Trinseo(TSE)

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Trinseo (TSE) Launches PMMA Depolymerization Facility in Italy
ZACKS· 2024-06-27 16:20
Core Insights - Trinseo PLC has opened a PMMA depolymerization facility in Rho, Italy, marking a significant step in its sustainability efforts and commitment to a circular economy [1][2][5] Sustainability Commitment - The new facility is part of Trinseo's strategy to support sustainability goals, focusing on innovative recycling technologies to help customers achieve their own sustainability objectives [2][5] - The facility utilizes advanced continuous depolymerization technology to produce high-purity regenerated MMA from both pre- and post-consumer acrylic solutions, enhancing Trinseo's recycled feedstock capabilities [4][5] Technological Advancements - Depolymerization is a chemical recycling process that breaks down acrylic solutions into their constituent monomer, methyl methacrylate (MMA), allowing for the recycling of previously non-recyclable PMMA sheets [3] - This technology also facilitates the removal of additives and contaminants, enabling a broader recycling of PMMA [3] Product Development - The recycled MMA (rMMA) produced is comparable in quality to virgin raw materials and is used in Trinseo's ALTUGLAS and PLEXIGLAS R-Life product lines, suitable for high-demand applications [6] Market Performance - Trinseo's shares have experienced a significant decline of 79.9% over the past year, compared to a 33.4% decline in the industry [7]
Trinseo(TSE) - 2024 Q1 - Earnings Call Presentation
2024-05-09 19:46
Europe Asia 5 Q1'24 Q1'23 6 U.S. 4 • Styrene purchased via a mix of spot and contract prices • Q1 price increase contributed to working capital build, the majority of which we believe will reverse over the balance of the year Net Sales & Net Income ($MM) Q1'24 Q1'23 Net Sales Net Income Adjusted EBITDA* ($MM) Engineered Materials $4 ($12) Q1'24 Q1'23 Vol Price FX Total 3% (12%) 1% (8%) • Higher year-over-year volumes in paper & board applications, primarily in Asia Pacific • Adjusted EBITDA was $2 million a ...
Trinseo(TSE) - 2024 Q1 - Earnings Call Transcript
2024-05-09 19:45
Financial Data and Key Metrics Changes - The first quarter adjusted EBITDA was $45 million, in line with previous guidance, including $13 million of favorable net timing from rising styrene prices [35][36] - Cash used in operations during the quarter was $66 million, resulting in free cash flow of negative $82 million, attributed to a $61 million increase in trade working capital [53] - The company ended the quarter with $171 million of cash and $423 million of liquidity, including undrawn bank facilities [54] Business Line Data and Key Metrics Changes - Engineering materials are expected to generate above $20 million in EBITDA for Q2, reflecting a recovery in demand [59] - The MMA market saw margin expansion due to supply tightness, with March prices significantly higher in Europe [46] - The company anticipates a favorable mix in 2024, with engineering materials growing faster than the broader portfolio [71] Market Data and Key Metrics Changes - European spot styrene prices increased by about 60% in Q1 due to industry outages, leading to margin expansion at America’s Styrenics [35] - The MMA market in Europe is currently net short, with demand for architectural coatings tightening the market [48] - The company is about 20% below historical run rate volumes compared to normal demand, indicating potential for recovery [97] Company Strategy and Development Direction - The company is committed to integrating modern recycling technologies and has seen a record amount of products containing recycled material sold in Q1, a 65% increase over the prior year [33] - A sale process for the company’s interest in America’s Styrenics has commenced, with expectations for a definitive agreement by early 2025 [32] - The company plans to close its virgin polycarbonate production line in Germany due to soft demand and price declines, while continuing to focus on sustainable product offerings [32][50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the positive earnings momentum continuing into Q2, supported by tightness in styrene and MMA markets [55] - The company remains cautious about the overall demand environment, indicating that Q1 profitability is expected to be the low point of the year [36] - Management noted that while there are signs of improvement, the overall market remains challenging, and they are prioritizing liquidity [56] Other Important Information - The company has engaged local works council in Germany regarding the potential closure of its polycarbonate production line, reflecting ongoing challenges in the market [32] - The company is taking actions to moderate lower margin sales to conserve working capital, with minimal impact on earnings [54] Q&A Session All Questions and Answers Question: Can you quantify the impact of the turnaround in Q1? - The impact of the turnaround was approximately $8 million in earnings, with styrene prices not accelerating until March [62] Question: What kind of interest are you seeing in marketing the AmSty JV? - There has been interest from several strategic and financial parties, but active marketing has not yet begun [81] Question: How do you characterize the mix as volumes rise? - The company expects a favorable mix with higher margin product sales as volumes rise, particularly in engineering materials [59][71] Question: How far below normal levels is demand currently? - The company is about 20% below historical run rate volumes, with a potential $25 million per quarter EBITDA impact for every 10% recovery [97]
Trinseo(TSE) - 2024 Q1 - Quarterly Report
2024-05-09 19:05
[General Information](index=1&type=section&id=General%20Information) Details Trinseo PLC's Form 10-Q filing, SEC compliance, and forward-looking statement cautions [Filing Details and Forward-Looking Statements](index=1&type=section&id=Filing%20Details) This section provides the filing details for Trinseo PLC's Form 10-Q for the quarter ended March 31, 2024, including company identification, SEC filing compliance, and a cautionary note on forward-looking statements - Trinseo PLC (NYSE: TSE) filed its Quarterly Report on Form 10-Q for the period ended March 31, 2024, confirming compliance with SEC filing requirements[2](index=2&type=chunk)[3](index=3&type=chunk) - The company is classified as an 'Accelerated filer' and is not a shell company[4](index=4&type=chunk) - Forward-looking statements are subject to inherent uncertainties and risks, including successful implementation of restructuring initiatives, raw material and energy costs, regulatory compliance, and global economic conditions[12](index=12&type=chunk)[13](index=13&type=chunk) [PART I — FINANCIAL INFORMATION](index=4&type=section&id=Part%20I%20Financial%20Information) Presents the company's unaudited condensed consolidated financial statements and related disclosures [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements of Trinseo PLC for the three months ended March 31, 2024 and 2023, including balance sheets, statements of operations, comprehensive income (loss), shareholders' equity, and cash flows, along with detailed notes explaining the basis of presentation, accounting policies, and specific financial items [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Presents the company's unaudited condensed consolidated balance sheets for the period Key Balance Sheet Metrics | Metric | March 31, 2024 (Millions) | December 31, 2023 (Millions) | Change (Millions) | | :----- | :------------------------ | :--------------------------- | :---------------- | | Total Assets | $2,989.4 | $3,029.2 | $(39.8) | | Total Current Assets | $1,196.7 | $1,194.1 | $2.6 | | Cash and Cash Equivalents | $166.4 | $259.1 | $(92.7) | | Total Liabilities | $3,337.4 | $3,297.2 | $40.2 | | Total Shareholders' Equity | $(348.0) | $(268.0) | $(80.0) | | Accumulated Deficit | $(518.8) | $(443.0) | $(75.8) | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Presents the company's unaudited condensed consolidated statements of operations for the period Key Operating Results | Metric | Three Months Ended March 31, 2024 (Millions) | Three Months Ended March 31, 2023 (Millions) | YoY Change (Millions) | YoY Change (%) | | :----- | :------------------------------------------- | :------------------------------------------- | :-------------------- | :------------- | | Net Sales | $904.0 | $996.3 | $(92.3) | (9.3)% | | Gross Profit | $60.6 | $37.2 | $23.4 | 62.9% | | Operating Loss | $(3.3) | $(30.2) | $26.9 | (89.1)% | | Interest Expense, net | $63.0 | $38.3 | $24.7 | 64.5% | | Loss before Income Taxes | $(70.1) | $(65.6) | $(4.5) | 6.9% | | Provision for (benefit from) Income Taxes | $5.4 | $(16.7) | $22.1 | (132.3)% | | Net Loss | $(75.5) | $(48.9) | $(26.6) | 54.4% | | Net Loss per Share—Basic | $(2.14) | $(1.40) | $(0.74) | 52.9% | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Presents the company's unaudited condensed consolidated statements of comprehensive income (loss) Comprehensive Income (Loss) Summary | Metric | Three Months Ended March 31, 2024 (Millions) | Three Months Ended March 31, 2023 (Millions) | YoY Change (Millions) | | :----- | :------------------------------------------- | :------------------------------------------- | :-------------------- | | Net Loss | $(75.5) | $(48.9) | $(26.6) | | Cumulative Translation Adjustments | $(11.8) | $10.5 | $(22.3) | | Net Gain (Loss) on Cash Flow Hedges | $4.4 | $(7.4) | $11.8 | | Total Other Comprehensive Income (Loss), net of tax | $(7.8) | $3.4 | $(11.2) | | Comprehensive Loss | $(83.3) | $(45.5) | $(37.8) | [Condensed Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) Presents the company's unaudited condensed consolidated statements of shareholders' equity Shareholders' Equity Movements | Metric | Balance at Dec 31, 2023 (Millions) | Net Loss (Millions) | Other Comprehensive Loss (Millions) | Share-based Compensation (Millions) | Dividends (Millions) | Balance at Mar 31, 2024 (Millions) | | :----- | :--------------------------------- | :------------------ | :---------------------------------- | :---------------------------------- | :------------------- | :--------------------------------- | | Total Shareholders' Equity | $(268.0) | $(75.5) | $(7.8) | $3.6 | $(0.3) | $(348.0) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Presents the company's unaudited condensed consolidated statements of cash flows for the period Cash Flow Summary | Cash Flow Activity | Three Months Ended March 31, 2024 (Millions) | Three Months Ended March 31, 2023 (Millions) | YoY Change (Millions) | | :----------------- | :------------------------------------------- | :------------------------------------------- | :-------------------- | | Operating Activities | $(66.2) | $45.4 | $(111.6) | | Investing Activities | $(11.0) | $(21.8) | $10.8 | | Financing Activities | $(9.2) | $(20.5) | $11.3 | | Effect of Exchange Rates on Cash | $(3.2) | $2.3 | $(5.5) | | Net Change in Cash | $(89.6) | $5.4 | $(95.0) | | Cash and Cash Equivalents—end of period | $166.4 | $217.1 | $(50.7) | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures for the unaudited condensed consolidated financial statements [NOTE 1—BASIS OF PRESENTATION](index=9&type=section&id=NOTE%201%E2%80%94BASIS%20OF%20PRESENTATION) Outlines financial statement presentation basis, including segment realignment and discontinued operations - The Feedstocks segment was eliminated effective January 1, 2024, due to the closure of styrene plants in Boehlen, Germany, and Terneuzen, the Netherlands[35](index=35&type=chunk) - The company realigned its reporting segments to five: Engineered Materials, Latex Binders, Plastics Solutions, Polystyrene, and Americas Styrenics[35](index=35&type=chunk) [NOTE 2—RECENT ACCOUNTING GUIDANCE](index=9&type=section&id=NOTE%202%E2%80%94RECENT%20ACCOUNTING%20GUIDANCE) Discusses the impact of recently issued accounting standards on the financial statements - No recently issued accounting standards had a material effect on the financial statements as of March 31, 2024[36](index=36&type=chunk) [NOTE 3—NET SALES](index=10&type=section&id=NOTE%203%E2%80%94NET%20SALES) Details net sales by segment and geographical market for the reporting period Table: Net Sales by Segment | Segment | March 31, 2024 (Millions) | March 31, 2023 (Millions) | YoY Change (Millions) | YoY Change (%) | | :------ | :------------------------ | :------------------------ | :-------------------- | :------------- | | Engineered Materials | $189.2 | $206.2 | $(17.0) | (8.2)% | | Latex Binders | $241.5 | $249.0 | $(7.5) | (3.0)% | | Plastics Solutions | $265.7 | $300.3 | $(34.6) | (11.5)% | | Polystyrene | $207.6 | $240.8 | $(33.2) | (13.8)% | | Total Net Sales | $904.0 | $996.3 | $(92.3) | (9.3)% | - Europe and the United States were the largest geographical markets, with sales of **$462.5 million** and **$226.4 million** respectively in Q1 2024[40](index=40&type=chunk) [NOTE 4—RESTRUCTURING ACTIVITIES](index=11&type=section&id=NOTE%204%E2%80%94RESTRUCTURING%20ACTIVITIES) Summarizes ongoing restructuring plans, associated charges, and expected future impacts Table: Restructuring Charges | Restructuring Plan | Three Months Ended March 31, 2024 (Millions) | Three Months Ended March 31, 2023 (Millions) | | :----------------- | :------------------------------------------- | :------------------------------------------- | | Asset Optimization and Corporate Restructuring | $7.2 | $0.0 | | Asset Restructuring Plan | $1.4 | $7.7 | | Transformational Restructuring Program | $0.0 | $0.0 | | Total Restructuring Charges | $8.6 | $7.7 | - The Asset Optimization and Corporate Restructuring plan includes the closure of PMMA sheet plants in Bronderslev, Denmark, and Belen, New Mexico, and a PMMA extruded sheet line in Rho, Italy, as well as discontinuing styrene production at Terneuzen, Netherlands[41](index=41&type=chunk)[42](index=42&type=chunk) - The Asset Restructuring Plan (approved Dec 2022) includes closure of styrene production in Boehlen, Germany, a polycarbonate production line in Stade, Germany, and a PMMA sheet manufacturing site in Matamoros, Mexico[48](index=48&type=chunk) - The company expects to incur incremental contract termination charges of **$10.5 million** and decommissioning and other charges of **$0.5 million** within the Plastics Solution segment, mostly by end of 2024[47](index=47&type=chunk) [NOTE 5—INCOME TAXES](index=14&type=section&id=NOTE%205%E2%80%94INCOME%20TAXES) Presents income tax provision, effective tax rate, and factors influencing tax expense Table: Income Tax Provision and Rate | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----- | :-------------------------------- | :-------------------------------- | | Provision for (benefit from) Income Taxes | $5.4 million | $(16.7) million | | Effective Income Tax Rate | (7.7)% | 25.4% | - The decrease in the effective income tax rate was driven by an increase in losses not anticipated to provide a tax benefit, due to increased valuation allowances in the United States and Switzerland[54](index=54&type=chunk) - The company will continue to evaluate the need for a partial or full valuation allowance against its **$13.5 million** net deferred tax assets in its China subsidiary due to recent losses[55](index=55&type=chunk) [NOTE 6—EARNINGS PER SHARE](index=15&type=section&id=NOTE%206%E2%80%94EARNINGS%20PER%20SHARE) Details basic and diluted earnings per share calculations and contributing factors Table: Earnings Per Share Details | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----- | :-------------------------------- | :-------------------------------- | | Net Loss | $(75.5) million | $(48.9) million | | Weighted Average Shares—Basic | 35.3 million | 35.0 million | | Net Loss per Share—Basic | $(2.14) | $(1.40) | | Net Loss per Share—Diluted | $(2.14) | $(1.40) | - Potential shares from equity-based awards were excluded from diluted EPS calculation because the company recorded a net loss, making their inclusion anti-dilutive[59](index=59&type=chunk) [NOTE 7—INVENTORIES](index=15&type=section&id=NOTE%207%E2%80%94INVENTORIES) Provides a breakdown of inventory types and their values at period-end Table: Inventory Breakdown | Inventory Type | March 31, 2024 (Millions) | December 31, 2023 (Millions) | Change (Millions) | | :------------- | :------------------------ | :--------------------------- | :---------------- | | Finished goods | $190.2 | $162.4 | $27.8 | | Raw materials and semi-finished goods | $199.4 | $200.9 | $(1.5) | | Supplies | $41.6 | $41.4 | $0.2 | | Total | $431.2 | $404.7 | $26.5 | [NOTE 8—INVESTMENTS IN UNCONSOLIDATED AFFILIATES](index=15&type=section&id=NOTE%208%E2%80%94INVESTMENTS%20IN%20UNCONSOLIDATED%20AFFILIATES) Reports on investments in unconsolidated affiliates, including financial performance and dividends Table: Americas Styrenics Financials | Metric | Three Months Ended March 31, 2024 (Millions) | Three Months Ended March 31, 2023 (Millions) | YoY Change (Millions) | | :----- | :------------------------------------------- | :------------------------------------------- | :-------------------- | | Americas Styrenics Sales | $386.0 | $443.3 | $(57.3) | | Americas Styrenics Net Income (Loss) | $(3.7) | $37.8 | $(41.5) | | Dividends Received from Americas Styrenics | $0.0 | $20.0 | $(20.0) | - The company's investment in Americas Styrenics was **$258.4 million** as of March 31, 2024, an increase from **$252.2 million** at December 31, 2023[64](index=64&type=chunk) [NOTE 9—GOODWILL](index=17&type=section&id=NOTE%209%E2%80%94GOODWILL) Details goodwill balances by segment and accumulated impairment losses Table: Goodwill by Segment | Segment | Balance at Dec 31, 2023 (Millions) | Foreign Currency Impact (Millions) | Balance at Mar 31, 2024 (Millions) | | :------ | :--------------------------------- | :--------------------------------- | :--------------------------------- | | Latex Binders | $15.4 | $(0.4) | $15.0 | | Plastics Solutions | $44.0 | $(1.0) | $43.0 | | Polystyrene | $4.4 | $(0.1) | $4.3 | | Total Goodwill | $63.8 | $(1.5) | $62.3 | - The Engineered Materials segment has accumulated impairment losses of **$646.1 million** as of March 31, 2024[65](index=65&type=chunk) [NOTE 10—LONG TERM DEBT & AVAILABLE FACILITIES](index=17&type=section&id=NOTE%2010%E2%80%94LONG%20TERM%20DEBT%20%26%20AVAILABLE%20FACILITIES) Outlines long-term debt instruments, liquidity, and available borrowing facilities Table: Long-Term Debt Overview | Debt Instrument | March 31, 2024 (Millions) | December 31, 2023 (Millions) | | :-------------- | :------------------------ | :--------------------------- | | 2029 Senior Notes | $436.3 | $435.9 | | 2025 Senior Notes | $114.5 | $114.4 | | 2028 Term Loan B | $716.0 | $717.1 | | 2028 Refinance Term Loans | $1,024.0 | $1,023.9 | | Total Long-Term Debt, net | $2,276.7 | $2,277.6 | - As of March 31, 2024, the company had **$415.6 million** in Liquidity, comprising **$163.8 million** in cash and cash equivalents and **$251.7 million** available for borrowing under the 2026 Revolving Facility (**$101.7 million**) and Accounts Receivable Securitization Facility (**$150.0 million**)[71](index=71&type=chunk) - The Accounts Receivable Securitization Facility's maturity date was extended to November 2025, maintaining a borrowing limit of **$150.0 million**[76](index=76&type=chunk) - The company's ability to repay the 2025 Senior Notes (maturing September 2025) is dependent on achieving forecast cash flows and maintaining minimum liquidity requirements[73](index=73&type=chunk) [NOTE 11—FINANCIAL INSTRUMENTS AND DERIVATIVES](index=20&type=section&id=NOTE%2011%E2%80%94FINANCIAL%20INSTRUMENTS%20AND%20DERIVATIVES) Describes the company's use of derivative instruments for hedging market risks - The company uses foreign exchange forward contracts to economically hedge foreign currency risk, with a notional value of **$347.5 million** as of March 31, 2024[78](index=78&type=chunk)[79](index=79&type=chunk) - Commodity swap agreements are used to hedge natural gas price volatility, with open cash flow hedges having a notional value of approximately **462 thousand megawatt hours** as of March 31, 2024[82](index=82&type=chunk)[83](index=83&type=chunk) - The company expects to reclassify an approximate **$9.6 million** net loss from Accumulated Other Comprehensive Income (AOCI) into earnings in the next twelve months related to commodity cash flow hedges[87](index=87&type=chunk) [NOTE 12—FAIR VALUE MEASUREMENTS](index=23&type=section&id=NOTE%2012%E2%80%94FAIR%20VALUE%20MEASUREMENTS) Presents fair value measurements for financial instruments and nonrecurring assets Table: Derivative Financial Instruments Fair Value | Derivative Type | March 31, 2024 (Millions) | December 31, 2023 (Millions) | Change (Millions) | | :-------------- | :------------------------ | :--------------------------- | :---------------- | | Net Derivative Asset Position | $0.7 | $0.0 | $0.7 | | Net Derivative Liability Position | $(15.8) | $(27.0) | $11.2 | | Total Net Derivative Position | $(15.1) | $(27.0) | $11.9 | - The fair value of the company's debt instruments (2029 Senior Notes, 2025 Senior Notes, 2028 Term Loan B, 2028 Refinance Term Loans) was estimated at **$1,871.1 million** as of March 31, 2024, using Level 2 inputs[97](index=97&type=chunk) - Boehlen styrene monomer assets, measured at fair value on a nonrecurring basis using Level 3 inputs, remained at **$3.2 million** as of March 31, 2024[94](index=94&type=chunk) [NOTE 13—COMMITMENTS AND CONTINGENCIES](index=25&type=section&id=NOTE%2013%E2%80%94COMMITMENTS%20AND%20CONTINGENCIES) Details environmental matters, purchase commitments, asset retirement obligations, and litigation [Environmental Matters](index=25&type=section&id=Environmental%20Matters) Summarizes accrued obligations for environmental remediation and restoration costs - Accrued obligations for environmental remediation or restoration costs totaled **$1.3 million** as of March 31, 2024[99](index=99&type=chunk) [Purchase Commitments](index=25&type=section&id=Purchase%20Commitments) Outlines raw material purchase contracts requiring minimum volumes - The company has raw material purchase contracts requiring minimum volumes at current market prices, ranging from one to four years[102](index=102&type=chunk) [Asset Retirement Obligations](index=26&type=section&id=Asset%20Retirement%20Obligations) Details asset retirement obligations, particularly for the Boehlen, Germany site - The asset retirement obligation for the Boehlen, Germany site was **$18.1 million** as of March 31, 2024, with a current portion of **$8.8 million**[104](index=104&type=chunk)[105](index=105&type=chunk) [Litigation Matters](index=26&type=section&id=Litigation%20Matters) Discusses ongoing legal disputes, including class action settlements and arbitration - A class action complaint related to the Bristol Spill was preliminarily settled, with **$2.7 million** paid into escrow in April 2024, covered by insurance[107](index=107&type=chunk)[108](index=108&type=chunk) - The company is involved in an arbitration dispute with Synthos regarding the 2021 sale of its Rubber Business, with Synthos seeking non-monetary restitution and monetary damages[111](index=111&type=chunk)[112](index=112&type=chunk) [NOTE 14—PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS](index=29&type=section&id=NOTE%2014%E2%80%94PENSION%20PLANS%20AND%20OTHER%20POSTRETIREMENT%20BENEFITS) Reports on net periodic benefit costs and expected contributions for pension plans Table: Pension Plan Net Periodic Benefit Cost | Metric | Three Months Ended March 31, 2024 (Millions) | Three Months Ended March 31, 2023 (Millions) | | :----- | :------------------------------------------- | :------------------------------------------- | | Non-U.S. Defined Benefit Pension Plans Net Periodic Benefit Cost | $3.1 | $2.6 | | U.S. Defined Benefit Pension Plans Net Periodic Benefit Cost | $0.1 | $0.2 | - The company expects to contribute approximately **$6.7 million** to its defined benefit plans for the remainder of 2024[118](index=118&type=chunk) [NOTE 15—SHARE-BASED COMPENSATION](index=30&type=section&id=NOTE%2015%E2%80%94SHARE-BASED%20COMPENSATION) Details share-based compensation expenses and unrecognized costs for various award types Table: Share-Based Compensation Expense | Award Type | Three Months Ended March 31, 2024 (Millions) | Three Months Ended March 31, 2023 (Millions) | Unrecognized Compensation Cost as of March 31, 2024 (Millions) | | :--------- | :------------------------------------------- | :------------------------------------------- | :------------------------------------------------------------- | | RSUs | $2.4 | $4.8 | $6.5 | | Options | $0.8 | $2.6 | $1.1 | | PSUs | $0.6 | $0.8 | $4.8 | | RCUs | $2.1 | $0.0 | $3.0 | | Total | $5.9 | $8.2 | N/A | - **1,074,119** Restricted Cash Units (RCUs) were awarded in Q1 2024, which are cash-settled liability instruments remeasured based on the stock price[121](index=121&type=chunk)[124](index=124&type=chunk) [NOTE 16—SEGMENTS AND GEOGRAPHIC INFORMATION](index=31&type=section&id=NOTE%2016%E2%80%94SEGMENTS%20AND%20GEOGRAPHIC%20INFORMATION) Provides financial information by operating segment and geographic region - The company now operates under five segments: Engineered Materials, Latex