TRINSEO S.A.

Condensed Consolidated Statements of Operations

(In millions, except per share data)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Net sales	$	1,273.7	$	534.3	$	2,259.7	$	1,297.3
Cost of sales		1,053.7		510.9		1,850.8		1,216.2
Gross profit		220.0		23.4		408.9		81.1
Selling, general and administrative expenses		97.3		52.9		153.8		125.7
Equity in earnings of unconsolidated affiliates		30.1		14.4		53.0		24.2
Impairment charges		1.8		—		1.8		10.3
Operating income (loss)		151.0		(15.1)		306.3		(30.7)
Interest expense, net		21.6		11.7		33.6		22.0
Acquisition purchase price hedge (gain) loss		(33.0)		—		22.0		—
Loss on extinguishment of long-term debt		0.5		—		0.5		—
Other expense, net		5.6		0.4		8.0		1.7
Income (loss) from continuing operations before income taxes		156.3		(27.2)		242.2		(54.4)
Provision for (benefit from) income taxes		23.3		(53.0)		43.4		(10.8)
Net income (loss) from continuing operations		133.0		25.8		198.8		(43.6)
Net income (loss) from discontinued operations, net of income taxes		18.6		(154.2)		24.3		(121.1)
Net income (loss)	$	151.6	$	(128.4)	$	223.1	$	(164.7)
Weighted average shares- basic		38.8		38.2		38.6		38.4
Net income (loss) per share- basic:
Continuing operations	$	3.43	$	0.68	$	5.15	$	(1.14)
Discontinued operations		0.48		(4.04)		0.62		(3.15)
Net income (loss) per share- basic	$	3.91	$	(3.36)	$	5.77	$	(4.29)
Weighted average shares- diluted		39.6		38.3		39.6		38.4
Net income (loss) per share- diluted:
Continuing operations	$	3.35	$	0.67	$	5.02	$	(1.14)
Discontinued operations		0.47		(4.02)		0.61		(3.15)
Net income (loss) per share- diluted	$	3.82	$	(3.35)	$	5.63	$	(4.29)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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The following table illustrates each component of the purchase price consideration related to the Acquisition:



Initial cash purchase price paid ⁽¹⁾	$	1,369.0
Known purchase price adjustment, not yet paid ⁽²⁾		1.7
Total purchase price consideration	$	1,370.7

(1)

The Acquisition had an initial purchase price consideration of $1,370.7 million, of which $1,369.0 million was paid during the second quarter of 2021. This initial purchase price consideration is subject to customary working capital and other closing adjustments.

(2)

Known purchase price adjustment not yet paid relates primarily to consideration for certain assets at the Porto Marghera, Italy manufacturing site which will be legally transferred to Trinseo at a later date due to local transfer restrictions; however, the Company has the benefits and risks of ownership during the period from May 3, 2021 until the site legally transfers. This purchase price consideration is expected to be paid in the second half of 2021.

The Acquisition was funded using the net proceeds from the Company’s ~~financial position or results.~~new financing arrangements, including $450.0 million from its 2029 Senior Notes issued on March 24, 2021 and $750.0 million of incremental borrowings under the 2028 Term Loan B entered into in conjunction with closing of the transaction, as well as available cash. Refer to Note 148 for further ~~information.~~information on the financing arrangements used to fund the Acquisition.

~~NOTE 2—RECENT ACCOUNTING GUIDANCE~~

The Company accounted for the Acquisition as a business combination pursuant to ASC 805. In ~~May 2014,~~accordance with ASC 805, fair values are assigned to tangible and identifiable intangible assets acquired and liabilities assumed at the ~~Financial Accounting Standards Board (“FASB”)~~acquisition date based on the information that was available as of that date. The Company believes that the information available provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed for the ~~International Accounting Standards Board (“IASB”) jointly issued guidance which clarifies~~Acquisition; however, preliminary measurements of fair value, including, but not limited to, inventory, intangible assets, property, plant and equipment, pension and postretirement obligations, contingent liabilities, including environmental remediation obligations, and deferred tax assets and liabilities are subject to change during the ~~principles~~measurement period, and such changes could be material. The Company expects to finalize the valuation and accounting for ~~recognizing revenue~~the Acquisition as soon as practicable, but no later than one year after the acquisition date. During the measurement period, if new information is obtained about facts and ~~develops a common revenue standard for GAAP and International Financial Reporting Standards (“IFRS”). The core principle~~circumstances that existed as of the ~~guidance is~~acquisition date that, ~~an entity should recognize revenue to depict the transfer~~if known, would have resulted in revised estimated values of ~~promised goods~~those assets or ~~services to customers in an amount~~liabilities as of that ~~reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, the FASB has issued certain clarifying updates to this guidance, which~~date, the Company will ~~consider as part~~revise the preliminary purchase price allocation. The effect of ~~our adoption, which~~measurement period adjustments to the estimated fair values will be ~~effective~~reflected as if the adjustments had been completed on the acquisition date. The impact of all changes that do not qualify as measurement period adjustments will be included in current period earnings.

The Company allocated the purchase price of the Acquisition to identifiable assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The excess of the purchase price over the aggregate fair values was recorded as goodwill. The Company calculated the fair value of the assets acquired using the income and cost approaches (or a combination thereof). Fair values were determined based on various inputs including estimated future cash flows, discount rates, royalty rates, growth rates, sales projections, customer retention rates and terminal values. The fair value of pension liabilities assumed was determined in accordance with ASC 715 using key inputs including, but not limited to, discount rates, expected rates of return on plan assets, and future compensation growth rates. The various inputs used in the asset and pension valuations require significant management judgment.

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The table below summarizes the preliminary purchase price allocation for the assets acquired and liabilities assumed, based on their relative fair values, which have been assessed as of the May 3, 2021 acquisition date:


	May 3,
	2021
Cash and cash equivalents	$	10.4
Accounts receivable		19.1
Inventories ⁽¹⁾		78.6
Other current assets		8.7
Property, plant and equipment		236.0
Other intangible assets ⁽²⁾
Customer relationships		326.6
Developed technology		133.0
Tradenames		46.0
Other amortizable intangible assets		0.4
Right-of-use assets - operating		4.1
Deferred charges and other assets		27.9
Total fair value of assets acquired		890.8

Accounts payable		(15.0)
Current lease liabilities - operating		(1.7)
Income taxes payable		(0.1)
Accrued expenses and other current liabilities		(11.7)
Noncurrent lease liabilities - operating		(2.5)
Deferred income tax liabilities		(34.3)
Other noncurrent obligations ⁽³⁾		(22.5)
Total fair value of liabilities assumed		(87.8)
Net identifiable assets acquired		803.0
Purchase price consideration		1,370.7
Goodwill ⁽⁴⁾		567.7

(1)

Fair value of finished goods inventory acquired included a step-up in the value of approximately $10.1 million, which was fully amortized during the second quarter of 2021 within "Cost of sales" on the condensed consolidated statements of operations as the related inventory was sold to customers.

(2)

The expected weighted average useful life of the acquired intangible assets are 13 years for customer relationships, 10 years for developed technology, 16 years for tradenames, and 1-5 years for other amortizable intangible assets.

(3)

Includes $18.2 million of net pension and other employee benefits assumed as part of the Acquisition.

(4)

Goodwill largely consists of strategic and synergistic opportunities resulting from combining the PMMA business with the Company’s existing businesses and is allocated entirely to the Engineered Materials segment. Approximately $310.0 million of goodwill related to this acquisition will be deductible for income tax purposes based on the preliminary purchase price.

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information presents the condensed consolidated results of operations of the Company including the PMMA business for the three and six months ended June 30, 2021 and 2020, respectively, as if the Acquisition had occurred on January 1, 2020. The proforma results were calculated by combining the results of Trinseo with the PMMA business, but do not include adjustments related to cost savings or other synergies that are anticipated as a result of the Acquisition. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations would have been if the Acquisition had occurred as of January 1, ~~2018. The Company has completed its scoping assessment for the adoption~~2020, nor are they indicative of ~~this guidance by conducting surveys with relevant stakeholders in the business, including commercial~~future results of operations.

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	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Net sales	$	1,324.7	$	676.0	$	2,474.4	$	1,580.7
Net income (loss)	$	162.4	$	(126.2)	$	250.6	$	(177.9)
Income (loss) from continuing operations	$	143.8	$	28.0	$	226.3	$	(56.8)

Net sales and finance leadership, reviewing a representative sample of revenue arrangements across all businesses, and identifying a set of applicable qualitative revenue recognition changes related to the new standard update. In completing this phase, the Company has identified its major revenue streams, which are concentrated within individual product sales within each of our reportable segments. As a result of this work, the Company has concluded that it will adopt this new guidance applying the modified retrospective approach. The Company remains in the process of establishing and documenting key accounting policies, assessing new disclosure requirements, and evaluating impacts on business processes, information technology, and controls resulting from the adoption of this new standard. Additionally, while our final assessment has not been completed, we continue to progress in the quantificationnet loss of the ~~impacts that this standard will have on our consolidated financial statements~~PMMA business between the May 3, 2021 acquisition date and June 30, 2021 were $107.4 million and $3.8 million, respectively, and are ~~refining certain estimates that will be used in order to calculate such impacts.~~

~~In July 2015,~~recognized within the FASB issued guidance which simplifies the subsequent measurement of inventory by replacing the lower of cost or market test with a lower of cost or net realizable value (“NRV”) test. NRV is calculated as the estimated selling price less reasonably predictable costs of completion, disposal and transportation. The Company adopted this guidance effective January 1, 2017, and the adoption did not have a material impact to the Company’s financial position or results of operations.

~~In February~~ 2016, the FASB issued guidance related to leases that outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new guidance requires lessees to recognize on the consolidated balance sheets lease liabilities and corresponding right-of-use assets for all leases with terms of greater than 12 months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. This new guidance is effective for public companies for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The new guidance must be adopted using a modified retrospective transition, and provides for certain practical expedients. The Company is in the process of assessing the impact on its consolidated financial

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statements from the adoption of the new guidance. However, as we are the lessee under various real estate, railcar, and other equipment leases, which we currently account for as operating leases, we anticipate an increase in the recognition of right-of-use assets and lease liabilities as a result of this adoption.

~~In August 2016, the FASB issued guidance that aims to eliminate diversity in practice for how certain cash receipts and payments are presented and classified in the~~Company's condensed consolidated statements of ~~cash flows. Additionally,~~operations for the ~~FASB has issued further guidance related~~three and six months ended June 30, 2021.

Transaction-related costs

Pursuant to GAAP, costs incurred to complete the ~~presentation of restricted cash on the consolidated statements of cash flows.~~Acquisition as well as costs incurred to integrate into our operations are expensed as incurred. The Company ~~adopted this guidance effective September~~incurred $18.2 million and $19.8 million of transaction-related costs for the three and six months ended June 30, ~~2017.~~2021, respectively. The ~~most significant impact of this adoption to the Company~~amount was ~~the requirement to classify debt prepayment or extinguishment costs, which the Company had historically classified~~recorded within ~~cash flows from operating activities, as financing cash outflows. This change is reflected~~“Selling, general and administrative expenses” in the Company’s condensed consolidated ~~statement~~statements of operations, and are reflected in the six months ended June 30, 2020 in the supplemental pro forma information above.

In connection with the Acquisition, the Company entered into certain customary transitional services agreements with Arkema to provide for the orderly separation and transition of various functions and processes. These services will be provided by Arkema to the Company for up to 18 months after closing, with certain extension options available. These services include information technology, accounting and finance, procurement, supply chain, and other services, while we assume the operations of the PMMA business.

Additionally, the Company paid Arkema $10.6 million for certain information technology separation costs in order to support the transition services agreements entered into at the time of close. These payments have not been included as a component of consideration transferred, and instead have been capitalized as prepaid assets within “Other current assets” on the condensed consolidated balance sheets. The cost will be recognized as expense over the period in which the services are expected to be rendered under the transition services agreements.

Subsequent Event – Announced Agreement to Acquire Aristech Surfaces

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

NOTE 4—DIVESTITURES AND DISCONTINUED OPERATIONS

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

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classified as discontinued operations in the condensed consolidated statements of operations and statements of cash flows for all periods presented, in accordance with the ~~nine~~guidance in ASC 205-20, Discontinued Operations.

The following table summarizes the assets and liabilities classified as held-for-sale at June 30, 2021 and December 31, 2020:


	June 30,		December 31,
	2021		2020
Assets
Current assets
Accounts receivable, net of allowance	$	85.7	$	59.7
Inventories and other current assets		89.2		60.6
Total current assets		174.9		120.3
Property, plant and equipment, net		154.6		170.3
Other assets
Goodwill		11.7		12.1
Other intangible assets, net		17.9		20.2
Deferred charges and other assets		23.9		25.6
Total other assets		53.5		57.9
Total assets held-for-sale ⁽¹⁾	$	383.0	$	348.5
Liabilities
Current liabilities
Accounts payable		33.7		29.5
Accrued expenses and other current liabilities		10.3		12.7
Total current liabilities		44.0		42.2
Noncurrent liabilities
Other noncurrent obligations		42.4		42.3
Total noncurrent liabilities		42.4		42.3
Total liabilities held-for-sale ⁽¹⁾	$	86.4	$	84.5

(1)

All balance sheet amounts as of June 30, 2021 have been classified as current within the condensed consolidated balance sheets, as the sale is expected to occur within one year of the balance sheet date.

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The following table summarizes the results of the Synthetic Rubber business for the three and six months ended ~~September~~June 30, ~~2017, including~~2021 and 2020, which are reflected as discontinued operations in the ~~impacts~~Company’s condensed consolidated statements of operations:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Net sales	$	135.7	$	36.4	$	259.9	$	138.1
Cost of sales		108.2		66.9		219.3		156.5
Gross profit (loss)		27.5		(30.5)		40.6		(18.4)
Selling, general and administrative expenses		5.6		5.4		11.8		10.3
Impairment charges		—		—		—		28.0
Operating income (loss)		21.9		(35.9)		28.8		(56.7)
Other expense, net		0.8		0.6		1.0		0.8
Income (loss) from discontinued operations before income taxes		21.1		(36.5)		27.8		(57.5)
Provision for income taxes		2.5		117.7		3.5		63.6
Net income (loss) from discontinued operations	$	18.6	$	(154.2)	$	24.3	$	(121.1)

Amounts for operating net sales and costs of sales which had previously been eliminated in consolidation related to intercompany sales of styrene monomer to the Synthetic Rubber business are now reflected on a gross basis as a component of net sales and costs of sales from continuing operations for all periods presented. The Company has recast these amounts because upon completion of the ~~Company’s debt refinancing during~~sale of the ~~third quarter of 2017 (refer~~Synthetic Rubber business, the Company will continue to have these ongoing transactions with Synthos, under a supply agreement executed in conjunction with the divestiture. Refer to Note 5 for recast segment net sales reflecting this adjustment.

Additionally, the Company previously allocated certain corporate management overhead costs to the former Synthetic Rubber segment which may no longer be allocated to discontinued operations under the relevant authoritative accounting guidance. Accordingly, the Company has recast its segment reporting results to reflect the reattribution of these expenses in all periods presented. Refer to Note 16 for recast segment results reflecting this adjustment.

NOTE 5—NET SALES

Refer to the Annual Report for information on the Company's accounting policies and further ~~information). While this adoption was applied using~~background related to its net sales.

The following table provides disclosure of net sales to external customers by primary geographical market (based on the ~~retrospective approach, there were no transactions during~~location where sales originated), by segment for the ~~nine~~three and six months ended ~~September~~June 30, ~~2016 that required~~2021 and 2020. Prior period balances in this table have been recast to reflect current period presentation, as described in Notes 1 and 4, including updates for the ~~condensed consolidated statement of cash flows for that period to be recast.~~

In January 2017, the FASB issued guidance that revises the definition of a business in order to assist in determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the new guidance, fewer transactions are expected to be accounted for as business combinations. The Company adopted this guidance effective January 1, 2017. We expect this adoption could affect conclusions reached for future transactions in several areas, including acquisitions and disposals.

~~In January 2017, the FASB issued guidance to simplify the accounting for goodwill impairment by removing Step 2~~classification of the test, which requires a hypothetical purchase price allocation. As a result, a goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The Company adopted this guidance effective January 1, 2017, which did not have a material impact toCompany’s former Synthetic Rubber segment as discontinued operations and the Company’s ~~financial position or results~~prior year resegmentation.

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	Latex		Engineered		Base
Three Months Ended	Binders		Materials		Plastics		Polystyrene		Feedstocks		Total
June 30, 2021
United States	$	74.1	$	60.9	$	71.6	$	—	$	3.3	$	209.9
Europe		160.5		80.3		253.8		199.8		68.0		762.4
Asia-Pacific		74.3		37.8		51.9		113.5		—		277.5
Rest of World		2.3		2.0		19.6		—		—		23.9
Total	$	311.2	$	181.0	$	396.9	$	313.3	$	71.3	$	1,273.7
June 30, 2020
United States	$	50.9	$	7.4	$	30.0	$	—	$	1.3	$	89.6
Europe		72.3		8.7		89.1		95.1		21.6		286.8
Asia-Pacific		40.4		21.3		26.8		60.7		1.7		150.9
Rest of World		1.3		0.1		5.6		—		—		7.0
Total	$	164.9	$	37.5	$	151.5	$	155.8	$	24.6	$	534.3

In March 2017, the FASB issued guidance that requires employers to present the service cost component of net periodic benefit cost in the same statement of operations line item as other employee compensation costs arising from services rendered during the period. The other components of net periodic benefit cost are to be presented outside of any subtotal of operating income. This presentation amendment is relevant to the Company and will be applied on a retrospective basis. This guidance is effective for fiscal years and interim periods beginning after December 15, 2017, and early adoption is permitted. Placeholder


	Latex		Engineered		Base
Six Months Ended	Binders		Materials		Plastics		Polystyrene		Feedstocks		Total
June 30, 2021
United States	$	141.9	$	71.1	$	134.2	$	—	$	6.7	$	353.9
Europe		278.1		101.4		451.7		349.0		138.1		1,318.3
Asia-Pacific		138.1		72.1		100.6		231.1		—		541.9
Rest of World		4.1		2.2		39.3		—		—		45.6
Total	$	562.2	$	246.8	$	725.8	$	580.1	$	144.8	$	2,259.7
June 30, 2020
United States	$	113.1	$	17.4	$	90.7	$	—	$	3.9	$	225.1
Europe		174.2		23.6		239.2		204.9		61.8		703.7
Asia-Pacific		92.8		44.2		53.6		133.7		14.8		339.1
Rest of World		3.9		0.1		25.4		—		—		29.4
Total	$	384.0	$	85.3	$	408.9	$	338.6	$	80.5	$	1,297.3

NOTE 6—INVESTMENTS IN UNCONSOLIDATED AFFILIATES

The Company is currently ~~assessing the impact of adopting this guidance on its results of operations.~~

In August 2017, the FASB issued significant amendments to existing hedge accounting guidance. Among other things, this guidance will make more financial and nonfinancial hedging strategies eligible for hedge accounting, amend presentation and disclosure requirements, and change how companies assess effectiveness. This guidance is required for public companies for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The Company is currently assessing the timing and related impact of adopting this guidance on its financial position and results of operations.

~~NOTE 3—INVESTMENTS IN UNCONSOLIDATED AFFILIATES~~

~~During the nine months ended September 30, 2017, the Company had two~~supplemented by 1 joint ~~ventures~~:venture, Americas Styrenics LLC (“Americas ~~Styrenics”,~~Styrenics,” a styrene and polystyrene joint venture with Chevron Phillips Chemical Company LP) ~~and Sumika Styron Polycarbonate Limited (“Sumika Styron Polycarbonate”~~, ~~a polycarbonate joint venture with Sumitomo Chemical Company Limited). Investments held in the unconsolidated affiliates are~~which is accounted for byusing the equity method. The results of Americas Styrenics are included within its own reporting segment, and the results of Sumika Styron Polycarbonate were included within the Basic Plastics reporting segment until the Company sold its 50% share of the entity in January 2017. Refer to the discussion below for further information about the sale of the Company’s share in Sumika Styron Polycarbonate during the first quarter of 2017.segment.

~~Both of the unconsolidated affiliates are~~Americas Styrenics is a privately held ~~companies;~~company; therefore, a quoted market ~~prices~~price for ~~their stock are~~its equity interests is not available. The summarized financial information of the Company’s unconsolidated ~~affiliates~~affiliate is shown below. ~~This table includes summarized financial information for Sumika Styron Polycarbonate through the date of sale in January 2017.~~


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Sales	$	495.6	$	225.4	$	918.5	$	547.5
Gross profit	$	74.5	$	31.3	$	139.9	$	38.4
Net income	$	63.6	$	20.1	$	114.6	$	11.8

~~Three Months Ended~~

~~Nine Months Ended~~

~~September 30,~~

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2017

2016

2017

2016

Sales

$
458,744

$
460,305

$
1,369,572

$
1,241,908

Gross profit

$
90,594

$
84,095

$
176,352

$
240,366

Net income

$
81,059

$
65,041

$
141,508

$
188,853

~~Americas Styrenics~~

As of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016, respectively,~~2020, the Company’s investment in Americas Styrenics was ~~$161.9~~$253.2 million and ~~$149.7~~$240.1 million, respectively, which was ~~$49.1~~$12.0 million and ~~$71.2~~$16.3 million ~~less~~greater than the Company’s 50% share of the underlying net assets of Americas Styrenics,. respectively. This amount represents the difference between the book value of assets contributed to the joint venture at the time of formation (May 1, 2008) and the Company’s 50% share of the total recorded value of the joint venture’s assets and certain adjustments to conform with the Company’s accounting policies. This difference is being amortized over athe weighted average remaining useful life of the contributed assets of

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approximately ~~3.1~~2.8 years as of ~~September~~June 30, ~~2017.~~2021. The Company received dividends ~~from~~ ~~Americas Styrenics~~of ~~$35.0~~$25.0 million and ~~$80.0~~$40.0 million from Americas Styrenics during the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, respectively, ~~compared to $40.0 million and $100.0 million~~while 0 dividends were received during the three and ~~nine~~six months ended ~~September~~June 30, ~~2016, respectively.~~2020.

~~Sumika Styron Polycarbonate~~

On January 31, 2017, the Company completed the sale of its 50% share in Sumika Styron Polycarbonate to Sumitomo Chemical Company Limited for total sales proceeds of approximately $42.1 million. As a result, the Company recorded a gain on sale of $9.3 million during the nine months ended September 30, 2017, which was included within “Other expense (income), net” in the condensed consolidated statement of operations and was allocated entirely to the Basic Plastics segment. In addition, the parties have entered into a long-term agreement to continue sourcing polycarbonate resin from Sumika Styron Polycarbonate to the Company’s Performance Plastics segment.

As of December 31, 2016, the Company’s investment in Sumika Styron Polycarbonate was $41.8 million. Due to the sale in January 2017, the Company no longer has an investment in Sumika Styron Polycarbonate as of September 30, 2017. The Company received dividends from Sumika Styron Polycarbonate of zero and $9.8 million during the three and nine months ended September 30, 2017, respectively, compared to zero and $6.2 million during the three and nine months ended September 30, 2016, respectively. The dividend received during the nine months ended September 30, 2017 from Sumika Styron Polycarbonate related to the Company’s proportionate share of earnings for the year ended December 31, 2016.

NOTE 4—7—INVENTORIES

Inventories consisted of the following:

September 30,

December 31,


2017

2016

Finished goods

$
239,663

$
187,577

Raw materials and semi-finished goods

211,186

168,804

Supplies

32,309

28,964

Total

$
483,158

$
385,345


	June 30,		December 31,
	2021		2020
Finished goods	$	262.3	$	132.9
Raw materials and semi-finished goods		262.8		161.7
Supplies		37.8		29.5
Total	$	562.9	$	324.1

NOTE 5—8—DEBT

Refer to ~~discussion below~~the Annual Report for ~~details of the Company’s debt refinancing that occurred during the third quarter of 2017. For~~ definitions of capitalized terms not included herein ~~refer to~~and further background on the ~~Annual Report.~~Company’s debt structure discussed below. The Company was in compliance with all debt related covenants as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016.~~

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2020.

As of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016,~~2020, debt consisted of the following:

September 30, 2017

Interest Rate as of September 30, 2017

Maturity
Date

Carrying
Amount

Unamortized
Deferred
Financing
Fees(1)

Total Debt,
Less
Unamortized
Deferred
Financing
Fees

Senior Credit Facility



2022 Revolving Facility(2)

Various

September 2022

$
—

$
—

$
—

2024 Term Loan B(3)

3.735%

September 2024

700,000

(18,957)

681,043

2025 Senior Notes

5.375%

September 2025

500,000

(9,600)

490,400

Accounts Receivable Securitization Facility(4)

Various

May 2019

—

—

—

Other indebtedness

Various

Various

1,481

—

1,481

Total debt

$
1,201,481

$
(28,557)

$
1,172,924

Less: current portion

(7,000)

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

$
1,165,924

December 31, 2016

Interest Rate as of December 31, 2016

Maturity
Date

Carrying
Amount

Unamortized
Deferred
Financing
Fees(1)

Total Debt,
Less
Unamortized
Deferred
Financing
Fees

2020 Senior Credit Facility



2020 Revolving Facility

Various

May 2020

$
—

$
—

$
—

2021 Term Loan B

4.250%

November 2021

491,545

(9,159)

482,386

2022 Senior Notes

USD Notes

6.750%

May 2022

300,000

(5,726)

294,274

Euro Notes

6.375%

May 2022

394,275

(7,157)

387,118

Accounts Receivable Securitization Facility

Various

May 2019

—

—

—

Other indebtedness

Various

Various

1,591

—

1,591

Total debt

$
1,187,411

$
(22,042)

$
1,165,369

Less: current portion

(5,000)

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

$
1,160,369

~~(1)~~

This caption does not include deferred financing fees related to the Company’s revolving facilities, which are included within “Deferred charges and other assets” on the condensed consolidated balance sheets.

~~(2)~~

The Company had $357.2 million (net of $17.8 million outstanding letters of credit) of funds available for borrowing under this facility as of September 30, 2017. Additionally, the Company is required to pay a quarterly commitment fee in respect of any unused commitments under this facility equal to 0.375% per annum.

~~(3)~~

The 2024 Term Loan B bears an interest rate of LIBOR plus 2.50%, subject to a 0.00% LIBOR floor. As of September 30, 2017, $7.0 million of the scheduled future payments related to this facility were classified as current debt on the Company’s condensed consolidated balance sheet.

~~(4)~~

This facility has a borrowing capacity of $200.0 million. As of September 30, 2017, the Company had approximately $148.8 million of accounts receivable available to support this facility, based on the pool of eligible accounts receivable. In regards to outstanding borrowings, fixed interest charges are 2.6% plus variable commercial paper rates, while for available, but undrawn commitments, fixed interest charges are 1.4%.

~~2020 Senior Credit Facility~~

On May 5, 2015, the Company entered into a credit agreement which included $825.0 million of senior secured financing (the “2020 Senior Credit Facility”), inclusive of a $325.0 million revolving credit facility maturing in May 2020 (the “2020 Revolving Facility”) and a $500.0 million senior secured term loan B facility maturing in November 2021 (the “2021 Term Loan B”).

In September 2017, upon completion of the refinancing transactions discussed below, the Company terminated the 2020 Senior Credit Facility. Prior to this termination, the Company had no outstanding borrowings under the 2020 Revolving Facility and had $490.0 million outstanding under the 2021 Term Loan B, excluding unamortized original

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issue discount. As a result of this termination, the Company recognized a $0.8 million loss on extinguishment of long-term debt, comprised entirely of the write-off of a portion of the existing unamortized deferred financing fees and unamortized original issue discount related to the 2021 Term Loan B. The remaining unamortized deferred financing fees and unamortized original issue discount for both the 2020 Revolving Facility and 2021 Term Loan B remain capitalized and will be amortized along with new deferred financing fees over the life of the new facilities, discussed in further detail below.


				June 30, 2021						December 31, 2020
		Interest Rate as of June 30, 2021	Maturity Date	Carrying Amount		Unamortized Deferred Financing Fees ⁽¹⁾		Total Debt, Less Unamortized Deferred Financing Fees		Carrying Amount		Unamortized Deferred Financing Fees ⁽¹⁾		Total Debt, Less Unamortized Deferred Financing Fees
Senior Credit Facility	On September 6, 2017, Trinseo Materials Operating S.C.A. and Trinseo Materials Finance, Inc. (together, the “Borrowers” or “Issuers”), both wholly-owned subsidiaries of the Company, entered into a senior secured credit agreement (the “Credit Agreement”), which provides senior secured financing of up to $1,075.0 million (the “Senior Credit Facility”). The Senior Credit Facility provides for senior secured financing consisting of a (i) $375.0 million revolving credit facility, with a $25.0 million swingline subfacility and a $35.0 million letter of credit subfacility maturing in September 2022 (the “2022 Revolving Facility”) and a (ii) $700.0 million senior secured term loan B facility maturing in September 2024 (the “2024 Term Loan B”). Amounts under the 2022 Revolving Facility are available in U.S. dollars and euros.	~~The~~
2024 Term Loan B ~~bears an interest rate of LIBOR plus 2.50%, subject to a 0.00% LIBOR floor. Further, the~~		2.104%	September 2024	$	673.9	$	(9.5)	$	664.4	$	677.3	$	(10.8)	$	666.5
2028 Term Loan B ~~requires scheduled quarterly payments in amounts equal to 0.25% of the original principal amount of the 2024 Term Loan B, with the balance to be paid at maturity.~~	~~Loans under the 2022~~	2.604%	May 2028		746.3		(18.3)		728.0		—		—		—
2026 Revolving Facility at the Borrowers’ option, may be maintained as (a) LIBO rate loans, which bear interest at a rate per annum equal to the LIBO rate plus the applicable margin (as defined in the Credit Agreement), if applicable, or (b) base rate loans which shall bear interest at a rate per annum equal to the base rate plus the applicable margin (as defined in the Credit Agreement).⁽²⁾	~~The~~	Various	May 2026		—		—		—		—		—		—
2029 Senior ~~Credit~~Notes		5.125%	April 2029		450.0		(15.5)		434.5		—		—		—
2025 Senior Notes		5.375%	September 2025		500.0		(5.6)		494.4		500.0		(6.2)		493.8
Accounts Receivable Securitization Facility is collateralized by a security interest in substantially all of the assets of the Borrowers, and the guarantors thereunder, including Trinseo Materials S.à r.l., certain Luxembourg subsidiaries and certain foreign subsidiaries organized in the United States, The Netherlands, Hong Kong, Singapore, Ireland, Germany and Switzerland.⁽³⁾	The Senior Credit Facility requires the Borrowers and their restricted subsidiaries to comply with customary affirmative, negative and financial covenants, including limitations on their abilities to incur liens; make certain loans and investments; incur additional debt (including guarantees or other contingent obligations); merge, consolidate liquidate or dissolve; transfer or sell assets; pay dividends and other distributions to shareholders or make certain other restricted payments; enter into transactions with affiliates; restrict any restricted subsidiary from paying dividends or making other distributions or agree to certain negative pledge clauses; materially alter the business we conduct; prepay certain other indebtedness; amend certain material documents; and change our fiscal year.	The 2022 Revolving Facility contains a financial covenant that requires compliance with a springing first lien net leverage ratio test. If the outstanding balance under the 2022 Revolving Facility exceeds 30% of the $375.0 million borrowing capacity (excluding undrawn letters of credit up to $10.0 million and cash collateralized letters of credit) at a quarter end, then the Borrowers’ first lien net leverage ratio may not exceed 2.00 to 1.00. As of Various	September ~~30, 2017, the Company was in compliance with all~~2021		0		0		0		0		0		0
Other indebtedness		Various	Various		7.9		—		7.9		10.0		—		10.0
Total debt ~~covenant requirements under the Senior Credit Facility.~~	~~Fees incurred in connection with the issuance of the 2024 Term Loan B were $12.3 million. Due to a~~			$	2,378.1	$	(48.9)	$	2,329.2	$	1,187.3	$	(17.0)	$	1,170.3
Less: current portion of the 2024 Term Loan B meeting the criteria for modification accounting, $1.2 million of these fees were expensed and included within “Other expense (income), net” in the condensed consolidated statement of operations for the three and nine months ended September 30, 2017. The remaining $11.1 million of fees were capitalized and recorded within “Long-term⁽⁴⁾									(19.1)						(12.2)
Total long-term debt, net of unamortized deferred financing ~~fees” on the condensed consolidated balance sheet, to be amortized along with the remaining $8.1 million of unamortized~~fees								$	2,310.1					$	1,158.1

(1)

This caption does not include deferred financing ~~fees from the 2021 Term Loan B. Capitalized~~ fees related to the ~~2024 Term Loan B~~Company’s revolving facilities, which are ~~being amortized over the 7.0 year term of the facility using the effective interest method.~~

~~Fees incurred in connection with the issuance of the 2022 Revolving Facility were $0.8 million and were capitalized and recorded~~included within “Deferred charges and other assets” inon the condensed consolidated balance sheets. ~~The new capitalized fees~~

(2)

On May 3, 2021, in conjunction with the Acquisition, the Company extended its Revolving Facility (previously the “2022 Revolving Facility,” now the “2026 Revolving Facility”), originally maturing in September 2022, to May 2026, as described further below. As of June 30, 2021, under the 2026 Revolving Facility, the Company had a capacity of $375.0 million and funds available for borrowing of $360.4 million (net of $14.6 million outstanding letters of credit). Additionally, the Company is required to pay a quarterly commitment fee in respect of any unused commitments under this facility equal to 0.375% per annum.

