Trinseo(TSE) - 2023 Q1 - Quarterly Report

Company Information Filing Details Trinseo PLC filed its 10-Q quarterly report for the period ended March 31, 2023, registered in Ireland, headquartered in Pennsylvania, and classified as a large accelerated filer - The company filed its 10-Q quarterly report for the period ended March 31, 2023[2] - Trinseo PLC is a public company registered in Ireland with its principal executive offices in Wayne, Pennsylvania, USA[2][3] - The company is classified as a large accelerated filer and has submitted all required reports and interactive data files within the past 12 months[3][4] Company Stock Information | Metric | Details | | :--- | :--- | | Registered Securities | Ordinary Shares, par value $0.01 per share | | Trading Symbol | TSE | | Registered Exchange | New York Stock Exchange | | Outstanding Shares as of April 28, 2023 | 35,146,342 shares | Preliminary Information Company Definition and Context This report defines 'Trinseo' as Trinseo PLC and 'Company' as Trinseo and its consolidated subsidiaries, with all financial data referring to Trinseo PLC, the surviving entity of a 2021 merger - "Trinseo" specifically refers to Trinseo PLC, while "Company," "we," and similar terms refer to Trinseo and its consolidated subsidiaries[9] - Trinseo PLC is the surviving entity following a cross-border merger with its predecessor, Trinseo S.A., in October 2021[9] - The company can make cash distributions under Irish law through dividends or distributable profits[9] Cautionary Note on Forward-Looking Statements This report contains forward-looking statements about future plans and objectives, subject to inherent uncertainties and risks, with no obligation to update them - This quarterly report contains forward-looking statements regarding future plans, objectives, forecasts, and strategies, which are not historical facts[12] - Forward-looking statements are subject to inherent uncertainties, risks, and environmental changes, and actual results may differ materially from expectations[12][13] - The company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law[14] Available Information The company's annual, quarterly, and current reports, along with their amendments, are freely accessible on the investor relations section of its website - The company's annual reports, quarterly reports, and current reports, along with their amendments, are available free of charge on the investor relations section of its website at www.trinseo.com[16](index=16&type=chunk) Part I Financial Information Item 1. Financial Statements This section contains Trinseo PLC's unaudited condensed consolidated financial statements for the periods ended March 31, 2023, and December 31, 2022, along with related notes Condensed Consolidated Balance Sheets The condensed consolidated balance sheets provide a snapshot of the company's financial position, detailing assets, liabilities, and shareholders' equity as of March 31, 2023, and December 31, 2022 Condensed Consolidated Balance Sheets (Summary) | Metric (million USD) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | 217.1 | 211.7 | | Accounts receivable, net | 622.5 | 586.0 | | Inventories | 502.6 | 553.6 | | Total current assets | 1,376.3 | 1,390.7 | | Investments in unconsolidated affiliates | 252.7 | 255.1 | | Property, plant and equipment, net | 681.0 | 691.1 | | Goodwill | 414.2 | 410.4 | | Other intangible assets, net | 759.4 | 772.0 | | Total assets | 3,741.5 | 3,760.2 | | Liabilities and Shareholders' Equity | | | | Short-term borrowings and current portion of long-term debt | 16.6 | 16.0 | | Accounts payable | 454.6 | 438.1 | | Total current liabilities | 717.8 | 689.4 | | Long-term debt, net | 2,299.9 | 2,301.6 | | Total noncurrent liabilities | 2,647.5 | 2,650.5 | | Total shareholders' equity | 376.2 | 420.3 | | Total liabilities and shareholders' equity | 3,741.5 | 3,760.2 | - As of March 31, 2023, the company's total assets were $3,741.5 million, a slight decrease from $3,760.2 million as of December 31, 2022[20] - Total shareholders' equity decreased from $420.3 million as of December 31, 2022, to $376.2 million as of March 31, 2023[20] Condensed Consolidated Statements of Operations The condensed consolidated statements of operations present the company's revenues, expenses, and net income (loss) for the three months ended March 31, 2023, and 2022, highlighting profitability trends Condensed Consolidated Statements of Operations (Summary) | Metric (million USD) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net sales | 996.3 | 1,386.7 | | Cost of sales | 959.1 | 1,210.7 | | Gross profit | 37.2 | 176.0 | | Selling, general and administrative expenses | 84.7 | 96.7 | | Operating income (loss) | (30.2) | 64.6 | | Interest expense, net | 38.3 | 21.9 | | Income (loss) from continuing operations before income taxes | (65.6) | 39.7 | | Provision for (benefit from) income taxes | (16.7) | 22.6 | | Net income (loss) from continuing operations | (48.9) | 17.1 | | Net income (loss) | (48.9) | 16.7 | | Basic net income (loss) per share | (1.40) | 0.45 | | Diluted net income (loss) per share | (1.40) | 0.44 | - For the three months ended March 31, 2023, net sales decreased by 28% year-over-year to $996.3 million, and gross profit decreased by 79% to $37.2 million[23] - The company shifted from net income from continuing operations of $17.1 million to a net loss of $48.9 million, with a basic net loss per share of $1.40 compared to net income per share of $0.45 in the prior year period[23] Condensed Consolidated Statements of Comprehensive Income (Loss) This statement details the company's net income (loss) and other comprehensive income (loss) components, such as foreign currency translation adjustments, for the three months ended March 31, 2023, and 2022 Condensed Consolidated Statements of Comprehensive Income (Loss) (Summary) | Metric (million USD) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net income (loss) | (48.9) | 16.7 | | Other