UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2018~~2019

◻TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36473

Trinseo S.A.

(Exact name of registrant as specified in its charter)

Luxembourg

N/A

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

1000 Chesterbrook Boulevard

Suite 300

Berwyn, PA 19312

(Address of Principal Executive Offices)

(610) 240-3200

(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ◻

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer	◻	

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ◻ No ☒

Securities registered pursuant to Section 12(b) of the Act:


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

As of ~~May 1, 2018,~~April 30, 2019, there were ~~43,177,966~~40,831,125 of the registrant’s ordinary shares outstanding.

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TABLE OF CONTENTS


		Page

Part I	Financial Information

Item 1.	Financial Statements	4

	Condensed Consolidated Balance Sheets as of March 31, ~~2018~~2019 and December 31, ~~2017~~2018 (Unaudited)	4

	Condensed Consolidated Statements of Operations for the three months ended March 31, ~~2018~~2019 and ~~2017~~2018 (Unaudited)	5

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, ~~2018~~2019 and ~~2017~~2018 (Unaudited)	6

	Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, ~~2018~~2019 and ~~2017~~2018 (Unaudited)	7

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, ~~2018~~2019 and ~~2017~~2018 (Unaudited)	8

	Notes to Condensed Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2627

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37

Item 4.	Controls and Procedures	37

Part II	Other Information

Item 1.	Legal Proceedings	3738

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3.	Defaults Upon Senior Securities	3839

Item 4.	Mine Safety Disclosures	3839

Item 5.	Other Information	3839

Item 6.	Exhibits	3839

Exhibit Index

Signatures

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Trinseo S.A.

Quarterly Report on Form 10-Q

For the quarterly period ended March 31, ~~2018~~2019

Unless otherwise indicated or required by context, as used in this Quarterly Report on Form 10-Q (“Quarterly Report”), the term “Trinseo” refers to Trinseo S.A. (NYSE: TSE), a public limited liability company (société anonyme) existing under the laws of Luxembourg, and not its subsidiaries. The terms “Company,” “we,” “us” and “our” refer to Trinseo and its consolidated subsidiaries, taken as a consolidated entity. All financial data provided in this Quarterly Report is the financial data of the Company, unless otherwise indicated.

Prior to the formation of the Company, our business was wholly owned by The Dow Chemical Company (together with other affiliates, “Dow”). In June 2010, investment funds advised or managed by affiliates of Bain Capital Partners, LP (“Bain Capital”) acquired an ownership interest in our business through an indirect ownership interest in us. During 2016, Bain Capital Everest Manager Holding SCA (“the former Parent”), an affiliate of Bain Capital, divested its entire ownership interest in the Company in a series of secondary offerings to the market.

Definitions of capitalized terms not defined herein appear within our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 (“Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on ~~March 1, 2018.~~February 28, 2019. The Company may distribute cash to shareholders under Luxembourg law via repayments of equity or an allocation of statutory profits. Since the Company began paying dividends, all distributions have been considered repayments of equity under Luxembourg law.

Cautionary Note on Forward-Looking Statements

This Quarterly Report contains forward-looking statements including, without limitation, statements concerning plans, objectives, goals, projections, strategies, future events or performance, and underlying assumptions and other statements, which are not statements of historical facts. Forward-looking statements may be identified by the use of words like “expect,” “anticipate,” “intend,” “forecast,” “see,” “outlook,” “will,” “may,” “might,” “potential,” “likely,” “target,” “plan,” “contemplate,” “seek,” “attempt,” “should,” “could,” “would” or expressions of similar meaning. Forward-looking statements reflect management’s evaluation of information currently available and are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Specific factors that may impact performance or other predictions of future actions have, in many but not all cases, been identified in connection with specific forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in our Annual Report filed with the SEC on ~~March 1, 2018~~February 28, 2019 under Part I, Item IA— “Risk ~~Factors”~~Factors,” and elsewhere within this Quarterly Report.

As a result of these or other factors, our actual results may differ materially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Therefore, we caution you against relying on these forward-looking statements. The forward-looking statements included in this Quarterly Report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

Available Information

Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are available free of charge through the Investor Relations section of our website, www.trinseo.com, as soon as reasonably practicable after the reports are electronically filed or furnished with the ~~U.S. Securities and Exchange Commission.~~SEC. We provide this website and information contained in or connected to it for informational purposes only. That information is not a part of this Quarterly Report.

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PART I —FINANCIAL INFORMATION

Item 1. Financial Statements

TRINSEO S.A.

Condensed Consolidated Balance Sheets

(In millions, except per share data)

(Unaudited)


