which had an effective date of September 29, 2017 and mature over a period of five years. Under the terms of the swap agreements, the Company is required to pay the counterparties a stream of fixed interest payments at a rate of 1.81%, and in turn, receives variable interest payments based on 1-month LIBOR (1.88% as of March 31, 2018) from the counterparties. Net Investment Hedge Through August 31, 2017, the Company had designated a portion (€280 million) of the original principal amount of the Company’s previous €375.0 million Euro Notes as a hedge of the foreign currency exposure of the Issuers’ net investment in certain European subsidiaries. Effective September 1, 2017, the Company de-designated the Euro Notes as a net investment hedge of the Issuers’ net investment in certain European subsidiaries, as the Euro Notes were redeemed on September 7, 2017. Through the date of de-designation, this hedge was deemed to be highly effective, and changes in the Euro Notes’ carrying value resulting from fluctuations in the euro exchange rate were recorded as cumulative foreign currency translation loss of $24.1 million within AOCI as of December 31, 2017. On August 29, 2017, the Issuers executed an indenture pursuant to which they issued the $500.0 million 5.375% 2025 Senior Notes. Subsequently, on September 1, 2017, the Company entered into certain fixed-for-fixed cross currency swaps (“CCS”), swapping USD principal and interest payments on the newly issued 2025 Senior Notes for euro-denominated payments. Under the terms of the CCS, the Company has notionally exchanged $500.0 million at an interest rate of 5.375% for €420 million at a weighted average interest rate of 3.45% for approximately five years. Effective September 1, 2017, the Company designated the full notional amount of the CCS (€420 million) as a hedge of the Issuers’ net investment in certain European subsidiaries. As the CCS were deemed to be highly effective hedges, changes in the fair value of the CCS were recorded as cumulative foreign currency translation loss of $38.0 million within AOCI as of March 31, 2018. Summary of Derivative Instruments Information regarding changes in the fair value of the Company’s derivative instruments, net of tax, including those not designated for hedge accounting treatment, is as follows:
The Company recorded losses of $5.3 million and $1.7 million during the three months ended March 31, 2018 and 2017, respectively, from settlements and changes in the fair value of outstanding forward contracts (not designated as hedges). The losses from these forward contracts offset net foreign exchange transaction gains of $10.4 million and $0.6 million during the three months ended March 31, 2018 and 2017, respectively, which resulted from the remeasurement of the Company’s foreign currency denominated assets and liabilities. The cash settlements of these foreign exchange forward contracts are included within operating activities in the condensed consolidated statement of cash flows. As of March 31, 2018, the Company had no ineffectiveness related to its derivatives designated as hedging instruments. Further, the Company expects to reclassify in the next twelve months an approximate $11.5 million net loss from AOCI into earnings related to the Company’s outstanding foreign exchange cash flow hedges and interest rate swaps as of March 31, 2018 based on current foreign exchange rates. The following table summarizes the net unrealized gains and losses and balance sheet classification of outstanding derivatives recorded in the condensed consolidated balance sheets:
Forward contracts, interest rate swaps, and cross currency swaps are entered into with a limited number of counterparties, each of which allows for net settlement of all contracts through a single payment in a single currency in the event of a default on or termination of any one contract. As such, in accordance with the Company’s accounting policy, these derivative instruments are recorded on a net basis by counterparty within the condensed consolidated balance sheets. Information regarding the gross amounts of the Company’s derivative instruments and the amounts offset in the condensed consolidated balance sheets is as follows:
Refer to Notes 9 and 17 of the condensed consolidated financial statements for further information regarding the fair value of the Company’s derivative instruments and the related changes in AOCI. |
Fair Value Measurements |
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Fair Value Measurements | NOTE 9—FAIR VALUE MEASUREMENTS Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date. Level 1—Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2—Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3—Valuation is based upon other unobservable inputs that are significant to the fair value measurement. The following table summarizes the basis used to measure certain assets and liabilities at fair value on a recurring basis in the condensed consolidated balance sheets as of March 31, 2018 and December 31, 2017:
The Company uses an income approach to value its derivative instruments, utilizing discounted cash flow techniques, considering the terms of the contract and observable market information available as of the reporting date, such as interest rate yield curves and currency spot and forward rates. Significant inputs to the valuation for these derivative instruments are obtained from broker quotations or from listed or over-the-counter market data, and are classified as Level 2 in the fair value hierarchy. Fair Value of Debt Instruments The following table presents the estimated fair value of the Company’s outstanding debt not carried at fair value as of March 31, 2018 and December 31, 2017, respectively:
The fair value of the Company’s debt facilities above (each Level 2 securities) is determined using over-the-counter market quotes and benchmark yields received from independent vendors. There were no other significant financial instruments outstanding as of March 31, 2018 and December 31, 2017. |
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Income Taxes | NOTE 10—PROVISION FOR INCOME TAXES
Provision for income taxes for the three months ended March 31, 2018 totaled $24.9 million, resulting in an effective tax rate of 17.1%. Provision for income taxes for the three months ended March 31, 2017 totaled $29.3 million, resulting in an effective tax rate of 20.0%. The decrease in the effective tax rate for the three months ended March 31, 2018 as compared to the same period in 2017 was primarily driven by the reduction in the U.S. federal corporate tax rate from 35% to 21%, effective January 1, 2018, in accordance with the enactment of the Tax Cuts and Jobs Act signed into law on December 22, 2017. The decrease related to the reduction in the U.S. federal corporate tax rate effective in 2018 was partially offset by the $9.3 million gain on sale of the Company’s 50% share in Sumika Styron Polycarbonate during the three months ended March 31, 2017, which was exempt from tax (refer to Note 4 for further information). |
Commitments and Contingencies |
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Mar. 31, 2018 | |
Commitments and Contingencies Disclosure | |
Commitments and Contingencies | NOTE 11—COMMITMENTS AND CONTINGENCIES Environmental Matters Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based on current law, existing technologies and other information. Pursuant to the terms of the agreement associated with the Company’s formation, the pre-closing environmental conditions were retained by Dow and Dow has agreed to indemnify the Company from and against all environmental liabilities incurred or relating to the predecessor periods. No environmental claims have been asserted or threatened against the Company, and the Company is not a potentially responsible party at any Superfund Sites. As of March 31, 2018 and December 31, 2017, the Company had no accrued obligations for environmental remediation and restoration costs. Inherent uncertainties exist in the Company’s potential environmental liabilities primarily due to unknown conditions, whether future claims may fall outside the scope of the indemnity, changing governmental regulations and legal standards regarding liability, and evolving technologies for handling site remediation and restoration. In connection with the Company’s existing indemnification, the possibility is considered remote that environmental remediation costs will have a material adverse impact on the condensed consolidated financial statements. Purchase Commitments In the normal course of business, the Company has certain raw material purchase contracts where it is required to purchase certain minimum volumes at current market prices. These commitments range from 1 to 4 years. In certain raw material purchase contracts, the Company has the right to purchase less than the required minimums and pay a liquidated damages fee, or, in case of a permanent plant shutdown, to terminate the contracts. In such cases, these obligations would be less than the annual commitment as disclosed in the Notes to Consolidated Financial Statements included in the Annual Report. Litigation Matters From time to time, the Company may be subject to various legal claims and proceedings incidental to the normal conduct of business, relating to such matters as product liability, antitrust/competition, past waste disposal practices and release of chemicals into the environment. While it is impossible at this time to determine with certainty the ultimate outcome of these routine claims, the Company does not believe that the ultimate resolution of these claims will have a material adverse effect on the Company’s results of operations, financial condition or cash flow. Legal costs, including those legal costs expected to be incurred in connection with a loss contingency, are expensed as incurred. |
Pension Plans and Other Postretirement Benefits |
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Pension Plans and Other Postretirement Benefits | NOTE 12—PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS The components of net periodic benefit costs for all significant plans were as follows:
In accordance with recently issued accounting standards, service cost related to the Company’s defined benefit pension plans and other postretirement plans is included within “Cost of sales” and “Selling, general and administrative expenses” whereas all other components of net periodic benefit cost are included within “Other income, net” in the condensed consolidated statements of operations. Refer to Note 2 for further information. As of March 31, 2018 and December 31, 2017, the Company’s benefit obligations included primarily in “Other noncurrent obligations” in the condensed consolidated balance sheets were $195.2 million and $188.7 million, respectively. The Company made cash contributions and benefit payments to unfunded plans of approximately $2.0 million during the three months ended March 31, 2018. The Company expects to make additional cash contributions, including benefit payments to unfunded plans, of approximately $4.5 million to its defined benefit plans for the remainder of 2018. |
Stock-Based Compensation |
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Stock-Based Compensation | NOTE 13—STOCK-BASED COMPENSATION Refer to the Annual Report for definitions of capitalized terms not included herein and further background on the Company’s stock-based compensation programs included in the tables below. The following table summarizes the Company’s stock-based compensation expense for the three months ended March 31, 2018 and 2017, as well as unrecognized compensation cost as of March 31, 2018:
The following table summarizes awards granted and the respective weighted average grant date fair value for the three months ended March 31, 2018:
Option Awards The following are the weighted average assumptions used within the Black-Scholes pricing model for the Company’s option awards granted during the three months ended March 31, 2018:
Since the Company’s equity interests were privately held prior to its initial public offering (“IPO”) in June 2014, there is limited publicly traded history of the Company’s ordinary shares. Until such time that the Company can determine expected volatility based solely on the publicly traded history of its ordinary shares, expected volatility used in the Black-Scholes model for option awards granted is based on a combination of the Company’s historical volatility and similar companies’ stock that are publicly traded. The expected term of option awards represents the period of time that option awards granted are expected to be outstanding. For the option awards granted during the three months ended March 31, 2018, the simplified method was used to calculate the expected term, given the Company’s limited historical exercise data. The risk-free interest rate for the periods within the expected term of option awards is based on the U.S. Treasury yield curve in effect at the time of grant. The dividend yield is estimated based on historical and expected dividend activity. Performance Share Units (PSUs) The following are the weighted average assumptions used within the Monte Carlo valuation model for PSUs granted during the three months ended March 31, 2018:
Determining the fair value of PSUs requires considerable judgment, including estimating the expected volatility of the price of the Company’s ordinary shares, the correlation between the Company’s stock price and that of its peer companies, and the expected rate of interest. The expected volatility for each grant is determined based on the historical volatility of the Company’s ordinary shares. The expected term of PSUs represents the length of the performance period. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for a duration equivalent to the performance period. The stock price is the closing price of the Company’s ordinary shares on the grant date. |
Acquisitions and Divestitures |
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Acquisitions and Divestitures | NOTE 14—ACQUISITIONS AND DIVESTITURES Acquisition of API Plastics On July 10, 2017, the Company acquired 100% of the equity interests of API Applicazioni Plastiche Industriali S.p.A, or API Plastics, a privately held company. The gross purchase price for the acquisition was $90.6 million, inclusive of $8.4 million of cash acquired, yielding a net purchase price of $82.3 million, all of which was paid for during the year ended December 31, 2017 (noting no cash flows during the three months ended March 31, 2017). API Plastics, based in Mussolente, Italy, is a manufacturer of soft-touch polymers and bioplastics, such as thermoplastic elastomers (“TPEs”), whose results are included within our Performance Plastics segment. 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. During the first quarter of 2018, there were no changes to the purchase price allocation for the acquisition of API Plastics. However, further adjustments may be necessary as a result of the Company’s on-going assessment of additional information related to the fair value of assets acquired and liabilities assumed, including goodwill, during the measurement period. During the three months ended March 31, 2018, transaction and integration costs related to advisory and professional fees incurred in conjunction with the API Plastics acquisition were $0.3 million, and were included within “Selling, general and administrative expenses” in the condensed consolidated statement of operations. Refer to the Annual Report for further information. |