comprehensive income (loss), net of tax | 3.4 | (2.5) | | Comprehensive income (loss) | (45.5) | 14.2 | - For the three months ended March 31, 2023, comprehensive loss was $45.5 million, compared to comprehensive income of $14.2 million in the prior year period[25] - Other comprehensive income (loss), net of tax, shifted from a loss of $2.5 million in the prior year to income of $3.4 million, primarily influenced by cumulative translation adjustments[25] Condensed Consolidated Statements of Shareholders' Equity This statement outlines changes in shareholders' equity, including net income (loss), dividends, and other comprehensive income (loss), for the three months ended March 31, 2023, and 2022 Condensed Consolidated Statements of Shareholders' Equity (Summary) | Metric (million USD) | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total shareholders' equity | 376.2 | 420.3 | | Retained earnings | 210.4 | 264.5 | | Accumulated other comprehensive loss | (127.9) | (131.3) | | Dividends on ordinary shares | (5.2) | (12.1) (Three Months Ended March 31, 2022) | - As of March 31, 2023, total shareholders' equity was $376.2 million, a decrease from $420.3 million as of December 31, 2022, primarily due to a net loss of $48.9 million and dividend payments of $5.2 million during the period[28] - Accumulated other comprehensive loss improved from ($131.3) million as of December 31, 2022, to ($127.9) million as of March 31, 2023[28] Condensed Consolidated Statements of Cash Flows This statement summarizes the cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2023, and 2022, reflecting liquidity generation and usage Condensed Consolidated Statements of Cash Flows (Summary) | Metric (million USD) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash from operating activities | 45.4 | (5.0) | | Net cash from investing activities | (21.8) | (47.0) | | Net cash from financing activities | (20.5) | (70.6) | | Effect of exchange rate changes | 2.3 | (1.7) | | Net change in cash, cash equivalents, and restricted cash | 5.4 | (124.3) | | Cash, cash equivalents, and restricted cash at end of period | 217.1 | 448.7 | - For the three months ended March 31, 2023, net cash from operating activities was $45.4 million, compared to cash used of $5.0 million in the prior year period, primarily driven by working capital release[31][203] - Net cash used in investing activities decreased from $47.0 million in the prior year to $21.8 million, mainly due to reduced capital expenditures[31][207][208] - Net cash used in financing activities decreased from $70.6 million in the prior year to $20.5 million, primarily due to reduced share repurchases[31][209][210] Notes to Condensed Consolidated Financial Statements NOTE 1—BASIS OF PRESENTATION These unaudited condensed consolidated financial statements are prepared in accordance with US GAAP, incorporating management's necessary recurring adjustments, and should be read alongside the 2022 annual report - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and include normal recurring adjustments deemed necessary by management[34] - These statements should be read in conjunction with the company's audited consolidated financial statements in its 2022 Annual Report on Form 10-K[34] - Unless otherwise noted, amounts and activities in this quarterly report are presented on a continuing operations basis[35] NOTE 2—RECENT ACCOUNTING GUIDANCE No recently issued accounting guidance significantly impacted the company's condensed consolidated financial statements as of March 31, 2023 - As of March 31, 2023, no recently issued accounting guidance had a material impact on the company's condensed consolidated financial statements[36] NOTE 3—ACQUISITIONS The company completed the acquisition of Heathland B.V. on January 3, 2022, a European plastic waste recycler, with its performance included in the Plastics Solutions segment - On January 3, 2022, the company completed the acquisition of Heathland B.V. for an estimated total purchase consideration of $29.3 million, including an initial cash payment of $22.9 million and $6.4 million in contingent cash consideration[37] - Heathland, a leading European post-consumer and post-industrial plastic waste collector and recycler, has its results included in the Plastics Solutions segment[37] - In February 2023, the company paid $1.2 million in contingent consideration based on Heathland's first-year performance milestones[38] NOTE 4—DIVESTITURES AND DISCONTINUED OPERATIONS On December 1, 2021, the company divested its Synthetic Rubber business to Synthos S.A. for $402.4 million, entering into long-term supply agreements for raw materials - On December 1, 2021, the company completed the divestiture of its Synthetic Rubber business to Synthos S.A. for a purchase price of $402.4 million[39] - Following the divestiture, Trinseo entered into long-term supply agreements with Synthos to provide certain raw materials for the Synthetic Rubber business[39] Synthetic Rubber Business Discontinued Operations Income (Loss) (Summary) | Metric (million USD) | Three Months Ended March 31, 2022 | | :--- | :--- | | Net sales | 0.1 | | Cost of sales | 0.7 | | Gross loss | (0.6) | | Operating loss | (0.4) | | Net loss from discontinued operations | (0.4) | NOTE 5—NET SALES Net sales for the three months ended March 31, 2023, totaled $996.3 million, a 28% decrease from the prior year, with all segments and the European region experiencing declines Net Sales by Geographic Market and Segment (million USD) | Segment/Region | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Engineered Materials | 206.2 | 295.2 | | Latex Binders | 248.1 | 306.7 | | Plastics Solutions | 289.9 | 396.5 | | Polystyrene | 209.1 | 318.0 | | Feedstocks | 43.0 | 70.3 | | Total | 996.3 | 1,386.7 | | By Geographic Market | | | | United States | 250.8 | 309.0 | | Europe | 544.8 | 797.2 | | Asia Pacific | 168.0 | 247.6 | | Rest of World | 32.7 | 32.9 | - For the three months ended March 31, 2023, total net sales