		March 31,	December 31,		March 31,		December 31,
		2018	2017		2019		2018
Assets
Current assets
Cash and cash equivalents	$	398.9	$	432.8	$	516.4	$	452.3
Accounts receivable, net of allowance for doubtful accounts (March 31, 2018: $5.1; December 31, 2017: $5.6)		728.7		685.5
Accounts receivable, net of allowance for doubtful accounts (March 31, 2019: $4.9; December 31, 2018: $6.1)						650.4		648.1
Inventories		588.3		510.4		447.9		510.4
Other current assets		18.7		17.5		25.4		20.5
Total current assets		1,734.6		1,646.2		1,640.1		1,631.3
Investments in unconsolidated affiliates		168.1		152.5		198.9		179.1
Property, plant and equipment, net of accumulated depreciation (March 31, 2018: $556.5; December 31, 2017: $523.7)		635.2		627.0
Property, plant and equipment, net of accumulated depreciation (March 31, 2019: $605.5; December 31, 2018: $590.6)						575.0		592.1
Other assets
Goodwill		74.2		72.5		67.8		69.0
Other intangible assets, net		206.9		207.5		187.1		191.1
Right-of-use assets - operating						68.1		—
Deferred income tax assets		34.7		35.5		27.9		26.7
Deferred charges and other assets		32.7		30.8		41.6		37.5
Total other assets		348.5		346.3		392.5		324.3
Total assets	$	2,886.4	$	2,772.0	$	2,806.5	$	2,726.8
Liabilities and shareholders’ equity
Current liabilities
Short-term borrowings and current portion of long-term debt	$	7.0	$	7.0	$	7.1	$	7.0
Accounts payable		454.2		436.8		391.4		354.2
Current lease liabilities - operating						15.2		—
Income taxes payable		36.9		35.9		13.8		16.0
Accrued expenses and other current liabilities		135.3		146.9		155.3		159.8
Total current liabilities		633.4		626.6		582.8		537.0
Noncurrent liabilities
Long-term debt, net of unamortized deferred financing fees		1,164.0		1,165.0		1,160.4		1,160.8
Noncurrent lease liabilities - operating						53.2		—
Deferred income tax liabilities		51.4		49.2		46.4		45.4
Other noncurrent obligations		281.9		256.4		210.6		214.9
Total noncurrent liabilities		1,497.3		1,470.6		1,470.6		1,421.1
Commitments and contingencies (Note 11)
Shareholders’ equity
Ordinary shares, $0.01 nominal value, 50,000.0 shares authorized (March 31, 2018: 48.8 shares issued and 43.4 shares outstanding; December 31, 2017: 48.8 shares issued and 43.4 shares outstanding)		0.5		0.5
Ordinary shares, $0.01 nominal value, 50,000.0 shares authorized (March 31, 2019: 48.8 shares issued and 41.0 shares outstanding; December 31, 2018: 48.8 shares issued and 41.6 shares outstanding)						0.5		0.5
Additional paid-in-capital		566.6		578.8		568.8		575.4
Treasury shares, at cost (March 31, 2018: 5.4 shares; December 31, 2017: 5.4 shares)		(299.5)		(286.8)
Treasury shares, at cost (March 31, 2019: 7.8 shares; December 31, 2018: 7.2 shares)						(445.1)		(418.1)
Retained earnings		632.4		527.9		772.4		753.2
Accumulated other comprehensive loss		(144.3)		(145.6)		(143.5)		(142.3)
Total shareholders’ equity		755.7		674.8		753.1		768.7
Total liabilities and shareholders’ equity	$	2,886.4	$	2,772.0	$	2,806.5	$	2,726.8

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

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TRINSEO S.A.

Condensed Consolidated Statements of Operations

(In millions, except per share data)

(Unaudited)


	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2018		2017		2019		2018
Net sales	$	1,121.6	$	1,104.5	$	1,013.1	$	1,121.6
Cost of sales		946.4		905.5		915.7		946.4
Gross profit		175.2		199.0		97.4		175.2
Selling, general and administrative expenses		64.4		59.6		68.8		64.4
Equity in earnings of unconsolidated affiliates		45.5		19.3		32.2		45.5
Operating income		156.3		158.7		60.8		156.3
Interest expense, net		14.9		18.2		10.2		14.9
Other income, net		(3.8)		(6.1)
Other expense (income), net						4.0		(3.8)
Income before income taxes		145.2		146.6		46.6		145.2
Provision for income taxes		24.9		29.3		10.8		24.9
Net income	$	120.3	$	117.3	$	35.8	$	120.3
Weighted average shares- basic		43.4		44.1		41.3		43.4
Net income per share- basic	$	2.77	$	2.66	$	0.87	$	2.77
Weighted average shares- diluted		44.4		45.3		41.8		44.4
Net income per share- diluted	$	2.71	$	2.59	$	0.86	$	2.71

Dividends per share	$	0.36	$	0.30

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

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TRINSEO S.A.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In millions)

(Unaudited)


	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2018		2017		2019		2018
Net income	$	120.3	$	117.3	$	35.8	$	120.3
Other comprehensive income (loss), net of tax:
Cumulative translation adjustments		(2.1)		4.2		(0.3)		(2.1)
Net gain (loss) on cash flow hedges		2.8		(4.8)
Net gain on cash flow hedges						0.1		2.8
Pension and other postretirement benefit plans:
Amounts reclassified from accumulated other comprehensive income (loss)		0.6		1.4
Total other comprehensive income, net of tax		1.3		0.8
Net loss arising during period (net of tax of: $0.2 and $0.0)						(2.0)		—
Amounts reclassified from accumulated other comprehensive income						1.0		0.6
Total other comprehensive income (loss), net of tax						(1.2)		1.3
Comprehensive income	$	121.6	$	118.1	$	34.6	$	121.6

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

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TRINSEO S.A.

Condensed Consolidated Statements of Shareholders’ Equity

(In millions, except per share data)

(Unaudited)