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Segments | NOTE 15—SEGMENTS Through December 31, 2017, the Company operated under two divisions: Performance Materials and Basic Plastics & Feedstocks. The Performance Materials division included the following reporting segments: Latex Binders, Synthetic Rubber, and Performance Plastics. The Basic Plastics & Feedstocks division included the following reporting segments: Basic Plastics, Feedstocks, and Americas Styrenics. Effective January 1, 2018, the Company realigned its reporting segments to reflect the new model under which the business will be managed and results will be reviewed by the chief executive officer, who is the Company’s chief operating decision maker. Under this new segmentation, the Company will no longer have divisions, but will continue to report operating results for six segments, four of which remain unchanged from the Company’s prior segmentation: Latex Binders, Synthetic Rubber, Feedstocks, and Americas Styrenics. The results of our Polystyrene business, which was previously included within the results of the Basic Plastics segment, are now reported as a stand-alone segment. Performance Plastics, which previously consisted of compounds, blends, and ABS products sold to the automotive market, now includes the remaining portion of the Company’s ABS business, as well as the results of the Company’s SAN and PC businesses. This segmentation change will provide enhanced clarity to investors by concentrating the Company’s more specialized plastics into a single reporting segment, while also reducing complexity as PC and ABS are the primary inputs into the downstream production of the Company’s compounds and blends. The information in the tables below has been retroactively adjusted to reflect the changes in reporting segments. The Latex Binders segment produces styrene-butadiene latex, or SB latex, and other latex polymers and binders, primarily for coated paper and packaging board, carpet and artificial turf backings, as well as a number of performance latex binders applications, such as adhesive, building and construction and the technical textile paper market. The Synthetic Rubber segment produces synthetic rubber products used predominantly in high-performance tires, impact modifiers and technical rubber products, such as conveyer belts, hoses, seals and gaskets. The Performance Plastics segment produces highly engineered compounds and blends, and also includes our ABS, SAN, and PC businesses. The Performance Plastics segment, as recast, also included the results of our previously 50%-owned joint venture, Sumika Styron Polycarbonate, until the Company sold its share in the entity in January 2017 (refer to Note 4 for further information). Polystyrene is a stand-alone reporting segment, and includes a variety of general purpose polystyrenes, or GPPS, as well as HIPS, which is polystyrene that has been modified with polybutadiene rubber to increase its impact resistant properties. The Feedstocks segment includes the Company’s production and procurement of styrene monomer outside of North America, which is used as a key raw material in many of the Company’s products, including polystyrene, SB latex, ABS resins, solution styrene-butadiene rubber, or SSBR, etc. Lastly, the Americas Styrenics segment consists solely of the operations of our 50%-owned joint venture, Americas Styrenics, a producer of both styrene monomer and polystyrene in North America. Asset, capital expenditure, and intersegment sales information by reporting segment is not regularly reviewed or included with the Company’s reporting to the chief operating decision maker. Therefore, this information has not been disclosed below.
(1)The Company’s primary measure of segment operating performance is Adjusted EBITDA, which is defined as income from continuing operations before interest expense, net; provision for income taxes; depreciation and amortization expense; loss on extinguishment of long-term debt; asset impairment charges; gains or losses on the dispositions of businesses and assets; restructuring charges; acquisition related costs and other items. Segment Adjusted EBITDA is a key metric that is used by management to evaluate business performance in comparison to budgets, forecasts, and prior year financial results, providing a measure that management believes reflects core operating performance by removing the impact of transactions and events that would not be considered a part of core operations. Other companies in the industry may define Segment Adjusted EBITDA differently than the Company, and as a result, it may be difficult to use Segment Adjusted EBITDA, or similarly named financial measures, that other companies may use to compare the performance of those companies to the Company’s segment performance.