Binders, Plastics Solutions, Polystyrene, and Americas Styrenics, after eliminating the Feedstocks segment[125](index=125&type=chunk)[126](index=126&type=chunk) Table: Segment Adjusted EBITDA | Segment | Three Months Ended March 31, 2024 (Millions) | Three Months Ended March 31, 2023 (Millions) | YoY Change (Millions) | YoY Change (%) | | :------ | :------------------------------------------- | :------------------------------------------- | :-------------------- | :------------- | | Engineered Materials | $4.3 | $(11.7) | $16.0 | 136.8% | | Latex Binders | $25.7 | $24.0 | $1.7 | 7.1% | | Plastics Solutions | $22.7 | $23.6 | $(0.9) | (3.8)% | | Polystyrene | $12.6 | $8.9 | $3.7 | 41.6% | | Americas Styrenics | $6.1 | $17.6 | $(11.5) | (65.3)% | | Total Segment Adjusted EBITDA | $71.4 | $62.4 | $9.0 | 14.4% | - Adjusted EBITDA 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 benefits and other items[130](index=130&type=chunk) [NOTE 17—ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)](index=33&type=section&id=NOTE%2017%E2%80%94ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME%20(LOSS)) Details changes in accumulated other comprehensive income (loss) components Table: Accumulated Other Comprehensive Income (Loss) Components | AOCI Component | Balance as of Dec 31, 2023 (Millions) | Other Comprehensive Income (Loss) (Millions) | Reclassified to Net Income (Millions) | Balance as of Mar 31, 2024 (Millions) | | :------------- | :------------------------------------ | :------------------------------------------- | :------------------------------------ | :------------------------------------ | | Cumulative Translation Adjustments | $(141.9) | $(11.8) | $0.0 | $(153.7) | | Pension & Other Postretirement Benefit Plans, Net | $17.1 | $0.0 | $(0.4) | $16.7 | | Cash Flow Hedges, Net | $(4.8) | $0.1 | $4.3 | $(0.4) | | Total AOCI | $(129.6) | $(11.7) | $3.9 | $(137.4) | - **$4.3 million** net of tax from cash flow hedging items and **$(0.4) million** net of tax from pension and other postretirement benefit plan items were reclassified from AOCI to net income in Q1 2024[135](index=135&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Trinseo recognized a net loss of $75.5 million and Adjusted EBITDA of $45.0 million in Q1 2024, impacted by persistent demand weakness but mitigated by lower costs and restructuring - Net loss was **$75.5 million** and Adjusted EBITDA was **$45.0 million** for the three months ended March 31, 2024[138](index=138&type=chunk) - Sales volumes (excluding styrene-related sales) were the highest since Q3 2022 and marked the first year-over-year increase since Q1 2022[138](index=138&type=chunk) - The company commenced a sale process for its interest in Americas Styrenics, expected to lead to a definitive agreement in early 2025[142](index=142&type=chunk) - The Accounts Receivable Securitization Facility was renewed, extending its maturity to November 2025 with a **$150.0 million** borrowing limit[141](index=141&type=chunk) [2024 Year-to-Date Highlights](index=35&type=section&id=2024%20Year-to-Date%20Highlights) Summarizes key financial and operational highlights for the first quarter of 2024 - Net loss of **$75.5 million** and Adjusted EBITDA of **$45.0 million** were recognized in Q1 2024[138](index=138&type=chunk) - Sales volumes, excluding styrene-related sales, were the highest since Q3 2022 and showed the first year-over-year increase since Q1 2022[138](index=138&type=chunk) - The Accounts Receivable Securitization Facility was extended to November 2025, maintaining a **$150.0 million** borrowing limit[141](index=141&type=chunk) - A sale process for the company's interest in Americas Styrenics was commenced, with a definitive agreement anticipated in early 2025[142](index=142&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) Analyzes the company's net sales, gross profit, operating loss, and net loss for the period Table: Key Operating Results Summary | Metric | Three Months Ended March 31, 2024 (Millions) | Three Months Ended March 31, 2023 (Millions) | YoY Change (Millions) | YoY Change (%) | | :----- | :------------------------------------------- | :------------------------------------------- | :-------------------- | :------------- | | Net Sales | $904.0 | $996.3 | $(92.3) | (9)% | | Cost of Sales | $843.4 | $959.1 | $(115.7) | (12)% | | Gross Profit | $60.6 | $37.2 | $23.4 | 73% | | Selling, General and Administrative Expenses | $70.1 | $84.7 | $(14.6) | (17)% | | Operating Loss | $(3.3) | $(30.2) | $26.9 | (89)% | | Interest Expense, net | $63.0 | $38.3 | $24.7 | 64% | | Net Loss | $(75.5) | $(48.9) | $(26.6) | 54% | - Net sales decreased **9%** due to a **7%** decrease from lower selling prices (pass-through of raw material costs, weak polystyrene and ABS markets) and a **3%** decrease from lower sales volumes (Terneuzen styrene facility closure), partially offset by **1%** favorable foreign exchange rates[147](index=147&type=chunk) - Gross profit increased **73%** primarily due to prior year unfavorable impacts from natural gas hedges and fixed cost under absorption[149](index=149&type=chunk) - Equity in earnings of unconsolidated affiliate (Americas Styrenics) decreased by **$11.4 million** due to a planned turnaround at its largest styrene production facility[151](index=151&type=chunk) - The increase in interest expense, net, of **$24.7 million (64%)** was primarily due to higher market interest rates on variable rate debt, specifically the 2028 Refinance Loans[153](index=153&type=chunk) [Selected Segment Information](index=37&type=section&id=Selected%20Segment%20Information) Provides a breakdown of net sales and Adjusted EBITDA by operating segment Table: Segment Net Sales and Adjusted EBITDA | Segment | Net Sales (Q1 2024, Millions) | Net Sales (Q1 2023, Millions) | Adjusted EBITDA (Q1 2024, Millions) | Adjusted EBITDA (Q1 2023, Millions) | Adjusted EBITDA % Change | | :------ | :---------------------------- | :---------------------------- | :---------------------------------- | :---------------------------------- | :----------------------- | | Engineered Materials | $189.2 | $206.2 | $4.3 | $(11.7) | 137% | | Latex Binders | $241.5 | $249.0 | $25.7 | $24.0 | 7% | | Plastics Solutions | $265.7 | $300.3 | $22.7 | $23.6 | (4)% | | Polystyrene | $207.6 | $240.8 | $12.6 | $8.9 | 42% | | Americas Styrenics | N/A | N/A | $6.1 | $17.6 | (65)% | - Engineered Materials Adjusted EBITDA increased by **$16.0 million (137%)** due to higher margins from MMA and lower fixed costs[165](index=165&type=chunk) - Polystyrene Adjusted EBITDA increased by **$3.7 million (42%)** due to a favorable net timing variance and lower fixed costs following the Terneuzen plant closure[175](index=175&type=chunk) - Americas Styrenics Adjusted EBITDA decreased by **65%** due to a planned turnaround at its largest styrene production facility[178](index=178&type=chunk) [Non-GAAP Performance Measures](index=39&type=section&id=Non-GAAP%20Performance%20Measures) Reconciles non-GAAP financial measures, including Adjusted EBITDA, to GAAP equivalents - Adjusted EBITDA is defined as income from continuing operations before interest, taxes, depreciation, amortization, loss on debt extinguishment, asset impairment, gains/losses on dispositions, restructuring charges, acquisition costs, and other items[180](index=180&type=chunk) Table: Adjusted EBITDA Reconciliation | Metric | Three Months Ended March 31, 2024 (Millions) | Three Months Ended March 31, 2023 (Millions) | YoY Change (Millions) | YoY Change (%) | | :----- | :------------------------------------------- | :------------------------------------------- | :-------------------- | :------------- | | Net Loss | $(75.5) | $(48.9) | $(26.6) | 54.4% | | EBITDA | $37.9 | $28.7 | $9.2 | 32.1% | | Adjusted EBITDA | $45.0 | $36.3 | $8.7 | 24.0% | - Adjusted EBITDA addbacks for Q1 2024 included **$9.4 million** in restructuring and other charges and **$1.3 million** in other items, offset by a **$(3.6) million** net gain on disposition of businesses and assets[183](index=183&type=chunk)[184](index=184&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses the company's cash flows, liquidity position, and capital structure Table: Cash Flow Activities | Cash Flow Activity | Three Months Ended March 31, 2024 (Millions) | Three Months Ended March 31, 2023 (Millions) | YoY Change (Millions) | | :----------------- | :------------------------------------------- | :------------------------------------------- | :-------------------- | | Net cash provided by (used in) Operating activities | $(66.2) | $45.4 | $(111.6) | | Net cash used in Investing activities | $(11.0) | $(21.8) | $10.8 | | Net cash used in Financing activities | $(9.2) | $(20.5) | $11.3 | | Free Cash Flow | $(81.9) | $23.6 | $(105.5) | - As of March 31, 2024, Liquidity was **$415.6 million**, consisting of **$163.8 million** cash and cash equivalents, and **$251.7 million** available from the 2026 Revolving Facility and Accounts Receivable Securitization Facility[199](index=199&type=chunk) - Total outstanding indebtedness was **$2,341.4 million** as of March 31, 2024, with working capital at **$464.7 million**[199](index=199&type=chunk) - The company's ability to meet liquidity needs and repay the 2025 Senior Notes (maturing September 2025) is contingent on achieving forecast cash flows and maintaining minimum liquidity covenants[215](index=215&type=chunk) [Critical Accounting Policies and Estimates](index=46&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Reviews significant accounting policies and estimates that require management judgment - No material revisions to significant or critical accounting policies and estimates were made during the quarter ended March 31, 2024[221](index=221&type=chunk) [Off-Balance Sheet Arrangements](index=47&type=section&id=Off-Balance%20Sheet%20Arrangements) Discloses any off-balance sheet arrangements impacting the company's financial position - The company does not have any off-balance sheet arrangements[223](index=223&type=chunk) [Recent Accounting Pronouncements](index=47&type=section&id=Recent%20Accounting%20Pronouncements) Identifies and discusses the impact of new accounting standards - No material impact from recent accounting pronouncements was identified for the quarter ended March 31, 2024[225](index=225&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's exposure to market risks, including changes in interest rates, foreign currency exchange rates, and commodity prices, remained consistent with the information provided in its Annual Report, with no material changes - No material changes in exposure to market risks (interest rates, foreign currency, commodity prices) were reported compared to the Annual Report[226](index=226&type=chunk) [Item 4. Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2024 - Disclosure controls and procedures were deemed effective as of March 31, 2024[227](index=227&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2024[228](index=228&type=chunk) [PART II — OTHER INFORMATION](index=47&type=section&id=Part%20II%20Other%20Information) Includes legal proceedings, risk factors, equity sales, defaults, and other disclosures [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) Details legal claims and material developments affecting the company - Information on new and material legal proceedings for the quarter ended March 31, 2024, is provided in Note 13 to the condensed consolidated financial statements[230](index=230&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) Highlights significant risks and uncertainties impacting the company's business and financial results - Readers should consider risk factors from the Annual Report and material updates provided in this Quarterly Report[231](index=231&type=chunk)[232](index=232&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports on equity security sales not registered under the Securities Act and use of proceeds - A **$200.0 million** share repurchase program, authorized in September 2022, expired after 18 months[233](index=233&type=chunk) - No share repurchases were made during the three months ended March 31, 2024[233](index=233&type=chunk) [Item 3. Defaults Upon Senior Securities](index=48&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Discloses any defaults on senior securities during the reporting period - No defaults upon senior securities were reported[234](index=234&type=chunk) [Item 4. Mine Safety Disclosures](index=48&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) States the applicability of mine safety disclosures to the company's operations - Mine Safety Disclosures are not applicable[235](index=235&type=chunk) [Item 5. Other Information](index=48&type=section&id=Item%205.%20Other%20Information) Provides other material information not covered elsewhere in the report - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or officers during Q1 2024[236](index=236&type=chunk) [Item 6. Exhibits](index=48&type=section&id=Item%206.%20Exhibits) Refers to the Exhibit Index for a list of documents filed as exhibits to the Form 10-Q - The Exhibit Index provides a list of documents filed as exhibits[237](index=237&type=chunk) [Exhibit Index](index=49&type=section&id=Exhibit%20Index) Lists all exhibits filed with the Form 10-Q, including organizational documents and certifications - The Exhibit Index includes the Memorandum and Articles of Association, Indentures, various award agreements (RSU, PSU, Option, RCU), and CEO/CFO certifications[240](index=240&type=chunk) [Signatures](index=50&type=section&id=Signatures) Confirms the official signing of the report by authorized company officers - The report was signed by Frank Bozich (President, CEO) and David Stasse (EVP, CFO) on May 9, 2024[243](index=243&type=chunk)