	Shares		Shareholders' Equity												Shares		Shareholders' Equity
	Ordinary Shares Outstanding	Treasury Shares	Ordinary Shares		Additional Paid-In Capital		Treasury Shares		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total		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, 2018															41.6	7.2	$	0.5	$	575.4	$	(418.1)	$	(142.3)	$	753.2	$	768.7
Net income															—	—		—		—		—		—		35.8		35.8
Other comprehensive loss															—	—		—		—		—		(1.2)		—		(1.2)
Share-based compensation activity															0.1	(0.1)		—		(6.6)		7.0		—		—		0.4
Purchase of treasury shares															(0.7)	0.7		—		—		(34.0)		—		—		(34.0)
Dividends on ordinary shares ($0.40 per share)															—	—		—		—		—		—		(16.6)		(16.6)
Balance at March 31, 2019															41.0	7.8	$	0.5	$	568.8	$	(445.1)	$	(143.5)	$	772.4	$	753.1
Balance at December 31, 2017	43.4	5.4	$	0.5	$	578.8	$	(286.8)	$	(145.6)	$	527.9	$	674.8	43.4	5.4	$	0.5	$	578.8	$	(286.8)	$	(145.6)	$	527.9	$	674.8
Net income	—	—		—		—		—		—		120.3		120.3	—	—		—		—		—		—		120.3		120.3
Other comprehensive income	—	—		—		—		—		1.3		—		1.3	—	—		—		—		—		1.3		—		1.3
Stock-based compensation activity	0.3	(0.3)		—		(12.2)		11.5		—		—		(0.7)
Share-based compensation activity															0.3	(0.3)		—		(12.2)		11.5		—		—		(0.7)
Purchase of treasury shares	(0.3)	0.3		—		—		(24.2)		—		—		(24.2)	(0.3)	0.3		—		—		(24.2)		—		—		(24.2)
Dividends on ordinary shares ($0.36 per share)	—	—		—		—		—		—		(15.8)		(15.8)	—	—		—		—		—		—		(15.8)		(15.8)
Balance at March 31, 2018	43.4	5.4	$	0.5	$	566.6	$	(299.5)	$	(144.3)	$	632.4	$	755.7	43.4	5.4	$	0.5	$	566.6	$	(299.5)	$	(144.3)	$	632.4	$	755.7
Balance at December 31, 2016	44.3	4.5	$	0.5	$	573.7	$	(217.5)	$	(170.2)	$	261.2	$	447.7
Net income	—	—		—		—		—		—		117.3		117.3
Other comprehensive income	—	—		—		—		—		0.8		—		0.8
Stock-based compensation activity	0.2	(0.2)		—		1.0		6.9		—		—		7.9
Purchase of treasury shares	(0.4)	0.4		—		—		(23.3)		—		—		(23.3)
Dividends on ordinary shares ($0.30 per share)	—	—		—		—		—		—		(13.7)		(13.7)
Balance at March 31, 2017	44.1	4.7	$	0.5	$	574.7	$	(233.9)	$	(169.4)	$	364.8	$	536.7

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

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TRINSEO S.A.

Condensed Consolidated Statements of Cash Flows

(In millions)

(Unaudited)


	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2018		2017		2019			2018
Cash flows from operating activities
Net income	$	120.3	$	117.3	$	35.8		$	120.3
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		31.9		24.7		33.9			31.9
Amortization of deferred financing fees and issuance discount		1.1		1.4
Amortization of deferred financing fees, issuance discount, and excluded component of hedging instruments						(0.1)			1.1
Deferred income tax		2.5		11.3		(0.1)			2.5
Stock-based compensation expense		5.5		4.7
Share-based compensation expense						4.1			5.5
Earnings of unconsolidated affiliates, net of dividends		(15.5)		(2.9)		(19.7)			(15.5)
Unrealized net losses on foreign exchange forward contracts		0.1		0.2
Unrealized net (gain) loss on foreign exchange forward contracts						(6.6)			0.1
Gain on sale of businesses and other assets		(0.5)		(9.9)		(0.2)			(0.5)
Pension curtailment and settlement loss						0.7			—
Changes in assets and liabilities
Accounts receivable		(32.7)		(133.3)		(4.8)			(32.7)
Inventories		(70.3)		(91.6)		57.7			(70.3)
Accounts payable and other current liabilities		3.0		49.9		49.4			3.0
Income taxes payable		0.8		5.6		(2.0)	��		0.8
Other assets, net		(1.3)		(4.5)		2.8			(1.3)
Other liabilities, net		(4.1)		1.4		2.3			(4.1)
Cash provided by (used in) operating activities		40.8		(25.7)
Cash provided by operating activities						153.2			40.8
Cash flows from investing activities
Capital expenditures		(30.6)		(36.0)		(25.0)			(30.6)
Proceeds from the sale of businesses and other assets		0.5		42.1		0.7			0.5
Distributions from unconsolidated affiliates		—		0.8
Cash provided by (used in) investing activities		(30.1)		6.9
Cash used in investing activities						(24.3)			(30.1)
Cash flows from financing activities
Short-term borrowings, net		(0.1)		(0.1)		(0.1)			(0.1)
Purchase of treasury shares		(23.8)		(26.6)		(37.4)			(23.8)
Dividends paid		(16.2)		(13.3)		(17.4)			(16.2)
Proceeds from exercise of option awards		1.9		3.4		0.1			1.9
Withholding taxes paid on restricted share units		(8.0)		(0.1)		(3.8)			(8.0)
Repayments of 2024 Term Loan B		(1.8)		—		(1.8)			(1.8)
Repayments of 2021 Term Loan B		—		(1.3)
Cash used in financing activities		(48.0)		(38.0)		(60.4)			(48.0)
Effect of exchange rates on cash		3.4		1.8		(1.6)			3.4
Net change in cash and cash equivalents		(33.9)		(55.0)
Cash and cash equivalents—beginning of period		432.8		465.1
Net change in cash, cash equivalents, and restricted cash						66.9			(33.9)
Cash, cash equivalents, and restricted cash—beginning of period						452.3			432.8
Cash, cash equivalents, and restricted cash—end of period					$	519.2		$	398.9
Less: Restricted cash, included in "Other current assets"						(2.8)			—
Cash and cash equivalents—end of period	$	398.9	$	410.1	$	516.4		$	398.9

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

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TRINSEO S.A.

Notes to Condensed Consolidated Financial Statements

(Dollars in millions, unless otherwise stated)

(Unaudited)

NOTE 1—BASIS OF PRESENTATION

The unaudited interim condensed consolidated financial statements of Trinseo S.A. and its subsidiaries (the “Company”) as of and for the periods ended March 31, ~~2018~~2019 and ~~2017~~2018 were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and reflect all adjustments, consisting only of normal recurring adjustments, which, in the opinion of management, are considered necessary for the fair statement of the results for the periods presented. Because they cover interim periods, the statements and related notes to the financial statements do not include all disclosures normally provided in annual financial statements, and therefore, these statements should be read in conjunction with the ~~2017~~2018 audited consolidated financial statements included within the Company’s Annual Report on Form 10-K (“Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on ~~March 1, 2018.~~February 28, 2019.

The December 31, ~~2017~~2018 condensed consolidated balance sheet data presented herein was derived from the Company’s December 31, ~~2017~~2018 audited consolidated financial statements, but does not include all disclosures required by GAAP for annual periods.

Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications did not have a material impact on the Company’s financial position or results. Refer to Notes 2, 7, and 15 for further information.

NOTE 2—RECENT ACCOUNTING GUIDANCE

In May 2014, the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board (“IASB”) jointly issued guidance (“Topic 606”) which clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP and International Financial Reporting Standards (“IFRS”). The core principle of the guidance, which the FASB issued certain clarifying updates for, is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted Topic 606 effective January 1, 2018, electing to apply the modified retrospective approach only to contracts that were not completed as of the date of initial application at the individual contract level, rather than applying the portfolio approach. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts have not been adjusted and continue to be reported in accordance with historical accounting standards (“Topic 605”). As a result of our implementation procedures, we have determined that the cumulative effect to retained earnings from initially applying Topic 606 was immaterial and therefore, no adjustment was recorded. Furthermore, based on current contracts with customers, we do not expect the adoption of the new revenue standard to have a material impact to our financial statements on an ongoing basis. Refer to Note 3 for new disclosure requirements in effect as a result of this adoption.

In February 2016, the FASB issued guidance related to leases that outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new guidance requires lessees to recognize on the consolidated balance sheets lease liabilities and corresponding right-of-use (“ROU”) 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.~~applying the new standard to all leases existing at the date of initial application. The Company ~~is in~~adopted the ~~process of assessing~~standard effective January 1, 2019, and as a result, the impact on its consolidated financial statements from the adoption of the new guidance. However, as we are the lessee under various real estate, railcar, and other equipment leases, which we currently account for as operating leases, we anticipate an increase in the recognition of right-of-useCompany recorded ROU assets and lease liabilities ~~as a result~~ of ~~this adoption~~.

In March 2017, the FASB issued guidance that requires employers to present the service cost component of net periodic benefit cost in the same statement of operations line item as other employee compensation costs arising from services rendered during the period. The other components of net periodic benefit cost are to be presented outside of any subtotal of operating income. This guidance also requires employers to prospectively only consider the service cost component of net periodic benefit cost for potential capitalization into assets, with all other components of net periodic

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~~benefit cost being ineligible for capitalization. The Company adopted this guidance effective January 1, 2018~~$73.0 million and $72.4 million, respectively, on a retrospective basis. As a result of this adoption, for the three months ended March 31, 2017, the Company reclassified net periodic benefit cost of $1.2 million from “Cost of sales” and $0.8 million from “Selling, general and administrative expenses” to “Other income, net” within the condensed consolidated ~~statements~~balance sheet as of ~~operations.~~January 1, 2019. The ~~change related~~Company’s adoption of this standard did not result in a cumulative effect adjustment being recorded to ~~capitalization guidance is~~opening retained earnings as of January 1, 2019 and did not ~~expected to~~ have a material impact on the Company’s condensed consolidated ~~financial statements.~~statements of operations or cash flows. Refer to Note 18 for new disclosure requirements in effect as a result of this adoption.

In August 2017, the FASB issued significant amendments to its existing hedge accounting guidance. Among other things, this guidance will make more financial and nonfinancial hedging strategies eligible for hedge accounting, amend presentation and disclosure requirements, and change how companies assess effectiveness. This guidance is required for public companies for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The Company will adopt this guidance effective April 1, 2018, and is in the process of evaluating the ongoing impact to the Company’s consolidated financial statements.

~~In February~~ 2018, the FASB issued guidance ~~to address certain stranded income tax effects in~~ ~~accumulated other comprehensive income/loss~~ ~~(“AOCI”) resulting from~~which modifies the enactment of the U.S. “Tax Cuts and Jobs Act” signed into law on December 22, 2017. The amendment provides financial statement preparers with an option to reclassify stranded tax effects within AOCI, resulting from the reduction of the U.S. federal corporate income tax rate, to retained earnings. The amendment also includes disclosure requirements ~~regarding the Company’s accounting policy~~ for ~~releasing income tax effects from AOCI. The~~employers that sponsor defined benefit pension plans or other postretirement plans. This amendment is effective for ~~annual periods, and interim periods within those annual periods, beginning~~public companies for fiscal years ending after December 15, ~~2018.~~2020. Early adoption is permitted, and the provisions of the amendment should be applied ~~either in the period of adoption or retrospectively~~on a retrospective basis to ~~each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized.~~all periods presented. While the Company is ~~still evaluating~~currently assessing the ~~provisions~~impact of ~~this amendment, should the Company choose to adopt~~adopting this guidance, it is not ~~expected~~anticipated to have a material impact on the ~~Company’s~~ consolidated financial ~~statements~~.statements.

In August 2018, the FASB issued guidance which aligns the requirements for capitalizing implementation costs incurred in a cloud computing hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This standard update is effective for public companies for interim and annual periods beginning after December 15, 2019, with early adoption permitted. Entities may choose to adopt the new guidance either retrospectively or prospectively to eligible costs incurred on or after the date first applied. The Company is currently assessing the impact of adopting this guidance on its consolidated financial statements.

NOTE ~~3 —~~ 3—NET SALES

As discussed in Note 2, effective January 1, 2018, the Company adopted accounting guidance, Topic 606, issued by the FASB related to the recognition of revenue from contracts with customers. The Company’s accounting policy and practical expedient elections related to revenue recognition, including those elected as a result of the adoption of Topic 606, are summarized as follows.

Sales are recognized at a point when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services, and when the Company’s related performance obligation is satisfied under the terms of the contract. Standard terms of

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delivery are included in contracts of sale, order confirmation documents, and invoices. Sales and other taxes that the Company collects concurrent with sales-producing activities are excluded from “Net sales” and included as a component of “Cost of sales” in the condensed consolidated statements of operations. Additionally, freight and any directly related costs of transporting finished products to customers are accounted for as fulfilment costs and are also included within “Cost of ~~sales”.~~sales.” The amount of net sales recognized varies with changes in returns, rebates, cash sales incentives, and other allowances offered to customers based on the Company's experience.