were $996.3 million, a 28% decrease from $1,386.7 million in the prior year period[43] - Net sales declined across all segments, with the most significant decrease observed in the European region[43] NOTE 6—INVESTMENTS IN UNCONSOLIDATED AFFILIATES The company's investment in Americas Styrenics LLC, a joint venture accounted for using the equity method, totaled $252.7 million as of March 31, 2023 - The company currently supplements its operations through Americas Styrenics LLC, a styrene and polystyrene joint venture with Chevron Phillips Chemical Company LP, accounted for using the equity method[44] Americas Styrenics LLC Financial Information (Summary) | Metric (million USD) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Sales | 443.3 | 524.4 | | Gross profit | 52.9 | 48.1 | | Net income | 37.8 | 36.1 | - As of March 31, 2023, the company's investment in Americas Styrenics was $252.7 million, and it received $20.0 million in dividends during the period, an increase from $7.5 million in the prior year period[47] NOTE 7—INVENTORIES Total inventories decreased to $502.6 million as of March 31, 2023, from $553.6 million at December 31, 2022, primarily due to reductions in finished goods, raw materials, and work-in-process Inventory Composition (million USD) | Inventory Category | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Finished goods | 195.3 | 218.4 | | Raw materials and work-in-process | 265.9 | 295.6 | | Supplies | 41.4 | 39.6 | | Total | 502.6 | 553.6 | - As of March 31, 2023, the company's total inventories were $502.6 million, a decrease from $553.6 million as of December 31, 2022, primarily reflecting reductions in finished goods, raw materials, and work-in-process inventories[48] NOTE 8—DEBT The company remained in compliance with all debt covenants as of March 31, 2023, with total debt of $2,316.5 million and $100.5 million available under its revolving credit facility - The company was in compliance with all debt-related covenants as of March 31, 2023, and December 31, 2022[49] Debt Composition (million USD) | Debt Type | Carrying Amount as of March 31, 2023 | Carrying Amount as of December 31, 2022 | | :--- | :--- | :--- | | 2024 Term Loan B | 657.3 | 658.3 | | 2028 Term Loan B | 720.3 | 721.5 | | 2029 Senior Notes | 434.5 | 434.1 | | 2025 Senior Notes | 496.6 | 496.3 | | Other debt | 7.8 | 7.4 | | Total Debt | 2,316.5 | 2,317.6 | | Less: Current portion | (16.6) | (16.0) | | Long-term debt, net | 2,299.9 | 2,301.6 | - As of March 31, 2023, the 2026 Revolving Credit Facility had $375.0 million in committed capacity, with $100.5 million available for borrowing, and a First Lien Net Leverage Ratio of 4.85x[52] NOTE 9—GOODWILL Goodwill increased slightly to $414.2 million as of March 31, 2023, primarily due to foreign currency impacts, following impairment charges in Q4 2022 related to challenging macroeconomic conditions Goodwill Movement (million USD) | Segment | Balance as of December 31, 2022 | Foreign Currency Impact | Balance as of March 31, 2023 | | :--- | :--- | :--- | :--- | | Engineered Materials | 348.9 | 2.6 | 351.5 | | Latex Binders | 14.8 | 0.3 | 15.1 | | Plastics Solutions | 42.5 | 0.8 | 43.3 | | Polystyrene | 4.2 | 0.1 | 4.3 | | Total | 410.4 | 3.8 | 414.2 | - As of March 31, 2023, total goodwill was $414.2 million, a slight increase from $410.4 million as of December 31, 2022, primarily due to foreign currency impacts[53] - The company performed goodwill impairment tests on its PMMA business and Aristech Surfaces reporting units in the fourth quarter of 2022, recording impairment charges primarily due to persistent challenging macroeconomic conditions and decreased market capitalization[53][56] - The goodwill balance for the Engineered Materials segment as of March 31, 2023, includes cumulative impairment losses of $297.1 million[57] NOTE 10—DERIVATIVE INSTRUMENTS The company uses derivative financial instruments, including forward foreign exchange, interest rate, and commodity swap agreements, to manage exposure to market risks, not for trading or speculative purposes - The company uses derivative financial instruments to manage its exposure to foreign currency exchange rates, interest rates, and commodity price risks, including forward foreign exchange contracts, interest rate swap agreements, and commodity swap agreements, not for trading or speculative purposes[58] - As of March 31, 2023, the company held outstanding forward foreign exchange contracts with an absolute notional U.S. dollar equivalent of $657.5 million, primarily involving Euros, Chinese Yuan, and Korean Won[60] - The company holds commodity swap agreements to convert a portion of its natural gas costs to fixed-rate obligations, with these commodity derivatives designated as cash flow hedges[64] Impact of Derivative Instruments on Statements of Operations (million USD) | Impact Category | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Commodity cash flow hedges (reclassified from AOCI) | (6.4) | — | | Interest rate swaps (reclassified from AOCI) | — | (0.8) | | Forward foreign exchange contracts (not designated as hedges) | (7.8) | 8.8 | | Commodity economic hedges (not designated as hedges) | (12.4) | — | NOTE 11—FAIR VALUE MEASUREMENTS Fair value is defined as the price received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date, with derivative instruments valued using discounted cash flow techniques - Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date[80] Assets (Liabilities) Measured at Fair Value by Level (million USD) | Asset (Liability) Category | Total as of March 31, 2023 | Total as of December 31, 2022 | | :--- | :--- | :--- | | Forward foreign exchange contracts—(liabilities) | (12.4) | (11.0) | | Commodity economic hedges—(liabilities) | (15.4) | (6.6) | | Commodity cash flow hedges—(liabilities) | (25.5) | (12.2) | | Total Fair Value | (53.3) | (29.7) | - The company values derivative instruments using the income approach, employing discounted cash flow techniques, and