(3)

As of June 30, 2021, this facility had a borrowing capacity of $150.0 million, and the Company had approximately $150.0 million of accounts receivable available to support this facility, based on the pool of eligible accounts receivable. In regard to outstanding borrowings, fixed interest charges are 1.95% plus variable commercial paper rates, while for available, but undrawn commitments, fixed interest charges are 1.00%.

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(4)

As of June 30, 2021, the current portion of long-term debt was primarily related to ~~the 2022 Revolving Facility (along with $4.0~~$14.5 million of ~~unamortized deferred financing fees from~~ the 2020 Revolving Facility) are being amortized over the 5.0 year term of the facility using the straight-line method. Amortization of deferred financing fees are recorded within “Interest expense, net” in the condensed consolidated statements of operations.

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~~2022 Senior Notes~~

~~In May 2015, the Company issued $300.0 million aggregate~~scheduled future principal amount of 6.750% senior notes due May 1, 2022 (the “USD Notes”) and €375.0 million aggregate principal amount of 6.375% senior notes due May 1, 2022 (the “Euro Notes”, and together with the USD Notes, the “2022 Senior Notes”).

~~On September 7, 2017, using the net proceeds from the issuance of~~payments on both the 2024 Term Loan B ~~together with~~and 2028 Term Loan B. As of December 31, 2020, the net proceeds from the issuance of the 2025 Senior Notes (defined and discussed below), and available cash, the Company redeemed all outstanding borrowings under the 2022 Senior Notes, totaling $746.0 million in USD-equivalent principal, together with a total combined call premium of $53.0 million (with a redemption price of approximately 106.572% on the USD Notes and a redemption price of approximately 107.459% on the Euro Notes), and accrued and unpaid interest thereon of $17.0 million, using applicable foreign exchange rates.

~~As a result of this redemption, during the three months ended September 30, 2017, the Company recorded a loss on extinguishment~~current portion of long-term debt ~~of $64.5 million, which includes the above $53.0 million call premium and an $11.5 million write-off of unamortized deferred financing fees~~was primarily related to ~~the 2022 Senior Notes.~~

~~2025 Senior Notes~~

~~On August 29, 2017, the Issuers executed an indenture pursuant to which they issued $500.0~~$7.0 million ~~aggregate principal amount of 5.375% senior notes due 2025 (the “2025 Senior Notes”) in a 144A private transaction exempt from the registration requirements~~ of the ~~Securities Act of 1933, as amended. Interest~~scheduled future principal payments on the ~~2025 Senior Notes is payable semi-annually on May 3 and November 3 of each year, commencing on May 3, 2018. The 2025 Senior Notes mature on September 1, 2025.~~

At any time prior to September 1, 2020, the Issuers may redeem the 2025 Senior Notes in whole or in part, at their option, at a redemption price equal to 100% of the principal amount of such notes plus the relevant applicable premium as of, and accrued and unpaid interest to, but not including, the redemption date. At any time and from time to time after September 1, 2020, the Issuers may redeem the 2025 Senior Notes, in whole or in part, at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interest, if any, on the notes redeemed to, but not including, the redemption date:

12-month period commencing September 1 in Year

Percentage

2020

102.688
%
2021

101.792
%
2022

100.896
%
2023 and thereafter

100.000
%

At any time prior to September 1, 2020, the Issuers may redeem up to 40% of the aggregate principal amount of the 2025 Senior Notes at a redemption price equal to 105.375%, plus accrued and unpaid interest to, but not including, the redemption date, with the aggregate gross proceeds from certain equity offerings.

The 2025 Senior Notes are the Issuers’ senior unsecured obligations and rank equally in right of payment with all of the Issuers’ existing and future indebtedness that is not expressly subordinated in right of payment thereto. The 2025 Senior Notes will be senior in right of payment to any future indebtedness that is expressly subordinated in right of payment thereto and effectively junior to (a) the Issuers’ existing and future secured indebtedness, including the Company’s accounts receivable facility and the Issuers’ Senior Credit Facility (discussed above), to the extent of the value of the collateral securing such indebtedness and (b) all existing and future liabilities of the Issuers’ non-guarantor subsidiaries.

The Indenture contains customary covenants that, among other things, limit the Issuers’ and certain of their subsidiaries’ ability to incur additional indebtedness and guarantee indebtedness; pay dividends on, redeem or repurchase capital stock; make investments; prepay certain indebtedness; create liens; enter into transactions with the Issuers’ affiliates; designate the Issuers’ subsidiaries as Unrestricted Subsidiaries (as defined in the Indenture); and consolidate, merge, or transfer all or substantially all of the Issuers’ assets. The covenants are subject to a number of exceptions and qualifications. Certain of these covenants will be suspended during any period of time that (1) the 2025 Senior Notes have investment grade ratings (as defined in the Indenture) and (2) no default has occurred and is continuing under the Indenture. In the event that the 2025 Senior Notes are downgraded to below an investment grade rating, the Issuers and certain subsidiaries will again be subject to the suspended covenants with respect to future events. As of September 30, 2017, the Company was in compliance with all debt covenant requirements under the Indenture.

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~~Fees and expenses incurred in connection with the issuance of the 2025 Senior Notes were $9.7~~2024 Term Loan B.

2029 Senior Notes

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

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


12-month period commencing April 1 in Year	Percentage
2024	102.563	%
2025	101.281	%
2026 and thereafter	100.000	%

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

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

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

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

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

Senior Credit Facility

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

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

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

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

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

NOTE 9—GOODWILL

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


	Latex		Engineered		Base						Americas
	Binders		Materials		Plastics		Polystyrene		Feedstocks		Styrenics		Total
Balance at December 31, 2020	$	17.1	$	16.0	$	24.2	$	4.8	$	—	$	—	$	62.1
Acquisitions (Note 3)		—		567.7		—		—		—		—		567.7
Foreign currency impact		(0.6)		(4.8)		(0.8)		(0.1)		—		—		(6.3)
Balance at June 30, 2021	$	16.5	$	578.9	$	23.4	$	4.7	$	—	$	—	$	623.5

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NOTE 10—DERIVATIVE INSTRUMENTS

The Company’s ongoing business operations expose it to various risks, including fluctuating foreign exchange rates and interest rate risk. To manage these risks, the Company periodically enters into derivative financial instruments, such as foreign exchange forward contracts and interest rate swap agreements. The Company does not hold or enter into financial instruments for trading or speculative purposes. All derivatives are recorded on the condensed consolidated balance sheets at fair value.

Foreign Exchange Forward Contracts

Certain subsidiaries have assets and liabilities denominated in currencies other than their respective functional currencies, which creates foreign exchange risk. The Company’s principal strategy in managing its exposure to changes in foreign currency exchange rates is to naturally hedge the foreign currency-denominated liabilities on its balance sheet against corresponding assets of the same currency, such that any changes in liabilities due to fluctuations in exchange rates are offset by changes in their corresponding foreign currency assets. In order to further reduce this exposure, the Company also uses foreign exchange forward contracts to economically hedge the impact of the variability in exchange rates on assets and liabilities denominated in certain foreign currencies. The Company entered into a specific such foreign exchange forward contract in December 2020 in order to economically hedge the euro-denominated purchase price of the Arkema PMMA business, which was acquired on May 3, 2021, as discussed in Note 3. These derivative contracts are not designated for hedge accounting treatment.

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. The following table displays the notional amounts of the most significant net foreign exchange hedge positions outstanding as of June 30, 2021:


	June 30,
Buy / (Sell)	2021
Euro	$	(1,046.0)
Chinese Yuan	$	(50.9)
Swiss Franc	$	31.1
Mexican Peso	$	(15.3)
New Taiwan Dollar	$	12.2

Open foreign exchange forward contracts as of June 30, 2021 had maturities occurring over a period of two months.

Foreign Exchange Cash Flow Hedges

The Company also enters into forward contracts with the objective of managing the currency risk associated with forecasted U.S. dollar-denominated raw materials purchases by 1 of its subsidiaries whose functional currency is the euro. By entering into these forward contracts, which are designated as cash flow hedges, the Company buys a designated amount of U.S. dollars and sells euros at the prevailing market rate to mitigate the risk associated with the fluctuations in the euro-to-U.S. dollar foreign currency exchange rates. The qualifying hedge contracts are marked-to-market at each reporting date and any unrealized gains or losses are included in Accumulated Other Comprehensive Income (“AOCI”) to the extent effective, and reclassified to cost of sales in the period during which the transaction affects earnings or it becomes probable that the forecasted transaction will not occur.

Open foreign exchange cash flow hedges as of June 30, 2021 had maturities occurring over a period of six months, and had a net notional U.S. dollar equivalent of $48.0 million.

Interest Rate Swaps

On September 6, 2017, the Company issued the 2024 Term Loan B, which currently bears an interest rate of LIBOR plus 2.00%, subject to a 0.00% LIBOR floor. In order to reduce the variability in interest payments associated with the Company’s variable rate debt, during 2017 the Company entered into certain interest rate swap agreements to convert a portion of these variable rate borrowings into a fixed rate obligation. These interest rate swap agreements are designated as cash flow hedges, and as such, the contracts are marked-to-market at each reporting date and any

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unrealized gains or losses are included in AOCI to the extent effective, and reclassified to interest expense in the period during which the transaction affects earnings or it becomes probable that the forecasted transaction will not occur.

As of June 30, 2021, the Company had open interest rate swap agreements with a net notional U.S. dollar equivalent of $200.0 million which had an effective date of September 29, 2017 and mature in September 2022. Under the terms of the swap agreements, the Company is required to pay the counterparties a stream of fixed interest payments at a rate of 1.81%, and in turn, receives variable interest payments based on 1-month LIBOR (0.10% as of June 30, 2021) from the counterparties.

Net Investment Hedge

The Company accounts for its cross currency swaps (“CCS”) under the spot method, meaning that changes in the fair value of the hedge included in the assessment of effectiveness (changes due to spot foreign exchange rates) are recorded within AOCI, where they remain until either the sale or substantially complete liquidation of the subsidiary subject to the hedge. Additionally, the initial value of any component excluded from the assessment of effectiveness is recognized in income using a systematic and rational method over the life of the hedging instrument and any difference between the change in the fair value of the excluded component and amounts recognized in income under that systematic and rational method is recognized in AOCI. The Company amortizes any initial excluded component value of a CCS as a reduction of “Interest expense, net” in the condensed consolidated statements of operations using the straight-line method over the remaining term of the related CCS. Additionally, interest receipts and payments are accrued under the terms of the Company’s CCS and are recognized within “Interest expense, net” in the condensed consolidated statements of operations.

The Company entered into a CCS arrangement (the “2017 CCS”) on September 1, 2017, swapping U.S. dollar principal and interest payments of $500.0 million at an interest rate of 5.375% on its 2025 Senior Notes for euro-denominated payments of €420.0 million at a weighted average interest rate of 3.45% for approximately five years. The 2017 CCS was initially designated under the forward method and then redesignated under the spot method effective April 1, 2018. At the time of redesignation, the 2017 CCS had a cumulative foreign currency translation loss in AOCI of $38.0 million. The excluded component value related to the 2017 CCS at April 1, 2018 was $23.6 million, which was being amortized over its remaining term. On February 26, 2020, the Company settled its 2017 CCS and replaced it with a new CCS arrangement (the “2020 CCS”) that carried substantially the same terms as the 2017 CCS. Upon settlement of the 2017 CCS, the Company realized net cash proceeds of $51.6 million. The remaining $13.8 million unamortized balance of the initial excluded component related to the 2017 CCS at the time of settlement will remain in AOCI until either the sale or substantially complete liquidation of the relevant subsidiaries. Under the 2020 CCS, the Company notionally exchanged $500.0 million at an interest rate of 5.375% for €459.3 million at a weighted average interest rate of 3.672% for approximately 2.7 years, with a final maturity of November 3, 2022. The cash flows under the 2020 CCS are aligned with the Company’s principal and interest obligations on its 5.375% 2025 Senior Notes.

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Table of Contents

Summary of Derivative Instruments

The following table presents the effect of the Company’s derivative instruments, including those not designated for hedge accounting treatment, on the condensed consolidated statements of operations for the three and six months ended June 30, 2021 and 2020:


	Location and Amount of Gain (Loss) Recognized in Statements of Operations
	Three Months Ended								Three Months Ended
	June 30, 2021								June 30, 2020
	Cost of sales		Interest expense, net		Acquisition purchase price hedge gain (loss)		Other expense, net		Cost of sales		Interest expense, net		Acquisition purchase price hedge gain (loss)		Other expense, net
Total amount of income and (expense) line items presented in the statements of operations in which the effects of derivative instruments are recorded	$	(1,053.7)	$	(21.6)	$	33.0	$	(5.6)	$	(510.9)	$	(11.7)	$	—	$	(0.4)

The effects of cash flow hedge instruments:
Foreign exchange cash flow hedges
Amount of gain reclassified from AOCI into income	$	—	$	—	$	—	$	—	$	0.5	$	—	$	—	$	—
Interest rate swaps
Amount of loss reclassified from AOCI into income	$	—	$	(0.9)	$	—	$	—	$	—	$	(0.7)	$	—	$	—

The effects of net investment hedge instruments:
Cross currency swaps (CCS)
Amount of gain excluded from effectiveness testing	$	—	$	1.7	$	—	$	—	$	—	$	2.0	$	—	$	—

The effects of derivatives not designated as hedge instruments:
Foreign exchange forward contracts
Amount of gain (loss) recognized in income ⁽¹⁾	$	—	$	—	$	33.0	$	0.4	$	—	$	—	$	—	$	(8.1)

21

Table of Contents


	Location and Amount of Gain (Loss) Recognized in Statements of Operations
	Six Months Ended								Six Months Ended
	June 30, 2021								June 30, 2020
	Cost of sales		Interest expense, net		Acquisition purchase price hedge gain (loss)		Other expense, net		Cost of sales		Interest expense, net		Acquisition purchase price hedge gain (loss)		Other expense, net
Total amount of income and (expense) line items presented in the statements of operations in which the effects of derivative instruments are recorded	$	(1,850.8)	$	(33.6)	$	(22.0)	$	(8.0)	$	(1,216.2)	$	(22.0)	$	—	$	(1.7)

Effects of cash flow hedge instruments:
Foreign exchange cash flow hedges
Amount of gain (loss) reclassified from AOCI into income	$	(0.3)	$	—	$	—	$	—	$	0.6	$	—	$	—	$	—
Interest rate swaps
Amount of loss reclassified from AOCI into income	$	—	$	(1.7)	$	—	$	—	$	—	$	(0.7)	$	—	$	—

Effects of net investment hedge instruments:
Cross currency swaps
Amount of gain excluded from effectiveness testing ⁽²⁾	$	—	$	3.6	$	—	$	—	$	—	$	5.4	$	—	$	—

Effects of derivatives not designated as hedge instruments:
Foreign exchange forward contracts
Amount of gain (loss) recognized in income ⁽¹⁾	$	—	$	—	$	(22.0)	$	20.1	$	—	$	—	$	—	$	5.7

(1)

The $33.0 million gain and $22.0 million loss incurred from the change in fair value of the forward currency hedge arrangement on the euro-denominated purchase price of the Arkema PMMA business during the three and six months ended June 30, 2021, respectively, is presented separately in the condensed consolidated statements of operations ~~over their 8.0 year term using~~from the ~~effective interest method.~~

~~NOTE 6—GOODWILL AND INTANGIBLE ASSETS~~

~~Goodwill~~

~~The following table shows changes in the carrying amount of goodwill by segment from December 31, 2016 to September 30, 2017:~~

Performance Materials

Basic Plastics & Feedstocks

Latex

Synthetic

Performance

Basic

Americas


Binders

Rubber

Plastics

Plastics

Feedstocks

Styrenics

Total

Balance at December 31, 2016

$
11,544

$
8,177

$
4,210

$
5,554

$
—

$
—

$
29,485

Acquisition (Note 13)

—

—

28,598

—

—

—

28,598

Foreign currency impact

1,415

1,002

1,592

682

—

—

4,691

Balance at September 30, 2017

$
12,959

$
9,179

$
34,400

$
6,236

$
—

$
—

$
62,774

~~Other Intangible Assets~~

~~The following table provides information regarding~~gains recorded on the Company’s other ~~intangible assets as of September 30, 2017 and December 31, 2016, respectively:~~

September 30, 2017

December 31, 2016

Estimated

Gross

Gross

Useful Life

Carrying

Accumulated

Carrying

Accumulated


(Years)

Amount

Amortization

Net

Amount

Amortization

Net

Developed technology(1)

9 - 15

$
198,535

$
(91,078)

$
107,457

$
166,230

$
(72,159)

$
94,071

Customer Relationships(1)

19

14,520

(171)

14,349

—

—

—

Manufacturing Capacity Rights

6

22,426

(12,728)

9,698

19,977

(8,908)

11,069

Software

5 - 10

87,412

(22,617)

64,795

82,275

(15,095)

67,180

Software in development

N/A

8,617

—

8,617

4,751

—

4,751

Other(1)

3

3,056

(153)

2,903

274

—

274

Total

$
334,566

$
(126,747)

$
207,819

$
273,507

$
(96,162)

$
177,345

~~(1)~~

~~Balances as of September 30, 2017 include assets acquired related to the acquisition of API Applicazioni Plastiche Industriali S.p.A (“API Plastics”). Refer to Note 13 for further information.~~

foreign exchange forward contracts.

~~Amortization expense on other intangible assets totaled $7.2 million and $19.6 million~~
(2) Amounts for the three and ~~nine~~six months ended ~~September~~June 30, 2020 represents both the 2017 ~~respectively,~~CCS through its settlement on February 26, 2020 and ~~$5.0~~the 2020 CCS from when it was entered into on February 26, 2020 through June 30, 2020.

The following table presents the effect of cash flow and net investment hedge accounting on AOCI for the three and six months ended June 30, 2021 and 2020:


`	Gain (Loss) Recognized in AOCI on Balance Sheet
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Designated as Cash Flow Hedges
Foreign exchange cash flow hedges	$	(1.0)	$	(1.2)	$	2.7	$	0.9
Interest rate swaps		0.8		(0.1)		1.7		(5.9)
Total	$	(0.2)	$	(1.3)	$	4.4	$	(5.0)
Designated as Net Investment Hedges
Cross currency swaps (CCS) ⁽¹⁾	$	(7.1)	$	(10.3)	$	19.1	$	12.6
Total	$	(7.1)	$	(10.3)	$	19.1	$	12.6

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Table of Contents

(1)

Amount for the six months ended June 30, 2020 represents both the 2017 CCS through its settlement on February 26, 2020 and the 2020 CCS from when it was entered into on February 26, 2020 through June 30, 2021.


	Gain (Loss) Recognized in Other expense, net in Statement of Operations
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Settlements and changes in the fair value of forward contracts (not designated as hedges) ⁽¹⁾	$	0.4	$	(8.1)	$	20.1	$	5.7
Remeasurement of foreign currency-denominated assets and liabilities	$	0.6	$	9.0	$	(19.3)	$	(5.1)
	$	1.0	$	0.9	$	0.8	$	0.6

(1)

Amounts do not include the gains of $33.0 million and ~~$15.2~~losses of $22.0 million ~~for~~recorded from the change in fair value of the forward currency hedge arrangement on the euro-denominated purchase price of the Arkema PMMA business during the three and ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2021, respectively.

The Company expects to reclassify in the next twelve months an approximate $2.9 million net loss from AOCI into earnings related to the Company’s outstanding foreign exchange cash flow hedges and interest rate swaps as of June 30, 2021 based on current foreign exchange rates.

The following tables summarize the gross and net unrealized gains and losses, as well as the balance sheet classification, of outstanding derivatives recorded in the condensed consolidated balance sheets:


	June 30, 2021
	Foreign		Foreign
	Exchange		Exchange		Interest		Cross
Balance Sheet	Forward		Cash Flow		Rate		Currency
Classification	Contracts		Hedges		Swaps		Swaps		Total
Asset Derivatives:
Accounts receivable, net of allowance	$	25.4	$	0.5	$	—	$	5.6	$	31.5
Deferred charges and other assets		—		—		—		—		—
Gross derivative asset position		25.4		0.5		—		5.6		31.5
Less: Counterparty netting		(0.9)		—		—		—		(0.9)
Net derivative asset position	$	24.5	$	0.5	$	—	$	5.6	$	30.6
Liability Derivatives:
Accounts payable	$	(1.3)	$	—	$	(3.4)	$	—	$	(4.7)
Other noncurrent obligations		—		—		(0.8)		(48.1)		(48.9)
Gross derivative liability position		(1.3)		—		(4.2)		(48.1)		(53.6)
Less: Counterparty netting		0.9		—		—		—		0.9
Net derivative liability position	$	(0.4)	$	—	$	(4.2)	$	(48.1)	$	(52.7)
Total net derivative position	$	24.1	$	0.5	$	(4.2)	$	(42.5)	$	(22.1)

23

Table of Contents


	December 31, 2020
	Foreign		Foreign
	Exchange		Exchange		Interest		Cross
Balance Sheet	Forward		Cash Flow		Rate		Currency
Classification	Contracts		Hedges		Swaps		Swaps		Total
Asset Derivatives:
Accounts receivable, net of allowance ⁽¹⁾	$	8.2	$	—	$	—	$	5.0	$	13.2
Deferred charges and other assets		—		—		—		—		—
Gross derivative asset position		8.2		—		—		5.0		13.2
Less: Counterparty netting		(6.5)		—		—		—		(6.5)
Net derivative asset position	$	1.7	$	—	$	—	$	5.0	$	6.7
Liability Derivatives:
Accounts payable ⁽¹⁾	$	(8.3)	$	(2.1)	$	(3.4)	$	—	$	(13.8)
Other noncurrent obligations		—		—		(2.5)		(66.5)		(69.0)
Gross derivative liability position		(8.3)		(2.1)		(5.9)		(66.5)		(82.8)
Less: Counterparty netting		6.5		—		—		—		6.5
Net derivative liability position	$	(1.8)	$	(2.1)	$	(5.9)	$	(66.5)	$	(76.3)
Total net derivative position	$	(0.1)	$	(2.1)	$	(5.9)	$	(61.5)	$	(69.6)

15

~~Table of Contents~~

In addition to the significant accounting policies disclosed in Note 2 in our Annual Report, Basis of Presentation and Summary of Significant Accounting Policies, the Company notes the following significant accounting policies related to certain definite-lived intangible assets, for which we had substantial activity during the quarter ended September 30, 2017 as a result of the API Plastics acquisition.

~~Developed Technology~~

Acquired developed technology is recorded at fair value upon acquisition and is amortized using the straight-line method over the estimated useful life ranging from 9 years to 15 years. We determine amortization periods for developed technology based on our assessment of various factors impacting estimated useful lives and timing and extent of estimated cash flows of the acquired assets. This includes estimates of expected period of future economic benefit and competitive advantage related to existing processes and procedures at the date of acquisition. Significant changes to any of these factors may result in a reduction in the useful life of these assets.

~~Customer Relationships~~

Customer relationships are recorded at fair value upon acquisition and are amortized using the straight-line method over the estimated useful life of 19 years. We determine amortization periods for customer relationships based on our assessment of various factors impacting estimated useful lives and timing and extent of estimated cash flows of the acquired assets. This includes estimates of expected period of future economic benefit and customer retention rates. Significant changes to any of these factors may result in a reduction in the useful life of these assets.

~~NOTE 7—DERIVATIVE INSTRUMENTS~~

The Company’s ongoing business operations expose it to various risks, including fluctuating foreign exchange rates and interest rate risk. To manage these risks, the Company periodically enters into derivative financial instruments, such as foreign exchange forward contracts and interest rate swap agreements. The Company does not hold or enter into financial instruments for trading or speculative purposes. All derivatives are recorded on the condensed consolidated balance sheets at fair value.

~~Foreign Exchange Forward Contracts~~

Certain subsidiaries have assets and liabilities denominated in currencies other than their respective functional currencies, which creates foreign exchange risk. The Company’s principal strategy in managing its exposure to changes in foreign currency exchange rates is to naturally hedge the foreign currency-denominated liabilities on our balance sheet against corresponding assets of the same currency such that any changes in liabilities due to fluctuations in exchange rates are offset by changes in their corresponding foreign currency assets. In order to further reduce its exposure, the Company also uses foreign exchange forward contracts to economically hedge the impact of the variability in exchange rates on our assets and liabilities denominated in certain foreign currencies. These derivative contracts are not designated for hedge accounting treatment.

As of September 30, 2017, the Company had open foreign exchange forward contracts with a notional U.S. dollar equivalent absolute value of $327.9 million. The following table displays the notional amounts of the most significant net foreign exchange hedge positions outstanding
(1) Balance as of ~~September 30, 2017.~~

September 30,

Buy / (Sell)

2017

Euro

$
(161,885)

Chinese Yuan

$
(58,335)

Indonesian Rupiah

$
(29,493)

Swiss Franc

$
16,762

Korean Won

$
(10,983)

~~Foreign Exchange Cash Flow Hedges~~
The Company also enters into forward contracts with the objective of managing the currency risk associated with forecasted U.S. dollar-denominated raw materials purchases by one of its subsidiaries whose functional currency is the euro. By entering into these forward contracts, which are designated as cash flow hedges, the Company buysDecember 31, 2020 includes a ~~designated amount of U.S. dollars and sells euros at the prevailing market rate to mitigate the risk associated with the~~
16
~~Table of Contents~~
fluctuations in the euro-to-U.S. dollar foreign currency exchange rates. The qualifying hedge contracts are marked-to-market at each reporting date and any unrealized gains or losses are included in accumulated other comprehensive income/loss (“AOCI”) to the extent effective, and reclassified to cost of sales in the period during which the transaction affects earnings or it becomes probable that the forecasted transaction will not occur.
~~Open foreign exchange cash flow hedges as of September 30, 2017 have maturities occurring over a period~~ ~~of 15 months, and have a net notional U.S. dollar equivalent of $196.5 million.~~
~~Interest Rate Swaps~~
As discussed in Note 5, on September 6, 2017, the Company issued the 2024 Term Loan B, which bears an interest rate of LIBOR plus 2.50%, subject to a 0.00% LIBOR floor. In order to reduce the variability in interest payments associated with the Company’s variable rate debt, during the third quarter of 2017, the Company entered into certain interest rate swap agreements to convert a portion of these variable rate borrowings into a fixed rate obligation. These interest rate swap agreements are designated as cash flow hedges, and as such, the contracts are marked-to-market at each reporting date and any unrealized gains or losses are included in AOCI to the extent effective, and reclassified to interest expense in the period during which the transaction affects earnings or it becomes probable that the forecasted transaction will not occur.
~~As of September 30, 2017, the Company had open interest rate swap agreements with a net notional U.S. dollar equivalent of $200.0~~$7.3 million ~~which had an effective date of September 29, 2017 and mature over a period of five years.~~
~~Net Investment Hedge~~
~~Through August 31, 2017, the Company had designated a portion (€280 million)~~ ~~of the original principal amount of the Company’s previous~~ ~~€375.0 million Euro Notes~~ as a hedge of the foreign currency exposure of the Issuers’ net investment in certain European subsidiaries. Effective September 1, 2017, the Company de-designated the Euro Notes as a net investment hedge of the Issuers’ net investment in certain European subsidiaries, as the Euro Notes were redeemed on September 7, 2017 (refer to Note 5 for further information). Through the date of de-designation, this hedge was deemed to be highly effective, and changes in the ~~Euro Notes’~~ ~~carrying value resulting from fluctuations in the euro exchange rate were recorded as cumulative foreign currency translation loss of $24.1 million within AOCI as of September 30, 2017.~~
On August 29, 2017, the Issuers executed an indenture pursuant to which they issued the $500.0 million 5.375% 2025 Senior Notes (refer to Note 5 for further information). Subsequently, on September 1, 2017, the Company entered into certain fixed-for-fixed cross currency swaps (“CCS”), swapping USD principal and interest payments on the newly issued 2025 Senior Notes for euro-denominated payments. Under the terms of the CCS, the Company has notionally exchanged $500.0 million at an interest rate of 5.375% for €420 million at a weighted-average interest rate of 3.45% for approximately five years.
~~Effective September 1, 2017, the Company designated the full notional amount of the CCS (€420 million) as a hedge of the Issuers’ net investment in certain European subsidiaries. As~~ ~~the CCS were deemed to be highly effective hedges, changes in~~receivable representing the fair value of the ~~CCS were recorded as cumulative foreign~~forward currency ~~translation loss of $7.1 million within AOCI as of September 30, 2017.~~
17
~~Table of Contents~~
~~Summary of Derivative Instruments~~
~~Information regarding changes in~~hedge arrangement on the ~~fair value~~euro-denominated purchase price of the ~~Company’s derivative instruments, net of tax, including those not designated for hedge accounting treatment, is as follows:~~

Gain (Loss) Recognized in

Gain (Loss) Recognized in

AOCI on Balance Sheet

Statement of Operations

Three Months Ended September 30,

Statement of Operations

2017

2016

2017

2016

Classification
Designated as Cash Flow Hedges

Foreign exchange cash flow hedges

$
(4,458)

$
(2,280)

$
(2,666)

$
245

Cost of sales
Interest rate swaps

743

—

(6)

—

Interest expense, net
Total

$
(3,715)

$
(2,280)

$
(2,672)

$
245

Net Investment Hedges

Euro Notes

$
(13,924)

$
(2,128)

$
—

$
—

Cross-currency swaps (CCS)

(7,112)

—

—

—

Total

$
(21,036)

$
(2,128)

$
—

$
—

Not Designated as Cash Flow Hedges

Foreign exchange forward contracts

$
—

$
—

$
(6,526)

$
1,060

Other expense (income), net
Total

$
—

$
—

$
(6,526)

$
1,060

Gain (Loss) Recognized in

Gain (Loss) Recognized in

AOCI on Balance Sheet

Statement of Operations

Nine Months Ended September 30,

Statement of Operations

2017

2016

2017

2016

Classification
Designated as Cash Flow Hedges

Foreign exchange cash flow hedges

$
(22,234)