~~The Company has elected to apply the following practical expedients as allowed under Topic 606:~~

The incremental costs of obtaining contracts are expensed as incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less, and are included within “Selling, general and administrative expenses” in the condensed consolidated statements of operations.

When the period between customer payment and transfer of goods/services is determined to be one year or less at contract inception, the promised amount of consideration under the contract is not adjusted for the effects of a significant financing component.

In consideration of the disclosure requirements regarding the transaction price and expected period of recognition of remaining performance obligations that are unsatisfied as of the end of a reporting period, the Company has elected the following optional exemptions:

The Company will not disclose the aggregate amount of the transaction price allocated to remaining performance obligations for its contracts with an original expected duration of one year or less, which applies to the vast majority of the Company’s contracts with customers.

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For contracts with customers containing variable consideration (via enforceable minimum volume requirements) and an original expected duration greater than one year, the Company will not disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under these contracts with customers, each unit of production generally represents a separate performance obligation, the pricing for which is based on current or forecasted raw material prices, often using formulas that utilize commodity indices. Therefore, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required. The variable consideration in these contracts is resolved typically at the issuance of a purchase order or as of the date of revenue recognition.

The following table provides disclosure of net sales to external customers by primary geographical market (based on the location where sales originated), by segment for the three months ended March 31, ~~2018~~2019 and ~~2017, respectively:~~2018:


	Three Months Ended												Latex		Synthetic		Performance
	March 31, 2018
	Latex		Synthetic		Performance
	Binders		Rubber		Plastics		Polystyrene		Feedstocks		Total
Three Months Ended													Binders		Rubber		Plastics		Polystyrene		Feedstocks		Total
March 31, 2019
United States	$	64.3	$	—	$	84.1	$	0.2	$	3.7	$	152.3	$	63.3	$	—	$	81.8	$	—	$	2.7	$	147.8
Europe		113.3		149.2		249.2		148.2		57.9		717.8		101.4		124.6		213.3		138.2		40.5		618.0
Asia-Pacific		74.3		—		47.3		91.2		13.0		225.8		56.5		—		51.6		90.3		23.6		222.0
Rest of World		3.4		—		22.3		—		—		25.7		2.7		—		22.6		—		—		25.3
Total	$	255.3	$	149.2	$	402.9	$	239.6	$	74.6	$	1,121.6	$	223.9	$	124.6	$	369.3	$	228.5	$	66.8	$	1,013.1
March 31, 2018
United States													$	64.3	$	—	$	84.1	$	0.2	$	3.7	$	152.3
Europe														113.3		149.2		249.2		148.2		57.9		717.8
Asia-Pacific														74.3		—		47.3		91.2		13.0		225.8
Rest of World														3.4		—		22.3		—		—		25.7
Total													$	255.3	$	149.2	$	402.9	$	239.6	$	74.6	$	1,121.6

Three Months Ended

March 31, 2017(1)

Latex

Synthetic

Performance

Binders

Rubber

Plastics

Polystyrene

Feedstocks

Total

United States

$
76.0

$
—

$
82.8

$
0.2

$
3.8

$
162.8

Europe

119.5

163.4

199.4

140.1

34.7

657.1

Asia-Pacific

89.0

—

32.7

88.1

48.4

258.2

Rest of World

4.4

—

22.0

—

—

26.4

Total

$
288.9

$
163.4

$
336.9

$
228.4

$
86.9

$
1,104.5

~~(1)~~

~~As the Company has adopted Topic 606 utilizing the modified retrospective approach, amounts for the three months ended March 31, 2017 above are disclosed as recognized under Topic 605.~~

For all material contracts with customers, control is transferred and sales are recognized at a point in time, when the Company satisfies the performance obligations according to the terms of the contract, and when title and the risk of loss is passed to the customer. Title and risk of loss varies by region and customer and is determined based upon the purchase order received from the customer and the applicable contractual terms or jurisdictional standards. The Company receives cash equal to the invoice price for most product sales, subject to cash sales incentives with certain customers, with payment terms generally ranging from 10 to 90 days (with an approximate weighted average of 50 days as of March 31, 2018), also varying by segment and region.

Certain of the Company’s contracts with customers contain multiple performance obligations, most commonly due to the sale of multiple distinct products. The transaction price within these contracts is allocated between these separate and distinct products based on their stand-alone selling prices, as defined within the contract. The Company’s products are typically sold at observable stand-alone sales values, which are used to determine the estimated stand-alone selling price. The stand-alone selling prices of the Company’s products are generally based, in part, on the current or forecasted costs of key raw materials, but are often subject to a predetermined lag period for the pass through of these costs. As such, contracts with customers typically include provisions that allow for the changes in stand-alone selling prices to reflect the pass through of changes in raw material costs, often using pricing formulas that utilize commodity indices.

In cases where the Company’s transaction price is considered variable at the point of revenue recognition, the ‘most likely amount’ method is used to estimate the effect of any related uncertainty. In formulating this estimate, the

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Company considers all historical, current, and forecasted information that is reasonably available to identify a reasonable number of possible consideration amounts. Once the transaction price, including impacts of variable consideration, is estimated, revenue is recognized only to the extent that it is probable that a subsequent change in the estimate would not result in a significant revenue reversal. Furthermore, if the Company is not able to rely on observable stand-alone selling prices, the ‘expected cost plus a margin approach’ is utilized to estimate the stand-alone selling price of each performance obligation, primarily utilizing historical experience. During the three months ended March 31, 2018, the impact of recognizing changes in selling prices related to prior periods was immaterial.