Trinseo(TSE) - 2024 Q1 - Quarterly Results
2024-05-08 20:32
[First Quarter 2024 Financial & Strategic Overview](index=1&type=section&id=First%20Quarter%202024%20Financial%20Results%20and%20Provides%20Second%20Quarter%20Outlook) This section provides a comprehensive overview of Trinseo's financial performance and key strategic initiatives during the first quarter of 2024 [First Quarter 2024 Financial Highlights](index=1&type=section&id=First%20Quarter%202024%20Financial%20Highlights) Trinseo reported a wider net loss of $76 million on $904 million net sales, a 9% decrease, while Adjusted EBITDA improved to $45 million due to favorable timing and better margins Q1 2024 Key Financial Metrics | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Sales | $904 million | $996 million | | Net Loss | $(76) million | $(49) million | | Diluted EPS | $(2.14) | $(1.40) | | Adjusted Net Loss* | $(69) million | $(35) million | | Adjusted EPS* | $(1.94) | $(1.01) | | EBITDA* | $38 million | $29 million | | Adjusted EBITDA* | $45 million | $36 million | - Net sales decreased **9%** year-over-year, with a **7%** decrease attributed to lower prices and weak markets, and a **3%** decrease due to lower sales volumes from the Terneuzen styrene facility closure[4](index=4&type=chunk) - The Q1 net loss of **$76 million** was **$27 million** worse than the prior year, while Adjusted EBITDA increased by **$9 million** to **$45 million**, driven by higher margins and a **$13 million** favorable net timing impact[5](index=5&type=chunk)[3](index=3&type=chunk) [Operational and Strategic Highlights](index=1&type=section&id=First%20Quarter%202024%20Operational%20and%20Strategic%20Highlights) Negative free cash flow of $82 million was driven by working capital, while liquidity remained strong, and strategic divestitures and plant closures are underway - Free Cash Flow was negative **$82 million**, impacted by a **$61 million** increase in trade working capital due to seasonality and a more than **50%** increase in styrene monomer prices[3](index=3&type=chunk) - The company ended the quarter with **$171 million** in cash and approximately **$252 million** in additional liquidity from undrawn financing facilities, with the Accounts Receivable Securitization Facility's capacity increased by **$36 million**[3](index=3&type=chunk) - Strategic initiatives include commencing the sale process for Americas Styrenics and the potential closure of the Stade, Germany polycarbonate plant, projected to increase annual profitability by **$15 million** to **$20 million**[3](index=3&type=chunk) [Management Commentary and Outlook](index=2&type=section&id=2024%20Outlook) This section presents management's insights on Q1 2024 performance and the company's financial and operational outlook for the second quarter [Management Commentary on Q1 2024 Performance](index=2&type=section&id=Management%20Commentary%20on%20Q1%202024%20Performance) Management observed steady Q1 improvements, anticipating continued margin expansion as destocking ends and working capital reverses in Q3 - Management believes destocking has ended in some value chains, leading to significant margin expansion in Engineered Materials and Americas Styrenics in March[6](index=6&type=chunk) - The increase in working capital was larger than typical seasonality due to significantly higher styrene costs, expected to reverse and release working capital in Q3[6](index=6&type=chunk) [Second Quarter 2024 Outlook](index=2&type=section&id=Second%20Quarter%202024%20Outlook) Q2 2024 outlook projects significant profitability improvement driven by operational turnarounds, seasonal demand, and favorable market conditions, with improved free cash flow Q2 2024 Guidance | Metric | Q2 2024 Forecast | | :--- | :--- | | Net Loss | $53 million to $38 million | | Adjusted EBITDA | $60 million to $75 million | - Profitability is expected to improve significantly due to the completion of the Americas Styrenics turnaround and seasonal strength in building and construction applications[8](index=8&type=chunk) - Continued tightness in styrene and MMA markets is expected to support higher margins, with free cash flow also projected to improve sequentially[8](index=8&type=chunk) - Liquidity preservation remains the company's top priority despite positive earnings momentum and adequate access to liquidity[8](index=8&type=chunk) [Segment Performance Analysis](index=2&type=section&id=First%20Quarter%20Results%20and%20Commentary%20by%20Business%20Segment) This section details the financial performance and key drivers for each of Trinseo's business segments in the first quarter of 2024 [Reporting Segment Changes](index=2&type=section&id=Reporting%20Segment%20Changes) Effective January 1, 2024, the Feedstocks reporting segment was eliminated, with its historical results reallocated to consuming segments - As of January 1, 2024, the Feedstocks reporting segment has been eliminated, with its historical results now included within the Latex Binders, Plastics Solutions, and Polystyrene segments[7](index=7&type=chunk) [Engineered Materials](index=2&type=section&id=Engineered%20Materials) Engineered Materials' net sales declined 8% to $189 million, but Adjusted EBITDA significantly improved to $4 million due to higher MMA margins Engineered Materials Performance (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Sales | $189.2 million | $206.2 million | | Adjusted EBITDA | $4.3 million | $(11.7) million | - The **$16 million** year-over-year increase in Adjusted EBITDA was mainly due to higher MMA-related margins, lower natural gas hedge losses, and fixed cost under-absorption in the prior year[9](index=9&type=chunk) [Latex Binders](index=2&type=section&id=Latex%20Binders) Latex Binders' net sales decreased 3% to $241 million, while Adjusted EBITDA slightly increased to $26 million due to modest volume and margin gains Latex Binders Performance (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Sales | $241.5 million | $249.0 million | | Adjusted EBITDA | $25.7 million | $24.0 million | - Net sales were down **3%** YoY, with a **7%** price decrease partially offset by a **3%** volume increase in paper and board applications[9](index=9&type=chunk) [Plastics Solutions](index=2&type=section&id=Plastics%20Solutions) Plastics Solutions' net sales fell 12% to $266 million due to weak markets, while Adjusted EBITDA remained stable at $23 million Plastics Solutions Performance (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Sales | $265.7 million | $300.3 million | | Adjusted EBITDA | $22.7 million | $23.6 million | - Adjusted EBITDA was stable as lower ABS margin was almost entirely offset by a favorable net timing variance caused by increasing styrene costs during the quarter[9](index=9&type=chunk) [Polystyrene](index=2&type=section&id=Polystyrene) Polystyrene net sales decreased 14% to $208 million, but Adjusted EBITDA rose to $13 million due to favorable timing and lower fixed costs Polystyrene Performance (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Sales | $207.6 million | $240.8 million | | Adjusted EBITDA | $12.6 million | $8.9 million | - Adjusted EBITDA increased by **$4 million** YoY, as favorable net timing and lower fixed costs from the Terneuzen plant closure offset price and margin pressure[9](index=9&type=chunk) [Americas Styrenics](index=2&type=section&id=Americas%20Styrenics) Americas Styrenics reported Adjusted EBITDA of $6 million, a $12 million decrease, primarily due to a planned turnaround Americas Styrenics Performance (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Adjusted EBITDA | $6.1 million | $17.6 million | - The **$12 million** year-over-year decrease in Adjusted EBITDA was caused by a planned turnaround at its largest styrene production facility[9](index=9&type=chunk) [Condensed Consolidated Financial Statements (Unaudited)](index=5&type=section&id=TRINSEO%20PLC%20Condensed%20Consolidated%20Statements%20of%20Operations) This section presents the unaudited condensed consolidated statements of operations, balance sheets, and cash flows for the specified periods [Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2024 net sales were $904 million, with gross profit increasing to $60.6 million, but a net loss of $75.5 million due to higher interest expense Q1 2024 Statement of Operations (in millions) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net sales | $904.0 | $996.3 | | Gross profit | $60.6 | $37.2 | | Operating income (loss) | $(3.3) | $(30.2) | | Interest expense, net | $63.0 | $38.3 | | Net loss | $(75.5) | $(48.9) | | Net loss per share- diluted | $(2.14) | $(1.40) | [Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets were $3.0 billion, with cash decreasing to $166.4 million, while long-term debt remained stable and shareholders' equity became more negative Balance Sheet Highlights (in millions) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $166.4 | $259.1 | | Total assets | $2,989.4 | $3,029.2 | | Long-term debt, net | $2,276.7 | $2,277.6 | | Total liabilities | $3,337.4 | $3,297.2 | | Shareholders' equity | $(348.0) | $(268.0) | [Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash used in operating activities was $66.2 million, leading to an $89.6 million net decrease in cash, ending at $166.4 million Cash Flow Summary (in millions) | Line Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Cash provided by (used in) operating activities | $(66.2) | $45.4 | | Capital expenditures | $(15.7) | $(21.8) | | Cash used in investing activities | $(11.0) | $(21.8) | | Cash used in financing activities | $(9.2) | $(20.5) | | Net change in cash | $(89.6) | $5.4 | | Cash and cash equivalents—end of period | $166.4 | $217.1 | [Notes to Financial Statements](index=8&type=section&id=TRINSEO%20PLC%20Notes%20to%20Condensed%20Consolidated%20Financial%20Information) This section provides supplementary notes to the condensed consolidated financial information, including segment net sales and non-GAAP reconciliations [Net Sales by Segment](index=8&type=section&id=Note%201%3A%20Net%20Sales%20by%20Segment) Net sales by segment are detailed, showing a total of $904 million in Q1 2024, a decline from $996.3 million in Q1 2023 Net Sales by Segment (in millions) | Segment | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Engineered Materials | $189.2 | $206.2 | | Latex Binders | $241.5 | $249.0 | | Plastics Solutions | $265.7 | $300.3 | | Polystyrene | $207.6 | $240.8 | | **Total Net Sales** | **$904.0** | **$996.3** | [Reconciliation of Non-GAAP Measures](index=8&type=section&id=Note%202%3A%20Reconciliation%20of%20Non-GAAP%20Performance%20Measures%20to%20Net%20Income) This note reconciles GAAP Net Loss to non-GAAP measures like EBITDA and Adjusted EBITDA, providing insights into core operational performance and Q2 2024 forecasts [Reconciliation of Net Loss to EBITDA and Adjusted EBITDA (Q1 2024 vs Q1 2023)](index=9&type=section&id=Reconciliation%20of%20Net%20Loss%20to%20EBITDA%20and%20Adjusted%20EBITDA%20%28Q1%202024%20vs%20Q1%202023%29) Q1 2024 Net Loss of $75.5 million reconciled to Adjusted EBITDA of $45.0 million, reflecting adjustments for interest, taxes, D&A, and restructuring charges Reconciliation of Net Loss to Adjusted EBITDA (in millions) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | **Net loss** | **$(75.5)** | **$(48.9)** | | Interest expense, net | 63.0 | 38.3 | | Provision for (benefit from) income taxes | 5.4 | (16.7) | | Depreciation and amortization | 45.0 | 56.0 | | **EBITDA** | **$37.9** | **$28.7** | | Restructuring and other charges | 9.4 | 3.7 | | Other items | (2.3) | 3.9 | | **Adjusted EBITDA** | **$45.0** | **$36.3** | [Reconciliation of Forecasted Net Loss to Adjusted EBITDA (Q2 2024 Outlook)](index=10&type=section&id=Reconciliation%20of%20Forecasted%20Net%20Loss%20to%20Adjusted%20EBITDA%20%28Q2%202024%20Outlook%29) Q2 2024 forecast projects Adjusted EBITDA between $60 million and $75 million, reconciling to a Net Loss of $53 million to $38 million Q2 2024 Forecast Reconciliation (in millions) | Metric | Q2 2024 Forecast | | :--- | :--- | | Adjusted EBITDA | $60 - $75 | | Interest expense, net | ~$63 | | Provision for income taxes | ~$4 | | Depreciation and amortization | ~$46 | | **Net Loss** | **$(53) - $(38)** | [Reconciliation of Free Cash Flow](index=10&type=section&id=Note%203%3A%20Reconciliation%20of%20Non-GAAP%20Liquidity%20Measures%20to%20Cash%20from%20Operations) This section reconciles cash from operations to Free Cash Flow, showing a negative $81.9 million in Q1 2024 compared to positive $23.6 million in Q1 2023 Free Cash Flow Reconciliation (in millions) | Line Item | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Cash provided by (used in) operating activities | $(66.2) | $45.4 | | Capital expenditures | (15.7) | (21.8) | | **Free Cash Flow** | **$(81.9)** | **$23.6** |