$
(3,676)

$
794

$
616

Cost of sales
Interest rate swaps

743

—

(6)

—

Interest expense, net
Total

$
(21,491)

$
(3,676)

$
788

$
616

Net Investment Hedges

Euro Notes

$
(38,584)

$
(4,615)

$
—

$
—

Cross-currency swaps (CCS)

(7,112)

—

—

—

Total

$
(45,696)

$
(4,615)

$
—

$
—

Not Designated as Cash Flow Hedges

Foreign exchange forward contracts

$
—

$
—

$
(17,036)

$
2,054

Other expense (income), net
Total

$
—

$
—

$
(17,036)

$
2,054

~~The Company recorded losses of $6.5 million and~~ $17.0 million during the three and nine months ended September 30, 2017, respectively, and gains of $1.1 million and $2.1 million during the three and nine months ended September 30, 2016, respectively, ~~from settlements and changes in the fair value of outstanding forward contracts (not designated as hedges)~~. The gains and losses from these forward contracts offset net foreign exchange transaction gains of $8.2 million and $16.1 million during the three and nine months ended September 30, 2017, respectively, and losses of $1.5 million and $4.1 million during the three and nine months ended September 30, 2016, respectively, which resulted from the remeasurement of the Company’s foreign currency denominated assets and liabilities. The cash settlements of these foreign exchange forward contracts are included within operating activities in the condensed consolidated statement of cash flows.
As of September 30, 2017, the Company had no ineffectiveness related to its derivatives designated as hedging instruments. Further, the Company expects to reclassify in the next twelve months an approximate $10.3 million net loss from AOCI into earnings related to the Company’s outstanding foreign exchange cash flow hedges and interest rate swaps as of September 30, 2017 based on current foreign exchange rates.
18
~~Table of Contents~~
~~The following table summarizes the net unrealized gains and losses and balance sheet classification of outstanding derivatives recorded in the condensed consolidated balance sheets:~~

September 30, 2017

December 31, 2016

Foreign
Exchange

Foreign
Exchange

Interest

Cross-

Foreign
Exchange

Foreign
Exchange

Forward

Cash Flow

Rate

Currency

Forward

Cash Flow

Balance Sheet Classification

Contracts

Hedges

Swaps

Swaps

Total

Contracts

Hedges

Total

Asset Derivatives:

Accounts receivable, net of allowance

$
3,368

$
—

$
—

$
6,420

$
9,788

$
1,664

$
11,018

$
12,682

Deferred charges and other assets

—

—

1,432

—

1,432

—

—

—

Total asset derivatives

$
3,368

$
—

$
1,432

$
6,420

$
11,220

$
1,664

$
11,018

$
12,682

Liability Derivatives:

Accounts payable

$
117

$
9,612

$
688

$
—

$
10,417

$
511

$
—

$
511

Other noncurrent obligations

—

2,148

—

13,531

15,679

—

—

—

Total liability derivatives

$
117

$
11,760

$
688

$
13,531

$
26,096

$
511

$
—

$
511

Forward contracts, interest rate swaps, and cross currency swaps are entered into with a limited number of counterparties, each of which allows for net settlement of all contracts through a single payment in a single currency in the event of a default on or termination of any one contract. As such, in accordance with the Company’s accounting policy, we record these derivative instruments on a net basis by counterparty within the condensed consolidated balance sheet. ~~Information regarding the gross amounts of the Company’s derivative instruments and the amounts offset in the condensed consolidated balance sheets is as follows:~~

Gross Amounts

Gross Amounts

Net Amounts

Recognized in the

Offset in the

Presented in the


Balance Sheet

Balance Sheet

Balance Sheet

Balance at September 30, 2017

Derivative assets

$
12,793

$
(1,573)

$
11,220

Derivative liabilities

27,669

(1,573)

26,096

Balance at December 31, 2016

Derivative assets

$
23,401

$
(10,719)

$
12,682

Derivative liabilities

11,230

(10,719)

511

~~Refer to Notes 8 and 16 of the condensed consolidated financial statements for further information regarding the fair value of the Company’s derivative instruments and the related changes in AOCI~~.
~~NOTE 8—FAIR VALUE MEASUREMENTS~~
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date.
~~Level 1—Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.~~
Level 2—Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
~~Level 3—Valuation is based upon other unobservable inputs that are significant to the fair value measurement.~~
19
~~Table of Contents~~
~~The following table summarizes the basis used to measure certain assets and liabilities at fair value on a recurring basis in the condensed consolidated balance~~ ~~sheets as of September 30, 2017 and December 31, 2016.~~

September 30, 2017

Quoted Prices in Active Markets for Identical Items

Significant Other Observable Inputs

Significant Unobservable Inputs

Assets (Liabilities) at Fair Value

(Level 1)

(Level 2)

(Level 3)

Total

Foreign exchange forward contracts—Assets

$
—

$
3,368

$
—

$
3,368

Foreign exchange forward contracts—(Liabilities)

—

(117)

—

(117)

Foreign exchange cash flow hedges—(Liabilities)

—

(11,760)

—

(11,760)

Interest rate swaps—Assets

—

1,432

—

1,432

Interest rate swaps—(Liabilities)

—

(688)

—

(688)

Cross-currency swaps—Assets

—

6,420

—

6,420

Cross-currency swaps—(Liabilities)

—

(13,531)

—

(13,531)

Total fair value

$
—

$
(14,876)

$
—

$
(14,876)

December 31, 2016

Quoted Prices in Active Markets for Identical Items

Significant Other Observable Inputs

Significant Unobservable Inputs

Assets (Liabilities) at Fair Value

(Level 1)

(Level 2)

(Level 3)

Total

Foreign exchange forward contracts—Assets

$
—

$
1,664

$
—

$
1,664

Foreign exchange forward contracts—(Liabilities)

—

(511)

—

(511)

Foreign exchange cash flow hedges—Assets


—


11,018

—

11,018

Total fair value

$
—

$
12,171

$
—

$
12,171

The Company uses an income approach to value its derivative instruments, utilizing discounted cash flow techniques, considering the terms of the contract and observable market information available as of the reporting date, such as interest rate yield curves and currency spot and forward rates. Significant inputs to the valuation for these derivative instruments are obtained from broker quotations or from listed or over-the-counter market data, and are classified as Level 2 in the fair value hierarchy.
~~Fair Value of Debt Instruments~~
~~The following table presents the estimated fair value of the Company’s outstanding debt not carried at fair value as of September 30, 2017 and December 31, 2016, respectively:~~


As of

As of


September 30, 2017

December 31, 2016

2025 Senior Notes

$
515,625

$
—

2022 Senior Notes

USD Notes

—

315,000

Euro Notes

—

424,437

2024 Term Loan B

707,441

—

2021 Term Loan B

—

498,041

Total fair value

$
1,223,066

$
1,237,478

~~The fair value of the Company’s debt facilities above (each Level 2 securities) is determined using over-the-counter market quotes and benchmark yields received from independent vendors.~~
~~There were no other significant financial instruments outstanding as of September 30, 2017 and December 31, 2016.~~
20
~~Table of Contents~~
~~NOTE 9—PROVISION FOR INCOME TAXES~~

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016

Effective income tax rate

20.0
%

19.2
%

21.1
%

21.7
%

Provision for income taxes for the three and nine months ended September 30, 2017 were $8.3 million, resulting in an effective tax rate of 20.0%, and $56.4 million, resulting in an effective tax rate of 21.1%, respectively. Provision for income taxes for the three and nine months ended September 30, 2016 were $16.0 million, resulting in an effective tax rate of 19.2%, and $66.5 million, resulting in an effective tax rate of 21.7%, respectively.
~~While the effective tax rate for the three and nine months ended September 30, 2017 and 2016 remained relatively consistent, the rate was impacted by non-recurring items in both periods.~~
The effective tax rate for the three and nine months ended September 30, 2017 was impacted by payments made of $10.9 million related to a portion of the fees associated with the call premium paid to retire the Company’s 2022 Senior Notes, which are not anticipated to provide a tax benefit to the Company in the future (refer to Note 5 for further information). The effective tax rate for the three and nine months ended September 30, 2016 was impacted by an impairment charge of $0.3 million and $13.2 million, respectively, for the estimated loss on sale of Trinseo Brazil. Refer to Note 13 for further information.
~~NOTE 10—COMMITMENTS AND CONTINGENCIES~~
~~Environmental Matters~~
Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based on current law, existing technologies and other information. Pursuant to the terms of the agreement associated with the Company’s formation, the pre-closing environmental conditions were retained by Dow and Dow has agreed to indemnify the Company from and against all environmental liabilities incurred or relating to the predecessor periods. No environmental claims have been asserted or threatened against the Company, and the Company is not a potentially responsible party at any Superfund Sites. As of September 30, 2017 and December 31, 2016, the Company had no accrued obligations for environmental remediation and restoration costs.
Inherent uncertainties exist in the Company’s potential environmental liabilities primarily due to unknown conditions, whether future claims may fall outside the scope of the indemnity, changing governmental regulations and legal standards regarding liability, and evolving technologies for handling site remediation and restoration. In connection with the Company’s existing indemnification, the possibility is considered remote that environmental remediation costs will have a material adverse impact on the condensed consolidated financial statements.
~~Purchase Commitments~~
In the normal course of business, the Company has certain raw material purchase contracts where it is required to purchase certain minimum volumes at current market prices. These commitments range from 1 to 5 years. In certain raw material purchase contracts, the Company has the right to purchase less than the required minimums and pay a liquidated damages fee, or, in case of a permanent plant shutdown, to terminate the contracts. In such cases, these obligations would be less than the annual commitment as disclosed in the consolidated financial statements included in the Annual Report.
~~Litigation Matters~~
From time to time, the Company may be subject to various legal claims and proceedings incidental to the normal conduct of business, relating to such matters as product liability, antitrust/competition, past waste disposal practices and release of chemicals into the environment. While it is impossible at this time to determine with certainty the ultimate outcome of these routine claims, the Company does not believe that the ultimate resolution of these claims will have a material adverse effect on the Company’s results of operations, financial condition or cash flow. Legal costs, including those legal costs expected to be incurred in connection with a loss contingency, are expensed as incurred.
21
~~Table of Contents~~
~~NOTE 11—PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS~~Arkema PMMA business.

Forward contracts, interest rate swaps, and cross currency swaps are entered into with a limited number of counterparties, each of which allows for net settlement of all contracts through a single payment in a single currency in the event of a default on or termination of any one contract. As such, in accordance with the Company’s accounting policy, these derivative instruments are recorded on a net basis by counterparty within the condensed consolidated balance sheets.

Refer to Notes 11 and 18 of the condensed consolidated financial statements for further information regarding the fair value of the Company’s derivative instruments and the related changes in AOCI.

NOTE 11—FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date.

Level 1—Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2—Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3—Valuation is based upon other unobservable inputs that are significant to the fair value measurement.

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Table of Contents

The following table summarizes the basis used to measure certain assets and liabilities at fair value on a recurring basis in the condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020:


	June 30, 2021
	Quoted Prices in Active Markets for Identical Items		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets (Liabilities) at Fair Value	(Level 1)		(Level 2)		(Level 3)		Total
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)


	December 31, 2020
	Quoted Prices in Active Markets for Identical Items		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets (Liabilities) at Fair Value	(Level 1)		(Level 2)		(Level 3)		Total
Foreign exchange forward contracts—Assets	$	—	$	1.7	$	—	$	1.7
Foreign exchange forward contracts—(Liabilities)		—		(1.8)		—		(1.8)
Foreign exchange cash flow hedges—(Liabilities)		—		(2.1)		—		(2.1)
Interest rate swaps—(Liabilities)		—		(5.9)		—		(5.9)
Cross currency swaps—Assets		—		5.0		—		5.0
Cross currency swaps—(Liabilities)		—		(66.5)		—		(66.5)
Total fair value	$	—	$	(69.6)	$	—	$	(69.6)

The Company uses an income approach to value its derivative instruments, utilizing discounted cash flow techniques, considering the terms of the contract and observable market information available as of the reporting date, such as interest rate yield curves and currency spot and forward rates. Significant inputs to the valuation for these derivative instruments are obtained from broker quotations or from listed or over-the-counter market data, and are classified as Level 2 in the fair value hierarchy.

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Table of Contents

Nonrecurring Fair Value Measurements

The Company measured certain financial assets at fair value on a nonrecurring basis during the year ended December 31, 2020, which were still held as of June 30, 2021. These financial assets represent the Company’s styrene monomer assets in Boehlen, Germany, which it continues to operate. These assets were measured at fair value using underlying fixed asset records in conjunction with the use of industry experience and available market data, which are classified as Level 3 significant unobservable inputs in the fair value hierarchy. As a result of the fair value measurements performed, the Company recorded impairment charges on the Boehlen styrene monomer assets of $10.3 million during the first quarter of 2020. During the three and six months ended June 30, 2021, the Company recorded additional impairment charges of $1.8 million related to capital expenditures at the Boehlen styrene monomer facility that it determined to be impaired, which are also included within “Impairment charges” on the condensed consolidated statements of operations. Refer to the Company’s Annual Report for further information. As of June 30, 2021 and December 31, 2020, the value of the Boehlen styrene monomer assets are recorded at $3.5 million and $3.7 million, respectively, within the Company’s condensed consolidated balance sheets herein.

The Company’s polybutadiene rubber (“PBR,” specifically nickel and neodymium PBR) assets in Schkopau, Germany, which were mothballed in 2020, had also been measured on a nonrecurring basis during the year ended December 31, 2020, resulting in impairment charges of $28.0 million being recorded during the first quarter of 2020. However, as the Schkopau PBR assets are part of the Synthetic Rubber business, during the second quarter of 2021 they were classified as held-for-sale and their operating results were classified as discontinued operations for all periods presented, along with the rest of the Synthetic Rubber business. Refer to Note 4 for further information.

There were no other financial assets or liabilities measured at fair value on a nonrecurring basis as December 31, 2020.

Fair Value of Debt Instruments

The following table presents the estimated fair value of the Company’s outstanding debt not carried at fair value as of June 30, 2021 and December 31, 2020:


	As of		As of
	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

The fair value of the Company’s debt facilities above (each Level 2 securities) is determined using over-the-counter market quotes and benchmark yields received from independent vendors.

There were no other significant financial instruments outstanding as of June 30, 2021 and December 31, 2020.

NOTE 12—PROVISION FOR INCOME TAXES


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2021			2020			2021			2020
Effective income tax rate		14.9	%		195.0	%		17.9	%		19.8	%

Provision for income taxes for the three and six months ended June 30, 2021 totaled $23.3 million and $43.4 million, respectively, resulting in an effective tax rate of 14.9% and 17.9%, respectively. Benefit from income taxes for the three and six months ended June 30, 2020 totaled $53.0 million and $10.8 million, respectively, resulting in an effective tax rate of 195.0% and 19.8%, respectively.

The effective income tax rate for the three months ended June 30, 2020 was primarily driven by the change in the Company’s forecasted jurisdictional mix of earnings from first quarter 2020 estimates. The second quarter 2020 forecast

26

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anticipated a greater amount of income from continuing operations to be generated in lower rate jurisdictions than was previously estimated, resulting in a significant increase to the second quarter 2020 effective tax rate. Also impacting the rate for the three and six months ended June 30, 2020 was a tax benefit related to the impairment charges recorded during the period related to the Company’s assets in Boehlen, Germany. Refer to Note 9 in the condensed consolidated financial statements for further information.

NOTE 13—COMMITMENTS AND CONTINGENCIES

Environmental Matters

Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on current law, existing technologies and other information. Pursuant to the terms of the agreement associated with the Company’s formation, the pre-closing environmental liabilities were retained by Dow, and Dow agreed, subject to temporal, monetary, and other limitations to indemnify the Company from and against environmental liabilities incurred or relating to the predecessor periods. Other than certain immaterial environmental liabilities assumed as part of the Acquisition, no environmental claims have been asserted or threatened against the Company, and the Company is not a potentially responsible party at any Superfund Sites. As of June 30, 2021 the Company had $5.0 million of accrued obligations for environmental remediation or restoration costs, which were recorded at fair value within the opening balance sheet of the acquired PMMA business during the second quarter 2021. The Company had no accrued obligations for environmental remediation or restoration costs as of December 31, 2020.

Inherent uncertainties exist in the Company’s potential environmental liabilities primarily due to unknown conditions, whether future claims may fall outside the scope of the indemnity, changing governmental regulations and legal standards regarding liability, and evolving technologies for handling site remediation and restoration. In connection with the Company’s existing indemnification, the possibility is considered remote that environmental remediation costs will have a material adverse impact on the condensed consolidated financial statements over the next 12 months.

Purchase Commitments

In the normal course of business, the Company has certain raw material purchase contracts where it is required to purchase certain minimum volumes at current market prices. These commitments range from one to seven years. In certain raw material purchase contracts, the Company has the right to purchase less than the required minimums and pay a liquidated damages fee, or, in case of a permanent plant shutdown, to terminate the contracts. In such cases, these obligations would be less than the annual commitment as disclosed in the Notes to Consolidated Financial Statements included in the Annual Report.

Litigation Matters

From time to time, the Company may be subject to various legal claims and proceedings incidental to the normal conduct of business, relating to such matters as employees, product liability, antitrust/competition, past waste disposal practices and release of chemicals into the environment. While it is impossible at this time to determine with certainty the ultimate outcome of these routine claims, the Company does not believe that the ultimate resolution of these claims will have a material adverse effect on the Company’s results of operations, financial condition or cash flow. Legal costs, including those legal costs expected to be incurred in connection with a loss contingency, are expensed as incurred.

European Commission Request for Information

On June 6, 2018, Trinseo Europe GmbH, a subsidiary of the Company, received a Request for Information in the form of a letter from the European Commission Directorate General for Competition (the “European Commission”) related to styrene monomer commercial activity in the European Economic Area. The Company subsequently commenced an internal investigation into these commercial activities and discovered instances of inappropriate activity.

On October 28, 2019, a supplemental request for information was received from the European Commission. This request was limited to historical employment, entity, and organizational structures, along with certain financial, styrene purchasing, and styrene market information, as well as certain spot styrene purchase contracts. The Company has provided this information and continues to fully cooperate with the European Commission.

The proceedings with the European Commission continue and its outcome remains open. Based on its findings, the

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Table of Contents

European Commission may decide to: (i) require further information; (ii) conduct unannounced raids of the Company’s premises; (iii) adopt a decision imposing fines, and/or request certain behavioral or structural commitments from the Company; or (iv) in view of defense arguments by the Company close the proceedings. As a result of the above factors, the Company is unable to predict the ultimate outcome of this matter or estimate the range of reasonably possible losses that could be incurred. However, any potential losses incurred could be material to the Company’s results of operations, balance sheet, and cash flows for the period in which they are resolved or become probable and reasonably estimable.

NOTE 14—PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

The components of net periodic benefit costs for all significant plans were as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Defined Benefit Pension Plans ⁽¹⁾
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

(1)

All amounts represent components of net periodic benefit ~~costs for all significant plans were as follows:~~costs.

The Company had less than $0.1 million of net periodic benefit costs for its other postretirement plans for the three and six months ended June 30, 2021 and 2020.

Service cost related to the Company’s defined benefit pension plans and other postretirement plans is included within “Cost of sales” and “Selling, general and administrative expenses,” whereas all other components of net periodic benefit cost are included within “Other expense, net” in the condensed consolidated statements of operations. As of June 30, 2021 and December 31, 2020, the Company’s benefit obligations included primarily in “Other noncurrent obligations” in the condensed consolidated balance sheets were $307.6 million and $294.4 million, respectively.

The Company made cash contributions and benefit payments to unfunded plans of approximately $2.0 million and $3.6 million during the three and six months ended June 30, 2021, respectively. The Company expects to make additional cash contributions, including benefit payments to unfunded plans, of approximately $2.9 million to its defined benefit plans for the remainder of 2021.

NOTE 15—SHARE-BASED COMPENSATION

Refer to the Annual Report for definitions of capitalized terms not included herein and further background on the Company’s share-based compensation programs included in the tables below.

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Table of Contents

The following table summarizes the Company’s share-based compensation expense for the three and six months ended June 30, 2021 and 2020, as well as unrecognized compensation cost as of June 30, 2021:


									As of
	Three Months Ended				Six Months Ended				June 30, 2021
	June 30,				June 30,				Unrecognized		Weighted
	2021		2020		2021		2020		Compensation Cost		Average Years
RSUs	$	1.9	$	1.7	$	3.6	$	3.3	$	13.9	2.0
Options		1.1		0.8		2.2		1.8		4.7	1.5
PSUs		0.7		0.5		1.2		1.0		4.4	2.1
Total share-based compensation expense	$	3.7	$	3.0	$	7.0	$	6.1

The following table summarizes awards granted and the respective weighted average grant date fair value for the six months ended June 30, 2021:


	Six Months Ended
	June 30, 2021
	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

Option Awards

The following are the weighted average assumptions used within the Black-Scholes pricing model for the Company’s option awards granted during the six months ended June 30, 2021:

Six Months Ended

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016

Defined Benefit Pension Plans


Service cost

$
5,000

$
4,156

$
14,291

$
12,438

Interest cost

1,184

1,391

3,376

4,160

Expected return on plan assets

(450)

(492)

(1,285)

(1,474)

Amortization of prior service credit

(503)

(488)

(1,456)

(1,459)

Amortization of net loss

1,479

1,058

4,232

3,169

Net settlement and curtailment loss(1)

—

—

129

—

Net periodic benefit cost

$
6,710

$
5,625

$
19,287

$
16,834

June 30, 2021

Expected term (in years)

5.50

Expected volatility

48.72

%

Risk-free interest rate

0.75

%

Dividend yield

1.78

%

The expected volatility assumption is determined based on the historical volatility of the Company’s publicly traded ordinary shares. The expected term of option awards represents the period of time that option awards granted are expected to be outstanding. For the option awards granted during the six months ended June 30, 2021, the simplified method was used to calculate the expected term, given the Company’s limited historical exercise data. The risk-free interest rate for the periods within the expected term of option awards is based on the U.S. Treasury yield curve in effect at the time of grant. The dividend yield is estimated based on historical and expected dividend activity.

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Table of Contents

Performance Share Units (PSUs)

The following are the weighted average assumptions used within the Monte Carlo valuation model for PSUs granted during the six months ended June 30, 2021:


		Six Months Ended
		June 30, 2021
Expected term (in years)		3.00
Expected volatility		58.00	%
Risk-free interest rate		0.20	%
Share price	$	61.06

Determining the fair value of PSUs requires considerable judgment, including estimating the expected volatility of the price of the Company’s ordinary shares, the correlation between the Company’s share price and that of its peer companies, and the expected rate of interest. The expected volatility for each grant is determined based on the historical volatility of the Company’s ordinary shares. The expected term of PSUs represents the length of the performance period. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for a duration equivalent to the performance period. The share price is the closing price of the Company’s ordinary shares on the grant date.

NOTE 16—SEGMENTS

Beginning in the second quarter of 2021, the Company reported the results of the Synthetic Rubber business as discontinued operations in the condensed consolidated statements of operations for all periods presented, and therefore it is no longer presented as a separate reportable segment. Refer to Note 4 for further information. Additionally, as discussed in the Annual Report, the Company realigned its reporting segments effective October 1, 2020, as a result of which the Company’s former Performance Plastics segment was reorganized into 2 standalone reporting segments: Engineered Materials and Base Plastics. There were no changes to the Company’s remaining 4 segments. Refer to the Annual Report for further information on the resegmentation. The information in the tables below has been retroactively adjusted to reflect these changes in reporting segments.

The Latex Binders segment produces styrene-butadiene latex (“SB latex”) and other latex polymers and binders, primarily for coated paper and packaging board, carpet and artificial turf backings, as well as a number of performance latex binders applications, such as adhesive, building and construction and the technical textile paper market. The Engineered Materials segment includes the Company’s compounds and blends products sold into higher growth and value applications, such as consumer electronics and medical, as well as soft thermoplastic elastomers (“TPEs”) products which are sold into markets such as footwear and automotive. Additionally, following the Acquisition on May 3, 2021, the Engineered Materials segment also includes PMMA and MMA products, which are sold into a variety of applications including automotive, building & construction, medical and consumer electronics. The Base Plastics segment contains the results of the acrylonitrile-butadiene-styrene (“ABS”), styrene-acrylonitrile (“SAN”), and polycarbonate (“PC”) businesses, as well as compounds and blends for automotive and other applications. The Polystyrene segment includes a variety of general purpose polystyrenes (“GPPS”) and polystyrene that has been modified with polybutadiene rubber to increase its impact resistant properties (“HIPS”). The Feedstocks segment includes the Company’s production and procurement of styrene monomer outside of North America, which is used as a key raw material in many of the Company’s products, including polystyrene, SB latex, and ABS resins. Lastly, the Americas Styrenics segment consists solely of the operations of the Company’s 50%-owned joint venture, Americas Styrenics, a producer of both styrene monomer and polystyrene in North America.

The following table provides disclosure of the Company’s segment Adjusted EBITDA, which is used to measure segment operating performance and is defined below, for the three and six months ended June 30, 2021 and 2020. Asset and intersegment sales information by reporting segment is not regularly reviewed or included with the Company’s reporting to the chief operating decision maker. Therefore, this information has not been disclosed below. Refer to Note 5 for the Company’s net sales to external customers by segment for the three and six months ended June 30, 2021 and 2020.

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Table of Contents


	Latex		Engineered		Base						Americas
Three Months Ended ⁽¹⁾	Binders		Materials		Plastics		Polystyrene		Feedstocks		Styrenics
June 30, 2021	$	32.2	$	27.8	$	82.0	$	51.1	$	39.8	$	30.1
June 30, 2020	$	16.1	$	4.8	$	(11.7)	$	14.6	$	(3.9)	$	14.4


	Latex		Engineered		Base						Americas
Six Months Ended ⁽¹⁾	Binders		Materials		Plastics		Polystyrene		Feedstocks		Styrenics
June 30, 2021	$	49.0	$	35.8	$	147.5	$	98.4	$	86.1	$	53.0
June 30, 2020	$	36.7	$	12.9	$	15.2	$	26.0	$	(20.8)	$	24.2

(1)

Represents a settlement loss of approximately $0.5 million triggered by benefit payments exceeding the sum of service and interest cost for one of the Company’s pension plans in Switzerland, partially offset by a curtailment gain of approximately $0.4 million related to a reduction in the number of participants in the Company’s pension plan in Japan.

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016

Other Postretirement Plans


Service cost

$
53

$
67

$
161

$
196

Interest cost

63

135

189

385

Amortization of prior service cost

26

25

77

77

Amortization of net gain

(11)

(43)

(32)

(128)

Net periodic benefit cost

$
131

$
184

$
395

$
530

As of September 30, 2017 and December 31, 2016, the Company’s benefit obligations included primarily in “Other noncurrent obligations” in the condensed consolidated balance sheets were $221.6 million and $195.8 million, respectively. The net periodic benefit costs are recognized in the condensed consolidated statement of operations as “Cost of sales” and “Selling, general and administrative expenses.”

The Company made cash contributions and benefit payments to unfunded plans of approximately $1.7 million and $11.9 million during the three and nine months ended September 30, 2017, respectively. The Company expects to make additional cash contributions, including benefit payments to unfunded plans, of approximately $4.0 million to its defined benefit plans for the remainder of 2017.

~~NOTE 12—STOCK-BASED COMPENSATION~~

~~Refer to the Annual Report for definitions of capitalized terms not included herein and further background on the Company’s stock-based compensation programs included in the tables below.~~

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~~Table of Contents~~

The following table summarizes the Company’s stock-based compensation expense for the three and nine months ended September 30, 2017 and 2016, as well as unrecognized compensation cost as of September 30, 2017:

As of

Three Months Ended

Nine Months Ended

September 30, 2017

September 30,

September 30,

Unrecognized

Weighted

2017

2016

2017

2016

Compensation Cost

Average Years

RSUs

$
2,287

$
1,476

$
6,295

$
3,826

$
11,682

1.8

Options

454

733

3,661

4,867

1,659

1.4

PSUs

324

—

796

—

3,062

2.4

Restricted Stock Awards issued by Former Parent

—

3,817

—

6,149

—

—

Total Stock-based Compensation Expense

$
3,065

$
6,026

$
10,752

$
14,842

~~The following table summarizes awards granted and the respective weighted-average grant date fair value for the nine months ended September 30, 2017:~~

Nine Months Ended

September 30, 2017

Awards Granted

Weighted Average Grant Date Fair Value per Award

RSUs

110,767

$
70.85

Options

192,546

20.61

PSUs

50,937

75.74

~~Option Awards~~

~~The following are the weighted-average assumptions used within the Black-Scholes pricing model for the Company’s option awards granted during the nine months ended September 30, 2017:~~


	~~Nine Months Ended~~
	~~September 30,~~
	~~2017~~
~~Expected term (in years)~~	~~5.50~~
~~Expected volatility~~	~~35.00~~	%
~~Risk-free interest rate~~	~~2.19~~	%
~~Dividend yield~~	~~2.00~~	%

Since the Company’s equity interests were privately held prior to its initial public offering (“IPO”) in June 2014, there is limited publicly available trading history of the Company’s ordinary shares. Until such time that the Company can determine expected volatility based solely on the publicly traded history of its ordinary shares, expected volatility used in the Black-Scholes model for option awards granted is based on a combination of the Company’s historical volatility and similar companies’ stock that are publicly traded. The expected term of option awards represents the period of time that option awards granted are expected to be outstanding. For the option awards granted during the nine months ended September 30, 2017, the simplified method was used to calculate the expected term, given the Company’s limited historical exercise data. The risk-free interest rate for the periods within the expected term of option awards is based on the U.S. Treasury yield curve in effect at the time of grant. The dividend yield is estimated based on historical and expected dividend activity.

~~Performance Share Units (PSUs)~~

The Company granted PSUs for the first time during the nine months ended September 30, 2017. The PSUs, which are granted to executives, cliff vest on the third anniversary of the date of grant, generally subject to the executive remaining continuously employed by the Company through the vesting date and achieving certain performance conditions. The number of the PSUs that vest upon completion of the service period can range from 0 to 200 percent of the original grant, subject to certain limitations, contingent upon the Company’s total shareholder return (“TSR”) during the performance period relative to a pre-defined set of industry peer companies. Upon a termination of employment due

23

~~Table of Contents~~

to the executive’s death or retirement, or termination in connection with a change in control or other factors prior to the vesting date, the PSUs will vest in full or in part, depending on the type of termination and the achievement of the performance conditions. Dividend equivalents will accumulate on PSUs during the vesting period, will be paid in cash upon vesting, and do not accrue interest. When PSUs vest, shares will be issued from the existing pool of treasury shares. The fair value for PSU awards is computed using a Monte Carlo valuation model.

~~NOTE 13—ACQUISITIONS AND DIVESTITURES~~

~~Acquisition of API Plastics~~

On July 10, 2017, the Company acquired 100% of the equity interests of API Applicazioni Plastiche Industriali S.p.A, or API Plastics, a privately held company. The gross purchase price for the acquisition was $90.5 million, inclusive of $8.4 million of cash acquired, yielding a net purchase price of $82.1 million. These amounts are subject to certain customary post-closing adjustments. During the nine months ended September 30, 2017, the Company paid $79.7 million for this acquisition, leaving an additional $2.4 million of unpaid purchase price accrued, which is expected to be paid during the fourth quarter of 2017. API Plastics, based in Mussolente, Italy, is a manufacturer of soft-touch polymers and bioplastics, such as thermoplastic elastomers (“TPEs”). TPEs can be molded over rigid plastics such as ABS and PC/ABS, which presents opportunities for complementary technology product offerings within our Performance Plastics segment. The acquisition was funded through existing cash on hand.