The reconciliation of income before income taxes to Segment Adjusted EBITDA is as follows:
(2)Corporate unallocated includes corporate overhead costs and certain other income and expenses. (3)Adjusted EBITDA addbacks for the three months ended March 31, 2018 and 2017 are as follows:
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Restructuring | NOTE 16—RESTRUCTURING Refer to the Annual Report for further details regarding the Company’s previously announced restructuring activities included in the tables below. Restructuring charges are included within “Selling, general and administrative expenses” in the condensed consolidated statements of operations. The following table provides detail of the Company’s restructuring charges for the three months ended March 31, 2018 and 2017:
The following table provides a rollforward of the liability balances associated with the Company’s restructuring activities as of March 31, 2018. Employee termination benefit and contract termination charges are recorded within “Accrued expenses and other current liabilities” in the condensed consolidated balance sheet.
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Accumulated Other Comprehensive Income (Loss) | NOTE 17—ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The components of AOCI, net of income taxes, consisted of:
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Earnings Per Share | NOTE 18—EARNINGS PER SHARE Basic earnings per ordinary share (“basic EPS”) is computed by dividing net income available to ordinary shareholders by the weighted average number of the Company’s ordinary shares outstanding for the applicable period. Diluted earnings per ordinary share (“diluted EPS”) is calculated using net income available to ordinary shareholders divided by diluted weighted average ordinary shares outstanding during each period, which includes unvested RSUs, option awards, and PSUs. Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential ordinary shares would have an anti-dilutive effect. The following table presents basic EPS and diluted EPS for the three months ended March 31, 2018 and 2017, respectively:
* Refer to Note 13 for discussion of RSUs, option awards, and PSUs granted to certain Company directors and employees. The number of anti-dilutive shares that have been excluded in the computation of diluted earnings per share for the three months ended March 31, 2018 and 2017 were 0.2 million and 0.2 million, respectively.
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Basis of Presentation. | |
Basis of Presentation | The unaudited interim condensed consolidated financial statements of Trinseo S.A. and its subsidiaries (the “Company”) as of and for the periods ended March 31, 2018 and 2017 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 2017 audited consolidated financial statements included within the Company’s Annual Report on Form 10-K (“Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on March 1, 2018. The December 31, 2017 condensed consolidated balance sheet data presented herein was derived from the Company’s December 31, 2017 audited consolidated financial statements, but does not include all disclosures required by GAAP for annual periods. Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications did not have a material impact on the Company’s financial position or results. Refer to Notes 2, 7, and 15 for further information. |
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Carrying Amount of Goodwill, by Segment |
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Derivative Instruments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notional Amounts of Most Significant Net Foreign Exchange Hedge Positions Outstanding |
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Schedule of Changes in Fair Value of Company's Derivatives Instruments |
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Net Unrealized Gains and Losses Recorded in Consolidated Balance Sheets |
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Gross Amounts of Derivative Instruments and Amounts Offset |
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Fair Value Measurements (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Assets and Liabilities at Fair Value on Recurring Basis |