Trinseo(TSE) - 2023 Q4 - Annual Report
2024-02-23 17:54
Part I [Item 1. Business](index=6&type=section&id=Item%201.%20Business) Trinseo PLC is a specialty material solutions provider with a global presence, focusing on transforming into a higher-margin, less cyclical business through strategic investments in sustainable solutions and divestitures of its styrenics businesses [The Company and Our Strategy](index=6&type=section&id=The%20Company%20and%20Our%20Strategy) Trinseo is transforming into a less cyclical, higher-margin specialty materials and sustainable solutions provider through strategic investments, divestitures, and cost reduction initiatives - Trinseo is strategically transforming into a specialty materials and sustainable solutions provider, focusing on less cyclical, higher-growth, and higher-margin product offerings[27](index=27&type=chunk) - The company is actively divesting its styrenics businesses (Polystyrene and Americas Styrenics segments) as a core part of its transformation strategy[28](index=28&type=chunk) - To support sustainability goals, Trinseo acquired Heathland B.V. for recycling thermoplastic waste and inaugurated a polycarbonate dissolution pilot facility for manufacturing recycled polymers[28](index=28&type=chunk) - The company has implemented restructuring initiatives since late 2022 to reduce costs, optimize assets, and improve profitability by closing underperforming plants and product lines[29](index=29&type=chunk) - Capital allocation priorities are servicing debt, funding targeted growth initiatives, and returning capital to shareholders through dividends and share repurchases[31](index=31&type=chunk) [Business Segments](index=7&type=section&id=Business%20Segments) In 2023, Trinseo operated six reporting segments, with plans to cease styrene manufacturing and discontinue the Feedstocks segment in 2024, each serving distinct end markets - The company operated under six reporting segments in 2023: Engineered Materials, Latex Binders, Plastics Solutions, Polystyrene, Feedstocks, and Americas Styrenics[34](index=34&type=chunk) - Beginning in 2024, the company will cease manufacturing styrene and will no longer report the results of the Feedstocks segment[34](index=34&type=chunk)[80](index=80&type=chunk) Key Segment Information (2023) | Segment | Key Products | Primary End Markets | 2023 Geographic Sales Mix (Approx.) | | :--- | :--- | :--- | :--- | | **Engineered Materials** | Thermoplastic compounds, PMMA sheets/resins | Consumer electronics, medical, automotive, footwear | 52% US, 34% Europe, 12% Asia | | **Latex Binders** | Styrene-butadiene (SB) latex, styrene-acrylate (SA) latex | Paper/board coatings, carpet, CASE applications | 53% Europe, 28% US, Rest in Asia | | **Plastics Solutions** | ABS, SAN, PC, compounds/blends | Automotive, construction, consumer durables | 56% Europe, 34% North America, 11% Asia | | **Polystyrene** | GPPS, HIPS | Appliances, packaging, consumer electronics | 65% Europe, 35% Asia | | **Feedstocks** | Styrene monomer | Internal consumption, merchant market | N/A (Discontinued in 2024) | | **Americas Styrenics** | Styrene, polystyrene (50% JV) | Packaging, disposables, consumer electronics | North America | [Our Relationship with Dow](index=14&type=section&id=Our%20Relationship%20with%20Dow) Trinseo maintains a significant operational and supply relationship with its former parent, Dow, through long-term agreements for site services and raw materials - The company continues to rely on Dow for critical site services, technology, and the supply of key raw materials through long-term agreements established after the 2010 separation[94](index=94&type=chunk) Financials of Dow Relationship (in millions) | Item | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | **Expenses under Service Agreements (SAR MOSA, AR MOD5, SAR SSAs)** | $140.5 | $273.9 | $214.9 | | **Purchases & Other Charges from Dow (excl. services)** | $570.5 | $688.7 | $1,143.9 | | **Sales to Dow** | $95.1 | $146.7 | $156.4 | - Key agreements include Site Services Agreements (SAR SSAs) with 25-year terms for utilities and maintenance at co-located sites, and the AR MOD5 Agreement for process control technology, which is being phased out[95](index=95&type=chunk)[97](index=97&type=chunk) [Sources and Availability of Raw Materials](index=15&type=section&id=Sources%20and%20Availability%20of%20Raw%20Materials) The company's key raw materials are subject to price volatility, with Dow remaining a significant supplier, and styrene now sourced entirely from third parties after the Terneuzen facility closure - Key raw materials include styrene, butadiene, benzene, ethylene, bisphenol A (BPA), and methyl methacrylate (MMA); their prices are volatile and influenced by supply/demand, energy costs, and transportation[103](index=103&type=chunk)[104](index=104&type=chunk) - In 2023, Dow supplied approximately **21%** of the company's raw materials, including **100%** of its benzene and ethylene requirements[105](index=105&type=chunk) - As of November 2023, following the closure of its Terneuzen styrene plant, Trinseo purchases **100%** of its styrene supply through long-term contracts and spot market purchases[106](index=106&type=chunk) [Technology, Sales, and Intellectual Property](index=15&type=section&id=Technology%2C%20Sales%2C%20and%20Intellectual%20Property) Trinseo's R&D focuses on customer-centric solutions, supported by global facilities, a direct sales force, and intellectual property derived from both internal development and licenses from Dow R&D and TS&D Costs (in millions) | Year | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | **Cost** | $57.6 | $51.4 | $63.9 | - The company operates **11** global R&D and technology centers, including pilot plants, to support innovation and customer collaboration[111](index=111&type=chunk) - Trinseo relies on a combination of its own patents, trade secrets, and perpetual, royalty-free licenses from Dow for intellectual property essential to its legacy business operations[116](index=116&type=chunk)[121](index=121&type=chunk) - The sales and marketing team consists of approximately **217** professionals who sell products to customers in about **80** countries, primarily through a direct sales force[114](index=114&type=chunk) [Environmental, Health, Safety and Sustainability](index=17&type=section&id=Environmental%2C%20Health%2C%20Safety%20and%20Sustainability) The company adheres to stringent EHS regulations and prioritizes sustainability through recycling and emissions reduction, with Board oversight, while managing potential liabilities from past incidents - The company is subject to extensive and stringent environmental, health, and safety laws regarding emissions, waste disposal, climate change, and chemical safety[123](index=123&type=chunk)[125](index=125&type=chunk) - Sustainability is a key strategic focus, with the company publishing an annual Sustainability Report using GRI, SASB, and TCFD frameworks and investing in recycling technologies[127](index=127&type=chunk)[128](index=128&type=chunk) - In March 2023, an accidental release of acrylic latex emulsion occurred at the Bristol, Pennsylvania site, leading to ongoing environmental claims[129](index=129&type=chunk) - The Board's Environmental, Health, Safety, Sustainability and Public Policy (EHSS&PP) Committee oversees the company's programs and policies in these areas[130](index=130&type=chunk) [Human Capital Resources](index=19&type=section&id=Human%20Capital%20Resources) As of December 31, 2023, Trinseo employed approximately 3,100 people globally, with a human capital strategy focused on organizational development, talent, DE&I, and employee health and safety - As of December 31, 2023, the company employed approximately **3,100** people, with the majority (**58%**) located in the EMEA region[138](index=138&type=chunk) - The company's human capital strategy is built on core values and focuses on Organizational Development, Talent Management, Diversity, Equity & Inclusion, and Recognition & Rewards[140](index=140&type=chunk)[141](index=141&type=chunk) - Trinseo emphasizes employee health and safety, striving for zero injuries, spills, or process safety incidents through its EH&S management system[143](index=143&type=chunk) - The company reports diversity metrics, noting that **33%** of its Board and **30%** of its executive leadership team are women[144](index=144&type=chunk) [Item 1A. Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) This section outlines Trinseo's principal risks, including challenges in executing its transformation strategy, volatility in costs, operational disruptions, regulatory compliance, and managing significant indebtedness - Strategic risks include the inability to successfully transform into a specialty materials provider, failure to achieve cost savings from restructuring, and challenges in divesting the styrenics businesses[151](index=151&type=chunk)[153](index=153&type=chunk)[155](index=155&type=chunk) - Operational risks are significant, including volatility in raw material and energy costs, potential production disruptions from hazards like chemical spills (e.g., the Bristol Spill), and reliance on Dow for key services and materials[160](index=160&type=chunk)[163](index=163&type=chunk)[168](index=168&type=chunk)[213](index=213&type=chunk) - Financial risks stem from the company's substantial indebtedness, which could limit operational flexibility, and restrictive covenants in its debt agreements that could be breached[201](index=201&type=chunk)[207](index=207&type=chunk) - Regulatory and compliance risks are extensive, covering environmental, health, and safety laws, international trade regulations, tax law changes, and potential liabilities from chemical exposure or land contamination[185](index=185&type=chunk)[190](index=190&type=chunk)[196](index=196&type=chunk)[198](index=198&type=chunk) [Item 1C. Cybersecurity](index=38&type=section&id=Item%201C.%20Cybersecurity) Trinseo maintains a comprehensive cybersecurity risk management program aligned with ISO27001 and NIST frameworks, overseen by the Audit Committee, with no material incidents reported to date - The company's cybersecurity program is aligned with ISO27001 and NIST frameworks and is overseen by the Board's Audit Committee[245](index=245&type=chunk) - A dedicated Chief Information Security Officer (CISO) manages the program and provides periodic reports to the Board and senior management[247](index=247&type=chunk)[248](index=248&type=chunk) - As of the report date, the company has not experienced any material cybersecurity incidents or incurred material related expenses[249](index=249&type=chunk) [Item 2. Properties](index=38&type=section&id=Item%202.%20Properties) Trinseo owns and operates 22 manufacturing sites and one recycling facility globally, with additional sourcing from 7 joint venture sites, all considered adequate for current needs - As of December 31, 2023, the company owns and operates **22** manufacturing sites and one recycling facility, supplemented by **7** joint venture sites[250](index=250&type=chunk) - The company's global footprint includes corporate offices in Ireland, the US, Hong Kong, and Switzerland, with numerous production and R&D facilities across the Americas, Europe, and Asia-Pacific[252](index=252&type=chunk) - Several key production sites, such as those in Midland (MI), Schkopau (Germany), and Terneuzen (The Netherlands), are co-located with Dow facilities under ground lease agreements where Trinseo owns the plant facilities[253](index=253&type=chunk) [Item 3. Legal Proceedings](index=40&type=section&id=Item%203.