The Company allocated the purchase price of the acquisition to identifiable assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The excess of the purchase price over the aggregate fair values was recorded as goodwill. The Company calculated the fair value of the assets acquired using the income and cost approaches (or a combination thereof). Fair values were determined based on Level 3 inputs including estimated future cash flows, discount rates, royalty rates, growth rates, sales projections, retention rates and terminal values, all of which require significant management judgment.

The purchase price allocation is based upon preliminary information and is subject to change if additional information about the facts and circumstances that existed at the acquisition date becomes available. Additional information is being gathered to finalize these preliminary measurements, particularly with respect to property, plant and equipment, intangible assets, inventory, deferred income taxes and income taxes payable. Further adjustments may be necessary as a result of the Company’s on-going assessment of additional information related to the fair value of assets acquired and liabilities assumed, including goodwill, during the measurement period.

24

~~Table of Contents~~

~~The following table summarizes the preliminary fair value measurement of the assets acquired and liabilities assumed as of the date of acquisition:~~

July 10,

2017

Cash and cash equivalents

$
8,431

Accounts receivable

16,484

Inventories

10,282

Other current assets

728

Property, plant, and equipment

24,146

Other intangible assets(1)

Customer relationships

14,000

Developed technology

11,500

Other amortizable intangible assets

2,700

Total fair value of assets acquired

$
88,271

Accounts payable

$
12,219

Income taxes payable

202

Accrued expenses and other current liabilities

1,416

Deferred income tax liabilities—noncurrent

11,262

Other noncurrent obligations

1,277

Total fair value of liabilities assumed

$
26,376

Net identifiable assets acquired

$
61,895

Goodwill(2)

28,598

Net assets acquired

$
90,493

~~(1)~~

~~The expected lives of the acquired intangible assets are 19 years for customer relationships, 9 years for developed technology, and 3 years for other amortizable intangible assets.~~

~~(2)~~

Goodwill consists of expected operating synergies resulting from combining API Plastics with our existing businesses, and is allocated entirely to the Performance Plastics segment. None of the goodwill related to this acquisition will be deductible for income tax purposes.

During the three and nine months ended September 30, 2017, transaction and integration costs related to advisory and professional fees incurred in conjunction with the API Plastics acquisition were $2.4 million and $3.5 million, respectively, and were included within “Selling, general and administrative expenses” in the condensed consolidated statement of operations. Additionally, during the three and nine months ended September 30, 2017, the Company recorded a $1.3 million non-cash fair value inventory adjustment related to the API Plastics acquisition which was included within “Cost of sales” in the condensed consolidated statement of operations.

Pro forma results of operations information has not been presented, as the effect of the API Plastics acquisition is not material. The operating results of API Plastics are included within the Company's condensed consolidated statement of operations since the acquisition date of July 10, 2017 and were not material to the Company's results for the three and nine months ended September 30, 2017.

~~Divestiture of Brazil Business~~

During the second quarter of 2016, the Company signed a definitive agreement to sell Trinseo do Brasil Comercio de Produtos Quimicos Ltda. (“Trinseo Brazil”), its primary operating entity in Brazil, including both a latex binders and automotive business. The sale closed on October 1, 2016.

As a result of this agreement, during the three and nine months ended September 30, 2016, the Company recorded impairment charges for the estimated loss on sale of approximately $0.3 million, and $13.2 million, respectively, within “Other expense (income), net” in the condensed consolidated statement of operations. The $13.2 million charge was allocated as $8.4 million, $4.2 million, and $0.6 million to the Performance Plastics segment, Latex Binders segment, and Corporate, respectively. During the year ended December 31, 2016, the Company received $1.8 million in proceeds

25

~~Table of Contents~~

~~from the sale of these businesses, with an additional $1.7 million received during the nine months ended September 30, 2017.~~

~~NOTE 14—SEGMENTS~~

Effective October 1, 2016, the Company realigned its reporting segments to reflect the new model under which the business is managed and results are reviewed by the chief executive officer, who is the Company’s chief operating decision maker. This change in segments was made to provide increased clarity and understanding around the indicators of profitability and cash flow of the Company. The previous Basic Plastics & Feedstocks segment was split into three new segments: Basic Plastics, which includes polystyrene, copolymers, and polycarbonate; Feedstocks, which represents the Company’s styrene monomer business; and Americas Styrenics, which reflects the equity earnings from its 50%-owned styrenics joint venture. In addition, certain highly differentiated ~~acrylonitrile-butadiene-styrene, or~~ ABS, supplied into Performance Plastics markets, which was previously included in the results of Basic Plastics & Feedstocks, is now included in Performance Plastics. Finally, the Latex segment was renamed to Latex Binders. In conjunction with the segment realignment, the Company also changed its primary measure of segment operating performance from EBITDA to Adjusted EBITDA. Refer to the discussion below for further information about Adjusted EBITDA.

~~The information in the tables below has been retroactively adjusted to reflect the changes in reporting segments and segment operating performance.~~

The Latex Binders segment produces styrene-butadiene latex, or SB latex, and other latex polymers and binders, primarily for coated paper and packaging board, carpet and artificial turf backings, as well as a number of performance latex binders applications, such as adhesive, building and construction and the technical textile paper market. The Synthetic Rubber segment produces synthetic rubber products used predominantly in high-performance tires, impact modifiers and technical rubber products, such as conveyer belts, hoses, seals and gaskets. The Performance Plastics segment produces highly engineered compounds and blends and some specialized ABS grades for automotive end markets, as well as consumer electronics, medical, electrical and lighting, collectively consumer essential markets, or CEM. The Basic Plastics segment produces styrenic polymers, including polystyrene, basic ABS, and styrene-acrylonitrile, or SAN, products, as well as polycarbonate, or PC, all of which are used as inputs in a variety of end use markets. The Basic Plastics segment also included the results of our previously 50%-owned joint venture, Sumika Styron Polycarbonate, until the Company sold its share in the entity in January 2017 (refer to Note 3 for further information). The Feedstocks segment includes the Company’s production and procurement of styrene monomer outside of North America, which is used as a key raw material in many of the Company’s products, including polystyrene, SB latex, ABS resins, solution styrene-butadiene rubber, or SSBR, etc. Lastly, the Americas Styrenics segment consists solely of the operations of our 50%-owned joint venture, Americas Styrenics, a producer of both styrene monomer and polystyrene in North America.

Asset, capital expenditure, and intersegment sales information is not reviewed or included with the Company’s reporting to the chief operating decision maker. Therefore, the Company has not disclosed this information for each reportable segment.

26

~~Table of Contents~~

Performance Materials

Basic Plastics & Feedstocks

Latex

Synthetic

Performance

Basic

Americas

Corporate

Three Months Ended

Binders

Rubber

Plastics

Plastics

Feedstocks

Styrenics

Unallocated

Total

September 30, 2017
















Sales to external customers

$
266,260

$
118,684

$
206,999

$
393,622

$
111,017

$
—

$
—

$
1,096,582

Equity in earnings of unconsolidated affiliates

—

—

—

—

—

43,807

—

43,807

Adjusted EBITDA(1)

32,343

(5,579)

29,436

42,062

45,597

43,807

Investment in unconsolidated affiliates

—

—

—

—

—

161,883

—

161,883

Depreciation and amortization

6,046

8,960

4,102

4,274

3,603

—

2,191

29,176

September 30, 2016

Sales to external customers

$
242,600

$
112,690

$
175,355

$
323,729

$
81,036

$
—

$
—

$
935,410

Equity in earnings of unconsolidated affiliates

—

—

—

2,356

—

34,330

—

36,686

Adjusted EBITDA(1)

29,815

28,491

30,187

34,134

12,729

34,330

Investment in unconsolidated affiliates

—

—

—

38,197

—

148,802

—

186,999

Depreciation and amortization

5,742

9,138

1,372

4,057

2,446

—

1,016

23,771

Performance Materials

Basic Plastics & Feedstocks

Latex

Synthetic

Performance

Basic

Americas

Corporate

Nine Months Ended

Binders

Rubber

Plastics

Plastics

Feedstocks

Styrenics

Unallocated

Total

September 30, 2017
















Sales to external customers

$
846,721

$
456,055

$
581,724

$
1,156,831

$
304,940

$
—

$
—

$
3,346,271

Equity in earnings (losses) of unconsolidated affiliates

—

—

—

810

—

92,219

—

93,029

Adjusted EBITDA(1)

105,228

68,381

79,799

112,691

86,342

92,219

Investment in unconsolidated affiliates

—

—

—

—

—

161,883

—

161,883

Depreciation and amortization

17,469

26,027

8,947

12,094

9,172

—

6,511

80,220

September 30, 2016

Sales to external customers

$
684,552

$
326,278

$
527,875

$
1,029,683

$
230,800

$
—

$
—

$
2,799,188

Equity in earnings (losses) of unconsolidated affiliates

—

—

—

5,375

—

104,939

—

110,314

Adjusted EBITDA(1)

70,042

81,787

103,745

115,050

66,087

104,939

Investment in unconsolidated affiliates

—

—

—

38,197

—

148,802

—

186,999

Depreciation and amortization

17,904

26,073

4,505

11,581

8,071

—

3,610

71,744

~~(1)~~The Company’s primary measure of segment operating performance is Adjusted EBITDA, which is defined as income from continuing operations before interest expense, net; provision for income taxes; depreciation and amortization expense; loss on extinguishment of long-term debt; asset impairment charges; gains or losses on the dispositions of businesses and assets; ~~restructuring;~~restructuring charges; acquisition related costs and benefits and other items. Segment Adjusted EBITDA is a key metric that is used by management to evaluate business performance in comparison to budgets, forecasts, and prior year financial results, providing a measure that management believes reflects core operating performance by removing the impact of transactions and events that would not be considered a part of core operations. Adjusted EBITDA is useful for analytical purposes; however, it should not be considered an alternative to the Company’s reported GAAP results, as there are limitations in using such financial measures. Other companies in the industry may define segment Adjusted EBITDA differently than the Company, and as a result, it may be difficult to use segment Adjusted EBITDA, or similarly named financial measures, that other companies may use to compare the performance of those companies to the Company’s segment performance.

The reconciliation of income (loss) from continuing operations before income taxes to segment Adjusted EBITDA is as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		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⁽²⁾		23.9		17.5		46.4		39.5
Adjusted EBITDA Addbacks⁽³⁾		23.1		8.0		86.4		38.5
Segment Adjusted EBITDA	$	263.0	$	34.3	$	469.8	$	94.2

27

(2)

~~Table of Contents~~

~~The reconciliation of income before income taxes to Segment Adjusted EBITDA is as follows:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016

Income before income taxes

$
41,515

$
83,254

$
267,068

$
306,305

Interest expense, net

18,436

18,832

55,355

56,542

Depreciation and amortization

29,176

23,771

80,220

71,744

Corporate Unallocated(2)

21,864

26,397

70,888

72,766

Adjusted EBITDA Addbacks(3)

76,675

17,432

71,129

34,293

Segment Adjusted EBITDA

$
187,666

$
169,686

$
544,660

$
541,650

~~(2)~~Corporate unallocated includes corporate overhead costs and certain other income and expenses.

(3)

Adjusted EBITDA addbacks for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 are as follows:

Three Months Ended

Nine Months Ended

September 30,

September 30,

(in millions)

2017

2016

2017

2016

Loss on extinguishment of long-term debt (Note 5)

$
65.3

$
—

$
65.3

$
—

Net loss (gain) on disposition of businesses and assets (Notes 3 and 13)

0.2

0.3

(9.7)

13.2

Restructuring and other charges (Note 15)

1.5

16.8

4.8

18.6

Acquisition transaction and integration costs (Note 13)

3.8

—

4.9

—

Asset impairment charges or write-offs(a)

4.3

—

4.3

—

Other items(b)

1.6

0.3

1.6

2.5

Total Adjusted EBITDA Addbacks

$
76.7

$
17.4

$
71.2

$
34.3


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Loss on extinguishment of long-term debt (Note 8)	$	0.5	$	—	$	0.5	$	—
Net gain on disposition of businesses and assets		—		—		(0.2)		(0.4)
Restructuring and other charges (Note 17)		6.3		5.4		6.7		7.2
Acquisition transaction and integration net costs ^(a)		43.2		(0.4)		49.2		(0.3)
Acquisition purchase price hedge (gain) loss (Note 10)		(33.0)		—		22.0		—
Asset impairment charges or write-offs (Note 11)		1.8		—		1.8		10.3
Other items ^(b)		4.3		3.0		6.4		21.7
Total Adjusted EBITDA Addbacks	$	23.1	$	8.0	$	86.4	$	38.5

~~(a)~~

~~Asset impairment charges for the three and nine months ended September 30, 2017 primarily relate to the impairment of certain long-lived assets in the Company’s Performance Plastics segment.~~

31

~~(b)~~

Other items for the three and nine months ended September 30, 2017 primarily relate to fees incurred in conjunction with the Company’s debt refinancing which was completed during the third quarter of 2017 (refer to Note 5 for further information). Other items for the three and nine months ended September 30, 2016 primarily relate to fees incurred in conjunction with the Company’s secondary offerings completed during these periods.

Table of Contents

28

~~Table~~
(a) Amounts for the three months ended June 30, 2021 include $18.2 million of ~~Contents~~
~~NOTE 15—RESTRUCTURING~~
acquisition costs, $10.4 million of integration costs, $10.1 million related to amortization of the fair-value step-up to inventory, and $4.5 million of transfer taxes associated with the Acquisition. Amounts for the six months ended June 30, 2021 include $19.8 million of acquisition costs, $14.8 million of integration costs, $10.1 million related to amortization of the fair-value step-up to inventory, and $4.5 million of transfer taxes associated with the Acquisition. Refer to ~~the Annual Report~~Note 3 for details regarding the Company’s previously announced restructuring activities included in the tables below. New restructuring activities are discussed in greater detail below. Restructuring charges are included within “Selling, general and administrative expenses” in the condensed consolidated statement of operations.
~~The following table provides detail of the Company’s restructuring charges~~further information.

(b)

Other items for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016:~~

Three Months Ended

Nine Months Ended

Cumulative

September 30,

September 30,

Life-to-date

2017

2016

2017

2016

Charges

Segment

Terneuzen Compounding Restructuring(1)

Asset impairment/accelerated depreciation

$
614

$
—

$
1,745

$
—

$
1,745

Employee termination benefits

170

—

326

—

326

Contract terminations

—

—

590

—

590

Decommissioning and other

192

—

192

—

818

Terneuzen Subtotal

$
976

$
—

$
2,853

$
—

$
3,479

Performance Plastics

Livorno Plant Restructuring(2)

Asset impairment/accelerated depreciation

$
—

$
14,345

$
—

$
14,345

$
14,345

Employee termination benefits

220

1,405

579

1,405

5,211

Contract terminations

—

269

—

269

269

Decommissioning and other

633

64

1,695

64

2,372

Livorno Subtotal

$
853

$
16,083

$
2,274

$
16,083

$
22,197

Latex Binders

Other Restructurings

288

759

1,453

2,989

Various

Total Restructuring Charges

$
2,117

$
16,842

$
6,580

$
19,072

~~(1)~~

In March 2017, the Company announced plans to upgrade its production capability for compounded resins with the construction of a new state-of-the art compounding facility to replace its existing compounding facility in Terneuzen, The Netherlands. The new facility is expected to start up by the end of 2018, with substantive production at the existing facility expected to cease by December 2018, followed by decommissioning activities in 2019. The Company expects to incur incremental accelerated depreciation charges of approximately $1.9 million through the end of 2018, as well as estimated decommissioning and other charges of approximately $1.2 million throughout 2019, the majority of which are expected to be paid in late 2018 and throughout 2019.

~~(2)~~

In August 2016, the Company announced its plan to cease manufacturing activities at its latex binders manufacturing facility in Livorno, Italy. The Company expects to incur incremental employee termination benefit charges of $0.2 million throughout 2017, which are expected to be paid in early 2018. The Company also expects to incur additional decommissioning costs associated with this plant shutdown in 2017, the cost of which will be expensed as incurred.

~~The following table provides a rollforward~~2021 primarily relate to fees incurred in conjunction with certain of the ~~liability balances~~Company’s strategic initiatives. Other items for the three and six months ended June 30, 2020 primarily relate to advisory and professional fees incurred in conjunction with the Company’s initiative to transition business services from Dow, including certain administrative services such as accounts payable, logistics, and IT services, which was substantially completed in 2020, as well as fees incurred in conjunction with certain of the Company’s strategic initiatives.

NOTE 17—RESTRUCTURING

Refer to the Annual Report for further details regarding the Company’s previously announced restructuring activities included in the tables below. Restructuring charges are included within “Selling, general and administrative expenses” in the condensed consolidated statements of operations.

The following table provides detail of the Company’s restructuring charges for the three and six months ended June 30, 2021 and 2020:


	Three Months Ended				Six Months Ended				Cumulative
	June 30,				June 30,				Life-to-date
	2021		2020		2021		2020		Charges		Segment
Corporate Restructuring Program
Accelerated depreciation	$	(0.4)	$	1.2	$	(0.4)	$	2.5	$	2.5
Employee termination benefits		0.1		4.1		0.5		4.4		20.0
Contract terminations		—		1.2		—		2.4		2.8
Decommissioning and other		—		—		—		—		0.2
Corporate Program Subtotal	$	(0.3)	$	6.5	$	0.1	$	9.3	$	25.5	N/A⁽¹⁾
Transformational Restructuring Program
Employee termination benefits	$	6.2	$	—	$	6.2	$	—	$	6.2	N/A⁽²⁾
Transformational Program Subtotal	$	6.2	$	—	$	6.2	$	—	$	6.2
Other Restructurings		—		0.1		—		0.4			Various
Total Restructuring Charges	$	5.9	$	6.6	$	6.3	$	9.7

(1)

In November 2019, the Company announced a corporate restructuring program associated with the Company’s shift to a global functional structure and business excellence initiatives to drive greater focus on business process optimization and efficiency, which continued through the three and six months ended June 30, 2021. The Company expects to incur a limited amount of incremental employee termination benefit charges through the end of 2021, and the majority of these benefits are expected to be paid by the end of 2021. As this was identified as a corporate-related activity, the charges related to this restructuring ~~activities~~program were not allocated to a specific segment, but rather included within corporate unallocated.

32

Table of Contents

(2)

In May 2021, the Company approved a transformational restructuring program associated with the Company’s recent strategic initiatives. In connection with this restructuring program, during the second quarter of 2021, the Company incurred initial employee termination benefits charges of $6.2 million. The Company expects to incur incremental employee termination benefit charges related to impacted employees as of ~~September~~June 30, ~~2017. Employee termination benefit and contract termination~~2021 of less than $1.0 million, the majority of which are expected to be paid by June 30, 2022. As this was identified as a corporate-related activity, the charges ~~are recorded~~related to this restructuring program were not allocated to a specific segment, but rather included within corporate unallocated.

The following table provides a roll forward of the liability balances associated with the Company’s restructuring activities as of June 30, 2021. Employee termination benefit and contract termination charges are primarily recorded within “Accrued expenses and other current liabilities” in the condensed consolidated balance sheets.


	Balance at						Balance at
	December 31, 2020		Expenses		Deductions⁽¹⁾		June 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

(1)

Primarily includes payments made against the ~~condensed consolidated balance sheet.~~

Balance at





Balance at


December 31, 2016

Expenses

Deductions(1)

September 30, 2017

Employee termination benefits

$
5,021

$
2,492

$
(5,674)

$
1,839

Contract terminations

269

590

(122)

737

Decommissioning and other

—

2,474

(2,474)

—

Total

$
5,290

$
5,556

$
(8,270)

$
2,576

existing accrual, as well as immaterial impacts of foreign currency remeasurement.

NOTE 18—ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components of AOCI, net of income taxes, consisted of:


	Cumulative		Pension & Other
	Translation		Postretirement Benefit			Cash Flow
Three Months Ended June 30, 2021 and 2020	Adjustments		Plans, Net			Hedges, Net	Total
Balance as of March 31, 2021	$	(108.6)	$	(70.8)	$	(0.6)	$	(180.0)
Other comprehensive loss		(0.7)		—		(1.1)		(1.8)
Amounts reclassified from AOCI to net income⁽¹⁾		—		1.0		0.9		1.9
Balance as of June 30, 2021	$	(109.3)	$	(69.8)	$	(0.8)	$	(179.9)

Balance as of March 31, 2020	$	(96.0)	$	(55.1)	$	(3.1)	$	(154.2)
Other comprehensive loss		(1.1)		—		(1.5)		(2.6)
Amounts reclassified from AOCI to net income ⁽¹⁾		—		0.5		0.2		0.7
Balance as of June 30, 2020	$	(97.1)	$	(54.6)	$	(4.4)	$	(156.1)

~~(1)~~

~~Includes primarily payments made against the existing accrual, as well as immaterial impacts of foreign currency remeasurement.~~

33

Table of Contents


	Cumulative		Pension & Other
	Translation		Postretirement Benefit		Cash Flow
Six Months Ended June 30, 2021 and 2020	Adjustments		Plans, Net		Hedges, Net		Total
Balance as of December 31, 2020	$	(109.0)	$	(71.9)	$	(5.2)	$	(186.1)
Other comprehensive income (loss)		(0.3)		—		2.4		2.1
Amounts reclassified from AOCI to net income⁽¹⁾		—		2.1		2.0		4.1
Balance as of June 30, 2021	$	(109.3)	$	(69.8)	$	(0.8)	$	(179.9)

Balance as of December 31, 2019	$	(106.7)	$	(56.3)	$	0.6	$	(162.4)
Other comprehensive income (loss)		9.6		0.6		(5.1)		5.1
Amounts reclassified from AOCI to net income ⁽¹⁾		—		1.1		0.1		1.2
Balance as of June 30, 2020	$	(97.1)	$	(54.6)	$	(4.4)	$	(156.1)

29

~~Table of Contents~~

~~NOTE 16—ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)~~

~~The components of AOCI, net of income taxes, consisted of:~~

Cumulative

Pension & Other


Translation

Postretirement Benefit

Cash Flow

Three Months Ended  September 30, 2017 and 2016

Adjustments

Plans, Net


Hedges, Net

Total

Balance as of June 30, 2017

$
(95,747)

$
(61,332)

$
(5,504)

$
(162,583)

Other comprehensive income (loss)

(1,561)

—

(6,387)

(7,948)

Amounts reclassified from AOCI to net income (1)

—

840

2,672

3,512

Balance as of September 30, 2017

$
(97,308)

$
(60,492)

$
(9,219)

$
(167,019)

Balance as of June 30, 2016

$
(106,702)

$
(45,887)

$
4,173

$
(148,416)

Other comprehensive income (loss)

1,488

—

(2,035)

(547)

Amounts reclassified from AOCI to net income (1)

—

533

(245)

288

Balance as of September 30, 2016

$
(105,214)

$
(45,354)

$
1,893

$
(148,675)

Cumulative

Pension & Other


Translation

Postretirement Benefit

Cash Flow

Nine Months Ended  September 30, 2017 and 2016

Adjustments

Plans, Net

Hedges, Net

Total

Balance as of December 31, 2016

$
(118,922)

$
(63,504)

$
12,272

$
(170,154)

Other comprehensive income (loss)

21,614

—

(20,703)

911

Amounts reclassified from AOCI to net income (1)

—

3,012

(788)

2,224

Balance as of September 30, 2017

$
(97,308)

$
(60,492)

$
(9,219)

$
(167,019)

Balance as of December 31, 2015

$
(109,120)

$
(46,166)

$
5,569

$
(149,717)

Other comprehensive income (loss)

3,906

(800)

(3,060)

46

Amounts reclassified from AOCI to net income (1)

—

1,612

(616)

996

Balance as of September 30, 2016

$
(105,214)

$
(45,354)

$
1,893

$
(148,675)

~~(1)~~

(1) The following is a summary of amounts reclassified from AOCI to ~~net income for the three and nine months ended September 30, 2017 and 2016, respectively:~~

30

~~Table of Contents~~

Amount Reclassified from AOCI

Amount Reclassified from AOCI

AOCI Components

Three Months Ended  September 30,

Nine Months Ended  September 30,

Statement of Operations


2017

2016

2017

2016

Classification

Cash flow hedging items

Foreign exchange cash flow hedges

$
2,666

$
(245)

$
(794)

$
(616)

Cost of sales

Interest rate swaps

6

—

6

—

Interest expense, net

Total before tax

2,672

(245)

(788)

(616)

Tax effect

—

—

—

—

Provision for income taxes

Total, net of tax

$
2,672

$
(245)

$
(788)

$
(616)

Amortization of pension and other postretirement benefit plan items

Prior service credit

$
(477)

$
(461)

$
(1,379)

$
(1,382)

(a)

Net actuarial loss

1,697

1,250

4,886

3,770

(a)

Net settlement and curtailment loss

—

—

648

—

(a)

Total before tax

1,220

789

4,155

2,388

Tax effect

(380)

(256)

(1,143)

(776)

Provision for income taxes

Total, net of tax

$
840

$
533

$
3,012

$
1,612

~~(a)~~

~~These AOCI components are included in the computation of net periodic benefit costs (see Note 11).~~

~~NOTE 17—EARNINGS PER SHARE~~

~~Basic earnings per ordinary share (“basic EPS”) is computed by dividing~~ net income available to ordinary shareholders by the weighted average number of the Company’s ordinary shares outstanding for the applicable period. Diluted earnings per ordinary share (“diluted EPS”) is calculated using net income available to ordinary shareholders divided by diluted weighted-average ordinary shares outstanding during each period, which includes unvested RSUs, option awards, and PSUs. Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential ordinary shares would have an anti-dilutive effect.

~~The following table presents basic EPS and diluted EPS~~(loss) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016, respectively.~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

(in thousands, except per share data)

2017

2016

2017

2016

Earnings:

Net income

$
33,215

$
67,254

$
210,668

$
239,805

Shares:

Weighted-average ordinary shares outstanding

43,745

45,865

43,900

47,152

Dilutive effect of RSUs, option awards, and PSUs

1,037

1,096

1,146

889

Diluted weighted-average ordinary shares outstanding

44,782

46,961

45,046

48,041

Income per share:

Income per share—basic

$
0.76

$
1.47

$
4.80

$
5.09

Income per share—diluted

$
0.74

$
1.43

$
4.68

$
4.99

2020:


	Three Months Ended				Six Months Ended
	June 30,				June 30,				Statements of Operations
AOCI Components	2021		2020		2021		2020		Classification
Cash flow hedging items
Foreign exchange cash flow hedges	$	—	$	(0.5)	$	0.3	$	(0.6)	Cost of sales
Interest rate swaps		0.9		0.7		1.7		0.7	Interest expense, net
Total before tax		0.9		0.2		2.0		0.1
Tax effect		—		—		—		—	Provision for (benefit from) income taxes
Total, net of tax	$	0.9	$	0.2	$	2.0	$	0.1

Amortization of pension and other postretirement benefit plan items
Prior service credit	$	(0.2)	$	(0.3)	$	(0.5)	$	(0.6)	(a)
Net actuarial loss		1.7		1.1		3.6		2.3	(a)
Total before tax		1.5		0.8		3.1		1.7
Tax effect		(0.5)		(0.3)		(1.0)		(0.6)	Provision for (benefit from) income taxes
Total, net of tax	$	1.0	$	0.5	$	2.1	$	1.1

(a)

These AOCI components are included in the computation of net periodic benefit costs (see Note 14).

.

NOTE 19—EARNINGS PER SHARE

Basic earnings per ordinary share (“basic EPS”) is computed by dividing net income available to ordinary shareholders by the weighted average number of the Company’s ordinary shares outstanding for the applicable period. Diluted earnings per ordinary share (“diluted EPS”) is calculated using net income available to ordinary shareholders divided by diluted weighted average ordinary shares outstanding during each period, which includes unvested RSUs, option awards, and PSUs. Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss from continuing operations because the inclusion of the potential ordinary shares would have an anti-dilutive effect.

34

Table of Contents

The following table presents basic EPS and diluted EPS for the three and six months ended June 30, 2021 and 2020. Amounts have been recast to reflect the Company’s classification of its Synthetic Rubber business as discontinued operations for all periods presented.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in millions, except per share data)	2021		2020		2021		2020
Earnings:
Net income (loss) from continuing operations	$	133.0	$	25.8	$	198.8	$	(43.6)
Net income (loss) from discontinued operations		18.6		(154.2)		24.3		(121.1)
Net income (loss)	$	151.6	$	(128.4)	$	223.1	$	(164.7)
Shares:
Weighted average ordinary shares outstanding		38.8		38.2		38.6		38.4
Dilutive effect of RSUs, option awards, and PSUs⁽¹⁾		0.8		0.1		1.0		—
Diluted weighted average ordinary shares outstanding		39.6		38.3		39.6		38.4
Income (loss) per share:
Income (loss) per share—basic:
Continuing operations		3.43		0.68		5.15		(1.14)
Discontinued operations		0.48		(4.04)		0.62		(3.15)
Income (loss) per share—basic	$	3.91	$	(3.36)	$	5.77	$	(4.29)
Income (loss) per share—diluted:
Continuing operations		3.35		0.67		5.02		(1.14)
Discontinued operations		0.47		(4.02)		0.61		(3.15)
Income (loss) per share—diluted	$	3.82	$	(3.35)	$	5.63	$	(4.29)

*
(1) Refer to Note 1215 for discussion of RSUs, option awards, and PSUs granted to certain Company directors and employees. ~~The number of~~There were 0.6 million anti-dilutive shares that have been excluded infrom the computation of diluted earnings per share ~~were 0.2 million~~ for ~~the both~~ the three and ~~nine~~six months ended ~~September~~June 30, ~~2017, respectively, and zero for both the three and nine months ended September 30, 2016, respectively.~~
31
~~Table of Contents~~
~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations~~
~~2017 Year-to-Date Highlights~~
~~In the third quarter of 2017, Trinseo recognized net income of $33.2~~2021. There were 1.9 million and Adjusted EBITDA of $165.8 million. On a year-to-date basis, we recognized net income of $210.7 million and Adjusted EBITDA of $473.8 million. Refer to “Non-GAAP Performance Measures” below for further discussion of our use of non-GAAP measures in evaluating our performance and a reconciliation of these measures. Other highlights for the year are described below.
~~2017 Debt Refinancing~~
~~During the three and nine months ended September 30, 2017, the Company executed a refinancing of its debt, including:~~
·
~~Issuing $500.0 million aggregate principal amount of 5.375% 2025 Senior Notes;~~
·
Entering the new Senior Credit Facility, which consists of the $375.0 million 2022 Revolving Facility and the $700.0 million 2024 Term Loan B, bearing an interest rate of LIBOR plus 2.50%, subject to a 0.00% LIBOR floor; and
·
Using the net proceeds from the above along with available cash to redeem all outstanding indebtedness under its existing 2022 Senior Notes and to repay all outstanding borrowings under its existing 2020 Senior Credit Facility, together with a $53.0 million call premium on the 2022 Senior Notes, accrued and unpaid interest, and fees and other expenses related to the refinancing.
~~Additionally, on September 1, 2017, the Company~~ ~~entered into certain fixed-for-fixed cross currency swaps (CCS), swapping USD principal and interest payments on the newly issued 2025 Senior Notes for euro-denominated payments. Refer to Note 7 in the condensed consolidated financial statements for further details.~~
~~The Company expects the aggregate cash interest savings~~anti-dilutive shares that have been excluded from the ~~refinancing and CCS to be approximately $25.0 million annually at current LIBO rates.~~
~~As a result~~computation of the refinancing, the Company recorded a loss on extinguishment of long-term debt of $65.3 million during the three and nine months ended September 30, 2017. Refer to Note 5 in the condensed consolidated financial statements for further information.
~~Acquisition of API Plastics~~
On July 10, 2017, the Company completed the acquisition of API Applicazioni Plastiche Industriali S.p.A, or API Plastics, for a gross purchase price of $90.5 million, inclusive of $8.4 million of cash acquired, yielding a net purchase price of $82.1 million which is subject to certain customary post-closing adjustments. API Plastics, based in Mussolente, Italy, is a manufacturer of soft-touch polymers and bioplastics, such as thermoplastic elastomers, or TPEs. TPEs can be molded over rigid plastics such as ABS and PC/ABS, which presents opportunities for complementary technology product offerings within our Performance Plastics segment. Refer to Note 13 in the condensed consolidated financial statements for further information.
~~Sale of Sumika Styron Polycarbonate~~
On January 31, 2017, the Company completed the sale of its 50% share in Sumika Styron Polycarbonate to Sumitomo Chemical Company Limited for total sales proceeds of approximately $42.1 million. As a result, the Company recorded a gain on sale of $9.3 million during the nine months ended September 30, 2017. In addition, the parties have entered into a long-term agreement to continue sourcing polycarbonate resin from Sumika Styron Polycarbonate to the Company’s Performance Plastics segment.
~~Share Repurchases and Dividends~~
~~In June 2017, the Company’s board of directors authorized an increase to our quarterly dividend, from $0.30~~diluted earnings per share ~~to $0.36 per share, a 20% increase. In addition, the board of directors authorized the repurchase of up to two~~
32
~~Table of Contents~~
~~million of the Company’s ordinary shares.~~
During the nine months ended September 30, 2017, under existing authority from its board of directors, the Company purchased 1,038,259 ordinary shares from its shareholders through a combination of open market transactions for an aggregate purchase price of $65.2 million. Additionally, during the nine months ended September 30, 2017, the Company’s board of directors declared quarterly dividends for an aggregate value of $1.02 per ordinary share, or $45.8 million.
~~Results of Operations~~
~~Results of Operations for the Three and Nine Months Ended September 30, 2017 and 2016~~
~~The table below sets forth our historical results of operations, and these results as a percentage of net sales for the periods indicated.~~
References to portfolio adjustments below represent the impacts of the Company’s acquisition and divestiture activity, including the sale of our business in Brazil during 2016, the sale of our joint venture Sumika Styron Polycarbonate during 2017, and the acquisition of API Plastics during 2017. Refer to the condensed consolidated financial statements for further information.