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Estimated Fair Value of Outstanding Debt Not Carried at Fair Value |
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Income Taxes (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||
Provision for Income Taxes | ||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Effective Tax Rate |
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Pension Plans and Other Postretirement Benefits (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defined Benefit Pension Plans | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Net Periodic Benefit Costs |
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Other Postretirement Plans | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Net Periodic Benefit Costs |
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Stock-Based Compensation (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Stock-Based Compensation Expense and Unrecognized Compensation Cost |
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Summary of Awards Granted and Weighted Average Grant-Date Fair Value |
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Option Awards | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Weighted-average Assumptions |
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Performance Share Units | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Weighted-average Assumptions |
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Segments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment [Table Text Block] |
(1)The Company’s primary measure of segment operating performance is Adjusted EBITDA, which is defined as income from continuing operations before interest expense, net; provision for income taxes; depreciation and amortization expense; loss on extinguishment of long-term debt; asset impairment charges; gains or losses on the dispositions of businesses and assets; restructuring charges; acquisition related costs and other items. Segment Adjusted EBITDA is a key metric that is used by management to evaluate business performance in comparison to budgets, forecasts, and prior year financial results, providing a measure that management believes reflects core operating performance by removing the impact of transactions and events that would not be considered a part of core operations. Other companies in the industry may define Segment Adjusted EBITDA differently than the Company, and as a result, it may be difficult to use Segment Adjusted EBITDA, or similarly named financial measures, that other companies may use to compare the performance of those companies to the Company’s segment performance. |
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Reconciliation of IBT to Adjusted EBITDA |
(2)Corporate unallocated includes corporate overhead costs and certain other income and expenses. (3)Adjusted EBITDA addbacks for the three months ended March 31, 2018 and 2017 are as follows:
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Restructuring (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Detail of Restructuring Charges |
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Rollforward of Liability Balances |
. |
Accumulated Other Comprehensive Income (Loss) (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders' Equity. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of AOCI, Net of Income Taxes |
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Reclassification out of Accumulated Other Comprehensive Income [Table Text Block] |
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Earnings Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings per Share Basic and Diluted |
* Refer to Note 13 for discussion of RSUs, option awards, and PSUs granted to certain Company directors and employees. The number of anti-dilutive shares that have been excluded in the computation of diluted earnings per share for the three months ended March 31, 2018 and 2017 were 0.2 million and 0.2 million, respectively.
|
Recent Accounting Guidance - Revenue Recognition (Details) - USD ($) $ in Millions |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Recent Accounting Guidance | ||
Cumulative effect of initially applying the new revenue standard to retained earnings | $ 632.4 | $ 527.9 |
Recent Accounting Guidance - Other (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Interest expense, net | $ 14.9 | $ 18.2 |