classifies them within Level 2 of the fair value hierarchy[83] - The company recorded an additional impairment charge of $0.3 million in the fourth quarter of 2022 for its styrene monomer assets in Boehlen, Germany, which had a value of $3.2 million as of March 31, 2023, and December 31, 2022[84] NOTE 12—PROVISION FOR INCOME TAXES The income tax benefit for the three months ended March 31, 2023, was $16.7 million, with an effective tax rate of 25.4%, a significant decrease from the prior year due to changes in the mix of profitable jurisdictions and reduced pre-tax income Effective Income Tax Rate | Period | Effective Income Tax Rate | | :--- | :--- | | Three Months Ended March 31, 2023 | 25.4 % | | Three Months Ended March 31, 2022 | 56.9 % | - For the three months ended March 31, 2023, the income tax benefit was $16.7 million, with an effective tax rate of 25.4%, compared to an income tax provision of $22.6 million and an effective tax rate of 56.9% in the prior year period[89] - The decrease in the effective income tax rate is primarily due to a change in the mix of jurisdictions where the company expects to be profitable and a $105.3 million decrease in income from continuing operations before income taxes[90][161] NOTE 13—COMMITMENTS AND CONTINGENCIES The company has accrued $3.5 million for environmental remediation obligations and faces multiple legal proceedings, including class action lawsuits, related to a latex emulsion product spill at its Bristol facility in March 2023 - As of March 31, 2023, and December 31, 2022, the company had an accrued obligation of $3.5 million for environmental remediation or restoration costs[92] - On March 24, 2023, the company experienced an accidental release of a latex emulsion product at its Bristol, Pennsylvania facility ("Bristol Release"), which was reported to authorities, and water samples showed no related substances[94][148] - The company faces multiple legal proceedings related to the Bristol Release, including a securities class action lawsuit, consumer class action lawsuits, and a Federal Notice of Interest and Administrative Order from the U.S. Coast Guard[103][104][105] - In November 2022, the company reached a settlement with the European Commission regarding styrene monomer commercial activities for $33.8 million, which was paid in full in December 2022[111] Asset Retirement Obligation Movement (million USD) | Movement Category | Balance as of March 31, 2023 | | :--- | :--- | | Beginning balance | 35.8 | | Obligations incurred | 0.9 | | Settlements | (2.2) | | Accretion expense | 0.5 | | Currency translation adjustments | 0.6 | | Ending Balance | 35.6 | NOTE 14—PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS Net periodic benefit costs for non-U.S. defined benefit pension plans were $2.6 million and for U.S. plans were $0.2 million for the three months ended March 31, 2023, with total benefit obligations of $183.4 million Net Periodic Benefit Cost (million USD) | Cost Category | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Non-U.S. defined benefit pension plans | 2.6 | 4.4 | | U.S. defined benefit pension plans | 0.2 | 0.2 | | Total Net Periodic Benefit Cost | 2.8 | 4.6 | - For the three months ended March 31, 2023, the company's net periodic benefit cost for non-U.S. defined benefit pension plans was $2.6 million, and for U.S. plans was $0.2 million[112] - As of March 31, 2023, the company's benefit obligation was $183.4 million, and it expects to make additional contributions of approximately $11.4 million to its defined benefit plans during the remainder of 2023[113][114] NOTE 15—SHARE-BASED COMPENSATION Total share-based compensation expense for the three months ended March 31, 2023, was $8.2 million, consistent with the prior year, with unamortized costs of $13.5 million for RSUs, $3.9 million for options, and $7.4 million for PSUs Share-Based Compensation Expense and Unrecognized Cost (million USD) | Incentive Type | Expense for Three Months Ended March 31, 2023 | Expense for Three Months Ended March 31, 2022 | Unrecognized Cost as of March 31, 2023 | | :--- | :--- | :--- | :--- | | Restricted Stock Units (RSUs) | 4.8 | 4.6 | 13.5 | | Options | 2.6 | 3.0 | 3.9 | | Performance Stock Units (PSUs) | 0.8 | 0.7 | 7.4 | | Total Share-Based Compensation Expense | 8.2 | 8.3 | | - For the three months ended March 31, 2023, total share-based compensation expense was $8.2 million, remaining largely consistent with the prior year period[116] Share-Based Compensation Granted for Three Months Ended March 31, 2023 (Summary) | Incentive Type | Number Granted | Weighted-Average Grant Date Fair Value Per Share | | :--- | :--- | :--- | | Restricted Stock Units (RSUs) | 394,292 | $24.10 | | Options | 438,727 | $10.86 | | Performance Stock Units (PSUs) | 219,238 | $20.23 | NOTE 16—SEGMENTS The company operates six segments: Engineered Materials, Latex Binders, Plastics Solutions, Polystyrene, Feedstocks, and Americas Styrenics, with Plastics Solutions reflecting a strategic focus on sustainability - The company operates six segments: Engineered Materials, Latex Binders, Plastics Solutions, Polystyrene, Feedstocks, and Americas Styrenics[121] - Effective January 1, 2023, the Base Plastics segment was renamed Plastics Solutions to better reflect the company's strategic focus on sustainability and material alternative solutions[121] Adjusted EBITDA by Segment (million USD) | Segment | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Engineered Materials | (11.7) | 34.7 | | Latex Binders | 26.0 | 30.2 | | Plastics Solutions | 25.6 | 68.6 | | Polystyrene | 15.7 | 45.3 | | Feedstocks | (10.8) | 4.1 | | Americas Styrenics | 17.6 | 21.6 | | Total Adjusted EBITDA | 62.4 | 204.5 | - For the three months ended March 31, 2023, the company's Adjusted EBITDA was $62.4 million, a significant decrease from $204.5 million in the prior year period, with declines across all segments[123][125] NOTE 17—RESTRUCTURING The company announced an asset restructuring plan in