Three Months Ended

Nine Months Ended

September 30,

September 30,

(in millions)

2017

%

2016

%

2017

%

2016

%

Net sales

$
1,096.6

100
%

$
935.4

100
%

$
3,346.3

100
%

$
2,799.2

100
%

Cost of sales

949.5

87
%

795.0

85
%

2,876.1

86
%

2,349.4

84
%

Gross profit

147.1

13
%

140.4

15
%

470.2

14
%

449.8

16
%

Selling, general and administrative expenses

65.7

6
%

73.9

8
%

181.6

5
%

180.6

7
%

Equity in earnings of unconsolidated affiliates

43.8

4
%

36.7

4
%

93.0

3
%

110.3

4
%

Operating income

125.2

11
%

103.2

11
%

381.6

12
%

379.5

14
%

Interest expense, net

18.4

2
%

18.8

2
%

55.4

2
%

56.5

2
%

Loss on extinguishment of long-term debt

65.3

6
%

—

—
%

65.3

2
%

—

—
%

Other expense (income), net

—

—
%

1.1

0
%

(6.2)

(0)
%

16.7

1
%

Income before income taxes

41.5

4
%

83.3

9
%

267.1

8
%

306.3

11
%

Provision for income taxes

8.3

1
%

16.0

2
%

56.4

2
%

66.5

2
%

Net income

$
33.2

3
%

$
67.3

7
%

$
210.7

6
%

$
239.8

8
%

~~Three Months Ended - September 30, 2017 vs. September 30, 2016~~
~~Net Sales~~
Of the 17% increase, 13% was due to higher selling prices primarily from the pass through of higher raw material costs, including higher styrene and butadiene costs to customers across our segments. Additionally, 2% of the increase was due to slightly higher sales volume, as increases in Performance Plastics and Basic Plastics sales volume were mostly offset by decreases in Latex Binders and Synthetic Rubber sales volume. A favorable currency impact increased sales by 3% as the euro strengthened in comparison to the U.S. dollar on a quarter-to-date basis. Offsetting these increases in net sales was a net 1% decrease related to portfolio adjustments.
~~Cost of Sales~~
Of the 19% increase, 12% was attributable to higher prices for raw materials, primarily related to styrene monomer and butadiene, and an additional 2% of the increase was due to increased sales volume, primarily in Performance Plastics and Basic Plastics. An unfavorable currency impact increased cost of sales by 4% as the euro strengthened in
33
~~Table of Contents~~
~~comparison to the U.S. dollar on a quarter-to-date basis. Slightly higher fixed costs resulted in a 1% increase which was mostly offset by a decrease in cost of sales related to portfolio adjustments.~~
~~Gross Profit~~
This increase was primarily due to increased margins per unit sold, primarily within Feedstocks, due to unplanned industry production outages, including the impact of Hurricane Harvey, as well as within Basic Plastics and Latex Binders.
~~Selling, General and Administrative Expenses~~
The majority of the $8.2 million decrease is due to a reduction in restructuring charges of $14.7 million, noting $14.3 million in asset impairment charges recorded in the prior year as a result of our decision to cease manufacturing operations at our latex facility in Livorno, Italy. This reduction is partially offset by additional transaction and integration related costs of $2.4 million related to the API Plastics acquisition and $3.6 million of asset impairment charges on certain long-lived assets within the Performance Plastics segment during the third quarter of 2017. Refer to Notes 13 and 15 in the condensed consolidated financial statements for further information.
~~Equity in Earnings of Unconsolidated Affiliates~~
Equity earnings increased in 2017, as equity earnings from Americas Styrenics increased from $34.3 million in 2016 to $43.8 million in 2017, primarily due to higher styrene margin which was partially offset by lower polystyrene margin. Additionally, equity earnings from Sumika Styron Polycarbonate decreased from $2.4 million in 2016 to zero in 2017, as the Company completed the sale of its 50% share in the entity to Sumitomo Chemical Company Limited in January 2017, and therefore did not have an ownership interest in the joint venture during the three months ended September 30, 2017. Refer to Note 3 in the condensed consolidated financial statements for further information.
~~Interest Expense, Net~~
Interest expense was relatively flat, noting that the Company’s debt refinancing during the third quarter of 2017 did not occur until later in the period, and therefore did not have a significant impact on interest expense for the three months ended ~~September~~June 30, ~~2017. Refer to Note 5 in~~2020. As the ~~condensed consolidated financial statements for further information.~~
~~Loss on Extinguishment of Long-Term Debt~~
Loss on extinguishment of long-term debt was $65.3 million for the three months ended September 30, 2017, which related to the Company’s debt refinancing during the third quarter of 2017. This amount was comprised of a $53.0 million call premium paid to retire the Company’s 2022 Senior Notes and a $11.5 million write-off of unamortized deferred financing fees related to these notes, as well as the write-off of $0.8 million of unamortized deferred financing fees and unamortized original issue discount related to the termination of the Company’s 2021 Term Loan B.
~~Other Expense (Income), net~~
Other income, net for the three months ended September 30, 2017 was less than $0.1 million, which consisted primarily of net foreign exchange transaction gains of approximately $1.7 million offset by other expenses of $1.7 million. Included in the net foreign exchange transaction gains of $1.7 million were foreign exchange transactions gains of $8.2 million, primarily due to the remeasurement of our euro denominated payables due to the relative changes in rates between the U.S. dollar and the euro during the period, partially offset by losses of $6.5 million from our foreign exchange forward contracts. Other expenses of $1.7 million primarily includes $1.2 million of fees incurred in conjunction with the Company’s debt refinancing during the third quarter of 2017.
Other expense, net for the three months ended September 30, 2016 was $1.1 million, which consisted primarily of net foreign exchange transaction losses of approximately $0.4 million, additional impairment charges of $0.3 million for the estimated loss on sale of the Company’s latex and automotive businesses in Brazil, and other expenses. Refer to Note 13 in the condensed consolidated financial statements for further information.~~Included in the net foreign exchange losses of $0.4 million were foreign exchange transaction losses of $1.5 million, primarily due to the remeasurement of~~
34
~~Table of Contents~~
our euro denominated payables due to the relative changes in rates between the U.S. dollar and the euro during the period, partially offset by gains of $1.1 million from our foreign exchange forward contracts.
~~Provision for Income Taxes~~
Provision for income taxes for the three months ended September 30, 2017 totaled $8.3 million resulting in an effective tax rate of 20.0%. Provision for income taxes for the three months ended September 30, 2016 totaled $16.0 million resulting in an effective tax rate of 19.2%.
The decrease in provision for income taxes was primarily driven by the $41.8 million decrease in income before income taxes, due predominantly to costs incurred related to the Company’s debt refinancing that occurred during the third quarter of 2017. Refer to Note 5 in the condensed consolidated financial statements for further information.
~~Nine Months Ended - September 30, 2017 vs. September 30, 2016~~
~~Net Sales~~
Of the 20% increase, 20% was due to higher selling prices primarily from the pass through of higher raw material costs, including higher styrene and butadiene costs to customers across our segments. Additionally, 1% of the increase was due to slightly higher sales volume, as increases in Performance Plastics and Synthetic Rubber sales volume were partially offset by decreases in Latex Binders and Basic Plastics sales volume. Offsetting these increases in net sales wasCompany recorded a net ~~1% decrease related to portfolio adjustments.~~
~~Cost of Sales~~
Of the 22% increase, 23% was attributable to higher prices for raw materials, primarily related to styrene monomer and butadiene, and an additional 1% of the increase was due to increased sales volume, primarily in Performance Plastics and Synthetic Rubber. Portfolio adjustments resulted in a 1% decrease in cost of sales, which was mostly offset by a slight increase in fixed costs.
~~Gross Profit~~
The increase was primarily attributable to higher year-to-date margins per unit sold, especially within the Latex Binders and Feedstocks segments, due to more favorable market conditions. Higher sales volume in Synthetic Rubber and Performance Plastics was partially offset by lower sales volume in Basic Plastics and Latex Binders, as well as margin compression in Performance Plastics due to higher raw material costs.
~~Selling, General and Administrative Expenses~~
The $1.0 million year-over-year increase is comprised of several offsetting factors. Restructuring expenses decreased by $12.5 million, noting $16.1 million in asset impairment and other charges recorded in the prior year as a result of our decision to cease manufacturing operations at our latex facility in Livorno, Italy, partially offset by $2.9 million in charges in the current year related to the upgrade and replacement of the Company’s compounding facility in Terneuzen, The Netherlands. Offsetting the decrease in restructuring expenses were increased costs incurred supporting growth initiatives of approximately $4.0 million, transaction and integration related costs of $3.5 million related to the API Plastics acquisition, and $3.6 million of asset impairment charges on certain long-lived assets within the Performance Plastics segment. Refer to Notes 13 and 15 in the condensed consolidated financial statements for further information.
~~Equity in Earnings of Unconsolidated Affiliates~~
Equity earnings decreased in 2017, as equity earnings from Americas Styrenics decreased from $104.9 million in 2016 to $92.2 million in 2017, primarily due to the planned and extended first quarter styrene outage at its St. James, LA facility, including lower margins on second quarter sales of styrene purchased during the outage. Additionally, equity earnings from Sumika Styron Polycarbonate decreased from $5.4 million in 2016 to $0.8 million in 2017, as the Company completed the sale of its 50% share in the entity to Sumitomo Chemical Company Limited in January 2017,
35
~~Table of Contents~~
and therefore did not have an ownership interest in the joint venture for the majority of the nine months ended September 30, 2017. Refer to Note 3 in the condensed consolidated financial statements for further information.
~~Interest Expense, Net~~
This slight decrease was primarily attributable to lower deferred financing fee amortization recorded into interest expense from our Accounts Receivable Securitization Facility. As the Company’s debt refinancing during the third quarter of 2017 did not occur until later in the period, there was no significant impact on interest expense for the nine months ended September 30, 2017. Refer to Note 5 in the condensed consolidated financial statements for further information.
~~Loss on Extinguishment of Long-Term Debt~~
Loss on extinguishment of long-term debt was $65.3 million for the nine months ended September 30, 2017, which related to the Company’s debt refinancing during the third quarter of 2017. This amount was comprised of a $53.0 million call premium paid to retire the Company’s 2022 Senior Notes and a $11.5 million write-off of unamortized deferred financing fees related to these notes, as well as the write-off of $0.8 million of unamortized deferred financing fees and unamortized original issue discount related to the termination of the Company’s 2021 Term Loan B.
~~Other Expense (Income), net~~
Other income, net for the nine months ended September 30, 2017 was $6.2 million, which primarily includes a $9.3 million gain related to the sale of the Company’s 50% share in Sumika Styron Polycarbonate in January 2017 (refer to Note 3 in the condensed consolidated financial statements for further information). Additionally, net foreign exchange transaction losses for the period were $0.9 million, which included $16.1 million of foreign exchange transaction gains primarily due to the remeasurement of our euro denominated payables due to the relative changes in rates between the U.S. dollar and the euro during the period, more than offset by $17.0 million of losses from our foreign exchange forward contracts. Additionally, other expenses included $1.2 million of fees incurred in conjunction with the Company’s debt refinancing during the third quarter of 2017.
~~Other expense, net for the nine months ended September 30, 2016 was $16.7 million, which includes an impairment charge for the estimated~~ loss on sale of our latex and automotive businesses in Brazil of approximately $13.2 million. Refer to Note 13 in the condensed consolidated financial statements for further information. Adding to these losses were net foreign exchange transaction losses of $2.0 million. Included in these net losses of $2.0 million were foreign exchange transactions losses of $4.1 million, primarily due to the remeasurement of our euro denominated payables due to the relative changes in rates between the U.S. dollar and the euro during the period, partially offset by gains of $2.1 million from our foreign exchange forward contracts.
~~Provision for Income Taxes~~
Provision for income taxes for the nine months ended September 30, 2017 totaled $56.4 million resulting in an effective tax rate of 21.1%. Provision for income taxes for the nine months ended September 30, 2016 totaled $66.5 million resulting in an effective tax rate of 21.7%.
The decrease in provision for income taxes was primarily driven by the $39.2 million decrease in income before income taxes, due predominantly to costs incurred related to the Company’s debt refinancing that occurred during the third quarter of 2017. Refer to Note 5 in the condensed consolidated financial statements for further information.
~~Outlook~~
Overall, we expect continued strong fundamental business performance through the remainder of 2017. European styrene monomer margin over raw materials is forecast to decline in the fourth quarter from third quarter levels by approximately $110 per ton, on average, as offline capacity begins to come back online. Additionally, in the fourth quarter, the Company will open a new SSBR pilot plant in Germany. This incremental capacity will allow for more
36
~~Table of Contents~~
efficient use of our production facilities and help speed up innovation in the performance tires market and will also deliver sufficient quantities of new SSBR formulations required for real-life tire testing.
~~Profitability should be higher in 2018 due mainly to Performance Materials growth initiatives and continued, strong supply and demand dynamics in Basic Plastics & Feedstocks.~~
37
~~Table of Contents~~
~~Selected Segment Information~~
Effective October 1, 2016, the Company realigned its reporting segments to reflect the new model under which the business is now managed and results are reviewed by the chief executive officer, who is the Company’s chief operating decision maker. The Company’s reportable segments are now as follows: Latex Binders, Synthetic Rubber, Performance Plastics, Basic Plastics, Feedstocks, and Americas Styrenics. In conjunction with this segment realignment, the Company changed its primary measure of segment operating performance to Adjusted EBITDA. Refer to the Annual Report for a description of our segments, including a detailed overview, products and end uses, and competition and customers.
The following sections describe net sales, Adjusted EBITDA, and Adjusted EBITDA margin by segment for the three and nine months ended September 30, 2017 and 2016, which have been recast to reflect the above changes. Inter-segment sales have been eliminated. Refer to Note 14 in the condensed consolidated financial statements for further information on these changes, as well as for a detailed definition of Adjusted EBITDA and a reconciliation of income before income taxes to segment Adjusted EBITDA.
References to portfolio adjustments below represent the impacts of the Company’s acquisition and divestiture activity, including the sale of our business in Brazil during 2016, the sale of our joint venture Sumika Styron Polycarbonate during 2017, and the acquisition of API Plastics during 2017. Refer to the condensed consolidated financial statements for further information.
~~Latex Binders Segment~~
Our Latex Binders segment produces SB latex and other latex polymers and binders primarily for coated paper and packaging board, carpet and artificial turf backings, as well as a number of performance latex applications,~~such as adhesive, building and construction and the technical textile paper market.~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

(in millions)


2017


2016


% Change

2017


2016

% Change

Net sales

$
266.3


$
242.6


10
%

$
846.7


$
684.6


24
%

Adjusted EBITDA

$
32.3

$
29.8

8
%

$
105.2

$
70.0


50
%

Adjusted EBITDA margin

12
%

12
%

12
%

10
%

~~Three Months Ended - September 30, 2017 vs. September 30, 2016~~
Net sales increased 10% from the prior year, due mostly to higher selling prices, which resulted in a 15% increase. These higher selling prices were primarily due to the pass through of higher butadiene and styrene costs to our customers. Offsetting this increase was a 4% decrease due to lower sales volume to the North America paper and carpet markets, as well as an additional 4% decrease due to portfolio adjustments. A favorable currency impact increased net sales by 2% as the euro strengthened in comparison to the U.S. dollar on a quarter-to-date basis.
The increase in Adjusted EBITDA of 8% was due to margin improvements of $9.8 million, a 33% increase, primarily due to better market conditions in Asia, partially offset by lower sales volume, which resulted in a 12% decrease. Increased fixed costs resulted in a 9% decrease in Adjusted EBITDA, while portfolio adjustments resulted in an additional 4% decrease in Adjusted EBITDA.
~~Nine Months Ended - September 30, 2017 vs. September 30, 2016~~
Of the 24% increase in net sales, 29% was due to higher selling prices, primarily due to the pass through of higher butadiene and styrene costs to our customers. Offsetting this increase was a 4% decrease due to portfolio adjustments and a 1% decrease in sales volume.
Adjusted EBITDA increased by $35.2 million, or 50%, year-over-year primarily due to margin improvements of $44.3 million, or 63%, particularly in Asia, resulting from favorable market conditions. Partially offsetting these margin improvements was a 7% decrease due to lower sales volume, primarily within the North America and European paper and carpet markets, and a 3% decrease due to increased fixed costs. Portfolio adjustments resulted in a 4% decrease to Adjusted EBITDA.
38
~~Table of Contents~~
~~Synthetic Rubber Segment~~
Our Synthetic Rubber segment produces styrene-butadiene and polybutadiene-based rubber products used predominantly in high-performance tires, impact modifiers and technical rubber products, such as conveyor belts, hoses, seals and gaskets. We have a broad synthetic rubber technology and product portfolio, focusing on specialty products, such as SSBR, lithium polybutadiene rubber, or Li-PBR, nickel polybutadiene rubber, or Ni-PBR, and neodymium polybutadiene rubber, or Nd-PBR, while also producing core products, such as emulsion styrene-butadiene rubber, or ESBR.

Three Months Ended

Nine Months Ended

September 30,

September 30,

(in millions)


2017


2016


% Change

2017


2016

% Change

Net sales

$
118.7


$
112.7


5
%

$
456.1


$
326.3


40
%

Adjusted EBITDA

$
(5.6)

$
28.5

(120)
%

$
68.4

$
81.8


(16)
%

Adjusted EBITDA margin

(5)
%

25
%

15
%

25
%

~~Three Months Ended - September 30, 2017 vs. September 30, 2016~~
Net sales increased 5% from the prior year, with higher selling prices contributing to 9% of the increase, primarily resulting from the pass through of higher butadiene and styrene costs to customers. A favorable currency impact increased net sales by 5% as the euro strengthened in comparison to the U.S. dollar on a quarter-to-date basis. Offsetting these increases was an 8% decrease due to lower sales volume, primarily from customer destocking in SSBR.
The majority of the overall $34.1 million decrease in Adjusted EBITDA was due to unfavorable raw material timing, due to rapidly declining butadiene prices, which led to a $23.9 million decrease related to margin as higher cost raw materials purchased in previous periods were reflected in our cost of goods sold during the third quarter. Additionally, lower sales volume, primarily from customer destocking in SSBR, contributed to a $7.2 million decrease.
~~Nine Months Ended - September 30, 2017 vs. September 30, 2016~~
Net sales increased 40% from the prior year, with higher selling prices contributing to 34% of the increase, primarily resulting from the pass through of higher butadiene and styrene costs to customers. Additionally, 6% of the increase was due to higher sales volume which was a result of higher customer demand for SSBR and ESBR, as well as higher sales of Ni-PBR, noting decreased production in the prior year to allow for Nd-PBR trials.
The majority of the overall $13.4 million decrease in Adjusted EBITDA was primarily due to unfavorable raw material timing resulting from declining butadiene prices during the period, net of favorable price lag, which resulted in a 14% decrease due to lower margins. Higher fixed costs, primarily from growth initiatives, resulted in a 9% decrease in Adjusted EBITDA. These decreases were partially offset by higher sales volume primarily related to higher demand for SSBR, ESBR, and Ni-PBR, which resulted in a 6% increase in Adjusted EBITDA.
~~Performance Plastics Segment~~
Our Performance Plastics segment consists of compounds and blends and some specialized ABS grades. We are a producer of highly engineered compounds and blends for automotive end markets, as well as consumer electronics, medical, electrical and lighting, collectively referred to as consumer essential markets. In July 2017, the Company completed the acquisition of API Plastics, the results of which are reported within the Performance Plastics segment. Refer to Note 13 in the condensed consolidated financial statements for further information.
39
~~Table of Contents~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

(in millions)


2017


2016


% Change

2017


2016

% Change

Net sales

$
207.0


$
175.4


18
%

$
581.7


$
527.9


10
%

Adjusted EBITDA

$
29.4

$
30.2

(3)
%

$
79.8

$
103.7


(23)
%

Adjusted EBITDA margin

14
%

17
%

14
%

20
%

~~Three Months Ended - September 30, 2017 vs. September 30, 2016~~
Of the 18% increase in net sales, 7% was due to higher selling prices due to the pass through of higher raw material costs to our customers, as well as a 7% increase due to increased sales volume as a result of higher volumes sold to the automotive market in North America and the consumer electronics market in Asia. A favorable currency impact increased net sales by 3% as the euro strengthened in comparison to the U.S. dollar on a quarter-to-date basis with an additional 1% increase due to portfolio adjustments.
The slight decrease in Adjusted EBITDA was due to several offsetting factors. A 14% increase in Adjusted EBITDA was due to increased sales volume to the automotive market in North America and the consumer electronics market in Asia, with an additional 2% net increase due to portfolio adjustments. Offsetting these increases was a 12% decrease due to margin compression from increased costs of raw materials, such as polycarbonate, not all of which were able to be passed through to our customers. Additionally, an inventory build during 2016 resulted in increased fixed cost absorption in the prior year, contributing to an overall 8% decrease in Adjusted EBITDA in the current year related to fixed costs.
~~Nine Months Ended - September 30, 2017 vs. September 30, 2016~~
Of the 10% increase in net sales, 5% was due to higher selling prices due to the pass through of higher raw material costs to our customers, as well as an 8% increase due to increased sales volume, primarily related to higher sales to the automotive markets in Europe and North America and the consumer electronics market in Asia. Portfolio adjustments resulted in a 2% decrease in net sales.
The overall decrease in Adjusted EBITDA of $23.9 million was the result of several factors. Unfavorable raw material timing led to lower margins for the period. In addition, the Company experienced margin compression from increased costs of raw materials, not all of which were able to be passed through to our customers. These two factors contributed to a combined 33% decrease in Adjusted EBITDA compared to the prior year. Additionally, increased fixed costs contributed to a 6% decrease in Adjusted EBITDA. Partially offsetting these decreases was a 13% increase due to increased sales volume growth to the automotive markets in Europe and North America and a 3% increase due to portfolio adjustments.
~~Basic Plastics Segment~~
The Basic Plastics segment produces styrenic polymers, including polystyrene, basic ABS, and SAN products, as well as PC, all of which are used as inputs in a variety of end use markets. The Basic Plastics segment also included the results of our previously 50%-owned joint venture Sumika Styron Polycarbonate prior to its sale in January 2017. Refer to Note 3 in the condensed consolidated financial statements for further information.
40
~~Table of Contents~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

(in millions)


2017


2016


% Change

2017


2016

% Change

Net sales

$
393.6


$
323.7


22
%

$
1,156.9


$
1,029.6


12
%

Adjusted EBITDA

$
42.1

$
34.2

23
%

$
112.7

$
115.1


(2)
%

Adjusted EBITDA margin

11
%

11
%

10
%

11
%

~~Three Months Ended - September 30, 2017 vs. September 30, 2016~~
Of the 22% increase in net sales, 10% was due to higher selling prices due to the pass through of higher styrene costs to customers and 7% was due to higher polystyrene and copolymer sales volume. Additionally, a favorable currency impact increased net sales by 4% as the euro strengthened in comparison to the U.S. dollar on a quarter-to-date basis.
Adjusted EBITDA increased 23%, or $7.9 million, of which 21% was due to higher margins, particularly in polycarbonate due to very tight market conditions. An additional 13% increase was due to higher sales volume, particularly in copolymers. Partially offsetting these increases was a 6% decrease due to increased fixed costs, which includes start-up costs incurred related to our new ABS capacity in Asia, and a 7% decrease due to portfolio adjustments, which included the impact of the sale of Sumika Styron Polycarbonate during the first quarter of 2017.
~~Nine Months Ended - September 30, 2017 vs. September 30, 2016~~
Of the 12% increase in net sales, 16% was due to higher selling prices due to the pass through of increased raw material costs to customers, primarily styrene. This increase was partially offset by a 3% decrease due to lower sales volume, primarily related to lower polystyrene sales in Asia, as we have increased our focus on higher margin business.
The slight decrease in Adjusted EBITDA was partly due to several offsetting factors. Firstly, an 11% increase in Adjusted EBITDA was due to higher year-to-date margins, primarily within ABS and polycarbonate. However, this increase was offset by lower sales volume, which resulted in a decrease of 4%, primarily related to Europe and Asia polystyrene sales, with competitor supply outages in Europe in the prior year and with an increased focus on higher margins in Asia. Higher fixed costs, including start-up costs incurred related to our new ABS capacity in Asia, contributed to an additional decrease of 4%. Portfolio adjustments resulted in a 4% decrease in Adjusted EBITDA, due to the sale of Sumika Styron Polycarbonate during the first quarter of 2017.
~~Feedstocks Segment~~
The Feedstocks segment includes the Company’s production and procurement of styrene monomer outside of North America, which is used as a key raw material in many of the Company’s products, including polystyrene, SB latex, ABS resins, SSBR, etc.

Three Months Ended

Nine Months Ended

September 30,

September 30,

(in millions)


2017


2016


% Change

2017


2016

% Change

Net sales

$
111.0


$
81.0


37
%

$
304.9


$
230.8


32
%

Adjusted EBITDA

$
45.6

$
12.7

259
%

$
86.3

$
66.1


31
%

Adjusted EBITDA margin

41
%

16
%

28
%

29
%

~~Three Months Ended - September 30, 2017 vs. September 30, 2016~~
The 37% increase in net sales was almost entirely due to the pass through of higher styrene prices, which contributed to 33% of the increase. A favorable currency impact increased net sales by 4% as the euro strengthened in comparison to the U.S. dollar on a quarter-to-date basis.
41
~~Table of Contents~~
The increase in Adjusted EBITDA was primarily due to higher styrene margin due to unplanned industry production outages, including the impact of Hurricane Harvey, which resulted in a $33.1 million increase in Adjusted EBITDA, slightly offset by a $1.4 million decrease due to higher maintenance-related fixed costs.
~~Nine Months Ended - September 30, 2017 vs. September 30, 2016~~
The 32% increase in net sales was almost entirely due to the pass through of higher styrene prices, which contributed to 30% of the increase. Higher styrene-related sales volume also resulted in a 3% increase in net sales.
The increase in Adjusted EBITDA was primarily due to higher margins as a result of favorable market conditions, which resulted in a 38% increase in Adjusted EBITDA, slightly offset by a 7% decrease due to higher maintenance-related fixed costs.
~~Americas Styrenics Segment~~
The Americas Styrenics segment consists solely of the operations of our 50%-owned joint venture, Americas Styrenics, a producer of both styrene monomer and polystyrene in North America. Styrene monomer is a basic building block of plastics and a key input to many of the Company’s products, as well as a key raw material for the production of polystyrene. Major applications for the polystyrene products Americas Styrenics produces include appliances, food packaging, food service disposables, consumer electronics and building and construction materials.

Three Months Ended

Nine Months Ended

September 30,

September 30,

(in millions)


2017


2016


% Change

2017


2016

% Change

Adjusted EBITDA*

$
43.8

$
34.3

28
%

$
92.2

$
104.9


(12)
%

*The results of this segment are comprised entirely of earnings from Americas Styrenics, our equity method investment. As such, Adjusted EBITDA related to this segment is included within “Equity in earnings of unconsolidated affiliates” in the consolidated statements of operations.
~~Three Months Ended - September 30, 2017 vs. September 30, 2016~~
The increase in Adjusted EBITDA was primarily due to higher styrene sales volume, including impacts from a stronger export market, as well as higher styrene margin as a result of unplanned industry supply outages, including the impact of Hurricane Harvey, which was offset by lower polystyrene margin.
~~Nine Months Ended – September 30, 2017 vs. September 30, 2016~~
The decrease in Adjusted EBITDA was primarily due to the planned first quarter styrene outage at the Americas Styrenics St. James, LA facility, which was extended in order to complete repairs on critical equipment. The facility came back online at full production in early April 2017. As a result of this extended outage, the Company incurred an unfavorable impact of approximately $23 million to Adjusted EBITDA.
~~Non-GAAP Performance Measures~~
~~We present Adjusted EBITDA as a non-GAAP financial performance measure, which we define as income~~ from continuing operations ~~before interest expense, net; provision~~ for ~~income taxes; depreciation and amortization expense; loss on extinguishment~~the six months ended June 30, 2020, potential shares related to equity-based awards have been excluded from the calculation of diluted EPS, as doing so would be anti-dilutive.

lder

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Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

2021 Year-to-Date Highlights

During the three and six months ended June 30, 2021, Trinseo recognized net income from continuing operations of $133.0 million and $198.8 million, respectively, and Adjusted EBITDA of $239.1 million and $423.4 million, respectively, representing very strong performance throughout the first half of the year. Refer to the discussion below for further information and refer to “Non-GAAP Performance Measures” for discussion of our use of non-GAAP measures in evaluating our performance and a reconciliation of these measures. Other highlights for the year are described below.

Acquisition of the Arkema PMMA Business

On May 3, 2021, the Company closed on the previously-announced acquisition of the PMMA and MMA businesses (together, referred to herein as the PMMA business) from Arkema for an initial purchase price consideration of $1,370.7 million, of which $1,369.0 million was paid during the second quarter of 2021, subject to customary working capital and other closing adjustments. The Acquisition was funded primarily using proceeds from new debt financing arrangements as described below. PMMA is a transparent and rigid plastic with a wide range of end uses, and complements Trinseo’s existing offerings across several end markets including automotive, building & construction, medical and consumer electronics. Refer to Note 3 in the condensed consolidated financial statements for further information.