Cost of sales | 946.4 | 905.5 |
Selling, general and administrative expenses | 64.4 | $ 59.6 |
Accounting Standards Update 2017-07 [Member] | Restatement Adjustment [Member] | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Cost of sales | (1.2) | |
Selling, general and administrative expenses | $ (0.8) |
Investments in Unconsolidated Affiliates - Summarized Financial Information (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Summarized Financial Information, Net Income | ||
Sales | $ 486.6 | $ 433.9 |
Gross profit | 95.2 | 20.6 |
Net income | $ 85.7 | $ 6.3 |
Investments in Unconsolidated Affiliates (Details) - USD ($) $ in Millions |
3 Months Ended | |||
---|---|---|---|---|
Jan. 31, 2017 |
Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2017 |
|
Investments in Unconsolidated Affiliates | ||||
Equity in earnings (losses) of unconsolidated affiliates | $ 45.5 | $ 19.3 | ||
Investments in unconsolidated affiliates | 168.1 | 160.6 | $ 152.5 | |
Americas Styrenics | ||||
Investments in Unconsolidated Affiliates | ||||
Investments in unconsolidated affiliates | 168.1 | 152.5 | ||
Investment in unconsolidated affiliates-difference between carrying amount and underlying equity | $ 43.8 | $ 46.4 | ||
Percentage of ownership underlying net assets | 50.00% | 50.00% | ||
Amortized weighted average remaining useful life | P2Y7M6D | |||
Dividends received from operating activities | $ 30.0 | 7.5 | ||
Sumika Styron Polycarbonate | ||||
Investments in Unconsolidated Affiliates | ||||
Investments in unconsolidated affiliates | $ 0.0 | |||
Percentage of ownership underlying net assets | 50.00% | |||
Sales proceeds | $ 42.1 | |||
Gain on sale | 9.3 | |||
Dividends received from operating and investing activities | $ 9.8 |
Inventories (Details) - USD ($) $ in Millions |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Inventories | ||
Finished goods | $ 285.6 | $ 250.9 |
Raw materials and semi-finished goods | 265.1 | 226.7 |
Supplies | 37.6 | 32.8 |
Total | $ 588.3 | $ 510.4 |
Goodwill and Intangible Assets (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2018
USD ($)
| |
Goodwill [Roll Forward] | |
Beginning Balance | $ 72.5 |
Foreign currency impact | 1.7 |
Ending Balance | 74.2 |
Latex Binders Segment | |
Goodwill [Roll Forward] | |
Beginning Balance | 16.5 |
Foreign currency impact | 0.4 |
Ending Balance | 16.9 |
Synthetic Rubber Segment | |
Goodwill [Roll Forward] | |
Beginning Balance | 11.7 |
Foreign currency impact | 0.3 |
Ending Balance | 12.0 |
Performance Plastics Segment [Member] | |
Goodwill [Roll Forward] | |
Beginning Balance | 39.6 |
Foreign currency impact | 0.9 |
Ending Balance | 40.5 |
Polystyrene [Member] | |
Goodwill [Roll Forward] | |
Beginning Balance | 4.7 |
Foreign currency impact | 0.1 |
Ending Balance | $ 4.8 |
Fair Value Measurements - Items not at Fair Value (Details) - Significant Other Observable Inputs (Level 2) - USD ($) $ in Millions |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Fair Value of Debt Instruments | ||
Total fair value of long term debt | $ 1,196.9 | $ 1,224.5 |
2025 Senior Notes | ||
Fair Value of Debt Instruments | ||
Total fair value of long term debt | 495.2 | 518.8 |
2024 Term Loan B | ||
Fair Value of Debt Instruments | ||
Total fair value of long term debt | $ 701.7 | $ 705.7 |
Provision for Income Taxes (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Provision for Income Taxes | ||
Effective tax rate | 17.10% | 20.00% |
Provision for income taxes | $ 24.9 | $ 29.3 |
Sumika Styron Polycarbonate | ||
Provision for Income Taxes | ||
Gain on sale | $ 9.3 |
Commitments and Contingencies (Details) |
Mar. 31, 2018
USD ($)
item
|
Dec. 31, 2017
USD ($)
|
---|---|---|
Commitments and Contingencies Disclosure | ||
Accrued obligations for environmental remediation and restoration costs | $ | $ 0 | $ 0 |
Environmental claims asserted | item | 0 |
Commitments and Contingencies - Purchase Commitments (Details) |
3 Months Ended |
---|---|
Mar. 31, 2018 | |
Maximum | |
Loss Contingencies [Line Items] | |
Purchase commitment period | 4 years |
Minimum | |
Loss Contingencies [Line Items] | |
Purchase commitment period | 1 year |
Pension Plans and Other Postretirement Benefits - Net Periodic Benefit Costs (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Defined Benefit Pension Plans | ||