%20Legal%20Proceedings) The company is subject to various legal claims incidental to its business, with material developments detailed in Note 20 of the consolidated financial statements - The company is involved in various legal claims and proceedings arising from the normal course of business[257](index=257&type=chunk) - For detailed information on legal matters, including the Bristol Spill litigation and the Synthos arbitration, readers are directed to Note 20 of the financial statements[257](index=257&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Shareholder Matters, and Issuer Purchases of Equity Securities](index=40&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Shareholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Trinseo's ordinary shares trade on the NYSE under 'TSE,' with a $200.0 million share repurchase program unlikely to be utilized due to liquidity needs, and dividends subject to Irish withholding tax - The company's ordinary shares are traded on the New York Stock Exchange (NYSE) under the ticker symbol **"TSE"**[260](index=260&type=chunk) - A **$200.0 million** share repurchase program was authorized in September 2022; as of December 31, 2023, the full **$200.0 million** remained available, but future repurchases are considered unlikely due to liquidity needs and debt covenants[263](index=263&type=chunk) - Dividends paid by the Irish-domiciled company are generally subject to a **25%** Irish dividend withholding tax, though U.S. resident shareholders can typically claim an exemption[266](index=266&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=42&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2023, Trinseo reported a significant net loss from continuing operations of $701.3 million, driven by goodwill impairment and tax valuation allowances, amidst weak demand, partially offset by cost savings and debt refinancing [2023 Highlights](index=42&type=section&id=2023%20Highlights) For fiscal year 2023, Trinseo recorded a net loss of $701.3 million, primarily due to non-cash impairment and tax valuation charges, while increasing cash through liquidity actions and undertaking major debt refinancing FY 2023 Key Financial Metrics | Metric | Value (in millions) | | :--- | :--- | | Net Loss from Continuing Operations | $(701.3) | | Goodwill Impairment Charge (non-cash) | $(349.0) | | Deferred Tax Asset Valuation Allowance (non-cash) | $(163.7) | | Adjusted EBITDA | $154.3 | - In September 2023, the company entered into **$1,077.3 million** in new term loans to repay its 2024 Term Loan B and redeem a majority of its 2025 Senior Notes, extending its debt maturity profile[273](index=273&type=chunk) - The company approved further asset and corporate restructuring in H2 2023, including discontinuing styrene production in Terneuzen, Netherlands, and closing several PMMA manufacturing lines to reduce costs and cyclical exposure[275](index=275&type=chunk)[277](index=277&type=chunk) - An accidental release of latex emulsion product occurred at the Bristol, PA facility on March 24, 2023, leading to ongoing regulatory and legal matters[276](index=276&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) For 2023, net sales decreased 26% to $3.68 billion, gross profit fell 48%, and net loss from continuing operations widened to $701.3 million, primarily due to lower volumes, pricing, and a significant impairment charge Consolidated Results of Operations (in millions) | Metric | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | **Net Sales** | $3,675.4 | $4,965.5 | (26)% | | **Gross Profit** | $142.3 | $272.3 | (48)% | | **Operating Loss** | $(455.4) | $(363.9) | (25)% | | **Net Loss from Continuing Operations** | $(701.3) | $(428.0) | (64)% | - The **26%** decrease in net sales was attributed to a **14%** drop in selling prices (from lower raw material pass-through) and a **13%** decline in sales volume due to customer destocking and weak demand[280](index=280&type=chunk) - SG&A expenses decreased by **22%** to **$310.3 million**, primarily due to lower costs associated with strategic initiatives, acquisitions, and restructuring[284](index=284&type=chunk) - Interest expense increased **67%** to **$188.4 million**, mainly due to higher market interest rates on variable rate debt[287](index=287&type=chunk) - The company recorded a **$349.0 million** non-cash goodwill impairment charge related to the Engineered Materials reporting unit in 2023[286](index=286&type=chunk) [Selected Segment Information](index=46&type=section&id=Selected%20Segment%20Information) In 2023, all segments experienced significant performance declines, with Engineered Materials' Adjusted EBITDA plummeting 93%, while Plastics Solutions remained relatively stable, and styrenics segments saw substantial drops Segment Adjusted EBITDA (in millions) | Segment | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | **Engineered Materials** | $4.9 | $71.6 | (93)% | | **Latex Binders** | $93.3 | $110.8 | (16)% | | **Plastics Solutions** | $89.4 | $91.0 | (2)% | | **Polystyrene** | $33.3 | $99.3 | (66)% | | **Feedstocks** | $(40.9) | $(75.2) | 46% | | **Americas Styrenics** | $62.1 | $102.2 | (39)% | - **Engineered Materials:** Net sales fell **24%** and Adjusted EBITDA dropped **93%** due to lower pricing, weak demand in construction and electronics, and lower margins[298](index=298&type=chunk)[299](index=299&type=chunk) - **Plastics Solutions:** Net sales decreased **22%** on lower volumes and pricing, but Adjusted EBITDA was nearly flat as improved margins and lower fixed costs offset the volume decline[304](index=304&type=chunk)[305](index=305&type=chunk) - **Polystyrene:** Net sales dropped **32%** and Adjusted EBITDA fell **66%** due to a **16%** volume decrease and a **17%** price decrease, driven by weak demand and lower styrene costs[308](index=308&type=chunk)[309](index=309&type=chunk) [Liquidity and Capital Resources](index=50&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2023, Trinseo had $471.0 million in total liquidity and $2.3 billion in debt, having executed a major refinancing in September 2023, while facing a springing leverage covenant on its revolving facility Liquidity Position as of Dec 31, 2023 (in millions) | Component | Value | | :--- | :--- | | Cash and cash equivalents | $259.1 | | Available Borrowings | $211.9 | | **Total Liquidity** | **$471.0** | | Total Indebtedness | ~$2,300.0 | - The company's 2028 Refinance Credit Agreement requires maintaining at least **$100.0 million** of liquidity at the end of any calendar month[327](index=327&type=chunk) - The Senior Credit Facility has a springing covenant that limits borrowing capacity to **30%** of the total if the first lien net leverage ratio is not met; the company has not been in compliance with this covenant since March 31, 2023[208](index=208&type=chunk)[331](index=331&type=chunk) - In September 2023, the company issued **$1,077.3 million** in new 2028 Refinance Term Loans to repay its 2024 Term Loan B and **$385.0 million** of its 2025 Senior Notes[273](index=273&type=chunk) [Cash Flows](index=53&type=section&id=Cash%20Flows) For 2023, net cash from operating activities significantly improved to $148.7 million due to inventory control, while investing activities decreased, resulting in positive free cash flow of $79.0 million Summary of Cash Flows (in millions) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | **Operating Activities** | $148.7 | $43.5 | | **Investing Activities** | $(31.7) | $(164.0) | | **Financing Activities** | $(66.0) | $(233.7) | | **Net Change in Cash** | $49.4 | $(361.3) | - Cash from operations increased to **$148.7 million** in 2023, primarily due to targeted inventory control and cash improvement initiatives, despite challenging operating results[348](index=348&type=chunk) - Investing activities used **$31.7 million**, mainly for capital expenditures of **$69.7 million**, which were significantly reduced as part of liquidity improvement actions[351](index=351&type=chunk) Free Cash Flow (in millions) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Cash provided by operating activities | $148.7 | $43.5 | | Capital expenditures | $(69.7) | $(149.0) | | **Free Cash Flow** | **$79.0** | **$(105.5)** | [Critical Accounting Policies and Estimates](index=57&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights critical accounting policies, including goodwill impairment, income tax valuation allowances, and pension benefit assumptions, with a $349.0 million goodwill impairment and significant deferred tax asset valuation allowances recorded in 2023 - **Goodwill Impairment:** A triggering event in Q2 2023 led to a goodwill impairment test for the Engineered Materials reporting unit, resulting in a **$349.0 million** charge, writing off the entire goodwill balance for that unit[393](index=393&type=chunk) - **Income Taxes:** The company established full valuation allowances against net deferred tax assets in its U.S. and Switzerland subsidiaries in December 2023, citing cumulative losses and adverse economic conditions; total valuation allowances were **$278.3 million** as of year-end[399](index=399&type=chunk)[398](index=398&type=chunk) - **Pension & Postretirement Benefits:** The company's accounting for these plans relies on critical assumptions for discount rates and expected long-term rates of return on assets, which are evaluated annually[405](index=405&type=chunk)[407](index=407&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=61&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Trinseo is exposed to market risks from interest rates, foreign currency exchange rates (primarily euro), and commodity prices, which it manages through operational activities and derivative instruments - **Interest Rate Risk:** The company has significant variable-rate debt; a hypothetical **100 basis point** increase in the SOFR rate would have resulted in approximately **$23.8 million** of additional interest expense in 2023[421](index=421&type=chunk) - **Foreign Currency Risk:** The primary exposure is the euro, as **53%** of 2023 net sales were generated in Europe; a **1%** change in the euro exchange rate would impact annual pre-tax profitability by approximately **$1.5 million**[424](index=424&type=chunk)[427](index=427&type=chunk) - **Raw Material Price Risk:** The company is exposed to price volatility for key raw materials; a hypothetical **10%** change in raw material prices would have impacted the 2023 cost of sales by approximately **$243.3 million**[429](index=429&type=chunk) - **Commodity Price Risk:** The company hedges its exposure to natural gas prices; inclusive of hedges, a hypothetical **10%** increase in natural gas prices would impact the cost of sales by approximately **$1.6 million**[432](index=432&type=chunk) [Item 9A. Controls and Procedures](index=64&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that Trinseo's disclosure controls and internal control over financial reporting were effective as of December 31, 2023, a conclusion confirmed by the independent auditor - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2023[436](index=436&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2023, based on the COSO framework[439](index=439&type=chunk) - PricewaterhouseCoopers LLP audited and issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2023[440](index=440&type=chunk) Part IV [Item 15. Exhibits, Financial Statement Schedules](index=67&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section provides an index to the company's consolidated financial statements for 2021-2023 and an extensive list of exhibits, including corporate documents, debt agreements, and executive certifications - This item contains the index to the company's consolidated financial statements, including the balance sheets, statements of operations, comprehensive income, shareholders' equity, and cash flows[457](index=457&type=chunk) - An exhibit index is provided, listing key corporate documents, debt agreements (such as the Credit Agreement and Indentures), material contracts with Dow, executive employment agreements, and certifications required by the Sarbanes-Oxley Act[460](index=460&type=chunk)[461](index=461&type=chunk)[462](index=462&type=chunk)[463](index=463&type=chunk) Financial Statements and Notes [Consolidated Financial Statements](index=80&type=section&id=Consolidated%20Financial%20Statements) Trinseo PLC's consolidated financial statements for 2023 show a significant decline, with total assets decreasing, shareholders' equity