NOTE 4—INVESTMENTS IN UNCONSOLIDATED AFFILIATES

The Company’s investments held in unconsolidated affiliates are accounted for by the equity method. The Company is currently supplemented by one joint venture, Americas Styrenics LLC (“Americas ~~Styrenics”,~~Styrenics,” a styrene and polystyrene joint venture with Chevron Phillips Chemical Company LP). Previously, the Company also had a 50% share in Sumika Styron Polycarbonate Limited (“Sumika Styron Polycarbonate”, a polycarbonate, or PC, joint venture with Sumitomo Chemical Company Limited), until the sale of the Company’s investment in the joint venture during the first quarter of 2017 (refer to discussion below for further information). Investments held in unconsolidated affiliates are accounted for by the equity method. The results of Americas Styrenics are included within its own reporting segment. The results of Sumika Styron Polycarbonate were included within the Performance Plastics reporting segment (as recast due to the segment realignment effective January 1, 2018 discussed further in Note 15) until the Company sold its share of the entity during the first quarter of 2017.

~~Both of the unconsolidated affiliates are~~Americas Styrenics is a privately held ~~companies;~~company; therefore, a quoted market ~~prices~~price for ~~their~~its stock ~~are~~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				Three Months Ended
	March 31,				March 31,
	2018		2017		2019		2018
Sales	$	486.6	$	433.9	$	369.2	$	486.6
Gross profit	$	95.2	$	20.6	$	54.2	$	95.2
Net income	$	85.7	$	6.3	$	42.9	$	85.7

Americas Styrenics

As of March 31, ~~2018~~2019 and December 31, ~~2017, respectively,~~2018, the Company’s investment in Americas Styrenics was ~~$168.1~~$198.9 million and ~~$152.5~~$179.1 million, respectively, which was ~~$43.8~~$22.7 million and $46.4 million less 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 a weighted average remaining useful life of the contributed assets of approximately ~~2.6~~2.1 years as of March 31, ~~2018.~~2019. The Company received dividends from Americas Styrenics of ~~$30.0~~$12.5 million and ~~$7.5~~$30.0 million during the three months ended March 31, 2019 and 2018, ~~and 2017,~~ respectively.

~~Sumika Styron Polycarbonate~~

On January 31, 2017, the Company completed the sale of its 50% share in Sumika Styron Polycarbonate to Sumitomo Chemical Company Limited for total sales proceeds of approximately $42.1 million. As a result, the Company recorded a gain on sale of $9.3 million during the three months ended March 31, 2017, which was included within “Other income, net” in the condensed consolidated statement of operations and was allocated entirely to the Performance Plastics segment (as recast under the segment realignment discussed further in Note 15). In addition, the parties entered into a long-term agreement to continue sourcing PC resin from Sumika Styron Polycarbonate to the Company’s Performance Plastics segment.

Due to the sale in January 2017, the Company no longer had an investment in Sumika Styron Polycarbonate as of December 31, 2017. The Company received dividends from Sumika Styron Polycarbonate of $9.8 million during the three months ended March 31, 2017 related to the Company’s proportionate share of earnings from the year ended December 31, 2016.

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NOTE 5—INVENTORIES

Inventories consisted of the following:


	March 31,		December 31,		March 31,		December 31,
	2018		2017		2019		2018
Finished goods	$	285.6	$	250.9	$	229.1	$	269.8
Raw materials and semi-finished goods		265.1		226.7		184.3		205.8
Supplies		37.6		32.8		34.5		34.8
Total	$	588.3	$	510.4	$	447.9	$	510.4

NOTE 6—DEBT

Refer to the Annual Report for definitions of capitalized terms not included herein and further background on the Company’s debt structure discussed below. The Company was in compliance with all debt related covenants as of March 31, ~~2018~~2019 and December 31, ~~2017.~~2018.

As of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, debt consisted of the following:


			March 31, 2018						December 31, 2017								March 31, 2019						December 31, 2018
	Interest Rate as of March 31, 2018	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		Interest Rate as of March 31, 2019	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
2024 Term Loan B															4.499%	September 2024	$	689.5	$	(15.6)	$	673.9	$	691.3	$	(16.2)	$	675.1
2022 Revolving Facility(2)	Various	September 2022	$	—	$	—	$	—	$	—	$	—	$	—	Various	September 2022		—		—		—		—		—		—
2024 Term Loan B(3)	4.377%	September 2024		696.5		(17.8)		678.7		698.3		(18.3)		680.0
2025 Senior Notes	5.375%	September 2025		500.0		(9.1)		490.9		500.0		(9.4)		490.6	5.375%	September 2025		500.0		(8.1)		491.9		500.0		(8.4)		491.6
Accounts Receivable Securitization Facility~~(4)~~(3)	Various	May 2019		—		—		—		—		—		—	Various	September 2021		—		—		—		—		—		—
Other indebtedness	Various	Various		1.4		—		1.4		1.4		—		1.4	Various	Various		1.7		—		1.7		1.1		—		1.1
Total debt			$	1,197.9	$	(26.9)	$	1,171.0	$	1,199.7	$	(27.7)	$	1,172.0			$	1,191.2	$	(23.7)	$	1,167.5	$	1,192.4	$	(24.6)	$	1,167.8
Less: current portion(4)								(7.0)						(7.0)								(7.1)						(7.0)
Total long-term debt, net of unamortized deferred financing fees							$	1,164.0					$	1,165.0							$	1,160.4					$	1,160.8

(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)

Under the 2022 Revolving Facility, the Company had a capacity of $375.0 million and funds available for borrowing of ~~$359.9~~$360.7 million (net of ~~$15.1~~ $14.3million outstanding letters of credit) as of March 31, ~~2018.~~2019. 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 March 31, 2018, $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~~This facility had a borrowing capacity of $150.0 million as of March 31, ~~2018.~~2019. Additionally, as of March 31, ~~2018,~~2019, the Company had accounts receivable available to support this facility in excess of its borrowing capacity, 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 ~~1.0%~~1.00%.

(4)

As of March 31, 2019 and December 31, 2018, the current portion of long-term debt primarily related to $7.0 million of the scheduled future principle payments on the 2024 Term Loan B.