Net periodic benefit cost | ||
Service cost | $ 3.1 | $ 4.6 |
Interest cost | 1.3 | 1.1 |
Expected return on plan assets | (0.6) | (0.4) |
Amortization of prior service cost (credit) | (0.3) | (0.5) |
Amortization of net (gain) loss | 1.0 | 1.4 |
Settlement and curtailment gain | 0.1 | |
Net periodic benefit cost | 4.5 | 6.3 |
Settlement and curtailment gain | 0.5 | |
Defined benefit curtailment gain | 0.4 | |
Amounts recognized in other comprehensive income (loss) | ||
Net periodic benefit cost | 4.5 | 6.3 |
Other Postretirement Plans | ||
Net periodic benefit cost | ||
Service cost | 0.1 | |
Interest cost | 0.1 | 0.1 |
Net periodic benefit cost | 0.1 | 0.2 |
Amounts recognized in other comprehensive income (loss) | ||
Net periodic benefit cost | $ 0.1 | $ 0.2 |
Pension Plans and Other Postretirement Benefits - Net Amounts Recognized (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Dec. 31, 2017 |
|
Net amounts recognized in the balance sheets at December 31 | ||
Noncurrent liabilities | $ (195.2) | $ (188.7) |
Cash contributions and benefit payments to unfunded plans | 2.0 | |
Expected contributions, remainder of current year | $ 4.5 |
Stock-Based Compensation - RSUs (Details) - Restricted Stock Units |
3 Months Ended |
---|---|
Mar. 31, 2018
$ / shares
shares
| |
Other-than-Options, Shares Activity | |
Granted, Shares | shares | 97,676 |
Other-than-Options, FV Activity | |
Granted, Weighted-Average Grant Date Fair Value per Share | $ / shares | $ 81.20 |
Stock-Based Compensation - Options and PSUs (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Options, Additional Disclosures | ||
Proceeds from exercise of option awards | $ 1.9 | $ 3.4 |
Option Awards | ||
Options Outstanding Roll Forward | ||
Granted, Options | 202,963 | |
Options, Additional Disclosures | ||
Unrecognized compensation cost, options | $ 2.9 | |
Fair Value Assumptions | ||
Expected term (in years) | 5 years 6 months | |
Expected volatility | 32.00% | |
Risk-free interest rate | 2.71% | |
Dividend yield | 2.00% | |
Options granted, Weighted average grant date fair value | $ 22.29 | |
Performance Share Units | ||
Fair Value Assumptions | ||
Expected term (in years) | 3 years | |
Expected volatility | 36.00% | |
Risk-free interest rate | 2.42% | |
Share Price | $ 81.20 | |
Other-than-Options, Shares Activity | ||
Granted, Shares | 50,289 | |
Other-than-Options, FV Activity | ||
Granted, Weighted-Average Grant Date Fair Value per Share | $ 88.51 |
Acquisitions and Divestitures - Acquisition (Details) - API Applicazioni Plastiche Industriali S.p.A. [Member] - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Jul. 10, 2017 |
Mar. 31, 2018 |
|
Business Acquisition [Line Items] | ||
Equity interest acquired | 100.00% | |
Gross purchase price | $ 90.6 | |
Cash acquired | 8.4 | |
Purchase price, net of cash acquired | $ 82.3 | |
Changes to purchase price allocation | $ 0.0 | |
Transaction costs | $ 0.3 |
Segments - Recon. of Net Income to Segment Adjusted EBITDA (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Segment Reporting Information [Line Items] | ||
Income before income taxes | $ 145.2 | $ 146.6 |
Interest expense, net | (14.9) | (18.2) |
Depreciation and amortization | 31.9 | 24.7 |
Corporate Unallocated | 20.1 | 27.6 |
Adjusted EBITDA addbacks | 3.0 | (7.8) |
Adjusted EBITDA | 215.1 | 209.3 |
Net loss (gain) on disposition of businesses and assets | (0.5) | (9.9) |
Restructuring and other charges | 0.5 | 2.1 |
Acquisition transactions and integration costs | 0.3 | |
Other items | 2.7 | |
Operating Segments [Member] | ||
Segment Reporting Information [Line Items] | ||
Income before income taxes | 145.2 | 146.6 |
Corporate Unallocated [Member] | ||
Segment Reporting Information [Line Items] | ||
Interest expense, net | (14.9) | (18.2) |
Depreciation and amortization | $ 2.3 | $ 2.1 |
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Earnings: | ||
Net income (loss) | $ 120.3 | $ 117.3 |
Shares: | ||
Weighted average ordinary shares outstanding | 43.4 | 44.1 |
Dilutive effect of RSUs and option awards | 1.0 | 1.2 |
Diluted weighted average ordinary shares outstanding | 44.4 | 45.3 |
Income (loss) per share: | ||
Income per share- basic | $ 2.77 | $ 2.66 |
Income per share- diluted | $ 2.71 | $ 2.59 |
Anti-dilutive shares excluded | 0.2 | 0.2 |