Trinseo(TSE) - 2021 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements This section presents Trinseo S.A.'s unaudited condensed consolidated financial statements and detailed notes for the periods ended June 30, 2021 and 2020 Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (Millions $) | Metric | June 30, 2021 (Millions $) | December 31, 2020 (Millions $) | Change (Millions $) | % Change | | :-------------------------------- | :-------------------------- | :----------------------------- | :------------------ | :------- | | Assets | | | | | | Cash and cash equivalents | 367.0 | 588.7 | (221.7) | -37.66% | | Accounts receivable, net | 769.0 | 469.5 | 299.5 | 63.79% | | Inventories | 562.9 | 324.1 | 238.8 | 73.68% | | Current assets held-for-sale | 383.0 | 120.3 | 262.7 | 218.37% | | Total current assets | 2,112.1 | 1,517.1 | 595.0 | 39.22% | | Property, plant and equipment, net | 641.3 | 431.1 | 210.2 | 48.76% | | Goodwill | 623.5 | 62.1 | 561.4 | 904.03% | | Other intangible assets, net | 649.4 | 162.6 | 486.8 | 299.39% | | Total assets | 4,504.7 | 2,845.2 | 1,659.5 | 58.32% | | Liabilities | | | | | | Short-term borrowings & current debt | 19.1 | 12.2 | 6.9 | 56.56% | | Accounts payable | 495.1 | 325.9 | 169.2 | 51.92% | | Current liabilities held-for-sale | 86.4 | 42.2 | 44.2 | 104.74% | | Total current liabilities | 814.0 | 533.3 | 280.7 | 52.63% | | Long-term debt, net | 2,310.1 | 1,158.1 | 1,152.0 | 99.47% | | Total liabilities | 3,674.9 | 2,254.9 | 1,420.0 | 62.97% | | Shareholders' Equity | | | | | | Total shareholders' equity | 829.8 | 590.3 | 239.5 | 40.57% | | Total liabilities and shareholders' equity | 4,504.7 | 2,845.2 | 1,659.5 | 58.32% | Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations (Millions $) | Metric (Millions $) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | % Change (3M) | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | % Change (6M) | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------ | :------------------------------- | :------------------------------- | :------------ | | Net sales | 1,273.7 | 534.3 | 138.40% | 2,259.7 | 1,297.3 | 74.19% | | Cost of sales | 1,053.7 | 510.9 | 106.26% | 1,850.8 | 1,216.2 | 52.18% | | Gross profit | 220.0 | 23.4 | 840.17% | 408.9 | 81.1 | 404.19% | | Selling, general and administrative expenses | 97.3 | 52.9 | 83.93% | 153.8 | 125.7 | 22.35% | | Equity in earnings of unconsolidated affiliates | 30.1 | 14.4 | 109.03% | 53.0 | 24.2 | 119.01% | | Operating income (loss) | 151.0 | (15.1) | -1100.66% | 306.3 | (30.7) | -1097.72% | | Interest expense, net | 21.6 | 11.7 | 84.62% | 33.6 | 22.0 | 52.73% | | Acquisition purchase price hedge (gain) loss | (33.0) | — | N/A | 22.0 | — | N/A | | Income (loss) from continuing operations before income taxes | 156.3 | (27.2) | -675.00% | 242.2 | (54.4) | -545.22% | | Provision for (benefit from) income taxes | 23.3 | (53.0) | -143.96% | 43.4 | (10.8) | -501.85% | | Net income (loss) from continuing operations | 133.0 | 25.8 | 415.50% | 198.8 | (43.6) | -556.90% | | Net income (loss) from discontinued operations | 18.6 | (154.2) | -112.06% | 24.3 | (121.1) | -120.07% | | Net income (loss) | 151.6 | (128.4) | -218.07% | 223.1 | (164.7) | -235.40% | | Net income (loss) per share- basic: Continuing operations | 3.43 | 0.68 | 404.41% | 5.15 | (1.14) | -551.75% | | Net income (loss) per share- basic: Discontinued operations | 0.48 | (4.04) | -111.88% | 0.62 | (3.15) | -119.68% | | Net income (loss) per share- basic | 3.91 | (3.36) | -216.37% | 5.77 | (4.29) | -234.50% | | Net income (loss) per share- diluted: Continuing operations | 3.35 | 0.67 | 399.99% | 5.02 | (1.14) | -540.35% | | Net income (loss) per share- diluted: Discontinued operations | 0.47 | (4.02) | -111.69% | 0.61 | (3.15) | -119.37% | | Net income (loss) per share- diluted | 3.82 | (3.35) | -214.03% | 5.63 | (4.29) | -231.23% | Condensed Consolidated Statements of Comprehensive Income (Loss) Condensed Consolidated Statements of Comprehensive Income (Loss) (Millions $) | Metric (Millions $) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income (loss) | 151.6 | (128.4) | 223.1 | (164.7) | | Other comprehensive income (loss), net of tax: | | | | | | Cumulative translation adjustments | (0.7) | (1.1) | (0.3) | 9.6 | | Net gain (loss) on cash flow hedges | (0.2) | (1.3) | 4.4 | (5.0) | | Pension and other postretirement benefit plans: Net gain arising during period | — | — | — | 0.6 | | Amounts reclassified from accumulated other comprehensive income | 1.0 | 0.5 | 2.1 | 1.1 | | Total other comprehensive income (loss), net of tax | 0.1 | (1.9) | 6.2 | 6.3 | | Comprehensive income (loss) | 151.7 | (130.3) | 229.3 | (158.4) | Condensed Consolidated Statements of Shareholders' Equity Condensed Consolidated Statements of Shareholders' Equity (Millions $) | Metric (Millions $) | Balance at Dec 31, 2020 | Net Income | Other Comprehensive Income | Share-based Compensation | Dividends | Balance at Jun 30, 2021 | | :------------------------------------ | :---------------------- | :--------- | :------------------------- | :----------------------- | :-------- | :---------------------- | | Ordinary Shares Outstanding | 38.4 | — | — | 0.4 | — | 38.8 | | Treasury Shares | 10.4 | — | — | (0.4) | — | 10.0 | | Ordinary Shares (value) | 0.5 | — | — | — | — | 0.5 | | Additional Paid-In Capital | 579.6 | — | — | (0.9) | — | 578.7 | | Treasury Shares (cost) | (542.9) | — | — | 17.6 | — | (525.3) | | Accumulated Other Comprehensive Income (Loss) | (186.1) | — | 6.2 | — | — | (179.9) | | Retained Earnings | 739.2 | 223.1 | — | — | (6.5) | 955.8 | | Total Shareholders' Equity | 590.3 | 223.1 | 6.2 | 16.7 | (6.5) | 829.8 | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (Millions $) | Metric (Millions $) | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Net income (loss) | 223.1 | (164.7) | | Net income (loss) from continuing operations | 198.8 | (43.6) | | Cash provided by operating activities - continuing operations | 44.3 | 118.4 | | Cash used in operating activities - discontinued operations | (14.3) | (42.6) | | Cash provided by operating activities | 30.0 | 75.8 | | Cash provided by (used in) investing activities - continuing operations | (1,403.1) | 25.4 | | Cash used in investing activities - discontinued operations | (2.4) | (10.0) | | Cash provided by (used in) investing activities | (1,405.5) | 15.4 | | Cash provided by financing activities | 1,154.9 | 34.4 | | Effect of exchange rates on cash | (1.1) | (0.5) | | Net change in cash, cash equivalents, and restricted cash | (221.7) | 125.1 | | Cash, cash equivalents, and restricted cash—end of period | 367.0 | 582.5 | Notes to Condensed Consolidated Financial Statements NOTE 1—BASIS OF PRESENTATION This note outlines the preparation of unaudited interim financial statements in accordance with GAAP and reclassifications due to divestitures and resegmentation - The unaudited interim condensed consolidated financial statements are prepared in accordance with GAAP and include normal recurring adjustments, to be read with the 2020 Annual Report on Form 10-K[34] - Certain prior year amounts were reclassified due to the agreement to sell the Synthetic Rubber business, classifying its assets/liabilities as held-for-sale and operating results as discontinued operations, along with resegmentation effective October 1, 2020[36] NOTE 2—RECENT ACCOUNTING GUIDANCE This note details the adoption of new FASB guidance on income tax accounting and its immaterial impact on financial statements - The Company adopted new FASB guidance simplifying income tax accounting effective January 1, 2021, which did not materially impact its condensed consolidated financial statements[37] NOTE 3—ACQUISITIONS This note describes Trinseo's acquisition of Arkema's PMMA and MMA business and the planned acquisition of Aristech Surfaces LLC - On May 3, 2021, Trinseo completed the acquisition of Arkema's PMMA and MMA business for an initial cash purchase price of $1,369.0 million, funded by new financing arrangements and available cash, complementing existing offerings in key sectors[38][40] - Goodwill of $567.7 million from the Arkema PMMA acquisition is largely due to strategic and synergistic opportunities, allocated to the Engineered Materials segment, with approximately $310.0 million deductible for income tax purposes[47] - The Company incurred $18.2 million and $19.8 million in transaction-related costs for the three and six months ended June 30, 2021, respectively, recorded in 'Selling, general and administrative expenses'[49] - On July 19, 2021, Trinseo announced an agreement to acquire Aristech Surfaces LLC for a preliminary purchase price of $445.0 million, expected to close by year-end 2021, becoming part of the Engineered Materials segment[52] Preliminary Purchase Price Allocation for Arkema PMMA Business Acquisition (May 3, 2021) | Asset/Liability | Fair Value (Millions $) | | :-------------------------------- | :---------------------- | | Cash and cash equivalents | 10.4 | | Accounts receivable | 19.1 | | Inventories | 78.6 | | Property, plant and equipment | 236.0 | | Other intangible assets (Customer relationships, Developed technology, Tradenames, etc.) | 506.0 | | Total fair value of assets acquired | 890.8 | | Total fair value of liabilities assumed | (87.8) | | Net identifiable assets acquired | 803.0 | | Purchase price consideration | 1,370.7 | | Goodwill | 567.7 | NOTE 4—DIVESTITURES AND DISCONTINUED OPERATIONS This note outlines the agreement to sell the Synthetic Rubber business and its classification as discontinued operations - On May 21, 2021, Trinseo agreed to sell its Synthetic Rubber business to Synthos S.A. for $449.4 million (reduced by $41.6 million for pension liabilities assumption), expected to close in H1 2022, leading to its classification as held-for-sale and discontinued operations[53][54] Assets and Liabilities Classified as Held-for-Sale | Metric (Millions $) | June 30, 2021 | December 31, 2020 | | :------------------------------------ | :-------------- | :---------------- | | Total assets held-for-sale | 383.0 | 348.5 | | Total liabilities held-for-sale | 86.4 | 84.5 | Results of Synthetic Rubber Business (Discontinued Operations) | Metric (Millions $) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net sales | 135.7 | 36.4 | 259.9 | 138.1 | | Gross profit (loss) | 27.5 | (30.5) | 40.6 | (18.4) | | Operating income (loss) | 21.9 | (35.9) | 28.8 | (56.7) | | Net income (loss) from discontinued operations | 18.6 | (154.2) | 24.3 | (121.1) | NOTE 5—NET SALES This note provides a breakdown of net sales to external customers by segment and geographic region Net Sales to External Customers by Segment and Geography (Three Months Ended June 30) | Segment (Millions $) | United States | Europe | Asia-Pacific | Rest of World | Total | | :------------------- | :------------ | :----- | :----------- | :------------ | :---- | | June 30, 2021 | | | | | | | Latex Binders | 74.1 | 160.5 | 74.3 | 2.3 | 311.2 | | Engineered Materials | 60.9 | 80.3 | 37.8 | 2.0 | 181.0 | | Base Plastics | 71.6 | 253.8 | 51.9 | 19.6 | 396.9 | | Polystyrene | — | 199.8 | 113.5 | — | 313.3 | | Feedstocks | 3.3 | 68.0 | — | — | 71.3 | | Total | 209.9 | 762.4 | 277.5 | 23.9 | 1,273.7 | | June 30, 2020 | | | | | | | Latex Binders | 50.9 | 72.3 | 40.4 | 1.3 | 164.9 | | Engineered Materials | 7.4 | 8.7 | 21.3 | 0.1 | 37.5 | | Base Plastics | 30.0 | 89.1 | 26.8 | 5.6 | 151.5 | | Polystyrene | — | 95.1 | 60.7 | — | 155.8 | | Feedstocks | 1.3 | 21.6 | 1.7 | — | 24.6 | | Total | 89.6 | 286.8 | 150.9 | 7.0 | 534.3 | Net Sales to External Customers by Segment and Geography (Six Months Ended June 30) | Segment (Millions $) | United States | Europe | Asia-Pacific | Rest of World | Total | | :------------------- | :------------ | :----- | :----------- | :------------ | :---- | | June 30, 2021 | | | | | | | Latex Binders | 141.9 | 278.1 | 138.1 | 4.1 | 562.2 | | Engineered Materials | 71.1 | 101.4 | 72.1 | 2.2 | 246.8 | | Base Plastics | 134.2 | 451.7 | 100.6 | 39.3 | 725.8 | | Polystyrene | — | 349.0 | 231.1 | — | 580.1 | | Feedstocks | 6.7 | 138.1 | — | — | 144.8 | | Total | 353.9 | 1,318.3 | 541.9 | 45.6 | 2,259.7 | | June 30, 2020 | | | | | | | Latex Binders | 113.1 | 174.2 | 92.8 | 3.9 | 384.0 | | Engineered Materials | 17.4 | 23.6 | 44.2 | 0.1 | 85.3 | | Base Plastics | 90.7 | 239.2 | 53.6 | 25.4 | 408.9 | | Polystyrene | — | 204.9 | 133.7 | — | 338.6 | | Feedstocks | 3.9 | 61.8 | 14.8 | — | 80.5 | | Total | 225.1 | 703.7 | 339.1 | 29.4 | 1,297.3 | NOTE 6—INVESTMENTS IN UNCONSOLIDATED AFFILIATES This note details Trinseo's equity method investment in Americas Styrenics LLC and its financial performance - Trinseo's primary unconsolidated affiliate is Americas Styrenics LLC, a 50%-owned joint venture with Chevron Phillips Chemical Company LP, accounted for using the equity method[63] - The Company's investment in Americas Styrenics was $253.2 million as of June 30, 2021, up from $240.1 million at December 31, 2020, with dividends received of $25.0 million and $40.0 million for the three and six months ended June 30, 2021, respectively[65][66] Summarized Financial Information of Americas Styrenics LLC | Metric (Millions $) | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Sales | 495.6 | 225.4 | 918.5 | 547.5 | | Gross profit | 74.5 | 31.3 | 139.9 | 38.4 | | Net income | 63.6 | 20.1 | 114.6 | 11.8 | NOTE 7—INVENTORIES This note provides a breakdown of inventory categories and their respective values Inventories Breakdown | Category (Millions $) | June 30, 2021 | December 31, 2020 | | :-------------------- | :------------ | :---------------- | | Finished goods | 262.3 | 132.9 | | Raw materials and semi-finished goods | 262.8 | 161.7 | | Supplies | 37.8 | 29.5 | | Total | 562.9 | 324.1 | NOTE 8—DEBT This note details Trinseo's debt structure, compliance with covenants, and recent financing activities - Trinseo was in compliance with all debt-related covenants as of June 30, 2021, and December 31, 2020[68] - On March 24, 2021, Trinseo issued $450.0 million of 5.125% senior notes due 2029, and on May 3, 2021, borrowed $750.0 million under a new 2028 Term Loan B and refinanced its revolving credit facility to a new $375.0 million 2026 Revolving Facility, in conjunction with the Arkema PMMA acquisition[72][78] - The 2028 Term Loan B bears an interest rate of LIBOR plus 2.50% (0.00% LIBOR floor) and requires quarterly payments of 0.25% of the original principal[79] Debt Structure (Millions $) | Debt Instrument | Interest Rate (June 30, 2021) | Maturity Date | Carrying Amount (June 30, 2021) | Carrying Amount (Dec 31, 2020) | | :-------------------------- | :---------------------------- | :------------ | :------------------------------ | :----------------------------- | | 2024 Term Loan B | 2.104% | Sep 2024 | 673.9 | 677.3 | | 2028 Term Loan B | 2.604% | May 2028 | 746.3 | — | | 2029 Senior Notes | 5.125% | Apr 2029 | 450.0 | — | | 2025 Senior Notes | 5.375% | Sep 2025 | 500.0 | 500.0 | | Other indebtedness | Various | Various | 7.9 | 10.0 | | Total debt | | | 2,378.1 | 1,187.3 | | Less: current portion | | | (19.1) | (12.2) | | Total long-term debt, net | | | 2,310.1 | 1,158.1 | NOTE 9—GOODWILL This note details the changes in goodwill, primarily driven by the Arkema PMMA acquisition - Goodwill increased significantly by $561.4 million from December 31, 2020, to June 30, 2021, primarily due to the Arkema PMMA acquisition, which added $567.7 million in goodwill, mainly allocated to the Engineered Materials segment[83] Changes in Goodwill by Segment (Millions $) | Segment | Balance at Dec 31, 2020 | Acquisitions (Note 3) | Foreign Currency Impact | Balance at Jun 30, 2021 | | :------------------- | :---------------------- | :-------------------- | :---------------------- | :---------------------- | | Latex Binders | 17.1 | — | (0.6) | 16.5 | | Engineered Materials | 16.0 | 567.7 | (4.8) | 578.9 | | Base Plastics | 24.2 | — | (0.8) | 23.4 | | Polystyrene | 4.8 | — | (0.1) | 4.7 | | Total | 62.1 | 567.7 | (6.3) | 623.5 | NOTE 10—DERIVATIVE INSTRUMENTS This note describes Trinseo's use of derivative instruments to manage foreign exchange and interest rate risks - Trinseo uses derivative financial instruments (foreign exchange forward contracts, interest rate swaps, cross currency swaps) to manage foreign exchange and interest rate risks, not for speculative purposes, with all derivatives recorded at fair value[85] - As of June 30, 2021, the Company had open foreign exchange forward contracts with a notional U.S. dollar equivalent absolute value of $1,185.3 million, primarily hedging euro-denominated exposures[87] - The Company uses foreign exchange cash flow hedges for forecasted U.S. dollar-denominated raw material purchases by its euro-functional currency subsidiary, with $48.0 million net notional value outstanding as of June 30, 2021[88][89] - Interest rate swap agreements convert a portion of variable rate debt (2024 Term Loan B) to a fixed rate, with $200.0 million net notional value outstanding as of June 30, 2021, maturing in September 2022[90][93] - A cross currency swap (2020 CCS) notionally exchanges $500.0 million for €459.3 million, aligning with principal and interest obligations on the 2025 Senior Notes, maturing in November 2022[95] Effect of Derivative Instruments on Statements of Operations (Three Months Ended June 30, 2021) | Item | Location in Statements of Operations | Gain (Loss) (Millions $) | | :------------------------------------ | :--------------------------------- | :----------------------- | | Foreign exchange cash flow hedges | Cost of sales | — | | Interest rate swaps | Interest expense, net | (0.9) | | Cross currency swaps (excluded from effectiveness testing) | Interest expense, net | 1.7 | | Foreign exchange forward contracts (not designated as hedge) | Acquisition purchase price hedge (gain) loss | 33.0 | | Foreign exchange forward contracts (not designated as hedge) | Other expense, net | 0.4 | Effect of Derivative Instruments on Statements of Operations (Six Months Ended June 30, 2021) | Item | Location in Statements of Operations | Gain (Loss) (Millions $) | | :------------------------------------ | :--------------------------------- | :----------------------- | | Foreign exchange cash flow hedges | Cost of sales | (0.3) | | Interest rate swaps | Interest expense, net | (1.7) | | Cross currency swaps (excluded from effectiveness testing) | Interest expense, net | 3.6 | | Foreign exchange forward contracts (not designated as hedge) | Acquisition purchase price hedge (gain) loss | (22.0) | | Foreign exchange forward contracts (not designated as hedge) | Other expense, net | 20.1 | NOTE 11—FAIR VALUE MEASUREMENTS This note outlines the fair value measurements of assets and liabilities, including derivative instruments and outstanding debt - The Company uses an income approach with discounted cash flow techniques to value derivative instruments, classifying significant inputs as Level 2 in the fair value hierarchy[112] - Impairment charges of $1.8 million were recorded for capital expenditures at the Boehlen styrene monomer facility during the three and six months ended June 30, 2021, classified as Level 3 fair value measurements[114] Assets (Liabilities) at Fair Value (June 30, 2021) | Instrument | Level 2 (Millions $) | Total (Millions $) | | :------------------------------------ | :------------------- | :----------------- | | Foreign exchange forward contracts—Assets | 24.5 | 24.5 | | Foreign exchange forward contracts—(Liabilities) | (0.4) | (0.4) | | Foreign exchange cash flow hedges—Assets | 0.5 | 0.5 | | Interest rate swaps—(Liabilities) | (4.2) | (4.2) | | Cross currency swaps—Assets | 5.6 | 5.6 | | Cross currency swaps—(Liabilities) | (48.1) | (48.1) | | Total fair value | (22.1) | (22.1) | Estimated Fair Value of Outstanding Debt (Millions $) | Debt Instrument | June 30, 2021 | December 31, 2020 | | :-------------------------- | :------------ | :---------------- | | 2029 Senior Notes | 460.3 | — | | 2028 Term Loan B | 741.7 | — | | 2025 Senior Notes | 513.0 | 513.5 | | 2024 Term Loan B | 667.5 | 674.0 | | Total fair value | 2,382.5 | 1,187.5 | NOTE 12—PROVISION FOR INCOME TAXES This note explains the effective income tax rate and factors influencing its fluctuations - The effective income tax rate for Q2 2020 was significantly impacted by a change in the forecasted jurisdictional mix of earnings, anticipating more income from lower-rate jurisdictions, and a tax benefit from impairment charges on Boehlen assets[120][121] Effective Income Tax Rate | Period | Effective Income Tax Rate | | :------------------------------------ | :------------------------ | | Three Months Ended June 30, 2021 | 14.9 % | | Three Months Ended June 30, 2020 | 195.0 % | | Six Months Ended June 30, 2021 | 17.9 % | | Six Months Ended June 30, 2020 | 19.8 % | NOTE 13—COMMITMENTS AND CONTINGENCIES This note addresses environmental remediation obligations and ongoing legal proceedings - As of June 30, 2021, Trinseo had $5.0 million in accrued obligations for environmental remediation or restoration costs, assumed as part of the Arkema PMMA acquisition[122] - The Company is subject to various legal claims and proceedings incidental to normal business, including an ongoing European Commission Request for Information related to styrene monomer commercial activity, with unpredictable outcomes that could be material[125][126][129] NOTE 14—PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS This note provides details on net periodic benefit costs and benefit obligations for pension plans - The Company's benefit obligations, primarily in 'Other noncurrent obligations', were $307.6 million as of June 30, 2021, up from $294.4 million at December 31, 2020[132] - Cash contributions and benefit payments to unfunded plans were $2.0 million and $3.6 million for the three and six months ended June 30, 2021, respectively, with an additional $2.9 million in contributions expected for the remainder of 2021[133] Net Periodic Benefit Costs for Defined Benefit Pension Plans (Millions $) | Component | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Service cost | 4.1 | 3.1 | 8.2 | 6.5 | | Interest cost | 0.5 | 0.7 | 1.0 | 1.4 | | Expected return on plan assets | (0.3) | (0.3) | (0.3) | (0.6) | | Amortization of prior service credit | (0.2) | (0.3) | (0.4) | (0.6) | | Amortization of net loss | 1.6 | 1.0 | 3.1 | 2.0 | | Net periodic benefit cost | 5.7 | 4.2 | 11.6 | 8.7 | NOTE 15—SHARE-BASED COMPENSATION This note details share-based compensation expense and unrecognized compensation costs for various award types - As of June 30, 2021, unrecognized compensation cost for RSUs, Options, and PSUs totaled $13.9 million, $4.7 million, and $4.4 million, respectively, with weighted average years to vest ranging from 1.5 to 2.1 years[136] Share-Based Compensation Expense (Millions $) | Award Type | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | RSUs | 1.9 | 1.7 | 3.6 | 3.3 | | Options | 1.1 | 0.8 | 2.2 | 1.8 | | PSUs | 0.7 | 0.5 | 1.2 | 1.0 | | Total | 3.7 | 3.0 | 7.0 | 6.1 | Awards Granted and Weighted Average Grant Date Fair Value (Six Months Ended June 30, 2021) | Award Type | Awards Granted | Weighted Average Grant Date Fair Value per Award | | :------------------- | :------------- | :----------------------------------------------- | | RSUs | 166,575 | $60.96 | | Options | 240,412 | $23.35 | | PSUs | 49,463 | $61.06 | NOTE 16—SEGMENTS This note describes the realignment of reporting segments and provides segment-level financial performance data - Effective Q2 2021, the Synthetic Rubber business is reported as discontinued operations, and the Company realigned its reporting segments in Q4 2020, reorganizing the former Performance Plastics segment into Engineered Materials and Base Plastics, while other segments remain unchanged[140][141] Segment Adjusted EBITDA (Millions $) | Segment | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Latex Binders | 32.2 | 16.1 | 49.0 | 36.7 | | Engineered Materials | 27.8 | 4.8 | 35.8 | 12.9 | | Base Plastics | 82.0 | (11.7) | 147.5 | 15.2 | | Polystyrene | 51.1 | 14.6 | 98.4 | 26.0 | | Feedstocks | 39.8 | (3.9) | 86.1 | (20.8) | | Americas Styrenics | 30.1 | 14.4 | 53.0 | 24.2 | Reconciliation of Income (Loss) from Continuing Operations Before Income Taxes to Segment Adjusted EBITDA (Millions $) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Income (loss) from continuing operations before income taxes | 156.3 | (27.2) | 242.2 | (54.4) | | Interest expense, net | 21.6 | 11.7 | 33.6 | 22.0 | | Depreciation and amortization | 38.1 | 24.3 | 61.2 | 48.6 | | Corporate Unallocated | 23.9 | 17.5 | 46.4 | 39.5 | | Adjusted EBITDA Addbacks | 23.1 | 8.0 | 86.4 | 38.5 | | Segment Adjusted EBITDA | 263.0 | 34.3 | 469.8 | 94.2 | NOTE 17—RESTRUCTURING This note details restructuring charges incurred, including a new transformational program, and the roll forward of restructuring liabilities - In May 2021, the Company approved a transformational restructuring program, incurring initial employee termination benefits charges of $6.2 million in Q2 2021, included in corporate unallocated expenses[150] Restructuring Charges (Millions $) | Program | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Corporate Restructuring Program Subtotal | (0.3) | 6.5 | 0.1 | 9.3 | | Transformational Restructuring Program Subtotal | 6.2 | — | 6.2 | — | | Other Restructurings | — | 0.1 | — | 0.4 | | Total Restructuring Charges | 5.9 | 6.6 | 6.3 | 9.7 | Roll Forward of Restructuring Liability Balances (Millions $) | Liability Type | Balance at Dec 31, 2020 | Expenses | Deductions | Balance at Jun 30, 2021 | | :-------------------------- | :---------------------- | :------- | :--------- | :---------------------- | | Employee termination benefits | 7.9 | 6.7 | (4.3) | 10.3 | | Contract terminations | 0.1 | — | — | 0.1 | | Total | 8.0 | 6.7 | (4.3) | 10.4 | NOTE 18—ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) This note outlines the components of accumulated other comprehensive income (loss) and expected reclassifications to net income - The Company expects to reclassify an approximate $2.9 million net loss from AOCI into earnings over the next twelve months, related to outstanding foreign exchange cash flow hedges and interest rate swaps[104] Components of Accumulated Other Comprehensive Income (Loss) (Millions $) | Component | Balance as of March 31, 2021 | Other Comprehensive Loss | Reclassified to Net Income | Balance as of June 30, 2021 | | :------------------------------------ | :--------------------------- | :----------------------- | :------------------------- | :-------------------------- | | Cumulative Translation Adjustments | (108.6) | (0.7) | — | (109.3) | | Pension & Other Postretirement Benefit Plans, Net | (70.8) | — | 1.0 | (69.8) | | Cash Flow Hedges, Net | (0.6) | (1.1) | 0.9 | (0.8) | | Total | (180.0) | (1.8) | 1.9 | (179.9) | NOTE 19—EARNINGS PER SHARE This note presents basic and diluted earnings per share and explains the treatment of potentially dilutive securities - Diluted EPS considers potentially dilutive securities (RSUs, options, PSUs) unless their inclusion would be anti-dilutive, as was the case for the six months ended June 30, 2020, due to a net loss from continuing operations[154][157] Basic and Diluted EPS (Six Months Ended June 30) | Metric (per share) | 2021 | 2020 | | :------------------------------------ | :--- | :--- | | Income (loss) per share—basic: Continuing operations | 5.15 | (1.14) | | Income (loss) per share—basic: Discontinued operations | 0.62 | (3.15) | | Income (loss) per share—basic | 5.77 | (4.29) | | Income (loss) per share—diluted: Continuing operations | 5.02 | (1.14) | | Income (loss) per share—diluted: Discontinued operations | 0.61 | (3.15) | | Income (loss) per share—diluted | 5.63 | (4.29) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Trinseo's financial condition and results of operations, highlighting strategic initiatives, segment performance, liquidity, and non-GAAP measures 2021 Year-to-Date Highlights This section summarizes key strategic and financial achievements for the first half of 2021 - Trinseo achieved strong performance in H1 2021 with net income from continuing operations of $198.8 million and Adjusted EBITDA of $423.4 million[160] - The Company completed the acquisition of Arkema's PMMA business on May 3, 2021, for $1,370.7 million, funded by new debt financing (2029 Senior Notes and 2028 Term Loan B)[161][162] - An agreement was signed on May 21, 2021, to sell the Synthetic Rubber business to Synthos S.A. for $449.4 million, with closing expected in H1 2022, now classified as discontinued operations[163][164] - Trinseo announced its intention to redomicile its parent company from Luxembourg to Ireland, expected to be completed in Q4 2021, subject to High Court approval[165] - On July 19, 2021, the Company entered into an agreement to acquire Aristech Surfaces LLC for $445.0 million, expected to close by year-end 2021[168] Results of Operations This section analyzes the financial performance for the three and six months ended June 30, 2021, compared to the prior year Three Months Ended – June 30, 2021 vs. June 30, 2020 This section compares the financial results for the three months ended June 30, 2021, against the same period in 2020 - Net sales increased by 138% (+$739.4 million), driven by 95% from higher selling prices (due to raw material costs), 20% from the PMMA business acquisition, 17% from increased sales volumes, and 6% from currency impacts[172] - Gross profit increased by 840% (+$196.6 million) due to higher margins from strong demand and tight supply in styrene, polystyrene, ABS, and polycarbonate, and higher volume, particularly in automotive[174] - Selling, General and Administrative Expenses (SG&A) increased by 84% (+$44.4 million), primarily due to $33.1 million in acquisition transaction and integration costs[175] - Equity in earnings of unconsolidated affiliates increased by $15.7 million, mainly from Americas Styrenics due to increased polystyrene sales volume and higher styrene margins[176] - Interest expense, net, increased by 85% (+$9.9 million) due to the issuance of the 2029 Senior Notes and 2028 Term Loan B[178] - A $33.0 million acquisition purchase price hedge gain was recognized from the change in fair value of the euro-denominated PMMA business hedge[179] - Net income from discontinued operations was $18.6 million in Q2 2021, a significant improvement from a $(154.2) million loss in Q2 2020[185] Six Months Ended – June 30, 2021 vs. June 30, 2020 This section compares the financial results for the six months ended June 30, 2021, against the same period in 2020 - Net sales increased by 