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NOTE 7—GOODWILL

The following table shows changes in the carrying amount of goodwill, by segment, from December 31, ~~2017~~2018 to March 31, ~~2018. Prior period balances in this table have been recast in conjunction with the segment realignment that occurred during the first quarter of 2018. Refer to Note 15 for further information.~~2019:

Latex

Synthetic

Performance

Americas


Binders

Rubber

Plastics

Polystyrene

Feedstocks

Styrenics

Total

Balance at December 31, 2017

$
16.5

$
11.7

$
39.6

$
4.7

$
—

$
—

$
72.5

Foreign currency impact

0.4

0.3

0.9

0.1

—

—

1.7

Balance at March 31, 2018

$
16.9

$
12.0

$
40.5

$
4.8

$
—

$
—

$
74.2


	Latex		Synthetic		Performance						Americas
	Binders		Rubber		Plastics		Polystyrene		Feedstocks		Styrenics		Total
Balance at December 31, 2018	$	15.9	$	11.3	$	37.3	$	4.5	$	—	$	—	$	69.0
Foreign currency impact		(0.3)		(0.2)		(0.6)		(0.1)		—		—		(1.2)
Balance at March 31, 2019	$	15.6	$	11.1	$	36.7	$	4.4	$	—	$	—	$	67.8

NOTE 8—DERIVATIVE INSTRUMENTS

The Company’s ongoing business operations expose it to various risks, including fluctuating foreign exchange rates and interest rate risk. To manage these risks, the Company periodically enters into derivative financial instruments, such as foreign exchange forward contracts and interest rate swap agreements. The Company does not hold or enter into financial instruments for trading or speculative purposes. All derivatives are recorded on the condensed consolidated balance sheets at fair value. ~~Refer to Note 9 for fair value disclosures related to these instruments.~~

Foreign Exchange Forward Contracts

Certain subsidiaries have assets and liabilities denominated in currencies other than their respective functional currencies, which creates foreign exchange risk. The Company’s principal strategy in managing its exposure to changes in foreign currency exchange rates is to naturally hedge the foreign currency-denominated liabilities on ~~our~~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. These derivative contracts are not designated for hedge accounting treatment.

As of March 31, ~~2018,~~2019, the Company had open foreign exchange forward contracts with a notional U.S. dollar equivalent absolute value of ~~$334.7~~$408.9 million. The following table displays the notional amounts of the most significant net foreign exchange hedge positions outstanding as of March 31, ~~2018:~~2019:


	March 31,		March 31,
Buy / (Sell)	2018		2019
Euro	$	(129.4)	$	(217.8)
Chinese Yuan	$	(78.2)	$	(78.2)
Swiss Franc	$	54.6	$	45.1
Taiwan Dollar	$	14.4
Indonesian Rupiah	$	(14.0)	$	(18.2)
Mexican Peso			$	(14.9)

Open foreign exchange forward contracts as of March 31, ~~2018~~2019 had maturities occurring over a period of two months.

Foreign Exchange Cash Flow Hedges

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

Open foreign exchange cash flow hedges as of March 31, ~~2018~~2019 had maturities occurring over a period of nine months, and had a net notional U.S. dollar equivalent of ~~$162.0~~$107.1 million.

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Interest Rate Swaps

On September 6, 2017, the Company issued the 2024 Term Loan B, which currently bears an interest rate of ~~LIBOR~~the London Interbank Offered Rate (“LIBOR”) plus ~~2.50%~~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 ~~the third quarter of~~ 2017 the Company entered into certain interest rate swap agreements to convert a portion of these variable rate borrowings into a fixed rate obligation. These interest rate swap agreements are designated as cash flow hedges, and as such, the contracts are marked-to-market at each reporting date and any unrealized gains or losses are included in AOCI to the extent effective, and reclassified to interest expense in the period during which the transaction affects earnings or it becomes probable that the forecasted transaction will not occur.

As of March 31, ~~2018,~~2019, the Company had open interest rate swap agreements with a net notional U.S. dollar equivalent of $200.0 million which had an effective date of September 29, 2017 and mature over a period of five years. Under the terms of the swap agreements, the Company is required to pay the counterparties a stream of fixed interest payments at a rate of 1.81%, and in turn, receives variable interest payments based on 1-month LIBOR ~~(1.88%~~(2.50% as of March 31, ~~2018)~~2019) from the counterparties.

Net Investment Hedge

~~Through August 31, 2017, the Company had designated a portion (€280 million)~~ ~~of the original principal amount of the Company’s previous~~ ~~€375.0 million Euro Notes~~ as a hedge of the foreign currency exposure of the Issuers’ net investment in certain European subsidiaries. Effective September 1, 2017, the Company de-designated the Euro Notes as a net investment hedge of the Issuers’ net investment in certain European subsidiaries, as the Euro Notes were redeemed on September 7, 2017. Through the date of de-designation, this hedge was deemed to be highly effective, and changes in the ~~Euro Notes’~~ ~~carrying value resulting from fluctuations in the euro exchange rate were recorded as cumulative foreign currency translation loss of $24.1 million within AOCI as of December 31, 2017.~~

On ~~August 29, 2017, the Issuers executed an indenture pursuant to which they issued the $500.0 million 5.375% 2025 Senior Notes. Subsequently, on~~ September 1, 2017, the Company entered into certain fixed-for-fixed cross currency swaps (“CCS”), swapping USD principal and interest payments on ~~the newly issued~~its 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~~€420.0 million at a weighted average interest rate of 3.45% for approximately five years.

~~Effective~~ On September 1, 2017, the Company designated the full notional amount of the CCS (€~~420~~420.0 million) as a hedge of ~~the Issuers’~~its net investment in certain European ~~subsidiaries. As~~subsidiaries under the forward method, with all changes in the fair value of the CCS recorded as a component of AOCI, as the CCS were deemed to be highly effective ~~hedges,~~hedges. A cumulative foreign currency translation loss of $38.0 million was recorded within AOCI related to the CCS through March 31, 2018.