December 2022 to reduce costs, improve profitability, and address market overcapacity, including facility closures in Germany and Mexico - In December 2022, the company announced an asset restructuring plan aimed at reducing costs, improving profitability, reducing exposure to cyclical markets and high natural gas prices, and addressing market overcapacity[129] - The plan includes the closure of the styrene production facility in Boehlen, Germany, the closure of one production line at the Stade polycarbonate plant in Germany, and the closure of the PMMA sheet manufacturing site in Matamoros, Mexico[129] Restructuring Charges (million USD) | Restructuring Type | Charges for Three Months Ended March 31, 2023 | Charges for Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Asset Restructuring Plan | 7.7 | — | | Transformation Restructuring Plan | — | 0.3 | | Other Restructuring | — | 0.1 | | Total Restructuring Charges | 7.7 | 0.4 | - On April 4, 2023, the company entered into an agreement to sell its PMMA sheet manufacturing facility in Matamoros, Mexico, for approximately $19.0 million in cash consideration[130] NOTE 18—ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Accumulated other comprehensive loss improved to $127.9 million as of March 31, 2023, from $131.3 million at December 31, 2022, primarily due to positive foreign currency translation adjustments Accumulated Other Comprehensive Income (Loss) Components (million USD) | Component | Balance as of March 31, 2023 | Balance as of December 31, 2022 | | :--- | :--- | :--- | | Cumulative translation adjustments | (140.7) | (151.2) | | Pension and other postretirement benefit plans, net | 29.3 | 29.0 | | Cash flow hedges, net | (16.5) | (9.1) | | Total | (127.9) | (131.3) | - As of March 31, 2023, accumulated other comprehensive loss was $127.9 million, an improvement from $131.3 million as of December 31, 2022, primarily benefiting from positive foreign currency translation adjustments[134] Amounts Reclassified from AOCI to Net Income (million USD) | AOCI Component | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Commodity cash flow hedges | 6.4 | — | | Interest rate swaps | — | 0.8 | | Amortization of pension and other postretirement benefit plan items | 0.4 | 0.5 | | Total (pre-tax) | 6.8 | 1.3 | NOTE 19—EARNINGS PER SHARE For the three months ended March 31, 2023, the company reported a basic and diluted loss per share from continuing operations of $1.40, compared to earnings per share in the prior year Earnings (Loss) Per Share Data | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net income (loss) from continuing operations | (48.9) | 17.1 | | Net income (loss) | (48.9) | 16.7 | | Weighted-average ordinary shares outstanding | 35.0 | 37.3 | | Dilutive effect (RSUs, options, PSUs) | — | 0.8 | | Diluted weighted-average ordinary shares outstanding | 35.0 | 38.1 | | Basic earnings (loss) per share—continuing operations | (1.40) | 0.46 | | Basic earnings (loss) per share—total | (1.40) | 0.45 | | Diluted earnings (loss) per share—continuing operations | (1.40) | 0.45 | | Diluted earnings (loss) per share—total | (1.40) | 0.44 | - For the three months ended March 31, 2023, the company reported a basic and diluted loss per share from continuing operations of $1.40, compared to basic and diluted earnings per share from continuing operations of $0.46 and $0.45, respectively, in the prior year period[138] - Due to the net loss from continuing operations for the three months ended March 31, 2023, potential shares associated with share-based compensation were excluded from the diluted earnings per share calculation as they were anti-dilutive[138][140] NOTE 20—IMPAIRMENT AND OTHER CHARGES Total impairment and other charges for the three months ended March 31, 2023, were $0.3 million, primarily related to the impairment of styrene monomer assets in Germany, significantly lower than the prior year's $36.3 million Impairment and Other Charges (million USD) | Charge Category | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Asset impairment charges or write-offs | 0.3 | 0.7 | | European Commission information request | — | 35.6 | | Total | 0.3 | 36.3 | - For the three months ended March 31, 2023, total impairment and other charges amounted to $0.3 million, primarily related to the impairment of styrene monomer assets in Boehlen, Germany[141] - In the prior year period, these charges were $36.3 million, mainly comprising an estimated liability of $35.6 million related to an information request from the European Commission[141] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses the company's financial condition and operating results for the three months ended March 31, 2023, highlighting decreased sales and profits due to customer destocking and weak demand, mitigated by restructuring and cost controls - For the three months ended March 31, 2023, the company reported a net loss from continuing operations of $48.9 million and Adjusted EBITDA of $36.3 million[144] - Customer destocking and an uncertain economic and geopolitical macro environment led to year-over-year declines in sales volume and margins across all segments[144] - The company is restarting the exploration of a divestiture of its styrene businesses, which is expected to include the Feedstocks and Polystyrene reporting segments and its 50% ownership in Americas Styrenics[146] - The company has implemented several liquidity improvement measures, including working capital reduction, deferred capital expenditures, and significant reductions in cash dividends, to achieve positive operating cash flow and strong quarter-end liquidity[145] 2023 Year-to-Date Highlights Key highlights for Q1 2023 include a net loss from continuing operations of $48.9 million, adjusted EBITDA of $36.3 million, the restart of styrene business divestiture exploration, and the sale of a PMMA sheet manufacturing facility - The company recorded a net loss from continuing operations of $48.9 million and Adjusted