74% (+$962.4 million), driven by 52% from higher selling prices, 9% from increased volumes, 8% from the PMMA business acquisition, and 5% from currency impacts[186] - Gross profit increased by 404% (+$327.8 million) due to higher margins from strong demand and tight supply in styrene, polystyrene, ABS, and polycarbonate, and higher volume, particularly in automotive[188] - Selling, General and Administrative Expenses (SG&A) increased by 22% (+$28.1 million), primarily due to $39.1 million in acquisition transaction and integration costs, partially offset by a $17.1 million decrease in advisory and professional fees[189] - Equity in earnings of unconsolidated affiliates increased by $28.8 million, mainly from Americas Styrenics due to increased sales volume and higher styrene margins[191] - Interest expense, net, increased by 53% (+$11.6 million) due to the issuance of the 2029 Senior Notes and 2028 Term Loan B[193] - A $22.0 million acquisition purchase price hedge loss was recognized from the change in fair value of the euro-denominated PMMA business hedge[194] - Net income from discontinued operations was $24.3 million in H1 2021, a significant improvement from a $(121.1) million loss in H1 2020[198] Outlook This section provides Trinseo's forward-looking perspective on earnings performance and strategic direction - Trinseo expects continued strong earnings performance, bolstered by favorable market conditions and the PMMA business acquisition[200] - The Company is strategically pursuing opportunities in higher growth and less cyclical product offerings, integrating the PMMA business, and planning the acquisition of Aristech Surfaces, transforming into a specialty materials and sustainable solutions provider[200] Selected Segment Information This section provides detailed financial performance for each of Trinseo's operating segments Latex Binders Segment This section analyzes the financial performance of the Latex Binders segment - Q2 2021 net sales increased 89% YoY, primarily due to 70% higher pricing from raw material cost pass-through, 13% from increased sales volume (recovering from COVID-19), and 6% from foreign exchange[205] - Q2 2021 Adjusted EBITDA increased 100% YoY (+$16.1 million), driven by 72% from increased sales volume, 39% from higher margins, and 16% from foreign exchange, partially offset by 25% higher fixed costs[206] Latex Binders Segment Performance (Millions $) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | % Change (3M) | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | % Change (6M) | | :------------------- | :------------------------------- | :------------------------------- | :------------ | :------------------------------- | :------------------------------- | :------------ | | Net sales | 311.2 | 164.9 | 89% | 562.2 | 384.0 | 46% | | Adjusted EBITDA | 32.2 | 16.1 | 100% | 49.0 | 36.7 | 34% | | Adjusted EBITDA margin | 10% | 10% | | 9% | 10% | | Engineered Materials Segment This section analyzes the financial performance of the Engineered Materials segment, including the impact of the PMMA acquisition - Q2 2021 net sales increased 383% YoY, with 287% attributed to the newly acquired PMMA business, while excluding PMMA, sales volume positively impacted net sales by 69% due to prior year COVID-19 impacts[212] - Q2 2021 Adjusted EBITDA increased 479% YoY (+$23.0 million), with 457% attributed to the PMMA business, while legacy business volume gains were partially offset by lower margins from higher raw material costs[213] Engineered Materials Segment Performance (Millions $) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | % Change (3M) | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | % Change (6M) | | :------------------- | :------------------------------- | :------------------------------- | :------------ | :------------------------------- | :------------------------------- | :------------ | | Net sales | 181.0 | 37.5 | 383% | 246.8 | 85.3 | 189% | | Adjusted EBITDA | 27.8 | 4.8 | 479% | 35.8 | 12.9 | 178% | | Adjusted EBITDA margin | 15% | 13% | | 15% | 15% | | Base Plastics Segment This section analyzes the financial performance of the Base Plastics segment - Q2 2021 net sales increased 162% YoY, with 109% from higher pricing (raw material pass-through, commercial excellence), 40% from increased sales volume (construction, appliances, automotive recovery), and 14% from foreign exchange[218][219] - Q2 2021 Adjusted EBITDA increased 801% YoY (+$93.7 million), driven by 513% from higher margins (ABS, polycarbonate), 203% from higher sales volume, and 92% from foreign exchange[220] Base Plastics Segment Performance (Millions $) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | % Change (3M) | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | % Change (6M) | | :------------------- | :------------------------------- | :------------------------------- | :------------ | :------------------------------- | :------------------------------- | :------------ | | Net sales | 396.9 | 151.5 | 162% | 725.8 | 408.9 | 78% | | Adjusted EBITDA | 82.0 | (11.7) | (801)% | 147.5 | 15.2 | 870% | | Adjusted EBITDA margin | 21% | (8)% | | 20% | 4% | | Polystyrene Segment This section analyzes the financial performance of the Polystyrene segment and outlines future recycling initiatives - Q2 2021 net sales increased 101% YoY, primarily due to 113% higher pricing from styrene cost pass-through, partially offset by a 12% decrease in sales volume following high prior-year demand for essential applications[225] - Q2 2021 Adjusted EBITDA increased 250% YoY (+$36.5 million), mainly due to 305% higher margins from commercial excellence and tight market conditions, partially offset by lower sales volume, higher fixed costs, and foreign exchange impacts[226] - Trinseo plans to build a full commercial-scale polystyrene recycling plant in Tessenderlo, Belgium, expected to be operational in 2023[223] Polystyrene Segment Performance (Millions $) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | % Change (3M) | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | % Change (6M) | | :------------------- | :------------------------------- | :------------------------------- | :------------ | :------------------------------- | :------------------------------- | :------------ | | Net sales | 313.3 | 155.8 | 101% | 580.1 | 338.6 | 71% | | Adjusted EBITDA | 51.1 | 14.6 | 250% | 98.4 | 26.0 | 278% | | Adjusted EBITDA margin | 16% | 9% | | 17% | 8% | | Feedstocks Segment This section analyzes the financial performance of the Feedstocks segment - Q2 2021 net sales increased 190% YoY, primarily due to 184% higher pricing from increased styrene prices, partially offset by a 6% decrease in styrene-related sales volume[232] - Q2 2021 Adjusted EBITDA increased by $43.7 million, mainly due to $47.5 million from higher styrene margins in Europe (strong demand, tight supply), partially offset by $3.1 million from foreign exchange impacts[233] Feedstocks Segment Performance (Millions $) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | % Change (3M) | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | % Change (6M) | | :------------------- | :------------------------------- | :------------------------------- | :------------ | :------------------------------- | :------------------------------- | :------------ | | Net sales | 71.3 | 24.6 | 190% | 144.8 | 80.5 | 80% | | Adjusted EBITDA | 39.8 | (3.9) | (1,121)% | 86.1 | (20.8) | 514% | | Adjusted EBITDA margin | 56% | (16)% | | 59% | (26)% | | Americas Styrenics Segment This section analyzes the financial performance of the Americas Styrenics segment - Q2 2021 Adjusted EBITDA increased 109% YoY, mainly due to increased polystyrene sales volume and higher styrene margins in North America, driven by COVID-19 recovery, strong demand, and industry outages[238] Americas Styrenics Segment Performance (Millions $) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | % Change (3M) | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | % Change (6M) | | :------------------- | :------------------------------- | :------------------------------- | :------------ | :------------------------------- | :------------------------------- | :------------ | | Adjusted EBITDA | 30.1 | 14.4 | 109% | 53.0 | 24.2 | 119% | Non-GAAP Performance Measures This section defines and reconciles Adjusted EBITDA as a non-GAAP financial measure - Trinseo presents Adjusted EBITDA as a non-GAAP financial measure to indicate ongoing performance and business trends, excluding impacts of non-core operations, defined as income from continuing operations before interest, taxes, depreciation, amortization, debt extinguishment loss, asset impairment, gains/losses on dispositions, restructuring, acquisition costs, and other items[242] Adjusted EBITDA Reconciliation (Millions $) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income (loss) from continuing operations | 133.0 | 25.8 | 198.8 | (43.6) | | Interest expense, net | 21.6 | 11.7 | 33.6 | 22.0 | | Provision for (benefit from) income taxes | 23.3 | (53.0) | 43.4 | (10.8) | | Depreciation and amortization | 38.1 | 24.3 | 61.2 | 48.6 | | EBITDA | 216.0 | 8.8 | 337.0 | 16.2 | | Loss on extinguishment of long-term debt | 0.5 | — | 0.5 | — | | Restructuring and other charges | 6.3 | 5.4 | 6.7 | 7.2 | | Acquisition transaction and integration net costs | 43.2 | (0.4) | 49.2 | (0.3) | | Acquisition purchase price hedge (gain) loss | (33.0) | — | 22.0 | — | | Asset impairment charges or write-offs | 1.8 | — | 1.8 | 10.3 | | Other items | 4.3 | 3.0 | 6.4 | 21.7 | | Adjusted EBITDA | 239.1 | 16.8 | 423.4 | 54.7 | Liquidity and Capital Resources This section discusses Trinseo's cash flows, capital resources, and liquidity position Cash Flows This section summarizes the Company's cash flow activities from operating, investing, and financing for the reported periods - Net cash provided by operating activities from continuing operations decreased to $44.3 million in H1 2021 from $118.4 million in H1 2020, primarily due to a $209.0 million reduction from net working capital changes (higher raw material costs, increased inventory)[249] - Net cash used in investing activities from continuing operations was $1,403.1 million in H1 2021, mainly due to $1,358.6 million for business acquisitions (Arkema PMMA) and $30.0 million in capital expenditures[252] - Net cash provided by financing activities was $1,154.9 million in H1 2021, driven by $746.3 million from 2028 Term Loan B and $450.0 million from 2029 Senior Notes, partially offset by deferred financing fees and dividend payments[254] Summary of Cash Flows (Millions $) | Cash Flow Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Operating activities - continuing operations | 44.3 | 118.4 | | Operating activities - discontinued operations | (14.3) | (42.6) | | Operating activities | 30.0 | 75.8 | | Investing activities - continuing operations | (1,403.1) | 25.4 | | Investing activities - discontinued operations | (2.4) | (10.0) | | Investing activities | (1,405.5) | 15.4 | | Financing activities | 1,154.9 | 34.4 | | Net change in cash, cash equivalents, and restricted cash | (221.7) | 125.1 | Free Cash Flow (Millions $) | Metric | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :------------------- | :------------------------------- | :------------------------------- | | Cash provided by operating activities | 30.0 | 75.8 | | Capital expenditures | (32.4) | (48.2) | | Free Cash Flow | (2.4) | 27.6 | Capital Resources and Liquidity This section details the Company's outstanding indebtedness, available liquidity, and dividend payment capacity - As of June 30, 2021, outstanding indebtedness totaled $2,378.1 million, working capital was $1,001.5 million, and the Company had $360.4 million available under its 2026 Revolving Facility and $150.0 million under its Accounts Receivable Securitization Facility[261][266][270] - The Senior Credit Facility and Indentures limit dividend payments and distributions to Trinseo S.A. and its shareholders, with dividends of $0.16 per ordinary share ($6.4 million total) declared in H1 2021, well within available capacity[275] Outstanding Indebtedness and Interest Expense (Millions $) | Debt Instrument | Balance (June 30, 2021) | Effective Interest Rate (H1 2021) | Interest Expense (H1 