New Financing Arrangements

On March 24, 2021, the Company issued $450.0 million aggregate principal amount of 5.125% senior notes due 2029 (the “2029 Senior Notes”). Further, on May 3, 2021, in conjunction with the closing of the Acquisition, the Company entered into $750.0 million in incremental term loan borrowings (“2028 Term Loan B”) under our existing senior secured credit facility. The net proceeds from the 2029 Senior Notes and the 2028 Term Loan B, as well as available cash, were used to fund the Acquisition. Refer to Note 8 in the condensed consolidated financial statements for further details on these new financing arrangements.

Divestiture of Synthetic Rubber Business

On May 21, 2021, the Company and Synthos S.A. and certain of its subsidiaries (together, “Synthos”) entered into an Asset Purchase Agreement (the “Purchase Agreement”), pursuant to which the Company has agreed to sell our Synthetic Rubber business to Synthos in an all-cash transaction for an aggregate purchase price of $449.4 million, which reflects a reduction of approximately $41.6 million for the assumption of pension liabilities by Synthos, subject to certain adjustments related to working capital and the exercise of certain option rights. The transaction is expected to close in the first half of 2022, subject to customary closing conditions and regulatory approvals. Additionally, Trinseo and Synthos have agreed to enter into a long term supply agreement, in which we will supply Synthos with certain raw materials used in the Synthetic Rubber business as of the date the transaction closes.

As a result of entering into the Purchase Agreement, the assets and liabilities of the Company’s Synthetic Rubber business were classified as held-for-sale during the second quarter of 2021 in the condensed consolidated balance sheets and the associated operating results of the Synthetic Rubber business, net of income tax, have been classified as discontinued operations in the condensed consolidated statements of operations and statements of cash flows for all periods presented. Refer to Note 4 in the condensed consolidated financial statements for further information.

Redomiciliation to Ireland

In April 2021, in the filing of our preliminary proxy statement with the Securities Exchange Commission (“SEC”), we announced our intention to effect a cross-border merger transaction that will, effectively, move the legal domicile of our parent company from Luxembourg to Ireland (the “Redomiciliation”). The Redomiciliation is expected to provide Trinseo with a favorable legal and regulatory infrastructure, while continuing to allow access to financial markets and customers, without impacting our business operations or our shareholders. The Redomiciliation, which received shareholder approval in June 2021, is expected to be completed in the fourth quarter 2021, subject to approval from the High Court of Ireland. Upon completion of the Redomiciliation, each shareholder will own the same number of shares of

36

Table of Contents

the new Irish parent company that such shareholder owned immediately prior to completion of the Redomiciliation. Trinseo will continue to conduct the same business operations as were conducted prior to the Redomiciliation, but with the new Irish entity as the parent company. We expect the ordinary shares of Trinseo PLC to be listed on the New York Stock Exchange (“NYSE”) under the symbol "TSE," the same symbol under which shares in Trinseo S.A. are currently listed. Following the Redomiciliation, we will remain subject to the SEC reporting requirements and the applicable corporate governance rules of the NYSE, and we will continue to report our financial results in U.S. dollars and GAAP.

Entry into Agreement to Acquire Aristech Surfaces

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

Results of Operations

Results of Operations for the Three and Six Months Ended June 30, 2021 and 2020


	Three Months Ended								Six Months Ended
	June 30,								June 30,
(in millions)	2021		%		2020		%		2021		%		2020		%
Net sales	$	1,273.7	100	%	$	534.3	100	%	$	2,259.7	100	%	$	1,297.3	100	%
Cost of sales		1,053.7	83	%		510.9	96	%		1,850.8	82	%		1,216.2	94	%
Gross profit		220.0	17	%		23.4	4	%		408.9	18	%		81.1	6	%
Selling, general and administrative expenses		97.3	8	%		52.9	10	%		153.8	7	%		125.7	10	%
Equity in earnings of unconsolidated affiliates		30.1	2	%		14.4	3	%		53.0	2	%		24.2	2	%
Impairment charges		1.8	—	%		—	—	%		1.8	—	%		10.3	1	%
Operating income (loss)		151.0	11	%		(15.1)	(3)	%		306.3	13	%		(30.7)	(3)	%
Interest expense, net		21.6	2	%		11.7	2	%		33.6	1	%		22.0	2	%
Acquisition purchase price hedge (gain) loss		(33.0)	(3)	%		—	—	%		22.0	1	%		—	—	%
Loss on extinguishment of long-term debt		0.5	—			—	—			0.5	—	%		—	—	%
Other expense, net		5.6	—	%		0.4	—	%		8.0	—	%		1.7	—	%
Income (loss) from continuing operations before income taxes		156.3	12	%		(27.2)	(5)	%		242.2	11	%		(54.4)	(5)	%
Provision for (benefit from) income taxes		23.3	2	%		(53.0)	(10)	%		43.4	2	%		(10.8)	(1)	%
Net income (loss) from continuing operations	$	133.0	10	%	$	25.8	5	%	$	198.8	9	%	$	(43.6)	(4)	%
Net income (loss) from discontinued operations, net of income taxes		18.6	2	%		(154.2)	(29)	%		24.3	1	%		(121.1)	(9)	%
Net income (loss)	$	151.6	12	%	$	(128.4)	(24)	%	$	223.1	10	%	$	(164.7)	(13)	%

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Table of Contents

Three Months Ended – June 30, 2021 vs. June 30, 2020

Net Sales

Of the 138% increase in net sales, 95% was attributable to increased selling prices, mainly due to the pass through of higher raw material costs, 20% was due to the addition of the PMMA business to our portfolio, and 17% was due to increased sales volumes. An additional 6% increase was due to currency impacts as the euro strengthened in comparison to the U.S. dollar during the period.

Cost of Sales

The 106% increase in cost of sales was primarily attributable to a 63% increase in raw material costs, a 21% increase due to the addition of the PMMA business to our portfolio, and a 13% increase in sales volumes. Also contributing to the increase was a 5% increase due to currency impacts. Additionally, there was an increase of $10.1 million, or 2%, related to the amortization of the fair-value step-up to inventory acquired as part of the Acquisition, discussed in Note 3 to the condensed consolidated financial statements.

Gross Profit

The increase in gross profit of 840% was primarily attributable to higher margins, due to strong demand and tight supply in styrene, polystyrene, ABS and polycarbonate, and higher volume, particularly in automotive. See the segment discussion below for further information.

Selling, General and Administrative Expenses (SG&A)

The $44.4 million, or 84%, increase in SG&A was primarily due to the $33.1 million of acquisition transaction and integration costs incurred for the Acquisition during the second quarter of 2021. Also contributing to the increase was a $1.6 million increase in costs associated with the Company’s strategic initiatives.

Equity in Earnings of Unconsolidated Affiliates

The increase in equity earnings of $15.7 million was due to equity earnings from Americas Styrenics, mainly attributable to increased polystyrene sales volume and higher styrene margins in North America.

Impairment Charges

During the three months ended June 30, 2021, the Company recorded impairment charges of $1.8 million related to capital expenditures at the Boehlen styrene monomer facility that were previously determined to be impaired. Refer to Note 11 in the condensed consolidated financial statements for further information.

Interest Expense, Net

The increase in interest expense, net of $9.9 million, or 85%, was primarily attributable to the Company’s issuance of the 2029 Senior Notes in the first quarter of 2021 and the 2028 Term Loan B during the second quarter of 2021. Refer to Note 8 in the condensed consolidated financial statements for further information.

Acquisition Purchase Price Hedge (Gain) Loss

The $33.0 million acquisition purchase price hedge gain for the three months ended June 30, 2021 was due to the change in fair value of the Company’s forward currency hedge arrangement on the euro-denominated purchase price of the Arkema PMMA business.

Other Expense, Net

Other expense, net for the three months ended June 30, 2021 was $5.6 million, which included $1.6 million of expense related to the non-service cost components of net periodic benefit cost and $4.5 million of transfer taxes associated with the Acquisition. These expense amounts were partially offset by foreign exchange transaction gains of $1.0 million, which included $0.6 million of foreign exchange transaction gains primarily from the remeasurement of

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Table of Contents

our euro denominated payables due to the relative changes in rates between the U.S. dollar and the euro during the period, in addition to $0.4 million of gains from our foreign exchange forward contracts, excluding the acquisition purchase price hedge.

Other expense, net for the three months ended June 30, 2020 was $0.4 million, which primarily included $1.1 million of expense related to the non-service cost components of net periodic benefit cost as well as offsetting foreign exchange transaction gains of $0.9 million. Net foreign transaction gains included $9.0 million of gains primarily from the remeasurement of our euro denominated payables due to the relative changes in rates between the U.S. dollar and the euro during the period, partially offset by $8.1 million of losses from our foreign exchange forward contracts.

Provision for (Benefit from) Income Taxes

Provision for income taxes for the three months ended June 30, 2021 totaled $23.3 million, resulting in an effective tax rate of 14.9%. Benefit from income taxes for the three months ended June 30, 2020 totaled $53.0 million, resulting in an effective tax rate of 195.0%.

The increase in provision for income taxes is primarily driven by the $183.5 million increase in income from continuing operations before income taxes.

Net Income (Loss) from Discontinued Operations, Net of Income Taxes

Net income (loss) from discontinued operations, net of tax during the three months ended June 30, 2021 and 2020 was $18.6 million and $(154.2) million, respectively, and was related the results of our Synthetic Rubber business, which were reclassified as discontinued operations for all periods presented in connection with the Company’s entry into an agreement to sell the business during the second quarter of 2021. Refer to Note 4 in the condensed consolidated financial statements for further information.

Six Months Ended – June 30, 2021 vs. June 30, 2020

Net Sales

Of the 74% increase in net sales, 52% was attributable to increased selling prices, mainly due to the pass through of higher raw material costs, 9% was due to increased volumes, and 8% was due to the addition of the PMMA business to our portfolio. An additional 5% increase was due to currency impacts as the euro strengthened in comparison to the U.S. dollar during the period.

Cost of Sales

The 52% increase in cost of sales was primarily attributable to a 28% increase in raw material costs, a 9% increase in volumes, and a 9% increase due to the addition of the PMMA business to our portfolio. Also contributing to the increase was a 4% increase due to currency impacts.

Gross Profit

The increase in gross profit of 404% was primarily attributable to higher margins, due to strong demand and tight supply in styrene, polystyrene, ABS and polycarbonate, and higher volume, particularly in automotive. See the segment discussion below for further information.

Selling, General and Administrative Expenses (SG&A)

The $28.1 million, or 22%, increase in SG&A was primarily due to the $39.1 million of acquisition transaction and integration costs incurred for the Acquisition during 2021. Partially offsetting this increase was a decrease of $17.1 million of advisory and professional fees, mainly related to the Company’s transition of business and technical services from Dow, which was largely completed in the first quarter of 2020.

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Table of Contents

Equity in Earnings of Unconsolidated Affiliates

The increase in equity earnings of $28.8 million was due to equity earnings from Americas Styrenics, mainly attributable to increased sales volume and higher styrene margins in North America.

Impairment Charges

During the six months ended June 30, 2021 and 2020, the Company recorded impairment charges of $1.8 million related to our Boehlen styrene monomer assets. Refer to Note 11 in the condensed consolidated financial statements for further information.

Interest Expense, Net

The increase in interest expense, net of $11.6 million, or 53%, was primarily attributable to the Company’s issuance of the 2029 Senior Notes during the first quarter of 2021 and the 2028 Term Loan B during the second quarter of 2021. Refer to Note 8 in the condensed consolidated financial statements for further information.

Acquisition Purchase Price Hedge (Gain) Loss

The $22.0 million acquisition purchase price hedge loss for the six months ended June 30, 2021 was due to the change in fair value of the Company’s forward currency hedge arrangement on the euro-denominated purchase price of the Arkema PMMA business.

Other Expense, Net

Other expense, net for the six months ended June 30, 2021 was $8.0 million, which included $3.4 million of expense related to the non-service cost components of net periodic benefit cost and $4.5 million of transfer taxes associated with the Acquisition. These expense amounts were partially offset by foreign exchange transaction gains of $0.8 million, which included $19.3 million of foreign exchange transaction losses primarily from the remeasurement of our euro denominated payables due to the relative changes in rates between the U.S. dollar and the euro during the period, offset by $20.1 million of gains from our foreign exchange forward contracts, excluding the acquisition purchase price hedge.

Other expense, net for the six months ended June 30, 2020 was $1.7 million, which included $2.3 million of expense related to the non-service cost components of net periodic benefit cost, partially offset by foreign exchange transaction gains of $0.6 million. Net foreign transaction gains included $5.1 million of losses primarily from the remeasurement of our euro denominated payables due to the relative changes in rates between the U.S. dollar and the euro during the period, offset by $5.7 million of gains from our foreign exchange forward contracts.

Provision for (Benefit from) Income Taxes

Provision for income taxes for the six months ended June 30, 2021 totaled $43.4 million, resulting in an effective tax rate of 17.9%. Benefit from income taxes for the six months ended June 30, 2020 totaled $10.8 million, resulting in an effective tax rate of 19.8%.

The increase in provision for income taxes is primarily driven by the $296.6 million increase in income from continuing operations before income taxes.

Net Income (Loss) from Discontinued Operations, Net of Income Taxes

Net income (loss) from discontinued operations, net of tax during the six months ended June 30, 2021 and 2020 was $24.3 million and $(121.1) million, respectively, and was related the results of our Synthetic Rubber business, which were reclassified as discontinued operations for all periods presented in connection with the Company’s entry into an agreement to sell the business during the second quarter of 2021. Refer to Note 4 in the condensed consolidated financial statements for further information.

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Outlook

Bolstered by favorable market conditions and the acquisition of the PMMA business, which closed on May 3, 2021 as discussed above in “2021 Highlights,” the Company had strong earnings performance in the first half of 2021. We continue to strategically pursue opportunities in higher growth and less cyclical product offerings, including through our ongoing integration of the newly acquired PMMA business into our portfolio and our recently announced entry into an agreement to acquire Aristech Surfaces. Through these actions and our enduring focus on our business excellence program, we are continuing our transformation into a specialty materials and sustainable solutions provider.

Selected Segment Information

The following sections describe net sales, Adjusted EBITDA, and Adjusted EBITDA margin by segment for the three and six months ended June 30, 2021 and 2020. Inter-segment sales have been eliminated. Refer to Note 16 in the condensed consolidated financial statements for further information on our segments, as well as for a detailed definition of Adjusted EBITDA and a reconciliation of income from continuing operations before income taxes to segment Adjusted EBITDA. Beginning in the second quarter of 2021, the Company reported the results of the Synthetic Rubber business, as discontinued operations in the condensed consolidated statement of operations for all periods presented, and therefore, it is no longer presented as a separate reportable segment. Refer to Note 4 in the condensed consolidated financial statements for further information. Additionally, prior period segment amounts herein have been recast in conjunction with the Company’s segment realignment that occurred during the fourth quarter of 2020, as described in Notes 4 and 16 of the condensed consolidated financial statements.

Latex Binders Segment

Our Latex Binders segment produces styrene-butadiene latex (“SB latex”) and other latex polymers and binders primarily for coated paper and packaging board, carpet and artificial turf backings, as well as a broad range of performance latex binders products, including SB latex, styrene-acrylate latex (“SA latex”), and vinylidene chloride latex for coatings, adhesives, sealants, and elastomers (“CASE”) applications.


	Three Months Ended								Six Months Ended
	June 30,								June 30,
($ in millions)	2021			2020			% Change		2021			2020			% Change
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	%

Three Months Ended – June 30, 2021 vs. June 30, 2020

The 89% increase in net sales was primarily due to a 70% increase in pricing from the pass through of raw material costs. Additionally, there was an increase of 13% due to increased sales volume for the period, which was driven by higher sales following headwinds in the prior year from COVID-19, and an increase of 6% due to foreign exchange rate impacts.

The $16.1 million, or 100%, increase in Adjusted EBITDA was primarily due to an increase of $11.5 million, or 72%, attributable to increased sales volume, as noted above. The increase was also due to higher margins of $6.2 million, or 39%, as well as an increase of $2.6 million, or 16%, caused by foreign exchange rate impacts. These increases were partially offset by a decrease of $4.0 million, or 25%, due to higher fixed costs.

Six Months Ended – June 30, 2021 vs. June 30, 2020

The 46% increase in net sales was primarily due to a 39% increase in pricing from the pass through of raw material costs. Additionally, there was an increase of 5% due to foreign exchange rate impacts and an increase of 3% due to increased sales volume for the period, which was attributable to higher sales following headwinds in the prior year from COVID-19.

The $12.3 million, or 34%, increase in Adjusted EBITDA was primarily due to an increase of $14.0 million, or 38%, attributable to increased sales volume, as noted above, as well as an increase of $4.7 million, or 13%, due to

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foreign exchange rate impacts. These increases were partially offset by a decrease from higher fixed costs of $4.4 million, or 12% as well as lower margins of $1.5 million, or 4%, which was a result of unfavorable net timing.

Engineered Materials Segment

Our Engineered Materials segment consists of rigid thermoplastic compounds and blends products sold into high growth and high value applications in markets such as consumer electronics and medical, as well as soft thermoplastic elastomers (“TPEs”) products which are sold into markets such as footwear and automotive. Additionally, following the Acquisition on May 3, 2021, the Engineered Materials segment also includes PMMA and MMA products, which are sold into a variety of applications including automotive, building & construction, medical and consumer electronics.


	Three Months Ended								Six Months Ended
	June 30,								June 30,
($ in millions)	2021			2020			% Change		2021			2020			% Change
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	%

Three Months Ended – June 30, 2021 vs. June 30, 2020

The segment’s quarterly results include two months of the newly acquired PMMA business. This addition resulted in 287% of the 383% increase in net sales. Excluding the PMMA business, sales volume positively impacted net sales by 69% due to COVID-19 impacts during the prior year.

Adjusted EBITDA increased $23.0 million, or 479%, of which 457% can be attributed to the addition of the PMMA business. Excluding the PMMA business, the volume gains from the legacy portion of the business were partially offset by lower margin from higher raw material costs.

Six Months Ended – June 30, 2021 vs. June 30, 2020

The 189% increase in net sales was primarily due to the addition of the PMMA business for two months in the second quarter. Additionally, there was an increase of 8% due to higher pricing as well as an increase of 5% due to foreign exchange rate impacts.

Adjusted EBITDA increased $22.9 million, or 178%, of which 169% can be attributed to the addition of the PMMA business during the second quarter. The remaining favorability is covered by volume gains following negative COVID-19 impacts in the prior year offset by lower margins from higher raw material costs.

Base Plastics Segment

Our Base Plastics segment consists of a variety of compounds and blends, the majority of which are for automotive applications. The segment also includes our acrylonitrile-butadiene-styrene (“ABS”), styrene-acrylonitrile (“SAN”), and polycarbonate (“PC”) businesses.


	Three Months Ended								Six Months Ended
	June 30,								June 30,
($ in millions)	2021			2020			% Change		2021			2020			% Change
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	%

Three Months Ended – June 30, 2021 vs. June 30, 2020

Of the 162% increase in net sales, 109% was due to higher pricing from the pass through of raw material costs and commercial excellence actions. An additional 40% increase was attributable to increased sales volume in applications

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like construction, appliances, and especially in automotive where COVID-19 caused production shutdowns in the prior year, and a 14% increase was due to foreign exchange rate impacts.

The $93.7 million, or 801%, increase in Adjusted EBITDA was primarily due to higher margins of $59.8 million, or 513%, particularly in ABS and polycarbonate products attributable to commercial excellence initiatives as well as tight supply and strong demand. Also contributing was an increase of $23.7 million, or 203%, due to higher sales volume as well as an increase of $10.7 million, or 92%, due to foreign exchange rate impacts.

Six Months Ended – June 30, 2021 vs. June 30, 2020

Of the 78% increase in net sales, 49% was due to higher pricing from the pass through of raw material costs. An additional 19% increase was attributable to higher sales volume in applications like construction and in automotive where COVID-19 caused production shutdowns in the prior year, and a 9% increase was due to foreign exchange rate impacts.

The $132.3 million, or 870%, increase in Adjusted EBITDA was primarily due to higher margins of $76.9 million, or 507%, particularly in ABS and polycarbonate products. Also contributing was an increase of $30.4 million, or 200%, due to higher sales volume, an increase of $19.2 million, or 127%, due to foreign exchange rate impacts, and an increase of $5.8 million, or 39%, due to lower fixed costs primarily from higher fixed cost absorption in comparison to the prior year.

Polystyrene Segment

Our product offerings in our Polystyrene segment include a variety of general purpose polystyrenes (“GPPS”) and polystyrene that has been modified with polybutadiene rubber to increase its impact resistant properties (“HIPS”). These products provide customers with performance and aesthetics at a low cost across applications, including appliances, packaging, including food packaging and food service disposables, consumer electronics, and building and construction materials. In April 2021, the Company announced our plans to build a full commercial scale polystyrene recycling plant in Tessenderlo, Belgium, which is expected to be operational in 2023.


	Three Months Ended								Six Months Ended
	June 30,								June 30,
($ in millions)	2021			2020			% Change		2021			2020			% Change
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	%

Three Months Ended – June 30, 2021 vs. June 30, 2020

Of the 101% increase in net sales, 113% of the increase was due to higher pricing primarily from the pass through of higher styrene costs to our customers. This increase was slightly offset by decreased sales volume of 12%, following the extremely high demand in the prior year related to COVID-19 essential applications such as packaging.

The $36.5 million, or 250%, increase in Adjusted EBITDA was primarily due to higher margins resulting from commercial excellence initiatives and very tight market conditions, which resulted in an increase of $44.4 million, or 305%. These effects were partially offset by a decrease of $4.1 million, or 28%, from lower sales volume, a decrease of $2.2 million, or 15%, from higher fixed costs, and a decrease of $1.6 million, or 11%, due to foreign exchange rate impacts.

Six Months Ended – June 30, 2021 vs. June 30, 2020

Of the 71% increase in net sales, 74% of the increase was due to higher pricing primarily from the pass through of higher styrene costs to our customers. This increase was slightly offset by a 3% decrease in sales volume.

The $72.4 million, or 278%, increase in Adjusted EBITDA was primarily due to higher margins resulting from commercial excellence initiatives, strong market conditions, and favorable net raw material timing, which resulted in an increase of $77.2 million, or 297%. These effects were partially offset by a $2.6 million, or 10%, decrease due to foreign exchange rate impacts and a $2.4 million, or 9%, decrease attributable to lower sales volume.

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Feedstocks Segment

The Feedstocks segment includes the Company’s production and procurement of styrene monomer outside of North America, which is used as a key raw material for the production of polystyrene, expandable polystyrene, SAN resins, SA latex, SB latex, ABS resins, unsaturated polyethylene resins, and styrene-butadiene rubber.


	Three Months Ended								Six Months Ended
	June 30,								June 30,
($ in millions)	2021			2020			% Change		2021			2020			% Change
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)	%

Three Months Ended – June 30, 2021 vs. June 30, 2020

Of the 190% increase in net sales, 184% was due to higher pricing from the pass through of higher styrene prices. This effect was partially offset by a 6% decrease due to lower styrene-related sales volume.

The increase of $43.7 million in Adjusted EBITDA was primarily due to higher styrene margins in Europe from strong demand and tight supply, which resulted in an increase of $47.5 million. Partially offsetting this effect was a decrease of $3.1 million due to foreign exchange rate impacts.

Six Months Ended – June 30, 2021 vs. June 30, 2020

Of the 80% increase in net sales, 83% was due to higher pricing from the pass through of higher styrene prices. This effect was partially offset by a 3% decrease due to lower styrene-related sales volume.

The increase of $106.9 million in Adjusted EBITDA was primarily due to higher styrene margins in Europe from strong demand and tight supply, which resulted in an increase of $114.5 million. Partially offsetting this effect was a decrease of $5.9 million due to foreign exchange rate impacts.

Americas Styrenics Segment

This segment consists solely of the equity earnings from of our 50%-owned joint venture, Americas Styrenics, a producer of both styrene monomer and polystyrene in North America. Styrene monomer is a basic building block of plastics and a key input to many of the Company’s products, as well as a key raw material for the production of polystyrene. Major applications for the polystyrene products Americas Styrenics produces include appliances, food packaging, food service disposables, consumer electronics, and building and construction materials.


	Three Months Ended						Six Months Ended
	June 30,						June 30,
($ in millions)	2021		2020		% Change		2021		2020		% Change
Adjusted EBITDA*	$	30.1	$	14.4	109	%	$	53.0	$	24.2	119	%

*The results of this segment are comprised entirely of earnings from Americas Styrenics, our equity method investment. As such, Adjusted EBITDA related to this segment is included within “Equity in earnings of unconsolidated affiliates” in the condensed consolidated statements of operations.

Three Months Ended – June 30, 2021 vs. June 30, 2020

The increase in Adjusted EBITDA was mainly due to increased polystyrene sales volume and higher styrene margins in North America, primarily attributable to COVID-19 related impacts in the prior year as well as strong demand and styrene industry outages caused by weather related and other events.

Six Months Ended – June 30, 2021 vs. June 30, 2020

The increase in Adjusted EBITDA was mainly due to increased sales volume and higher styrene margins in North America, primarily attributable to strong demand and industry outages caused by weather related and other events.

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Non-GAAP Performance Measures

We present Adjusted EBITDA as a non-GAAP financial performance measure, which we define as income from continuing operations before interest expense, net; provision for income taxes; depreciation and amortization expense; loss on extinguishment of long-term debt; asset impairment charges; gains or losses on the dispositions of businesses and assets; restructuring charges; ~~gains or losses on the dispositions of businesses and assets; restructuring;~~ acquisition related costs and other items. In doing so, we are providing management, investors, and credit rating agencies with an indicator of our ongoing performance and business trends, by removing the impact of transactions and events that we would not consider a part of our core operations.

There are limitations to using the financial performance measures such as Adjusted EBITDA. This performance measure is not intended to represent net income or other measures of financial performance. As such, it should not be used as an alternative to net income as an indicator of operating performance. Other companies in our industry may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use this or similarly-named financial measures that other companies may use, to compare the performance of those companies to our performance. We compensate for these limitations by providing a reconciliation of this performance measure to our net income, which is determined in accordance with GAAP.

Adjusted EBITDA is calculated as follows for the three and six months ended June 30, 2021 and 2020:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in millions)	2021		2020		2021		2020
Net income (loss)	$	151.6	$	(128.4)	$	223.1	$	(164.7)
Net income (loss) from discontinued operations		18.6		(154.2)		24.3		(121.1)
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^(a)	$	216.0	$	8.8	$	337.0	$	16.2
Loss on extinguishment of long-term debt		0.5		—		0.5		—
Net gain on disposition of businesses and assets		—		—		(0.2)		(0.4)
Restructuring and other charges^(b)		6.3		5.4		6.7		7.2
Acquisition transaction and integration net costs^(c)		43.2		(0.4)		49.2		(0.3)
Acquisition purchase price hedge (gain) loss^(d)		(33.0)		—		22.0		—
Asset impairment charges or write-offs^(e)		1.8		—		1.8		10.3
Other items^(f)		4.3		3.0		6.4		21.7
Adjusted EBITDA	$	239.1	$	16.8	$	423.4	$	54.7

(a)

EBITDA is a non-GAAP financial performance measure that we refer to in making operating decisions because we believe it provides our management as well as our investors and credit agencies with meaningful information regarding the Company’s operational performance. We believe the use of EBITDA as a metric assists our board of directors, management and investors in comparing our operating performance on a consistent basis. Other companies in our industry may define EBITDA differently than we do. As a result, it may be difficult to use EBITDA, or similarly-named financial measures that other companies may use, to compare the performance of those companies to our performance. We

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compensate for these limitations by providing ~~a reconciliation~~reconciliations of ~~this performance measure~~our EBITDA results to our net income, which is determined in accordance with GAAP.

~~Adjusted EBITDA is calculated as follows~~

(b)

Restructuring and other charges for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 primarily relate to the employee termination benefit charges incurred in connection with the Company’s transformational restructuring program, announced in the second quarter of 2021. Restructuring and ~~2016, respectively:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

(in millions)

2017

2016

2017

2016

Net income

$
33.2

$
67.3

$
210.7

$
239.8

Interest expense, net

18.4

18.8

55.4

56.5

Provision for income taxes

8.3

16.0

56.4

66.5

Depreciation and amortization

29.2

23.8

80.1

71.8

EBITDA(a)

$
89.1

$
125.9

$
402.6

$
434.6

Loss on extinguishment of long-term debt

65.3

—

65.3

—

Net loss (gain) on disposition of businesses and assets(b)

0.2

0.3

(9.7)

13.2

Restructuring and other charges(c)

1.5

16.8

4.8

18.6

Acquisition transaction and integration costs(d)

3.8

—

4.9

—

Asset impairment charges or write-offs(e)

4.3

—

4.3

—

Other items(f)

1.6

0.3

1.6

2.5

Adjusted EBITDA

$
165.8

$
143.3

$
473.8

$
468.9

~~(a)~~

EBITDA is a non-GAAP financial performance measure that we refer to in making operating decisions because we believe it provides our management as well as our investors and credit agencies with meaningful information regarding the Company’s operational performance. We believe the use of EBITDA as a metric assists our board of directors, management and investors in comparing our operating performance on a consistent basis. Other companies in our industry may define EBITDA differently than we do. As a result, it may be difficult to use EBITDA, or similarly-named financial measures that other companies may use, to compare the performance of those companies to our performance. We compensate for these limitations by providing reconciliations of our EBITDA results to our net income, which is determined in accordance with GAAP.

~~(b)~~

Net gain on disposition of businesses and assets during the nine months ended September 30, 2017 relates primarily to the sale of our 50% share in Sumika Styron Polycarbonate to Sumitomo Chemical Company Limited, for which the Company recorded a gain on sale of $9.3 million during the period. Refer to Note 3 in the condensed consolidated financial statements for further information. During the nine months ended September 30, 2016, the Company recorded an impairment charge for the estimated loss on sale of our primary operating entity in Brazil, which includes both latex and automotive businesses, of approximately $13.2 million. Refer to Note 13 in the condensed consolidated financial statements for further information.

~~(c)~~

~~Restructuring and other charges for the three and nine months ended September 30, 2017~~other charges for the three and six months ended June 30, 2020 primarily relate to employee termination benefit and decommissioning charges incurred in connection with the decision to cease manufacturing activities at our latex binders manufacturing facility in Livorno, Italy, as well as employee termination benefit charges and contract termination charges related to the upgrade and replacement of the Company’s compounding facility in Terneuzen, The Netherlands. Refer to Note 15 in the condensed consolidated financial statements for further information. Restructuring and other charges for the three and nine months ended September 30, 2016 relate primarily to $16.1 million in charges incurred in connection with the Livorno, Italy action noted above, consisting of an impairment charge for unrecoverable net book value of property, plant, and equipment and other assets, as well as employee and contract termination charges. The remaining restructuring charges for the three and nine months ended September 30, 2016 relate to employee termination benefit and decommissioning charges incurred in connection with the Allyn’s Point shutdown within our latex binders business, as well as employee termination benefit charges related to the elimination of certain corporate functions as a result of the sale of our latex and automotive businesses in Brazil.

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~~Note that the accelerated depreciation charges incurred as part of both the upgrade and replacement of the Company’s compounding facility in Terneuzen, The Netherlands~~ as well as ~~the Allyn’s Point shutdown are included within the “Depreciation and amortization” caption above, and therefore are not included as a separate adjustment within this caption.~~

~~(d)~~

~~Acquisition transaction and integration costs for the three and nine months ended September 30, 2017 relate to advisory and professional fees and a non-cash fair value inventory adjustment~~contract termination charges incurred ~~in conjunction with the Company’s acquisition of API Plastics, which closed in July 2017. Refer to Note 13 in the condensed consolidated financial statements for further information.~~

~~(e)~~

~~Asset impairment charges for the three and nine months ended September 30, 2017 relate to the impairment of certain long-lived assets within the Company’s Performance Plastics segment.~~

~~(f)~~

Other items for the three and nine months ended September 30, 2017 primarily relate to fees incurred in conjunction with the Company’s debt refinancing which was completed during the third quarter of 2017. Other items for the three and nine months ended September 30, 2016 primarily relate to fees incurred in conjunction with the Company’s secondary offerings completed during these periods.