EBITDA of $36.3 million in the first quarter of 2023[144] - The company is restarting the exploration of a divestiture of its styrene businesses, which is expected to include the Feedstocks and Polystyrene segments and its 50% ownership in Americas Styrenics[146] - The company has entered into an agreement to sell its PMMA sheet manufacturing facility in Matamoros, Mexico, for approximately $19.0 million in cash consideration[147] - On March 24, 2023, the company experienced an accidental release of a latex emulsion product at its Bristol, Pennsylvania facility, which was reported to authorities, and the company is cooperating with them[148] Results of Operations for the Three Months Ended March 31, 2023 and 2022 This section provides a comparative analysis of operating results, showing a 28% decline in net sales and a 79% drop in gross profit for the three months ended March 31, 2023, primarily due to reduced sales volume and weak market conditions Operating Results Summary (million USD) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change % | | :--- | :--- | :--- | :--- | | Net sales | 996.3 | 1,386.7 | -28% | | Cost of sales | 959.1 | 1,210.7 | -21% | | Gross profit | 37.2 | 176.0 | -79% | | Selling, general and administrative expenses | 84.7 | 96.7 | -12% | | Operating income (loss) | (30.2) | 64.6 | -147% | | Interest expense, net | 38.3 | 21.9 | +75% | | Income (loss) from continuing operations before income taxes | (65.6) | 39.7 | -265% | | Net income (loss) from continuing operations | (48.9) | 17.1 | -385% | - Net sales decreased by 28% year-over-year, primarily due to a 20% decline in sales volume from customer destocking and weak demand, and a 7% decrease in selling prices due to lower raw material costs[151] - Gross profit decreased by 79%, mainly attributable to lower sales volume and reduced margins from weak market conditions, as well as unfavorable natural gas hedging impacts[153] - Net interest expense increased by 75%, primarily due to higher LIBO rates year-over-year[158] Outlook Despite ongoing challenging operating conditions, the company anticipates improved profitability through modest input costs, pricing actions, and cost savings from its asset restructuring plan, while focusing on liquidity enhancement measures - Despite challenging operating conditions, including customer destocking and weak demand, persisting since the second half of 2022, European natural gas prices have significantly decreased, and arbitrage opportunities for low-cost standard products from Asia into Europe have diminished following the lifting of COVID-19 restrictions in China[163] - The company expects to improve profitability through modest input costs, pricing actions, and cost savings from its asset restructuring plan[163] - The company will continue to focus on liquidity improvement measures, such as working capital reduction, deferred capital expenditures, and further significant reductions in cash dividends, to enhance liquidity and strengthen its balance sheet[165] Selected Segment Information Engineered Materials Segment The Engineered Materials segment experienced a 30% decline in net sales and a 134% decrease in adjusted EBITDA for the three months ended March 31, 2023, driven by weak demand, customer destocking, and unfavorable gas hedging impacts Engineered Materials Segment Performance (million USD) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change % | | :--- | :--- | :--- | :--- | | Net sales | 206.2 | 295.2 | -30% | | Adjusted EBITDA | (11.7) | 34.7 | -134% | | Adjusted EBITDA Margin | -6% | 12% | | - Net sales decreased by 30%, primarily due to a 23% decline in sales volume from weak demand and customer destocking, and a 6% decrease in pricing[170] - Adjusted EBITDA decreased by 134%, mainly due to lower sales volume, reduced margins from weak MMA market conditions, and unfavorable natural gas hedging impacts[171] Latex Binders Segment The Latex Binders segment reported a 19% decrease in net sales and a 14% decrease in adjusted EBITDA for the three months ended March 31, 2023, primarily due to reduced sales volume across all regions and applications Latex Binders Segment Performance (million USD) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change % | | :--- | :--- | :--- | :--- | | Net sales | 248.1 | 306.7 | -19% | | Adjusted EBITDA | 26.0 | 30.2 | -14% | | Adjusted EBITDA Margin | 10% | 10% | | - Net sales decreased by 19%, primarily due to a 14% decline in sales volume across all regions and applications, and a 3% decrease in pricing due to lower raw material costs[175] - Adjusted EBITDA decreased by 14%, mainly due to lower sales volume from customer destocking and reduced demand in building and construction applications, partially offset by improved margins from favorable pricing actions[176] Plastics Solutions Segment The Plastics Solutions segment saw a 27% decline in net sales and a 63% drop in adjusted EBITDA for the three months ended March 31, 2023, mainly due to decreased sales volume in polycarbonate and copolymers, and lower pricing Plastics Solutions Segment Performance (million USD) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change % | | :--- | :--- | :--- | :--- | | Net sales | 289.9 | 396.5 | -27% | | Adjusted EBITDA | 25.6 | 68.6 | -63% | | Adjusted EBITDA Margin | 9% | 17% | | - Net sales decreased by 27% year-over-year, primarily due to a 20% decline in polycarbonate and copolymer sales volume, and a 5% decrease in pricing due to lower raw material costs[179] - Adjusted EBITDA decreased by 63%, mainly due to lower sales volume and reduced margins, as well as increased fixed costs[180] Polystyrene Segment The Polystyrene segment's net sales decreased by 34% and adjusted EBITDA by 65% for the three months ended March 31, 2023, attributed to weak demand in appliance and construction applications and lower styrene costs Polystyrene Segment Performance (million USD) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change % | | :--- | :--- | :--- | :--- | | Net