2021) | | :-------------------------- | :---------------------- | :-------------------------------- | :------------------------- | | 2024 Term Loan B | 673.9 | 2.1% | 10.3 | | 2028 Term Loan B | 746.3 | 2.6% | 3.7 | | 2026 Revolving Facility | — | —% | 1.2 | | 2029 Senior Notes | 450.0 | 5.1% | 6.6 | | 2025 Senior Notes | 500.0 | 5.4% | 10.4 | | Accounts Receivable Securitization Facility | — | — | 0.8 | | Other indebtedness | 7.9 | 2.5% | — | | Total | 2,378.1 | | 33.0 | Contractual Obligations and Commercial Commitments This section outlines new financing arrangements and significant long-term contracts - New financing arrangements include the $450.0 million 2029 Senior Notes and $750.0 million 2028 Term Loan B, entered into in Q1 and Q2 2021, respectively, to fund the Arkema PMMA acquisition[278] - A new two-year long-term contract was entered into with Dow Europe GmbH for benzene purchases at the Terneuzen location, with annual minimum purchase and maximum sale volume commitments[279] Critical Accounting Policies and Estimates This section confirms the reliance on significant accounting policies and management estimates, with no material revisions - The Company's interim financial statements rely on significant accounting policies and management estimates, with no material revisions to critical accounting policies or estimates since the Annual Report[282][283] Off-Balance Sheet Arrangements This section states that Trinseo does not have any off-balance sheet arrangements - Trinseo does not have any off-balance sheet arrangements[286] Recent Accounting Pronouncements This section refers to Note 2 for details on recent accounting pronouncements - The impact of recent accounting pronouncements is described in Note 2 of the condensed consolidated financial statements[288] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section reiterates the Company's exposure to market risks, including interest rates, foreign currency, and commodity prices, with no material changes - Trinseo is exposed to market risks from fluctuating interest rates, foreign currency exchange rates, and commodity prices, with no material changes to these exposures since the Annual Report[289] Item 4. Controls and Procedures This section details the evaluation of disclosure controls and procedures and changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures This section confirms the effectiveness of the Company's disclosure controls and procedures - Management, with CEO and CFO participation, concluded that Trinseo's disclosure controls and procedures were effective as of June 30, 2021[290] Changes in Internal Control over Financial Reporting This section addresses the exclusion of the PMMA acquisition from the internal control assessment and other changes - The acquisition of the PMMA business in May 2021 was excluded from the assessment of internal control over financial reporting as of December 31, 2021, as permitted by the SEC, with integration into the control structure expected within one year[291] - No other material changes in internal control over financial reporting occurred during the quarter ended June 30, 2021[292] PART II — OTHER INFORMATION Item 1. Legal Proceedings This section states that the Company is subject to various routine legal claims, none expected to have a material adverse effect - Trinseo is subject to various routine legal claims, but management believes no pending litigation is likely to have a material adverse effect on its business[294] Item 1A. Risk Factors This section updates risk factors related to recent acquisitions, dispositions, and increased indebtedness - The Company faces risks related to integrating the acquired PMMA business, including potential failure to realize anticipated benefits, longer or costlier integration, and inability to achieve expected synergies[298][299] - Risks associated with the proposed acquisition of Aristech Surfaces include potential delays or failure to complete the acquisition due to regulatory approvals, and difficulties in realizing anticipated cost and revenue synergies post-acquisition[301][302] - Trinseo's increased indebtedness (totaling $2.38 billion as of June 30, 2021) could adversely affect its financial condition by increasing vulnerability to economic downturns, requiring substantial cash flow for debt payments, limiting additional financing, and restricting operational flexibility[304][305][306] - Covenants in the Senior Credit Facility and Indentures restrict subsidiaries' ability to incur additional debt, pay dividends, make investments, and engage in certain transactions, potentially limiting the Company's ability to respond to changes or pursue opportunities[308][309] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports no unregistered sales of equity securities and the suspension of the share repurchase program - No unregistered sales of equity securities or use of proceeds from registered securities occurred[314] - The share repurchase program was suspended in December 2020, with 3.6 million ordinary shares still available for repurchase under the 2020 authorization as of June 30, 2021[314] Item 3. Defaults Upon Senior Securities This section confirms no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[315] Item 4. Mine Safety Disclosures This item is not applicable to the Company - This item is not applicable[316] Item 5. Other Information This section indicates no other information to report under this item - No other information to report[317] Item 6. Exhibits This section provides an index of exhibits filed with the Form 10-Q - The exhibit index includes key documents such as amended articles of association, indentures for 2025 and 2029 Senior Notes, amendments to the Credit Agreement (2021 Incremental and 2021 Revolver), a Benzene Sales Contract, and the Asset Purchase Agreement for the Synthetic Rubber business[321] SIGNATURES This section contains the signatures of the Company's principal executive and financial officers - The report is signed by Frank Bozich, President, Chief Executive Officer, and David Stasse, Executive Vice President, Chief Financial Officer, on August 5, 2021[326]