~~Liquidity and Capital Resources~~

~~Cash Flows~~

The table below summarizes our primary sources and uses of cash for the nine months ended September 30, 2017 and 2016, respectively. We have derived the summarized cash flow information from our unaudited financial statements.

Nine Months Ended

September 30,

(in millions)

2017

2016

Net cash provided by (used in):



Operating activities

$
194.8

$
324.7

Investing activities

(141.5)

(77.7)

Financing activities

(210.2)

(211.7)

Effect of exchange rates on cash

10.5

(0.3)

Net change in cash and cash equivalents

$
(146.4)

$
35.0

~~Operating Activities~~

~~Net cash provided by operating activities during the nine months ended September 30, 2017 totaled $194.8 million, inclusive of $80.0 million~~ in ~~dividends from Americas Styrenics, as well as dividends from Sumika Styron Polycarbonate, $8.9 million of which were classified as operating activities,~~connection with the ~~remaining $0.9 million classified as investing activities.~~Company’s corporate restructuring program announced in the fourth quarter of 2019. Refer to Note 317 in the condensed consolidated financial statements for further ~~information. Net cash used in operating assets and liabilities~~information regarding restructuring activities.

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(c)

Amounts for the ~~nine~~three months ended ~~September~~June 30, ~~2017 totaled $160.3~~2021 include $18.2 million ~~due primarily~~of acquisition costs, $10.4 million of integration costs, $10.1 million related to ~~increases in accounts receivable~~the amortization of ~~$92.8~~the fair-value step-up to inventory, and $4.5 million of transfer taxes associated with the Acquisition. Amounts for the six months ended June 30, 2021 include $19.8 million of acquisition costs, $14.8 million of integration costs, $10.1 million related to the amortization of the fair-value step-up to inventory, and ~~inventories~~$4.5 million of ~~$57.3 million, respectively. The increases in accounts receivable~~transfer taxes associated with the Acquisition. Refer to Note 3 for further information.

(d)

Acquisition purchase price hedge (gain) loss for the three and ~~inventories were primarily~~six months ended June 30, 2021 was due to ~~increased raw material prices.~~

~~Net cash provided by operating activities during~~ the ~~nine months ended September 30, 2016 totaled $324.7 million, due primarily to earnings for~~change in fair value of the ~~period. Also impacting cash flows from operating activities for~~Company’s forward currency hedge arrangement on the ~~period was $100.0 million in dividends from Americas Styrenics. Net cash used in operating assets and liabilities for~~euro-denominated purchase price of the nine months ended September 30, 2016 totaled $38.0 million, due primarily to increases in accounts receivable of $30.2 million and inventories of $27.6 million, respectively, offset by an increase in accounts payable and other current liabilities of $23.1 million. The increase in accounts receivable was primarily due to higher net sales during the third quarter of 2016, compared to the fourth quarter of 2015, due primarily to increasing raw material prices as well as volume increases. The increase in inventory was primarily due to increasing raw material prices, and the increase in accounts payable and other current liabilities is primarily due to timing of payments, as well as increases in prices for raw materials purchases.

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~~Investing Activities~~

Net cash used in investing activities for the nine months ended September 30, 2017 totaled $141.5 million, resulting from capital expenditures of $108.9 million and cash paid to acquire API Plastics of $79.7 million during the period, net of cash acquired (referArkema PMMA business. Refer to Note 1310 in the condensed consolidated financial statements for further ~~information). Offsetting these uses of cash were primarily proceeds received of $42.1 million from~~information.

(e)

Asset impairment charges or write-offs for the ~~sale~~three and six months ended June 30, 2021 and the six months ended June 30, 2020 relate to the impairment of the Company’s ~~50% share~~styrene monomer assets in ~~Sumika Styron Polycarbonate to Sumitomo Chemical Company Limited.~~

Net cash used in investing activities for the nine months ended September 30, 2016 totaled $77.7 million, primarily from capital expenditures of $82.7 million during the period, a significant portion of which related to our project to upgrade our legacy ERP environment to the latest version of SAP. Partially offsetting these capital expenditures were dividends received from Sumika Styron Polycarbonate during the period, $4.8 million of which were classified as investing activities on the condensed consolidated statement of cash flows, with the remaining $1.4 million classified as operating activities.

~~Financing Activities~~

Net cash used in financing activities during the nine months ended September 30, 2017 totaled $210.2 million. The most significant activity during the period related to the third quarter debt refinancing, which included net proceeds of $1,200.0 million from the issuance of our 2024 Term Loan B and our 2025 Senior Notes, offset by the retirement of our existing 2021 Term Loan B and 2022 Senior Notes totaling $1,238.5 million and deferred financing fees paid in conjunction with the refinancing of $19.2 million. As a result of the redemption of the 2022 Senior Notes, the Company paid a call premium of $53.0 million during the period. Additionally, the Company paid $65.2 million related to the repurchase of ordinary shares and also paid $42.2 million of dividends. Partially offsetting these uses of cash was $8.3 million of proceeds received from the exercise of option awards.

Net cash used in financing activities during the nine months ended September 30, 2016 totaled $211.7 million. This activity was primarily due to $194.1 million of payments related to the repurchase of ordinary shares during the period and $13.9 million of dividends paid, as well as $3.8 million of principal payments related to our 2021 Term Loan B.

~~Free Cash Flow~~

We use Free Cash Flow as a non-GAAP measure to evaluate and discuss the Company’s liquidity position and results. Free Cash Flow is defined as cash from operating activities, less capital expenditures. We believe that Free Cash Flow provides an indicator of the Company’s ongoing ability to generate cash through core operations, as it excludes the cash impacts of various financing transactions as well as cash flows from business combinations that are not considered organic in nature. We also believe that Free Cash Flow provides management and investors with a useful analytical indicator of our ability to service our indebtedness, pay dividends (when declared), and meet our ongoing cash obligations.

Free Cash Flow is not intended to represent cash flows from operations as defined by GAAP, and therefore, should not be used as an alternative for that measure. Other companies in our industry may define Free Cash Flow differently than we do. As a result, it may be difficult to use this or similarly-named financial measures that other companies may use, to compare the liquidity and cash generation of those companies to our own. We compensate for these limitations by providing a reconciliation to cash provided by operating activities, which is determined in accordance with GAAP.

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Nine Months Ended

September 30,

(in millions)

2017

2016

Cash provided by operating activities

$
194.8

$
324.7

Capital expenditures

(108.9)

(82.7)

Free Cash Flow

$
85.9

$
242.0

~~Refer to the discussion above for significant impacts to cash provided by operating activities for the nine months ended September 30, 2017 and 2016, respectively.~~

~~Capital Resources and Liquidity~~

We require cash principally for day-to-day operations, to finance capital investments and other initiatives, to purchase materials, to service our outstanding indebtedness, and to fund dividend payments to our shareholders. Our sources of liquidity include cash on hand, cash flow from operations, and amounts available under the Senior Credit Facility and the Accounts Receivable Securitization Facility.

As of September 30, 2017 and December 31, 2016, we had $1,201.5 million and $1,187.4 million, respectively, in outstanding indebtedness and $949.8 million and $890.7 million, respectively, in working capital. In addition, as of September 30, 2017 and December 31, 2016, we had $106.9 million and $88.8 million of foreign cash and cash equivalents on our balance sheet, respectively, all of which is readily convertible into other foreign currencies, including the U.S. dollar. Our intention is not to permanently reinvest our foreign cash and cash equivalents. Accordingly, we record deferred income tax liabilities related to the unremitted earnings of our subsidiaries.

~~As noted in Note 5 of the condensed consolidated financial statements, the Company completed a debt refinancing during the third quarter of 2017, the results of which are reflected in the table below.~~ ~~For definitions of capitalized terms not included herein, refer to the Annual Report~~.

The following table outlines our outstanding indebtedness as of September 30, 2017 and December 31, 2016 and the associated interest expense, including amortization of deferred financing fees. Effective interest rates for the borrowings included in the table below are for the nine months ended September 30, 2017 and the year ended December 31, 2016. Note that the effective interest rates below exclude the impact of deferred financing fee amortization.

As of and for the Nine Months Ended

As of and for the Year Ended

September 30, 2017

December 31, 2016

Effective

Effective

Interest

Interest

Interest

Interest

(dollars in millions)

Balance

Rate

Expense

Balance

Rate

Expense

Senior Credit Facility

2024 Term Loan B

$
700.0

3.7
%
$
2.0

$
—

—

$
—

2022 Revolving Facility

—

—

0.2

—

—

—

2020 Senior Credit Facility







2021 Term Loan B

—

4.3
%

15.9

491.5

4.3
%

23.3

2020 Revolving Facility

—

—

2.3

—

—

3.3

2025 Senior Notes

500.0

5.4
%

2.6

—

—

—

2022 Senior Notes

USD Notes

—

6.8
%

14.4

300.0

6.8
%

21.1

Euro Notes

—

6.4
%

18.8

394.3

6.4
%

27.4

Accounts Receivable Securitization Facility

—

—

2.2

—

—

3.3

Other indebtedness

1.5

4.8
%

0.1

1.6

4.8
%

0.1

Total

$
1,201.5

$
58.5

$
1,187.4

$
78.5

~~Our Senior Credit Facility includes the 2022 Revolving Facility, which matures in September 2022, and has a~~

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borrowing capacity of $375.0 million. As of September 30, 2017, the Company had no outstanding borrowings, and had $357.2 million (net of $17.8 million outstanding letters of credit) of funds available for borrowing under the 2022 Revolving Facility. Further, as of September 30, 2017, the Borrowers are required to pay a quarterly commitment fee in respect of any unused commitments under the 2022 Revolving Facility equal to 0.375% per annum.

We also continue to maintain our Accounts Receivable Securitization Facility set to mature in May 2019, under which our borrowing capacity is $200.0 million. As of September 30, 2017, there were no amounts outstanding under the Accounts Receivable Securitization Facility, with approximately $148.8 million of funds available for borrowing under this facility, based on the pool of eligible accounts receivable.

Our other borrowing arrangements include our $700.0 million 2024 Term Loan B (maturing in September 2024), which requires scheduled quarterly payments in amounts equal to 0.25% of the original principal, and our 2025 Senior Notes (maturing in September 2025), which totaled $500.0 million as of September 30, 2017.

The Senior Credit Facility and Indenture contain certain customary affirmative, negative and financial covenants. As of September 30, 2017, the Company was in compliance with all of these debt covenant requirements.Boehlen, Germany. Refer to Note ~~5 of~~11 in the condensed consolidated financial statements for further ~~information on~~information.

(f)

Other items for the ~~details~~three and six months ended June 30, 2021 primarily relate to fees incurred in conjunction with certain of ~~these covenant requirements.~~the Company’s strategic initiatives. Other items for the three and six months ended June 30, 2020 primarily relate to advisory and professional fees incurred in conjunction with our initiative to transition business services from Dow, including certain administrative services such as accounts payable, logistics, and IT services, which was substantially completed in 2020, as well as fees incurred in conjunction with certain of the Company’s strategic initiatives.

Liquidity and Capital Resources

Cash Flows

The table below summarizes our primary sources and uses of cash for the six months ended June 30, 2021 and 2020. We have derived the summarized cash flow information from our unaudited financial statements.


	Six Months Ended
	June 30,
(in millions)	2021		2020
Net cash provided by (used in):
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
Effect of exchange rates on cash		(1.1)		(0.5)
Net change in cash, cash equivalents, and restricted cash	$	(221.7)	$	125.1

Operating Activities

Net cash provided by operating activities from continuing operations during the six months ended June 30, 2021 totaled $44.3 million, driven by very strong earnings during the quarter, and inclusive of dividends received from Americas Styrenics of $40.0 million. Partially offsetting these factors was a $209.0 million reduction in operating cash from net working capital changes during the period, which were primarily attributable to significant increases in raw material costs, including the cost of benzene in Europe nearly doubling from February to May, and an increase in inventory ahead of third quarter planned maintenance. Net cash used in operating activities from discontinued operations during the six months ended June 30, 2021 totaled $14.3 million, which was also primarily attributable to raw material cost increases and higher inventory related to discontinued operations.

Net cash provided by operating activities from continuing operations during the six months ended June 30, 2020 totaled $118.4 million. This increase in cash was driven by a $134.0 million increase in operating cash generated from

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net working capital changes during the period, which were primarily attributable to the Company’s liquidity-focused actions during the period, including reduced capital spending, operating expenses, and working capital, as well as the impact of lower raw material prices and sales volumes. Net cash used in operating activities from discontinued operations during the six months ended June 30, 2020 totaled $42.6 million, and was also driven by the Company’s liquidity-focused actions during the period.

Investing Activities

Net cash used in investing activities from continuing operations during the six months ended June 30, 2021 totaled $1,403.1 million, which was primarily attributable to net cash paid for asset or business acquisitions of $1,358.6 million (see Note 3), capital expenditures of $30.0 million, and payments for the settlement of hedging instruments of $14.7 million (related to the acquisition purchase price hedge – see Note 10). Net cash used in investing activities from discontinued operations during the six months ended June 30, 2021 totaled $2.4 million, which was entirely attributable to capital expenditures.

Net cash provided by investing activities from continuing operations during the six months ended June 30, 2020 totaled $25.4 million, primarily resulting from proceeds from the settlement of hedging instruments of $51.6 million (see Note 10) as well as proceeds from the sale of businesses and other assets (primarily our land in Livorno, Italy that was sold in January 2020) of $11.9 million. These impacts were partially offset by capital expenditures of $38.2 million, which management has taken specific actions to control and reduce in response to COVID-19. Net cash used in investing activities from discontinued operations during the six months ended June 30, 2020 totaled $10.0 million, which was entirely attributable to capital expenditures.

Financing Activities

Net cash provided by financing activities during the six months ended June 30, 2021 totaled $1,154.9 million. This activity was primarily due to $746.3 million in proceeds from the issuance of the 2028 Term Loan B, $450.0 million in proceeds from the issuance of the 2029 Senior Notes, and $10.5 million in proceeds from exercise of option awards. This activity was partially offset by $35.0 million of deferred financing fees primarily related to the issuance of our 2028 Term Loan, $6.4 million of dividend payments, $6.2 million of net repayments of short-term borrowings, and $3.5 million of net principal payments related to our 2024 Term Loan B during the period.

Net cash provided by financing activities during the six months ended June 30, 2020 totaled $34.4 million. This activity was primarily due to proceeds of $100.0 million from the draw on the Company’s 2022 Revolving Facility. This was partially offset by $25.0 million of payments related to the repurchase of ordinary shares, $31.2 million of dividends paid, $5.4 million of net repayments of short-term borrowings, and $3.4 million of net principal payments related to our 2024 Term Loan B during the period.

Free Cash Flow

We use Free Cash Flow as a non-GAAP measures to evaluate and discuss the Company’s liquidity position and results. Free Cash Flow is defined as cash from operating activities, less capital expenditures. We believe that Free Cash Flow provides an indicator of the Company’s ongoing ability to generate cash through core operations, as it excludes the cash impacts of various financing transactions as well as cash flows from business combinations that are not considered organic in nature. We also believe that Free Cash Flow provides management and investors with useful analytical indicator of our ability to service our indebtedness, pay dividends (when declared), and meet our ongoing cash obligations.

Free Cash Flow is not intended to represent cash flows from operations as defined by GAAP, and therefore, should not be used as an alternative for that measure. Other companies in our industry may define Free Cash Flow differently than we do. As a result, it may be difficult to use this or similarly-named financial measures that other companies may use, to compare the liquidity and cash generation of those companies to our own. We compensate for these limitations by providing a reconciliation to cash provided by operating activities from continuing operations, which is determined in accordance with GAAP.

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	Six Months Ended
	June 30,
(in millions)	2021		2020
Cash provided by operating activities	$	30.0	$	75.8
Capital expenditures		(32.4)		(48.2)
Free Cash Flow	$	(2.4)	$	27.6

Refer to the discussion above for significant impacts to cash provided by operating activities for the six months ended June 30, 2021 and 2020.

Capital Resources and Liquidity

We require cash principally for day-to-day operations, to finance capital investments and other initiatives, to purchase materials, to service our outstanding indebtedness, and to fund the return of capital to shareholders via dividend payments and ordinary share repurchases, when deemed appropriate. Our sources of liquidity include cash on hand, cash flow from operations from continuing operations, and amounts available under the Senior Credit Facility and the Accounts Receivable Securitization Facility (discussed further below).

As of June 30, 2021 and December 31, 2020, we had $2,378.1 million and $1,187.3 million, respectively, in outstanding indebtedness and $1,001.5 million and $905.7 million, respectively, in working capital (calculated as current assets from continuing operations less current liabilities from continuing operations). In addition, as of June 30, 2021 and December 31, 2020, we had $100.6 million and $172.8 million, respectively, of foreign cash and cash equivalents on our balance sheet, outside of our country of domicile of Luxembourg, all of which is readily convertible into other foreign currencies, including the U.S. dollar. Our intention is not to permanently reinvest our foreign cash and cash equivalents. Accordingly, we record deferred income tax liabilities related to the unremitted earnings of our subsidiaries.

As discussed in Note 8 of the condensed consolidated financial statements, the Company completed a senior note issuance during the first quarter of 2021, and both borrowed a new tranche of term loans and refinanced our revolving credit facility during the second quarter of 2021. The results of these new financings are reflected in the table below.

The following table outlines our outstanding indebtedness as of June 30, 2021 and December 31, 2020 and the associated interest expense, including amortization of deferred financing fees and debt discounts. Effective interest rates for the borrowings included in the table below exclude the impact of deferred financing fee amortization, certain other fees charged to interest expense (such as fees for unused commitment fees during the period), and the impacts of derivatives designated as hedging instruments. For definitions of capitalized terms not included herein, refer to our Annual Report on Form 10-K (“Annual Report”).

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	As of and for the Six Months Ended						As of and for the Year Ended
	June 30, 2021						December 31, 2020
			Effective						Effective
			Interest		Interest				Interest		Interest
($ in millions)	Balance		Rate		Expense		Balance		Rate		Expense
Senior Credit Facility
2024 Term Loan B	$	673.9	2.1	%	$	10.3	$	677.3	2.6	%	$	23.3
2028 Term Loan B		746.3	2.6	%		3.7		—	—			—
2026 Revolving Facility		—	—	%		1.2		—	—			3.7
2029 Senior Notes		450.0	5.1	%		6.6		—	—			—
2025 Senior Notes		500.0	5.4	%		10.4		500.0	5.4	%		19.5
Accounts Receivable Securitization Facility		—	—			0.8		—	—			1.5
Other indebtedness*		7.9	2.5	%		—		10.0	2.4	%		0.1
Total	$	2,378.1			$	33.0	$	1,187.3			$	48.1

*For the six months ended June 30, 2021, interest expense on “Other indebtedness” totaled less than $0.1 million.

As of June 30, 2021, our Senior Credit Facility included the 2026 Revolving Facility, which is scheduled to mature in May 2026 and had a borrowing capacity of $375.0 million. As of June 30, 2021, the Company had $360.4 million of funds available for borrowing (net of $14.6 million outstanding letters of credit) under the 2026 Revolving Facility. Further, as of June 30, 2021, the Company is required to pay a quarterly commitment fee in respect of any unused commitments under the 2026 Revolving Facility equal to 0.375% per annum.

Also included in our Senior Credit Facility is our 2024 Term Loan B (with original principal of $700.0 million, maturing in September 2024), and our 2028 Term Loan B (with original principal of $750.0 million, maturing in May 2028), each of which requires scheduled quarterly payments in amounts equal to 0.25% of the original principal. The stated interest rate on our 2024 Term Loan B is London Interbank Offered Rate (“LIBOR”) plus 2.00% (subject to a 0.00% LIBOR floor). The stated interest rate on our 2028 Term Loan B is LIBOR plus 2.50% (subject to a 0.00% LIBOR floor). The Company made net principal payments of $3.5 million on the 2024 Term Loan B during the six months ended June 30, 2021, with an additional $14.5 million of scheduled future payments classified within current debt on the Company’s condensed consolidated balance sheet as of June 30, 2021 related to both the 2024 Term Loan B and 2028 Term Loan B.

Our 2025 Senior Notes, as issued under the Indenture executed in 2017, include $500.0 million aggregate principal amount of 5.375% senior notes that mature on September 1, 2025. Interest on the 2025 Senior Notes is payable semi-annually on May 3 and November 3 of each year, which commenced on May 3, 2018. These Notes may be redeemed prior to their maturity at the option of the Company under certain circumstances at specific redemption prices. Refer to our Annual Report for further information.

Our 2029 Senior Notes, as issued under the Indenture executed in 2021, include $450.0 million aggregate principal amount of 5.125% senior notes that mature on April 1, 2029. Interest on the 2029 Senior Notes is payable semi-annually on February 15 and August 15 of each year, which commences on August 15, 2021. These Notes may be redeemed prior to their maturity at the option of the Company under certain circumstances at specific redemption prices.

We continue to maintain our Accounts Receivable Securitization Facility which has a borrowing capacity of $150.0 million and matures in September 2021. As of June 30, 2021, there were no amounts outstanding under this facility, and the Company had approximately $150.0 million of accounts receivable available to support this facility, based on the pool of eligible accounts receivable.

Our ability to raise additional financing and our borrowing costs may be impacted by short- and long-term debt ratings assigned by independent rating agencies, which are based, in significant part, on our performance as measured by certain credit metrics such as interest coverage and leverage ratios.

We and our subsidiaries, affiliates or significant shareholders may from time to time seek to retire or purchase our outstanding debt through cash purchases in the open market, privately negotiated transactions, exchange transactions or

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otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Trinseo Materials Operating S.C.A. and Trinseo Materials Finance, Inc. (the “Issuers” of our 2029 Senior Notes and 2025 Senior Notes and “Borrowers” under our Senior Credit Facility) are dependent upon the cash generation and receipt of distributions and dividends or other payments from our subsidiaries and joint venture in order to satisfy their debt obligations. There are no known significant restrictions by third parties on the ability of subsidiaries of the Company to disburse or dividend funds to the Issuers and the Borrowers in order to satisfy these obligations. However, as the Company’s subsidiaries are located in a variety of jurisdictions, the Company can give no assurances that our subsidiaries will not face transfer restrictions in the future due to regulatory or other reasons beyond our control.

The Senior Credit Facility and Indentures also limit the ability of the Borrowers and Issuers, respectively, to pay dividends or make other distributions to Trinseo S.A., which could then be used to make distributions to shareholders. During the six months ended June 30, 2021, the Company declared dividends of $0.16 per ordinary share, totaling $6.4 million, of which $4.3 million was accrued as of June 30, 2021 and which was paid in July 2021. These dividends are well within the available capacity under the terms of the restrictive covenants contained in the Senior Credit Facility and Indentures. Further, additional capacity continues to be available under the terms of these covenants to support expected future dividends to shareholders, should the Company continue to declare them.

Our ability to generate cash from operations to pay our indebtedness and meet other liquidity needs is subject to certain risks described herein and under Part I, Item 1A-“Risk Factors” of our Annual Report. As of June 30, 2021, we were in compliance with all the covenants and default provisions under our debt agreements. Refer to our Annual Report for further information on the details of the covenant requirements.

Contractual Obligations and Commercial Commitments

During the first and second quarter of 2021, the Company entered into new financing arrangements in connection with our acquisition of Arkema’s PMMA business, including the $450.0 million 2029 Senior Notes issued on March 24, 2021 and the $750.0 million 2028 Term Loan B entered into on May 3, 2021 upon closing of the transaction. Refer to Notes 3 and 8 of the condensed consolidated financial statements and the “Capital Resources and Liquidity” section of Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations for details on these contractual obligations entered into subsequent to December 31, 2020.

Additionally during the second quarter of 2021, the Company entered into a long-term contract to purchase benzene directly from Dow Europe’s facilities for use at the Company’s Terneuzen location. This contract has a term of two years with an automatic two-year renewal provision, and contains annual minimum purchase and maximum sale volume commitments.

There have been no other material revisions outside the ordinary course of business to our contractual obligations as described within “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations and Commercial Commitments” within our Annual Report.

Critical Accounting Policies and Estimates

Our unaudited interim condensed consolidated financial statements are based on the selection and application of significant accounting policies. The preparation of unaudited interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenues and expenses at the date of and during the reporting period. Actual results could differ from those estimates. However, we are not currently aware of any reasonably likely events or circumstances that would result in materially different results.

We describe our significant accounting policies in Note 2, Basis of Presentation and Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements included in our Annual Report, while we discuss our critical accounting policies and estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within our Annual Report. There have been no material revisions to the significant accounting policies or critical accounting policies and estimates as filed in our Annual Report.

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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Recent Accounting Pronouncements

We describe the impact of recent accounting pronouncements in Note 2 of our condensed consolidated financial statements, included elsewhere within this Quarterly Report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As discussed in “Quantitative and Qualitative Disclosures About Market Risk” within our Annual Report, we are exposed to changes in interest rates and foreign currency exchange rates as well as changes in the prices of certain commodities that we use in production. There have been no material changes in our exposure to market risks from the information provided within our Annual Report.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining internal controls designed to provide reasonable assurance that information required to be disclosed by us in our reports that we file or submit under the Exchange Act (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, with the participation of our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2021. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this Quarterly Report were effective to provide the reasonable level of assurance described above.

Changes in Internal Control over Financial Reporting

As discussed in Note 3 to the condensed consolidated financial statements, in May 2021, the Company completed the acquisition of the PMMA business from Arkema. As permitted by the SEC, management has elected to exclude this acquisition from its assessment of the effectiveness of its internal control over financial reporting as of December 31, 2021. The Company began to integrate the PMMA business into our internal control over financial reporting structure subsequent to the acquisition date and expects to complete this integration within one year of the acquisition.

Aside from the PMMA business changes discussed above, there have been no additional changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended June 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

From time to time we may be subject to various legal claims and proceedings incidental to the normal conduct of business, relating to such matters as product liability, antitrust, competition, waste disposal practices, release of chemicals into the environment and other matters that may arise in the ordinary course of our business. We currently believe that there is no litigation pending that is likely to have a material adverse effect on our business. Regardless of the outcome, legal proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

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Item 1A. Risk Factors

Our business faces various risks. Certain important factors may have a material adverse effect on our business prospects, financial condition and results of operations, and you should carefully consider them. Accordingly, in evaluating our business, we encourage you to consider the risk factors related to our ordinary shares as well those risk factors related to our business and industry which have been previously disclosed in Part 1, Item 1A of our Annual Report for the year ended December 31, 2020. Certain material updates to these risk factors are included below.

We encourage you to consider these risks, in their entirety, in addition to other information contained in or incorporated by reference into this Quarterly Report and our other public filings with the SEC. Other events that we do not currently anticipate or that we currently deem immaterial may also affect our business, prospects, financial condition and results of operations. Production at our manufacturing facilities could be disrupted for a variety of reasons. Disruptions could expose us to significant losses or liabilities.

Risks Related to Acquisitions and Dispositions

We may fail to realize the anticipated benefits of the Acquisition or such benefits may take longer to realize than expected. We may also encounter difficulty integrating the PMMA business into our operations.

On May 3, 2021, we announced the closing of our acquisition from Arkema S.A. (“Arkema”) of its polymethyl methacrylates (“PMMA”) and activated methyl methacrylates (“MMA”) businesses (together, referred to herein as the “PMMA business”) for a purchase price of €1.137 billion (the “Acquisition”).

Our ability to realize the anticipated benefits of the Acquisition will depend on our ability to integrate the PMMA business into ours. Combining these businesses will be a complex and time-consuming process. As a result, we expect to devote significant attention and resources preparing for and then integrating the operations, systems, processes, procedures and personnel of the acquired PMMA business. This integration process may be disruptive to our ongoing business, and, if we fail to effectively integrate, or if integration takes longer or is more costly than expected, we could lose or diminish the expected benefits of the Acquisition. Even if we are able to integrate the PMMA business successfully, this integration may not result in the realization of the synergies and benefits that we currently expect, nor can we give assurances that these benefits will be achieved when expected or at all.

We also face risks that we fail to meet our financial and strategic goals, due to, among other things, inability to grow and manage growth profitability, maintain relationships with customers or retain key employees. We may also be adversely affected by other economic, business, and/or competitive factors which may not have existed at the time of closing. Such conditions could materially adversely impact our business and results of operations.

We face risks concerning our proposed acquisition of Aristech Surfaces, and may fail to realize the anticipated benefits of the Aristech Surfaces acquisition.

In July 2021, we entered into an agreement to purchase the issued and outstanding membership interests of Aristech Surfaces. The acquisition is expected to close in 2021, subject to customary closing conditions including regulatory approvals. It is possible that certain events may prevent, delay or otherwise materially adversely affect the completion of the acquisition. If the acquisition does not receive the required regulatory approvals, if a material adverse change occurs, or if another event occurs that delays or prevents the acquisition, our ability to complete the acquisition could materially impacted and, to the extent that the current price of the Company’s common shares reflects an assumption that the acquisition will be completed, the price of the Company’s common shares could be negatively impacted.

If the acquisition of Aristech Surfaces is completed, we may face difficulties realizing the anticipated benefits of the acquisition. We may fail to realize anticipated cost and revenue synergies from the transaction, reach expected margins, and we may not be successful in expanding or growing the business profitability. We may also fail to maintain relationships with customers or retain and integrate the employees of Aristech Surfaces. Aristech Surfaces may also be adversely affected by other economic, business, and/or competitive factors which may not exist at the time of closing. Such conditions could materially adversely impact our business and results of operations.

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Risks Related to Our Indebtedness

Our current and future level of indebtedness of our subsidiaries, including the incurrence of additional indebtedness to fund the Acquisition, could adversely affect our financial condition.

As of December 31, 2020, our indebtedness totaled approximately $1.2 billion. Additionally, as of December 31, 2020, we had $360.0 million (net of $15.0 million outstanding letters of credit) of funds available for borrowings under our Senior Credit Facility, as well as $150.0 million of funds available for borrowings under our accounts receivable securitization facility (the “Accounts Receivable Securitization Facility”).

Additionally, in connection with the Acquisition, our Trinseo Materials Operating S.C.A. and Trinseo Materials Finance Inc. subsidiaries issued $450.0 million principal amount of 5.125% Senior Notes due 2029 (the “2029 Senior Notes”) and borrowed an additional $750.0 million in term loans under our Senior Credit Facility, the proceeds of which were used to pay a portion of the purchase price of the Acquisition.

Our current level of indebtedness, as well as future borrowings or other indebtedness, could have significant consequences for our business, including but not limited to:

●

increasing our vulnerability to economic downturns and adverse industry, competitive, or market conditions;

●

requiring a substantial portion of our cash flows from operations to be dedicated to the payment of principal and interest on our ~~performance as measured by certain credit metrics such as interest coverage and leverage ratios.~~

We and our subsidiaries, affiliates or significant shareholders may from time to time seek to retire or purchase our outstanding debt through cash purchases in the open market, privately negotiated transactions, exchange transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Trinseo Materials Operating S.C.A. and Trinseo Materials Finance, Inc. (the “Issuers” of our 2025 Senior Notes and “Borrowers” under our Senior Credit Facility) are dependent upon the cash generation and receipt of distributions and dividends or other payments from our subsidiaries and joint venture in order to satisfy their debt obligations. There are no known significant restrictions by third parties on the ability of subsidiaries of the Company to disburse or dividend funds to the Issuers and the Borrowers in order to satisfy these obligations. However, as the Company’s subsidiaries are located in a variety of jurisdictions, the Company can give no assurances that its subsidiaries will not face transfer restrictions in the future due to regulatory or other reasons beyond our control.