sales | 209.1 | 318.0 | -34% | | Adjusted EBITDA | 15.7 | 45.3 | -65% | | Adjusted EBITDA Margin | 8% | 14% | | - Net sales decreased by 34% year-over-year, primarily due to a 22% decline in sales volume from weak demand in appliance and construction applications, and a 10% decrease in pricing due to lower styrene costs[184] - Adjusted EBITDA decreased by 65%, mainly due to the negative impact of weak demand on sales volume and margins, partially offset by lower fixed costs[185] Feedstocks Segment The Feedstocks segment experienced a 39% decrease in net sales and a 363% decline in adjusted EBITDA for the three months ended March 31, 2023, primarily due to reduced styrene-related sales volume, lower pricing, and unfavorable timing impacts Feedstocks Segment Performance (million USD) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change % | | :--- | :--- | :--- | :--- | | Net sales | 43.0 | 70.3 | -39% | | Adjusted EBITDA | (10.8) | 4.1 | -363% | | Adjusted EBITDA Margin | -25% | 6% | | - Net sales decreased by 39%, primarily due to a 19% decline in styrene-related sales volume and a 17% decrease in pricing[188] - Adjusted EBITDA decreased by $14.9 million, primarily attributable to a $15.4 million decline in styrene margins, including an unfavorable net timing impact of $7.3 million[189] - The styrene plant in Boehlen, Germany, was permanently shut down in December 2022 as part of the asset restructuring plan[189] Americas Styrenics Segment The Americas Styrenics segment's adjusted EBITDA decreased by 19% for the three months ended March 31, 2023, mainly due to lower styrene margins, partially offset by improved polystyrene margins Americas Styrenics Segment Performance (million USD) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change % | | :--- | :--- | :--- | :--- | | Adjusted EBITDA | 17.6 | 21.6 | -19% | - Adjusted EBITDA decreased by 19%, primarily due to lower styrene margins, partially offset by improved polystyrene margins[193] - The performance of this segment consists entirely of equity earnings from Americas Styrenics[192] Non-GAAP Performance Measures The company uses Adjusted EBITDA as a non-GAAP financial performance measure to assess ongoing operating performance and business trends, excluding non-core transactions and events - The company uses Adjusted EBITDA as a non-GAAP financial performance measure, defined as income from continuing operations before net interest expense, provision for income taxes, depreciation and amortization expense, loss on extinguishment of long-term debt, asset impairment charges, gains or losses on the disposition of businesses and assets, restructuring charges, acquisition-related costs, and other items[195] - Adjusted EBITDA is intended to provide management, investors, and credit rating agencies with an indicator of ongoing operating performance and business trends, excluding the impact of transactions and events not considered part of core operations[195] Adjusted EBITDA Calculation (million USD) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net income (loss) from continuing operations | (48.9) | 17.1 | | Interest expense, net | 38.3 | 21.9 | | Provision for (benefit from) income taxes | (16.7) | 22.6 | | Depreciation and amortization | 56.0 | 53.0 | | EBITDA | 28.7 | 114.6 | | Adjusted EBITDA | 36.3 | 177.6 | Liquidity and Capital Resources Cash Flows This section analyzes the company's cash flows from operating, investing, and financing activities for the three months ended March 31, 2023, highlighting a positive net cash flow from operations due to working capital release Cash Flow Summary (million USD) | Cash Flow Category | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash from operating activities | 45.4 | (5.0) | | Net cash from investing activities | (21.8) | (47.0) | | Net cash from financing activities | (20.5) | (70.6) | | Effect of exchange rate changes | 2.3 | (1.7) | | Net Change in Cash, Cash Equivalents, and Restricted Cash | 5.4 | (124.3) | - In the first quarter of 2023, net cash from continuing operations was $45.4 million, primarily driven by a significant release of working capital and cash improvement initiatives[203] - Net cash used in investing activities was $21.8 million, primarily for capital expenditures, with the company taking steps to reduce and defer capital spending[207] - Net cash used in financing activities was $20.5 million, mainly due to dividend payments of $11.8 million and debt repayments of $6.3 million[209] Free Cash Flow The company uses free cash flow, defined as cash flow from operating activities less capital expenditures, as a non-GAAP measure to evaluate its liquidity and performance - The company uses free cash flow, defined as cash flow from operating activities less capital expenditures, as a non-GAAP measure to assess its liquidity position and performance[211] Free Cash Flow (million USD) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash from operating activities | 45.4 | (5.0) | | Capital expenditures | (21.8) | (24.8) | | Free Cash Flow | 23.6 | (29.8) | - Free cash flow for the first quarter of 2023 was $23.6 million, compared to a negative $29.8 million in the prior year period, indicating a significant improvement in cash generation[213] Capital Resources and Liquidity Overview As of March 31, 2023, the company had $2,350.6 million in outstanding debt, $217.1 million in cash, and at least $250.5 million in available borrowing capacity, expecting sufficient resources for the next 12 months - As of March 31, 2023, the company had $2,350.6 million in outstanding debt and $658.5 million in working capital[216] - As of March 31, 2023, the company had $217.1 million in cash and cash equivalents, and at least $250.5 million in available borrowing capacity under its 2026 Revolving Credit Facility and Accounts Receivable Securitization Facility[227] - The company expects its financial resources to be sufficient to meet its operating and capital expenditure needs