turning to a deficit, and a net loss of $701.3 million, despite improved cash flow from operations Consolidated Balance Sheet Highlights (in millions) | Account | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $1,194.1 | $1,390.7 | | Total Assets | $3,029.2 | $3,760.2 | | Total Current Liabilities | $672.6 | $689.4 | | Long-term Debt | $2,277.6 | $2,301.6 | | Total Shareholders' Equity (Deficit) | $(268.0) | $420.3 | Consolidated Statement of Operations Highlights (in millions) | Account | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net Sales | $3,675.4 | $4,965.5 | $4,827.5 | | Gross Profit | $142.3 | $272.3 | $698.9 | | Operating Loss | $(455.4) | $(363.9) | $461.4 (Income) | | Net Loss | $(701.3) | $(430.9) | $440.0 (Income) | Consolidated Cash Flow Highlights (in millions) | Account | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net Cash from Operating Activities | $148.7 | $43.5 | $452.7 | | Net Cash from Investing Activities | $(31.7) | $(164.0) | $(1,539.7) | | Net Cash from Financing Activities | $(66.0) | $(233.7) | $1,075.7 | [Note 4—ACQUISITIONS](index=93&type=section&id=Note%204%E2%80%94ACQUISITIONS) This note details Trinseo's recent acquisitions, including Heathland B.V. in 2022 and Aristech Surfaces and Arkema's PMMA business in 2021, all contributing to the Engineered Materials segment - On January 3, 2022, the company acquired Heathland B.V., a European plastics recycler, for an estimated purchase price of **$29.3 million**, including cash and contingent consideration; the goodwill recorded was **$22.8 million**[590](index=590&type=chunk)[596](index=596&type=chunk) - On September 1, 2021, the company acquired Aristech Surfaces, a PMMA sheet manufacturer, for **$449.5 million**[597](index=597&type=chunk) - On May 3, 2021, the company acquired the PMMA business from Arkema S.A. for **$1,364.9 million**[600](index=600&type=chunk) [Note 7—RESTRUCTURING ACTIVITIES](index=97&type=section&id=Note%207%E2%80%94RESTRUCTURING%20ACTIVITIES) The company initiated multiple restructuring programs in 2022 and 2023, incurring $55.8 million in charges in 2023, primarily for closing styrene plants and PMMA lines to optimize assets and reduce costs Total Restructuring Charges (in millions) | Year | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | **Total Charges** | $55.8 | $55.6 | $8.6 | - In 2023, the company announced an **"Asset Optimization and Corporate Restructuring"** plan, which included discontinuing styrene production in Terneuzen, Netherlands, and closing PMMA sheet plants/lines in Denmark, New Mexico, and Italy; this resulted in **$54.4 million** of charges in 2023[612](index=612&type=chunk)[613](index=613&type=chunk) - In December 2022, the company announced an **"Asset Restructuring Plan"** to close the Boehlen, Germany styrene facility, a polycarbonate line in Stade, Germany, and the PMMA sheet site in Matamoros, Mexico; this plan incurred charges of **$56.7 million** in 2022 and **$3.5 million** in 2023[616](index=616&type=chunk) [Note 9—INCOME TAXES](index=100&type=section&id=Note%209%E2%80%94INCOME%20TAXES) The company's 2023 effective tax rate was (11)%, with a $68.4 million provision for income taxes primarily due to a $163.7 million increase in valuation allowances against deferred tax assets in the U.S. and Switzerland Income Tax Provision and Effective Rate | Metric | 2023 | 2022 | | :--- | :--- | | **Income (Loss) Before Taxes** | $(632.9)M | $(469.6)M | | **Provision for (Benefit from) Taxes** | $68.4M | $(41.6)M | | **Effective Tax Rate** | (11)% | 9% | - The increase in tax provision in 2023 was primarily due to a **$163.7 million** increase in valuation allowances, mainly in the U.S. and Switzerland[630](index=630&type=chunk) - Management established full valuation allowances against net deferred tax assets in its U.S. and Swiss subsidiaries in December 2023, citing cumulative losses and adverse economic conditions as evidence that realization is no longer more likely than not[636](index=636&type=chunk) - As of December 31, 2023, the company had total valuation allowances of **$278.3 million** against its deferred tax assets[633](index=633&type=chunk) [Note 15—GOODWILL AND OTHER INTANGIBLE ASSETS](index=106&type=section&id=Note%2015%E2%80%94GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) The company's goodwill decreased to $63.8 million in 2023 due to a $349.0 million impairment charge for the Engineered Materials unit, triggered by challenging market conditions, following a similar impairment in 2022 Goodwill Balance by Segment (in millions) | Segment | Dec 31, 2022 | Impairment (2023) | Dec 31, 2023 | | :--- | :--- | :--- | :--- | | **Engineered Materials** | $348.9 | $(349.0) | $0.0 | | **Plastics Solutions** | $42.5 | $0.0 | $44.0 | | **Latex Binders** | $14.8 | $0.0 | $15.4 | | **Polystyrene** | $4.2 | $0.0 | $4.4 | | **Total** | **$410.4** | **$(349.0)** | **$63.8** | - In Q2 2023, the company recorded a goodwill impairment charge of **$349.0 million** for the Engineered Materials reporting unit, equal to its full carrying value[661](index=661&type=chunk) - The impairment was triggered by persistent challenging operating conditions, customer destocking, weak demand, and a reduced forecast for near-term operating results[661](index=661&type=chunk) - Other intangible assets, net of amortization, totaled **$693.9 million** as of December 31, 2023, primarily consisting of customer relationships (**$378.9 million**) and developed technology (**$150.7 million**)[664](index=664&type=chunk) [Note 17—LONG TERM DEBT & AVAILABLE FACILITIES](index=108&type=section&id=Note%2017%E2%80%94LONG%20TERM%20DEBT%20%26%20AVAILABLE%20FACILITIES) As of December 31, 2023, Trinseo had $2.34 billion in total debt, having executed a significant refinancing in September 2023 to extend maturities, while facing restrictive covenants on its revolving credit facility Outstanding Debt as of Dec 31, 2023 (Carrying Amount, in millions) | Facility | Amount | | :--- | :--- | | 2029 Senior Notes (5.125%) | $447.0 | | 2025 Senior Notes (5.375%) | $115.0 | | 2028 Term Loan B (Variable) | $728.9 | | 2028 Refinance Term Loans (Variable) | $1,046.5 | | Other Indebtedness | $7.2 | | **Total Debt** | **$2,344.6** | - In September 2023, the company entered into a **$1,077.3 million** senior secured term loan facility maturing in May 2028; proceeds were used to repay the 2024 Term Loan B and redeem **$385.0 million** of the 2025 Senior Notes[673](index=673&type=chunk)[690](index=690&type=chunk)[707](index=707&type=chunk) - The company's **$375.0 million** 2026 Revolving Facility has a springing covenant that limits borrowing to **30%** of capacity if the first lien net leverage ratio exceeds **3.50x**; as of Dec 31, 2023, the ratio was **5.43x**, limiting available funds to **$98.4 million**[669](index=669&type=chunk)[671](index=671&type=chunk) [Note 20—COMMITMENTS AND CONTINGENCIES](index=121&type=section&id=Note%2020%E2%80%94COMMITMENTS%20AND%20CONTINGENCIES) This note details Trinseo's $1.21 billion in raw material purchase commitments and ongoing legal proceedings, including a class action lawsuit and regulatory actions related to the March 2023 Bristol chemical spill, and an arbitration dispute with Synthos - The company has raw material purchase commitments totaling **$1.21 billion** as of December 31, 2023, with **$531.6 million** due in 2024[748](index=748&type=chunk)[749](index=749&type=chunk) - Following the March 2023 Bristol Spill, the company faces a putative class action lawsuit and regulatory actions from the US Coast Guard and Pennsylvania Department of Environmental Protection (PADEP); an accrual has been established for the estimated resolution, which is not expected to be material[759](index=759&type=chunk)[760](index=760&type=chunk)[761](index=761&type=chunk) - Synthos S.A. initiated an arbitration dispute against Trinseo in October 2022 related to the 2021 sale of the rubber business, claiming improper disclosure of natural gas pricing for steam supply; Trinseo intends to vigorously defend itself[763](index=763&type=chunk)[765](index=765&type=chunk)[766](index=766&type=chunk) - The company recorded an asset retirement obligation for the Boehlen, Germany site, with a remaining liability of **$20.2 million** as of December 31, 2023[753](index=753&type=chunk)[754](index=754&type=chunk)
Trinseo(TSE) - 2023 Q4 - Earnings Call Transcript
2024-02-13 23:20
Financial Data and Key Metrics Changes - The company successfully refinanced $1.1 billion in near-term maturities until 2028, contributing to a $47 million year-over-year increase in cash on the balance sheet [1] - The company generated cash from operations of $149 million and free cash flow of $79 million in 2023, reflecting tight management of CapEx and working capital [26] - The company ended 2023 with $259 million in cash and $471 million in liquidity, indicating a strong liquidity position heading into 2024 [13] Business Line Data and Key Metrics Changes - Sales of recycled content-containing products increased by 16% year-over-year, indicating growth in sustainable offerings [24] - Adjusted EBITDA for Q4 was below expectations due to pronounced seasonality and destocking, with a forecasted rebound to $40 million to $50 million in Q1 [12][14] - The company reduced fixed costs by over $70 million since 2022, improving profitability and cash flow [6] Market Data and Key Metrics Changes - The company observed a recovery in volumes early in Q1, particularly in specialty business applications such as automotive and building and construction [33] - The company noted that customer destocking and competitive pressure from imports into Europe affected market demand throughout 2023 [9] - The company expects underlying market demand to remain constrained and generally in line with 2023 levels, despite higher volumes in specialty businesses [76] Company Strategy and Development Direction - The company remains focused on advancing sustainability initiatives and achieving 2030 sustainability goals, including the operation of recycling facilities in the Netherlands and Italy [10] - The company is exploring additional network optimization opportunities in Europe to enhance competitiveness [28] - The strategy emphasizes liquidity and profitability improvement while managing working capital effectively [27] Management's Comments on Operating Environment and Future Outlook - Management described 2023 as one of the most challenging years in the company's history, with significant customer destocking and geopolitical conflicts impacting trade flows [9] - The company anticipates significantly higher profitability in 2024 due to restructuring actions and expected lower natural gas hedge losses [28] - Management expressed caution regarding the full-year outlook for 2024 due to uncertainties in market recovery, particularly in China [42] Other Important Information - The company achieved a Triple Zero Award for 72% of its eligible sites, reflecting strong performance in environmental, health, and safety standards [75] - The company plans to maintain a disciplined cash focus with lower-than-historical CapEx of about $70 million in 2024 [68] Q&A Session Summary Question: Can you provide more details on the end markets seeing volume increases? - Management indicated that volume improvements are primarily in specialty business applications in Europe, automotive, and building and construction [33] Question: How will cash flow components impact 2024? - Management expects to achieve a working capital release of $50 million and does not anticipate needing to draw on credit lines due to sufficient cash reserves [34] Question: What is the minimum cash level the company feels comfortable maintaining? - Management stated that a minimum cash level of about $100 million is necessary to manage intra-month working capital swings [35] Question: What are the drivers for expected improvements in Q1? - The expected improvements are driven by volume recovery, the full benefit of restructuring activities, and the completion of a turnaround in the company's largest resin plant [86]
Trinseo(TSE) - 2023 Q4 - Earnings Call Presentation
2024-02-13 21:28
TRINSEO.. February 12, 2024 Introductions & Disclosure Rules • Frank Bozich, President & CEO • Andy Myers, Director of Investor Relations This presentation may contain forward-looking statements including, without limitation, statements concerning plans, objectives, goals, projections, forecasts, strategies, future events or performance, and underlying assumptions and other statements, which are not statements of historical facts or guarantees or assurances of future performance. Forward-looking statements ...