The Senior Credit Facility and Indenture also limit the ability of the Borrowers and Issuers, respectively, to pay dividends or make other distributions to Trinseo S.A., which could then be used to make distributions to shareholders. During the nine months ended September 30, 2017, the Company declared total dividends of $1.02 per ordinary share (totaling $45.8 million), of which $16.8 million remains accrued as of September 30, 2017, the majority of which will be paid in October 2017. These dividends are well within the available capacity under the terms of the restrictive covenants contained in the Senior Credit Facility and Indenture. Further, significant additional capacity continues to be available under the terms of these covenants to support expected future dividends to shareholders, should the Company continue to declare them.

The Company’s cash flow generation in recent years has been strong, with positive cash flows expected to continue for full year 2017. We believe that funds provided by operations, our existing cash and cash equivalent balances, borrowings available under our 2022 Revolving Facility and borrowings available under our Accounts Receivable Securitization Facility will be adequate to meet planned operating and capital expenditures for at least the next 12 months under current operating conditions. Nevertheless,indebtedness, therefore reducing our ability to ~~generate~~use our cash flow to fund capital expenditures and future business opportunities and returning cash to our shareholders in the form of dividends or share repurchases;

●

limiting our ability to obtain additional financing for working capital, capital expenditures, acquisitions, and general corporate or other purposes;

●

compromising our flexibility to capitalize on business opportunities or other strategic acquisitions, and to ~~pay our indebtedness and fund other liquidation needs is subject~~react to ~~certain risks described under “Part I, Item 1A-“Risk Factors” of our Annual Report.~~

~~Contractual Obligations and Commercial Commitments~~

Other than the impact of the Company’s debt refinancing during the third quarter of 2017, which included the issuance of our 2025 Senior Notes and 2024 Term Loan B, accompanied by the retirement of our 2022 Senior Notes and the 2021 Term Loan B (discussed in Note 5 to the condensed consolidated financial statements), there have been no material revisions outside the ordinary course of businesscompetitive pressures, as compared to our ~~contractual obligations as described within “Management’s~~

47

~~Table of Contents~~

~~Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations and Commercial Commitments” within our Annual Report.~~

~~Critical Accounting Policies and Estimates~~

Our unaudited interim condensed consolidated financial statements are based on the selection and application of significant accounting policies. The preparation of unaudited interim condensed consolidated financial statements in conformity with GAAP requires managementcompetitors, or forcing us to make ~~estimates~~nonstrategic divestitures;

●

placing us at a disadvantage compared to other, less leveraged competitors or competitors with comparable debt at more favorable interest rates; and ~~assumptions that affect the reported amounts~~

●

increasing our cost of assets and liabilities and revenues and expenses at the date of and during the reporting period. Actual results could differ from those estimates. However, we are not currently aware of any reasonably likely eventsborrowing.

Although the terms of our senior secured credit agreement (the “Credit Agreement”) governing our senior secured financing facility of up to $1,075.0 million (the “Senior Credit Facility”), and the note indentures governing the 2029 Senior Notes and our 5.375% senior notes due 2025 (the “Indentures”), contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and the indebtedness incurred in compliance with these restrictions could be substantial. Also, we are not prevented from incurring obligations that do not constitute “indebtedness” as defined in the Senior Credit Facility or the Indentures, such as operating leases and trade payables. If new debt is added to our subsidiaries’ current debt levels, the risks related to indebtedness that we now face could intensify.

In addition, a substantial portion of our subsidiaries’ current indebtedness is secured by substantially all of our assets, which may make it more difficult to secure additional borrowings at reasonable costs. If we default or declare bankruptcy, after these obligations are met, there may not be sufficient funds or assets to satisfy our subordinate interests, including those of our shareholders.

The terms of our subsidiaries’ indebtedness may restrict our current and future operations, particularly our ability to respond to change or to take certain actions.

The Indentures and the Credit Agreement governing our Senior Credit Facility contain a number of covenants imposing certain restrictions on our subsidiaries’ businesses. These restrictions may affect our ability to operate our business and may limit our ability to take advantage of business opportunities. These agreements restrict, among other things, our subsidiaries’ ability to:

●

sell or ~~circumstances that would result~~assign assets;

●

incur additional indebtedness;

53

Table of Contents

●

pay dividends to Trinseo S.A.;

●

make investments or acquisitions;

●

incur liens;

●

repurchase or redeem capital shares;

●

engage in mergers or consolidations;

●

materially ~~different results.~~

We describe our significant accounting policies in Note 2, Basis of Presentation and Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in our Annual Report, while we discuss our critical accounting policies and estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within our Annual Report. There have been no material revisions to the critical accounting policies as filed in our Annual Report, other than the impacts to our accounting policies from our acquisition of API Plastics during the third quarter of 2017, discussed within Note 6 to the condensed consolidated financial statements, and the following addition to our critical accounting estimates as a result of this transaction.

~~Business Combinations~~

Acquisitions that qualify as a business combination are accounted for using the purchase accounting method. Amounts paid for an acquisition are allocated to the assets acquired and liabilities assumed based on their fair value as of the date of acquisition. Goodwill is recorded as the difference in the fair value of the acquired assets and liabilities assumed (net assets acquired) and the purchase price. Goodwill is not amortized, but is reviewed for impairment annually as of October 1st~~, or when events or changes in~~alter the business ~~environment indicate that the carrying value of a reporting unit may exceed its fair value. Refer to the critical accounting policies~~they conduct;

●

engage in transactions with affiliates; and ~~estimates in “~~Management’s Discussion and Analysis of Financial Condition and Results of Operations” within our Annual Report for further information regarding the Company’s goodwill impairment testing methodology and significant judgments and assumptions applied.

Under the purchase accounting method, the Company completes valuation procedures for an acquisition, often with the assistance of third-party valuation specialists, to determine the fair value of the assets acquired and liabilities assumed. ~~These valuation procedures require management to make assumptions and apply significant judgment to estimate the fair value of the assets acquired and liabilities assumed. If the estimates~~

●

consolidate, merge or ~~assumptions used should significantly change, the resulting differences could materially affect the fair value of net assets.~~

Specifically, the calculation of the fair value of tangible assets, including property, plant and equipment, utilizes the cost approach, which computes the cost to replace the asset, less accrued depreciation resulting from physical deterioration, functional obsolescence and external obsolescence. The calculation of the fair value of identified intangible assets is determined using cash flow models following the income approach. Significant inputs include estimated future cash flows, discount rates, royalty rates, growth rates, sales projections, retention rates, and terminal values,transfer all or substantially all of which require significant management judgment. Definite-lived intangible assets, which are primarily comprised of developed technology, customer relationships, manufacturing capacity rights, and software, are amortized over their estimated useful lives using the straight-line method and are assessed for impairment whenever events or changes in circumstances indicate the carrying value of the asset may not be recoverable. Recoverability of assets that will continue to be used in ongoing operations is measured by comparing the carrying value of the asset to the forecasted undiscounted future cash flows related to the asset. In the event the carrying value of the asset exceeds its undiscounted future cash flows and the carrying value is not considered recoverable, impairment may exist. An impairment loss, if any, is measured as the excess of the asset’s carrying value over its fair value, generally based on a discounted future cash flow method, independent appraisals, etc.assets.

The ability of our subsidiaries to comply with the covenants and financial ratios and tests contained in the Indenture and Credit Agreement, to pay interest on indebtedness, fund working capital, and make anticipated capital expenditures depends on our future performance, which is subject to general economic conditions and other factors, some of which are beyond our control. There can be no assurance that our business will generate sufficient cash flow from operations or that future borrowings will be available under our Senior Credit Facility to fund liquidity needs in an amount sufficient to enable them to service their indebtedness. Furthermore, if we need additional capital for general corporate purposes or to execute on an expansion strategy, there can be no assurance that this capital will be available on satisfactory terms or at all.

A failure to repay amounts owed under the Senior Credit Facility, or the notes issued under our Indentures, at maturity would result in a default. In addition, a breach of any of the covenants in the Credit Agreement or Indentures or our inability to comply with the required financial ratios or limits could result in a default. If a default occurs, lenders may refuse to lend us additional funds and the lenders or noteholders could declare all of the debt and any accrued interest and fees immediately due and payable. A default under one of our subsidiaries’ debt agreements may trigger a cross-default under our other debt agreements.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a)

48

~~Table of Contents~~

~~Off-balance Sheet Arrangements~~

~~We do not have any off-balance sheet arrangements.~~

~~Recent Accounting Pronouncements~~

~~We describe the impact of recent accounting pronouncements in Note 2 to our condensed consolidated financial statements, included elsewhere within this Quarterly Report.~~

~~Item 3. Quantitative and Qualitative Disclosures about Market Risk~~

As discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within our Annual Report, we are exposed to changes in interest rates and foreign currency exchange rates as well as changes in the prices of certain commodities that we use in production. There have been no material changes in our exposure to market risks from the information provided within our Annual Report and our Quarterly Report on Form 10-Q filed with the SEC on August 3, 2017.

~~Item 4. Controls and Procedures~~

~~Evaluation of Disclosure Controls and Procedures~~

Our management is responsible for establishing and maintaining internal controls designed to provide reasonable assurance that information required to be disclosed by us in our reports that we file or submit under the Exchange Act (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, with the participation of our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2017. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this Quarterly Report were effective to provide the reasonable level of assurance described above.

~~Changes in Internal Control over Financial Reporting~~

As discussed in Note 13 to the condensed consolidated financial statements, in July 2017, the Company completed the acquisition of API Plastics. As permitted by the SEC, management has elected to exclude this acquisition from its assessment of the effectiveness of its internal control over financial reporting as of December 31, 2017. The Company began to integrate API Plastics into its internal control over financial reporting structure subsequent to the acquisition date and expects to complete this integration by June 2018.

Aside from the API Plastics changes discussed above, there have been no additional changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended September 30, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

~~PART II — OTHER INFORMATION~~

~~Item 1. Legal Proceedings~~

From time to time we may be subject to various legal claims and proceedings incidental to the normal conduct of business, relating to such matters as product liability, antitrust, competition, waste disposal practices, release of chemicals into the environment and other matters that may arise in the ordinary course of our business. We currently believe that there is no litigation pending that is likely to have a material adverse effect on our business. Regardless of the outcome, legal proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

49

~~Table of Contents~~

~~Item 1A. Risk Factors~~

Our business faces various risks. Certain important factors may have a material adverse effect on our business prospects, financial condition and results of operations, and you should carefully consider them. Accordingly, in evaluating our business, we encourage you to consider the risk factors related to our ordinary shares as well those risk factors related to our business and industry which have been previously disclosed in Item 1A of our Annual Report for the year ended December 31, 2016, for which there have been no material changes. We encourage you to consider these risks, in their entirety, in addition to other information contained in or incorporated by reference into this Quarterly Report and our other public filings with the SEC. Other events that we do not currently anticipate or that we currently deem immaterial may also affect our business, prospects, financial condition and results of operations.

~~Item 2. Unregistered Sales of Equity Securities and Use of Proceeds~~

~~(a)~~Recent sales of unregistered securities

None.

(b)

Use of Proceeds from registered securities

None.

(c)

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Under shareholder authorization granted at our annual generally meeting held on June 9, 2020, the Company is authorized to repurchase up to 3.6 million ordinary shares over the next two years at a price per share of not less than $1.00 and not more than $1,000.00. In December 2020, the Company announced our decision to suspend the share repurchase program. There were no share repurchases during the three months ended June 30, 2021. There are 3.6 million ordinary shares available for repurchase under the 2020 share repurchase authorization as of June 30, 2021.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

See Exhibit Index.

54

Table of Contents

EXHIBIT INDEX

Exhibit

No.

Description

3.1

Amended and Restated Articles of Association of Trinseo S.A., as amended (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K filed June 17, 2021).

4.1

Form of Specimen Share Certificate of Trinseo S.A. (incorporated herein by reference to Exhibit 4.1 to Amendment No. 3 to the Registration Statement filed on Form S-1, File No. 333-194561, filed May 16, 2014).

4.2

Indenture among Trinseo Materials Operating S.C.A., Trinseo Materials Finance, Inc. and The ~~following table contains information regarding purchases~~Bank of ~~our ordinary shares made during~~New York Mellon, as Trustee, dated as of August 29, 2017 (incorporated herein by reference to Exhibit 4.1 to the ~~quarter ended~~Current Report on Form 8-K, filed September ~~30,~~5, 2017).

4.3

Indenture among Trinseo Materials Operating S.C.A., Trinseo Materials Finance, Inc. and The Bank of New York Mellon, as Trustee, dated as of March 24, 2021 (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed March 24, 2021).

10.1

2021 Incremental Amendment to Credit Agreement dated September 6, 2017, among, inter alios, Trinseo Materials Operating S.C.A., Trinseo Materials Finance, Inc. and Deutsche Bank AG New York Bank, dated as of May 3, 2021 (incorporated by orreference to Exhibit 10.1 to the Current Report on ~~behalf~~Form 8-K filed May 5, 2021).

10.2

2021 Revolver Amendment to Credit Agreement dated September 6, 2017, among, inter alios, Trinseo Materials Operating S.C.A., Trinseo Materials Finance, Inc. and Deutsche Bank AG New York Bank, dated as of May 3, 2021 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed May 5, 2021).

10.3*

Benzene Sales Contract, between Dow Europe GmbH and Trinseo Europe GmbH, dated May 6, 2021 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed May 14, 2021).

10.4**

Asset Purchase Agreement, by and between Trinseo S.A., Trinseo Deutschland GmbH, Trinseo Europe GmbH, Trinseo Belgium B.V.B.A., Trinseo Export GmbH, and Synthos S.A., Blitz F21-410 GmbH, and Synthos Dwory 7 dated May 21, 2021 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed May 25, 2021).

31.1†

Certification of Chief Executive Officer Pursuant to Section 302 of the ~~Company or any “affiliated purchaser,” as defined by Rule 10b-18(a)(3)~~Sarbanes-Oxley Act of 2002

31.2†

Certification of Chief Financial Officer Pursuant to Section 302 of the ~~Securities Exchange~~Sarbanes-Oxley Act of ~~1934:~~

Issuer Purchases of Equity Securities
Period

Total number of shares purchased

Average price
paid per share

Total number of shares purchased as part of publicly announced plans or programs

Approximate number of shares that may yet be purchased under the plans or programs
July 1 - July 31, 2017

—

$
—

—

2,000,000
(1)
August 1 - August 31, 2017

143,655

$
61.32

143,655

1,856,345
(1)
September 1 - September 30, 2017

—

$
—

—

1,856,345
(1)
Total

143,655

$
61.32

143,655

~~(1)~~

The general meeting of our shareholders on June 21, 2017 authorized the Company to sunset the 2016 share repurchase authorization and replace it with a new authorization to repurchase up to 4.0 million ordinary shares at a price per share of not less than $1.00 and not more than $1,000. This authorization ends on June 21, 2020 or on the date of its renewal by a subsequent general meeting of shareholders. On June 22, 2017 the Company announced that the board of directors had authorized the Company to repurchase, subject to market and other conditions, up to 2.0 million shares over the subsequent 18 months under the 2017 share repurchase authorization.2002

~~Item 3. Defaults Upon Senior Securities~~

~~None.~~

~~Item 4. Mine Safety Disclosures~~32.1†

~~Not applicable.~~

~~Item 5. Other Information~~

~~None.~~

~~Item 6. Exhibits~~

~~See Exhibit Index.~~

50

~~Table~~Certification of ~~Contents~~Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~EXHIBIT INDEX~~

32.2†

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~Exhibit~~ ~~No.~~	~~Description~~
~~3.1~~	~~Amended and Restated Articles of Association of Trinseo S.A. (incorporated herein by reference to Exhibit 3.1 to the Quarterly Report filed on Form 10-Q, File No. 001-36473, filed August 3, 2017)~~

~~4.1~~	Form of Specimen Share Certificate of Trinseo S.A. (incorporated herein by reference to Exhibit 4.1 to Amendment No. 3 to the Registration Statement filed on Form S-1, File No. 333-194561, filed May 16, 2014)


~~4.2~~	Indenture among Trinseo Materials Operating S.C.A., Trinseo Materials Finance, Inc., and The Bank of New York Mellon, as Trustee, dated as of August 29, 2017 (incorporated herein by reference to Exhibit 4.1 to the Current Report filed on Form 8-K, File No. 001-36473, filed September 5, 2017)

~~10.1~~	Credit Agreement among Trinseo Materials Operating S.C.A., Trinseo Materials Finance, Inc., together with Trinseo Holding S.à r.l. and Trinseo Materials S.à r.l., Deutsche Bank AG New York Branch, as administrative agent, collateral agent, L/C issuer and swing line lender, and the guarantors and lenders party thereto from time to time, dated as of September 6, 2017 (incorporated herein by reference to Exhibit 10.1 to the Current Report filed on Form 8-K, File No. 001-36473, filed September 7, 2017)
~~10.2~~	~~Form of Cross-Currency Rate Swap Transaction Confirmation (incorporated herein by reference to Exhibit 10.2 to the Current Report filed on Form 8-K, File No. 001-36473, filed September 7, 2017)~~
~~31.1†~~	~~Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~
~~31.2†~~	~~Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~

~~32.1†~~	~~Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~

~~32.2†~~	~~Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~

~~101.INS†~~	~~XBRL Instance Document~~

~~101.SCH†~~	~~XBRL Taxonomy Extension Schema Document~~

~~101.CAL†~~	~~XBRL Taxonomy Extension Calculation Linkbase Document~~

~~101.DEF†~~	~~XBRL Taxonomy Extension Definition Linkbase Document~~

~~101.LAB†~~	~~XBRL Taxonomy Extension Label Linkbase Document~~

101.INS†	XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH†	XBRL Taxonomy Extension Schema Document

101.CAL†	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF†	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB†	XBRL Taxonomy Extension Label Linkbase Document

101.PRE†	XBRL Taxonomy Extension Presentation Linkbase Document

Table of Contents

~~† Filed herewith.~~104†

~~Table of Contents~~

~~SIGNATURES~~

~~Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, duly authorized.~~

~~Date: November 3, 2017~~

	~~TRINSEO S.A.~~Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

* Certain portions of this exhibit were redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K. The omitted information is (i) not material and (ii) would likely cause us competitive harm if publicly disclosed. We agree to furnish supplementally an unredacted copy of the exhibit to the Securities and Exchange Commission on its request; provided, however that the Company may request confidential treatment of this exhibit pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

** Certain schedules and similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Trinseo S.A. hereby agrees to furnish supplementally a copy of any omitted schedule to the SEC upon request.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, duly authorized.

Date: August 5, 2021

TRINSEO S.A.

By:
/s/ Frank Bozich

Name:
Frank Bozich

Title:
President, Chief Executive Officer

(Principal Executive Officer)

By:
/s/ David Stasse

Name:
David Stasse

Title:
Executive Vice President, Chief Financial Officer

(Principal Financial Officer)

~~By:~~
~~/s/ Christopher D. Pappas~~
~~Name:~~
~~Christopher D. Pappas~~
~~Title:~~
~~President, Chief Executive Officer~~
~~(Principal Executive Officer)~~
~~By:~~
~~/s/ Barry J. Niziolek~~
~~Name:~~
~~Barry J. Niziolek~~
~~Title:~~
~~Executive Vice President, Chief Financial Officer~~
~~(Principal Financial Officer)~~


Luxembourg	N/A
~~Luxembourg~~	~~N/A~~
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)




Large accelerated filer	☒	Accelerated filer	◻	

Non-accelerated filer	◻ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	◻☐	Emerging growth company	◻☐


Title of Each Class	Trading symbol	Name of Exchange on which registered
Ordinary Shares, par value $0.01 per share	TSE	New York Stock Exchange


	June 30,		December 31,
	2021		2020
Assets
Current assets
Cash and cash equivalents	$	367.0	$	588.7
Accounts receivable, net of allowance for doubtful accounts (June 30, 2021: $4.5; December 31, 2020: $5.6)		769.0		469.5
Inventories		562.9		324.1
Other current assets		30.2		14.5
Current assets held-for-sale		383.0		120.3
Total current assets		2,112.1		1,517.1
Investments in unconsolidated affiliates		253.2		240.1
Property, plant and equipment, net of accumulated depreciation (June 30, 2021: $546.9; December 31, 2020: $524.7)		641.3		431.1
Other assets
Goodwill		623.5		62.1
Other intangible assets, net		649.4		162.6
Right-of-use assets - operating, net		81.2		77.8
Deferred income tax assets		78.5		90.2
Deferred charges and other assets		65.5		36.0
Noncurrent assets held-for-sale		—		228.2
Total other assets		1,498.1		656.9
Total assets	$	4,504.7	$	2,845.2
Liabilities and shareholders’ equity
Current liabilities
Short-term borrowings and current portion of long-term debt	$	19.1	$	12.2
Accounts payable		495.1		325.9
Current lease liabilities - operating		18.2		15.5
Income taxes payable		26.3		10.0
Accrued expenses and other current liabilities		168.9		127.5
Current liabilities held-for-sale		86.4		42.2
Total current liabilities		814.0		533.3
Noncurrent liabilities
Long-term debt, net of unamortized deferred financing fees		2,310.1		1,158.1
Noncurrent lease liabilities - operating		65.5		65.5
Deferred income tax liabilities		90.7		60.7
Other noncurrent obligations		394.6		395.0
Noncurrent liabilities held-for-sale		—		42.3
Total noncurrent liabilities		2,860.9		1,721.6
Commitments and contingencies (Note 13)
Shareholders’ equity
Ordinary shares, $0.01 nominal value, 50,000.0 shares authorized (June 30, 2021: 48.8 shares issued and 38.8 shares outstanding; December 31, 2020: 48.8 shares issued and 38.4 shares outstanding)		0.5		0.5
Additional paid-in-capital		578.7		579.6
Treasury shares, at cost (June 30, 2021: 10.0 shares; December 31, 2020: 10.4 shares)		(525.3)		(542.9)
Retained earnings		955.8		739.2
Accumulated other comprehensive loss		(179.9)		(186.1)
Total shareholders’ equity		829.8		590.3
Total liabilities and shareholders’ equity	$	4,504.7	$	2,845.2


		September 30,	December 31,
		2017	2016
Assets
Current assets
Cash and cash equivalents	$	318,703	$	465,114
Accounts receivable, net of allowance for doubtful accounts (September 30, 2017: $6,045; December 31, 2016: $3,138)		719,094		564,428
Inventories		483,158		385,345
Other current assets		24,591		17,999
Total current assets		1,545,546		1,432,886
Investments in unconsolidated affiliates		161,883		191,418
Property, plant and equipment, net of accumulated depreciation (September 30, 2017: $505,100; December 31, 2016: $420,343)		600,067		513,757
Other assets
Goodwill		62,774		29,485
Other intangible assets, net		207,819		177,345
Deferred income tax assets—noncurrent		46,942		40,187
Deferred charges and other assets		31,521		24,412
Total other assets		349,056		271,429
Total assets	$	2,656,552	$	2,409,490
Liabilities and shareholders’ equity
Current liabilities
Short-term borrowings and current portion of long-term debt	$	7,000	$	5,000
Accounts payable		415,709		378,029
Income taxes payable		32,006		23,784
Accrued expenses and other current liabilities		140,988		135,357
Total current liabilities		595,703		542,170
Noncurrent liabilities
Long-term debt, net of unamortized deferred financing fees		1,165,924		1,160,369
Deferred income tax liabilities—noncurrent		40,332		24,844
Other noncurrent obligations		284,551		237,054
Total noncurrent liabilities		1,490,807		1,422,267
Commitments and contingencies (Note 10)
Shareholders’ equity
Ordinary shares, $0.01 nominal value, 50,000,000 shares authorized (September 30, 2017: 48,778 shares issued and 43,703 shares outstanding; December 31, 2016: 48,778 shares issued and 44,301 shares outstanding)		488		488
Additional paid-in-capital		576,790		573,662
Treasury shares, at cost (September 30, 2017: 5,075 shares; December 31, 2016: 4,477 shares)		(263,673)		(217,483)
Retained earnings		423,456		258,540
Accumulated other comprehensive loss		(167,019)		(170,154)
Total shareholders’ equity		570,042		445,053
Total liabilities and shareholders’ equity	$	2,656,552	$	2,409,490

`
		Page

		~~Page~~

Part I	Financial Information

Item 1.	Financial Statements	4

	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2017~~2021 and December 31, ~~2016~~2020 (Unaudited)	4

	Condensed Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (Unaudited)	5

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (Unaudited)	6

	Condensed Consolidated Statements of Shareholders’ Equity for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (Unaudited)	7

	Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~2020 (Unaudited)	8

	Notes to Condensed Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3236

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4951

Item 4.	Controls and Procedures	4951

Part II	Other Information

Item 1.	Legal Proceedings	4951

Item 1A.	Risk Factors	5052

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5054

Item 3.	Defaults Upon Senior Securities	5054

Item 4.	Mine Safety Disclosures	5054

Item 5.	Other Information	5054

Item 6.	Exhibits	5054

Exhibit Index

Signatures


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Net sales	$	1,096,582	$	935,410	$	3,346,271	$	2,799,188
Cost of sales		949,457		795,026		2,876,137		2,349,392
Gross profit		147,125		140,384		470,134		449,796
Selling, general and administrative expenses		65,732		73,900		181,552		180,635
Equity in earnings of unconsolidated affiliates		43,807		36,686		93,029		110,314
Operating income		125,200		103,170		381,611		379,475
Interest expense, net		18,436		18,832		55,355		56,542
Loss on extinguishment of long-term debt		65,260		—		65,260		—
Other expense (income), net		(11)		1,084		(6,072)		16,628
Income before income taxes		41,515		83,254		267,068		306,305
Provision for income taxes		8,300		16,000		56,400		66,500
Net income	$	33,215	$	67,254	$	210,668	$	239,805
Weighted average shares- basic		43,745		45,865		43,900		47,152
Net income per share- basic	$	0.76	$	1.47	$	4.80	$	5.09
Weighted average shares- diluted		44,782		46,961		45,046		48,041
Net income per share- diluted	$	0.74	$	1.43	$	4.68	$	4.99

Dividends per share	$	0.36	$	0.30	$	1.02	$	0.60


	Shares		Shareholders' Equity
	Ordinary Shares Outstanding	Treasury Shares	Ordinary Shares		Additional Paid-In Capital		Treasury Shares		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total
Balance at December 31, 2020	38.4	10.4	$	0.5	$	579.6	$	(542.9)	$	(186.1)	$	739.2	$	590.3
Net income	—	—		—		—		—		—		71.5		71.5
Other comprehensive income	—	—		—		—		—		6.1		—		6.1
Share-based compensation activity	0.3	(0.3)		—		(1.1)		12.9		—		—		11.8
Dividends on ordinary shares ($0.08 per share)	—	—		—		—		—		—		(3.4)		(3.4)
Balance at March 31, 2021	38.7	10.1	$	0.5	$	578.5	$	(530.0)	$	(180.0)	$	807.3	$	676.3
Net income	—	—		—		—		—		—		151.6		151.6
Other comprehensive income	—	—		—		—		—		0.1		—		0.1
Share-based compensation activity	0.1	(0.1)		—		0.2		4.7		—		—		4.9
Dividends on ordinary shares ($0.08 per share)	—	—		—		—		—		—		(3.1)		(3.1)
Balance at June 30, 2021	38.8	10.0	$	0.5	$	578.7	$	(525.3)	$	(179.9)	$	955.8	$	829.8


	Shares		Shareholders' Equity
	Ordinary Shares Outstanding	Treasury Shares	Ordinary Shares		Additional Paid-In Capital		Treasury Shares		Accumulated Other Comprehensive Income (Loss)		Retained Earnings (Accumulated Deficit)		Total
Balance at December 31, 2016	44,301	4,477	$	488	$	573,662	$	(217,483)	$	(170,154)	$	258,540	$	445,053
Net income	—	—		—		—		—		—		210,668		210,668
Other comprehensive income	—	—		—		—		—		3,135		—		3,135
Stock-based compensation activity	440	(440)		—		3,128		15,674		—		—		18,802
Purchase of treasury shares	(1,038)	1,038		—		—		(61,864)		—		—		(61,864)
Dividends on ordinary shares ($1.02 per share)	—	—		—		—		—		—		(45,752)		(45,752)
Balance at September 30, 2017	43,703	5,075	$	488	$	576,790	$	(263,673)	$	(167,019)	$	423,456	$	570,042
Balance at December 31, 2015	48,778	—	$	488	$	556,532	$	—	$	(149,717)	$	(18,289)	$	389,014
Adoption of new accounting standard	—	—		—		915		—		—		(915)		—
Net income	—	—		—		—		—		—		239,805		239,805
Other comprehensive income	—	—		—		—		—		1,042		—		1,042
Stock-based compensation activity	25	(25)		—		14,057		914		—		—		14,971
Purchase of treasury shares	(4,150)	4,150		—		—		(194,079)		—		—		(194,079)
Dividends on ordinary shares ($0.60 per share)	—	—		—		—		—		—		(27,316)		(27,316)
Balance at September 30, 2016	44,653	4,125	$	488	$	571,504	$	(193,165)	$	(148,675)	$	193,285	$	423,437


			September 30, 2017
	Interest Rate as of September 30, 2017	Maturity Date	Carrying Amount		Unamortized Deferred Financing Fees(1)		Total Debt, Less Unamortized Deferred Financing Fees
Senior Credit Facility
2022 Revolving Facility(2)	Various	September 2022	$	—	$	—	$	—
2024 Term Loan B(3)	3.735%	September 2024		700,000		(18,957)		681,043
2025 Senior Notes	5.375%	September 2025		500,000		(9,600)		490,400
Accounts Receivable Securitization Facility(4)	Various	May 2019		—		—		—
Other indebtedness	Various	Various		1,481		—		1,481
Total debt			$	1,201,481	$	(28,557)	$	1,172,924
Less: current portion								(7,000)
Total long-term debt, net of unamortized deferred financing fees							$	1,165,924


			December 31, 2016
	Interest Rate as of December 31, 2016	Maturity Date	Carrying Amount		Unamortized Deferred Financing Fees(1)		Total Debt, Less Unamortized Deferred Financing Fees
2020 Senior Credit Facility
2020 Revolving Facility	Various	May 2020	$	—	$	—	$	—
2021 Term Loan B	4.250%	November 2021		491,545		(9,159)		482,386
2022 Senior Notes
USD Notes	6.750%	May 2022		300,000		(5,726)		294,274
Euro Notes	6.375%	May 2022		394,275		(7,157)		387,118
Accounts Receivable Securitization Facility	Various	May 2019		—		—		—
Other indebtedness	Various	Various		1,591		—		1,591
Total debt			$	1,187,411	$	(22,042)	$	1,165,369
Less: current portion								(5,000)
Total long-term debt, net of unamortized deferred financing fees							$	1,160,369


	Cumulative		Pension & Other
	Translation		Postretirement Benefit			Cash Flow
Three Months Ended September 30, 2017 and 2016	Adjustments		Plans, Net			Hedges, Net	Total
Balance as of June 30, 2017	$	(95,747)	$	(61,332)	$	(5,504)	$	(162,583)
Other comprehensive income (loss)		(1,561)		—		(6,387)		(7,948)
Amounts reclassified from AOCI to net income (1)		—		840		2,672		3,512
Balance as of September 30, 2017	$	(97,308)	$	(60,492)	$	(9,219)	$	(167,019)

Balance as of June 30, 2016	$	(106,702)	$	(45,887)	$	4,173	$	(148,416)
Other comprehensive income (loss)		1,488		—		(2,035)		(547)
Amounts reclassified from AOCI to net income (1)		—		533		(245)		288
Balance as of September 30, 2016	$	(105,214)	$	(45,354)	$	1,893	$	(148,675)