for the next 12 months and to navigate the challenging macroeconomic environment[227][228] Outstanding Debt and Related Interest Expense (million USD) | Debt Type | Balance as of March 31, 2023 | Interest Expense for Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | 2024 Term Loan B | 661.7 | 11.6 | | 2028 Term Loan B | 734.1 | 13.8 | | 2026 Revolving Credit Facility | — | 0.5 | | 2029 Senior Notes | 447.0 | 6.3 | | 2025 Senior Notes | 500.0 | 7.0 | | Accounts Receivable Securitization Facility | — | 0.3 | | Other debt | 7.8 | 0.1 | | Total | 2,350.6 | 39.6 | Contractual Obligations and Commercial Commitments No significant revisions to the company's contractual obligations have occurred beyond the normal course of business since the annual report disclosure - No significant revisions to the company's contractual obligations, as described in its annual report, have occurred beyond the normal course of business[230] Critical Accounting Policies and Estimates The company's condensed consolidated financial statements rely on significant accounting policies and estimates, requiring management judgment, with no material revisions to those disclosed in the annual report - The company's condensed consolidated financial statements are based on the selection and application of significant accounting policies that require management to make estimates and assumptions affecting reported amounts[232] - As of now, the company has not identified any reasonably likely events or circumstances that would cause material differences in results[232] - No material revisions have been made to the significant accounting policies and critical accounting policies and estimates disclosed in the annual report[234] Off-Balance Sheet Arrangements The company has no off-balance sheet arrangements - The company has no off-balance sheet arrangements[236] Recent Accounting Pronouncements The impact of recent accounting pronouncements is detailed in Note 2 to the condensed consolidated financial statements - The impact of recent accounting pronouncements is described in Note 2 to the condensed consolidated financial statements[238] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks related to interest rates, foreign currency exchange rates, and commodity prices, with no significant changes since the annual report disclosure - The company is exposed to market risks from changes in interest rates, foreign currency exchange rates, and the prices of certain commodities used in its production[239] - There have been no material changes to the market risks faced by the company since the disclosure in its annual report[239] Item 4. Controls and Procedures Management assessed the company's disclosure controls and procedures as effective as of March 31, 2023, with no significant changes to internal controls reported this quarter - The company's management evaluated the effectiveness of its disclosure controls and procedures as of March 31, 2023, and concluded they were effective[240] - There were no changes in internal control over financial reporting during the quarter ended March 31, 2023, that materially affected or are reasonably likely to materially affect internal control[241] Part II Other Information Item 1. Legal Proceedings The company is involved in various legal claims and proceedings arising in the normal course of business, with updated information disclosed in Note 13 to the condensed consolidated financial statements - The company is involved in various legal claims and proceedings from time to time in the normal course of business[243] - Legal proceedings can adversely affect the company, regardless of outcome, due to defense and settlement costs, and diversion of management resources[243] - Updated information on legal proceedings for this quarter is disclosed in Note 13 to the condensed consolidated financial statements[243] Item 1A. Risk Factors The company's business faces various risks that could materially adversely affect its prospects, financial condition, and operating results, including uncertainties regarding the styrene business divestiture - The company's business is subject to various risks that could materially adversely affect its business prospects, financial condition, and results of operations[245] - The company may not successfully divest its styrene businesses, which depends on various factors including economic conditions, improvements in capital markets, finding a buyer, and negotiating acceptable terms[247] - Any divestiture could have a dilutive effect on the company's future earnings and may result in significant asset write-downs, including goodwill and other intangible assets[248] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The board approved a stock repurchase program on September 2, 2022, authorizing up to $200.0 million in ordinary share repurchases, with no repurchases made during the three months ended March 31, 2023 - The company's Board of Directors approved a stock repurchase program on September 2, 2022, authorizing the repurchase of up to $200.0 million of its ordinary shares[249] - For the three months ended March 31, 2023, the company did not make any stock repurchases[249] - As of March 31, 2023, $200.0 million remained available for stock repurchases[249] Item 3. Defaults Upon Senior Securities The company has not experienced any defaults upon senior securities - No defaults upon senior securities[250] Item 4. Mine Safety Disclosures Not applicable - Not applicable[251] Item 5. Other Information No other information is provided - None[252] Item 6. Exhibits This report includes an exhibit index listing various filed documents, such as corporate charters, indentures, employment agreements, certifications, and XBRL data files - This report includes an exhibit index listing various filed documents[255][258] - Exhibits include corporate charters, indentures, employment agreements, certifications from the Chief Executive Officer and Chief Financial Officer, and XBRL data files[258]