Trinseo(TSE) - 2023 Q3 - Quarterly Report
2023-11-06 18:48
```markdown Part I - Financial Information [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed consolidated financial statements for the period ended September 30, 2023, show a significant net loss, primarily driven by a large goodwill impairment charge. Total assets decreased compared to year-end 2022, mainly due to the goodwill write-down, while total liabilities remained relatively stable. Shareholders' equity turned into a deficit. The company undertook significant debt refinancing during the period [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2023, Trinseo's total assets were $3.27 billion, a decrease from $3.76 billion at year-end 2022, primarily due to a significant reduction in goodwill from $410.4 million to $61.2 million. Total liabilities were largely flat at approximately $3.3 billion. A key change is the shift in shareholders' equity from a positive $420.3 million to a deficit of $21.4 million, driven by a large accumulated deficit Condensed Consolidated Balance Sheet Highlights (in millions) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$3,271.2** | **$3,760.2** | | Cash and cash equivalents | $278.6 | $211.7 | | Goodwill | $61.2 | $410.4 | | **Total Liabilities** | **$3,292.6** | **$3,339.9** | | Long-term debt, net | $2,274.2 | $2,301.6 | | **Total Shareholders' Equity (Deficit)** | **($21.4)** | **$420.3** | | Retained earnings (accumulated deficit) | ($177.6) | $264.5 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the nine months ended September 30, 2023, Trinseo reported a net loss of $436.3 million, a stark contrast to the $65.6 million net loss in the same period of 2022. This was primarily driven by a $349.5 million impairment charge. Net sales declined by 29% to $2.84 billion. The third quarter showed a net loss of $38.4 million on sales of $879.0 million, an improvement from the $119.8 million loss in Q3 2022, despite lower sales Statement of Operations Summary (in millions) | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $879.0 | $1,178.1 | $2,837.9 | $3,990.3 | | Gross profit (loss) | $31.3 | ($39.5) | $122.0 | $275.5 | | Impairment and other charges | $0.1 | $1.9 | $349.5 | $39.5 | | Operating income (loss) | ($16.4) | ($99.1) | ($383.4) | $57.0 | | **Net loss** | **($38.4)** | **($119.8)** | **($436.3)** | **($65.6)** | | **Net loss per share- basic** | **($1.09)** | **($3.41)** | **($12.42)** | **($1.81)** | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first nine months of 2023, the company generated $131.2 million in cash from operating activities, a significant improvement from $9.4 million in the prior-year period, despite a larger net loss. This was driven by positive changes in working capital, particularly inventories. Investing activities used $11.1 million, significantly less than the prior year due to lower capital expenditures. Financing activities used $48.2 million, mainly for debt repayments partially offset by proceeds from new debt issuance Cash Flow Summary (Nine Months Ended Sep 30, in millions) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Cash provided by operating activities | $131.2 | $9.4 | | Cash used in investing activities | ($11.1) | ($109.8) | | Cash used in financing activities | ($48.2) | ($213.5) | | **Net change in cash** | **$66.9** | **($330.2)** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Key notes detail significant corporate actions and financial events. The company completed a major debt refinancing, repaying the 2024 Term Loan B and part of the 2025 Senior Notes with new 2028 Refinance Term Loans. A goodwill impairment charge of $349.0 million was recorded for the Engineered Materials reporting unit. The company is also managing legal contingencies from the Bristol Spill and an arbitration with Synthos. Several restructuring plans are underway to optimize assets and reduce costs, including plant closures and workforce reductions - On September 8, 2023, the company entered into a new **$1,077.3 million senior secured term loan facility** (2028 Refinance Term Loans) to repay its 2024 Term Loan B in full and redeem **$385.0 million of its 2025 Senior Notes**[56](index=56&type=chunk)[62](index=62&type=chunk)[65](index=65&type=chunk) - A goodwill impairment charge of **$349.0 million** was recorded in Q2 2023 for the Engineered Materials reporting unit due to challenging operating conditions and a revised outlook[69](index=69&type=chunk) - The company is involved in legal proceedings related to a latex emulsion release (the "Bristol Spill") and an arbitration dispute with Synthos concerning the 2021 sale of the Synthetic Rubber business[109](index=109&type=chunk)[125](index=125&type=chunk) - Multiple restructuring plans are in progress, including the closure of a PMMA plant in Denmark, a polyester plant in New Mexico, and a PMMA line in Italy, with expected charges for severance, depreciation, and decommissioning[147](index=147&type=chunk)[154](index=154&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a challenging year-to-date performance, marked by a net loss of $436.3 million for the first nine months of 2023, heavily impacted by a $349.0 million goodwill impairment. Persistent weak demand, especially in building & construction and consumer durables, led to a 29% YTD revenue decline. However, cost control, commercial actions, and restructuring initiatives helped mitigate the impact, leading to positive operating cash flow. The company successfully refinanced its debt, extending maturities to 2028. The outlook for Q4 remains constrained, but the company expects benefits from ongoing restructuring - Persistent weak demand and customer destocking drove a **25% YoY decrease in net sales for Q3** and a **29% decrease for the nine-month period**[179](index=179&type=chunk)[196](index=196&type=chunk) - The company is exploring the divestiture of its Styrenics business, which includes the Feedstocks and Polystyrene segments and its **50% ownership of Americas Styrenics**[170](index=170&type=chunk)[173](index=173&type=chunk) - Despite a challenging environment, the company generated **positive Free Cash Flow of $82.1 million** for the nine months ended Sep 30, 2023, a significant improvement from a **negative $85.4 million** in the prior year, driven by working capital reductions[273](index=273&type=chunk) Adjusted EBITDA Reconciliation (in millions) | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net loss from continuing operations | ($38.4) | ($117.9) | ($436.3) | ($63.7) | | Adjustments (Interest, Tax, D&A, etc.) | $67.6 | $64.2 | $459.9 | $269.8 | | Goodwill impairment charges | $0.0 | $0.0 | $349.0 | $0.0 | | **Adjusted EBITDA** | **$40.9** | **($36.6)** | **$134.0** | **$305.5** | [Results of Operations](index=38&type=section&id=Results%20of%20Operations) For Q3 2023 versus Q3 2022, net sales fell 25% to $879.0 million due to lower volumes (8%) and prices (20%). However, gross profit improved to $31.3 million from a loss of $39.5 million, driven by better margins in Feedstocks and Plastics Solutions. For the nine-month period, net sales dropped 29% to $2.84 billion, and gross profit fell 56% to $122.0 million. A significant $349.0 million goodwill impairment charge drove the nine-month operating loss to $383.4 million Q3 2023 vs Q3 2022 Key Changes (in millions) | Metric | Q3 2023 | Q3 2022 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $879.0 | $1,178.1 | ($299.1) | (25%) | | Gross Profit (Loss) | $31.3 | ($39.5) | $70.8 | 179% | | Operating Loss | ($16.4) | ($99.1) | $82.7 | 83% | | Net Loss | ($38.4) | ($119.8) | $81.4 | 68% | Nine Months 2023 vs Nine Months 2022 Key Changes (in millions) | Metric | 9M 2023 | 9M 2022 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $2,837.9 | $3,990.3 | ($1,152.4) | (29%) | | Gross Profit | $122.0 | $275.5 | ($153.5) | (56%) | | Operating (Loss) Income | ($383.4) | $57.0 | ($440.4) | (773%) | | Net Loss | ($436.3) | ($65.6) | ($370.7) | (565%) | [Selected Segment Information](index=42&type=section&id=Selected%20Segment%20Information) Segment performance for Q3 2023 was mixed. Plastics Solutions saw a significant Adjusted EBITDA increase to $22.0 million from a loss of $14.9 million in Q3 2022, driven by improved polycarbonate costs. Feedstocks also improved dramatically due to higher styrene margins. However, Engineered Materials, Latex Binders, and Polystyrene all experienced declines in Adjusted EBITDA due to lower volumes and weaker demand. For the nine-month period, all segments except Feedstocks saw significant declines in Adjusted EBITDA compared to 2022 Segment Adjusted EBITDA (in millions) | Segment | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 | | :--- | :--- | :--- | :--- | :--- | | Engineered Materials | $4.8 | $7.5 | $4.9 | $76.2 | | Latex Binders | $22.8 | $31.0 | $74.2 | $90.6 | | Plastics Solutions | $22.0 | ($14.9) | $73.1 | $99.8 | | Polystyrene | $9.2 | $18.7 | $31.2 | $87.0 | | Feedstocks | ($19.4) | ($78.0) | ($37.1) | ($59.8) | | Americas Styrenics | $19.0 | $22.8 | $49.1 | $83.8 | | **Total Segment Adjusted EBITDA** | **$58.4** | **($12.9)** | **$195.4** | **$377.6** | [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2023, the company had total liquidity of $492.9 million, consisting of $276.8 million in cash and $216.1 million in available borrowings. Total indebtedness stood at $2.3 billion. The company successfully refinanced its near-term debt, with no significant maturities until May 2028. A key covenant in the new 2028 Refinance Credit Agreement requires maintaining minimum liquidity of $100.0 million. The company was in compliance with all debt covenants as of the reporting date - Total liquidity as of Sep 30, 2023 was **$492.9 million**, including **$276.8 million cash** and **$216.1 million available** under revolving and securitization facilities[277](index=277&type=chunk) - The company's Senior Credit Facility has a springing covenant that limits borrowing capacity to **30% of the revolver** because the first lien net leverage ratio of **6.41x** exceeded the **3.50x threshold**. As of Sep 30, 2023, available borrowing under this facility was **$95.7 million**[280](index=280&type=chunk) - The company believes existing cash and available borrowings are adequate to meet operating needs and liquidity covenants for at least the next 12 months[289](index=289&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company states that there have been no material changes in its exposure to market risks, which include interest rates, foreign currency exchange rates, and commodity prices, from the information provided in its 2022 Annual Report - The company confirms no material changes in its exposure to market risks (interest rate, foreign currency, commodity prices) since its last Annual Report[301](index=301&type=chunk) [Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2023. There were no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of September 30, 2023[302](index=302&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[304](index=304&type=chunk) Part II - Other Information [Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various legal claims incidental to its business. For details on new matters and material developments during the quarter, the report refers to Note 13 of the condensed consolidated financial statements, which discusses litigation related to the Bristol Spill and other matters - For information on legal proceedings, including new matters and material developments, the company directs readers to Note 13 of the financial statements[306](index=306&type=chunk) [Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) This section provides material updates to the company's risk factors. Key risks highlighted include the potential failure to successfully divest the styrenics business, which is a key part of its transformation strategy. It also emphasizes risks associated with its substantial indebtedness of approximately $2.3 billion, which could increase vulnerability to economic downturns and limit operational flexibility. The restrictive covenants in its debt agreements, particularly the springing covenant on its revolving credit facility, are also noted as a significant risk - There is a risk that the company may not be successful in the proposed divestiture of its styrenics business, which could be impacted by economic conditions and the ability to find a suitable buyer[309](index=309&type=chunk)[310](index=310&type=chunk) - The company's total indebtedness of approximately **$2.3 billion** could adversely affect its financial condition by increasing vulnerability to downturns and dedicating a substantial portion of cash flow to debt service[311](index=311&type=chunk)[312](index=312&type=chunk) - Debt agreements contain restrictive covenants that may limit the ability to pay dividends, make investments, or incur additional debt. The Senior Credit Facility's springing covenant has limited access to the revolver since March 31, 2023[317](index=317&type=chunk)[320](index=320&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=54&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities. A share repurchase program authorized in September 2022 for up to $200.0 million remains in effect, with the full amount still available as of September 30, 2023, as no shares were repurchased during the third quarter - No share repurchases were made during the three months ended September 30, 2023. The full **$200.0 million** remains available under the current share repurchase authorization, which expires 18 months from September 2, 2022[326](index=326&type=chunk) [Defaults Upon Senior Securities](index=55&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon its senior securities during the period - **None**[327](index=327&type=chunk) [Mine Safety Disclosures](index=55&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - **Not applicable**[328](index=328&type=chunk) [Other Information](index=55&type=section&id=Item%205.%20Other%20Information) The company states that none of its directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the third quarter of 2023 - No director or officer trading plans under Rule 10b5-1 were adopted, modified, or terminated during the fiscal quarter ended September 30, 2023[329](index=329&type=chunk) [Exhibits](index=55&type=section&id=Item%206.%20Exhibits) This section provides an index of the exhibits filed with the Form 10-Q. Notable exhibits include the new Credit Agreement dated September 8, 2023, and the required CEO and CFO certifications under the Sarbanes-Oxley Act - The Exhibit Index lists key legal documents filed with the report, including the new Credit Agreement from September 2023 and Sarbanes-Oxley certifications[333](index=333&type=chunk) ```
Trinseo(TSE) - 2023 Q3 - Earnings Call Transcript
2023-11-06 16:54
Trinseo PLC (NYSE:TSE) Q3 2023 Earnings Conference Call November 6, 2023 10:00 AM ET Company Participants Andy Myers - Finance Director, Corporate FP&A and IR Frank Bozich - President, CEO & Director David Stasse - EVP, CFO & Interim Principal Accounting Officer Conference Call Participants Frank Mitsch - Fermium Research, LLC David Begleiter - Deutsche Bank Matthew Blair - Tudor, Pickering, Holt & Co. Michael Leithead - Barclays Hassan Ahmed - Alembic Global Advisors Laurence Alexander - Jefferies Operat ...