Effective April 1, 2018, the Company elected as an accounting policy to re-designate the CCS as a net investment hedge (and any future similar hedges) under the spot method. As such, changes in the fair value of the CCS ~~were~~that are included in the assessment of effectiveness (changes due to spot foreign exchange rates) are recorded as cumulative foreign currency translation ~~loss~~within OCI, and will remain in AOCI until either the sale or substantially complete liquidation of ~~$38.0 million within AOCI as~~the subsidiary. As of March 31, ~~2018.~~

~~Summary~~2019, no gains or losses have been reclassified from AOCI into income related to the sale or substantially complete liquidation of ~~Derivative Instruments~~

~~Information regarding changes~~the relevant subsidiaries. As an additional accounting policy election applied to similar hedges under this new standard, 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. 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. Prior to April 1, 2018, no components were excluded from the assessment of effectiveness for any of the Company’s ~~derivative instruments,~~existing net investment hedges.

As of ~~tax, including those not designated for hedge accounting treatment, is~~April 1, 2018, the initial excluded component value related to the CCS was $23.6 million, which the Company elected to amortize as ~~follows:~~a reduction of “Interest expense, net” in the condensed consolidated statements of operations using the straight-line method over the remaining term of the CCS. Additionally, the accrual of periodic USD and euro-denominated interest receipts and payments under the terms of the CCS are being recognized within “Interest expense, net” in the condensed consolidated statements of operations.

Gain (Loss) Recognized in

Gain (Loss) Recognized in

AOCI on Balance Sheet

Statement of Operations

Three Months Ended March 31,

Statement of Operations

2018

2017

2018

2017

Classification
Designated as Cash Flow Hedges

Foreign exchange cash flow hedges

$
(0.5)

$
(4.8)

$
(3.7)

$
2.5

Cost of sales
Interest rate swaps

3.3

—

(0.1)

—

Interest expense, net
Total

$
2.8

$
(4.8)

$
(3.8)

$
2.5

Net Investment Hedges

Euro Notes

$
—

$
(5.0)

$
—

$
—

Cross-currency swaps (CCS)

(20.4)

—

—

—

Total

$
(20.4)

$
(5.0)

$
—

$
—

Not Designated as Cash Flow Hedges

Foreign exchange forward contracts

$
—

$
—

$
(5.3)

$
(1.7)

Other income, net
Total

$
—

$
—

$
(5.3)

$
(1.7)

~~The Company recorded losses of~~ ~~$5.3 million and $1.7 million during the three months ended March 31, 2018 and~~

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Summary of Derivative Instruments

The following tables present 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 months ended March 31, 2019 and 2018:

The following tables present 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 months ended March 31, 2019 and 2018:
	Location and Amount of Gain (Loss) Recognized in Statements of Operations
	Three Months Ended						Three Months Ended
	March 31, 2019						March 31, 2018
	Cost of sales		Interest expense, net		Other expense (income), net		Cost of sales		Interest expense, net		Other expense (income), net
Total amount of (income) expense line items presented in the statements of operations in which the effects of derivative instruments are recorded	$	915.7	$	10.2	$	4.0	$	946.4	$	14.9	$	(3.8)

Effects of cash flow hedge instruments:
Foreign exchange cash flow hedges
Amount of gain (loss) reclassified from AOCI into income	$	0.6	$	—	$	—	$	(3.7)	$	—	$	—
Interest rate swaps
Amount of gain (loss) reclassified from AOCI into income	$	—	$	0.3	$	—	$	—	$	(0.1)	$	—

Effects of net investment hedge instruments:
Cross currency swaps (CCS)
Amount of gain excluded from effectiveness testing	$	—	$	4.0	$	—	$	—	$	—	$	—

Effects of derivatives not designated as hedge instruments:
Foreign exchange forward contracts
Amount of gain (loss) recognized in income	$	—	$	—	$	2.7	$	—	$	—	$	(5.3)

The following table presents the effect of cash flow and net investment hedge accounting on AOCI for the three months ended March 31, 2019 and 2018:


	Gain (Loss) Recognized in AOCI on Balance Sheet
	Three Months Ended
	March 31,
	2019		2018
Designated as Cash Flow Hedges
Foreign exchange cash flow hedges	$	2.3	$	(0.5)
Interest rate swaps		(2.2)		3.3
Total	$	0.1	$	2.8
Designated as Net Investment Hedges
Cross currency swaps (CCS)	$	11.5	$	(20.4)
Total	$	11.5	$	(20.4)

~~2017, respectively,~~The Company recorded gains of $2.7 million during the three months ended March 31, 2019 and losses of $5.3 million during the three months ended March 31, 2018 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~~losses of ~~$10.4 million and $0.6~~$3.1 million during the three months ended March 31, ~~2018~~2019 and ~~2017, respectively,~~gains of $10.4 million

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during the three months ended March 31, 2018, which resulted from the ~~remeasurement~~re-measurement 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~~statements of cash flows.

~~As of March 31, 2018, the Company had no ineffectiveness related to its derivatives designated as hedging instruments. Further, the~~The Company expects to reclassify in the next twelve months an approximate ~~$11.5~~$5.4 million net ~~loss~~gain from AOCI into earnings related to the Company’s outstanding foreign exchange cash flow hedges and interest rate swaps as of March 31, ~~2018~~2019 based on current foreign exchange rates.

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


	March 31, 2018										December 31, 2017										March 31, 2019
	Foreign		Foreign								Foreign		Foreign								Foreign		Foreign
	Exchange		Exchange		Interest		Cross-				Exchange		Exchange		Interest		Cross-				Exchange		Exchange		Interest		Cross
Balance Sheet	Forward		Cash Flow		Rate		Currency				Forward		Cash Flow		Rate		Currency				Forward		Cash Flow		Rate		Currency
Classification	Contracts		Hedges		Swaps		Swaps		Total		Contracts		Hedges		Swaps		Swaps		Total		Contracts		Hedges		Swaps		Swaps		Total
Asset Derivatives:
Accounts receivable, net of allowance	$	0.3	$	—	$	0.6	$	10.4	$	11.3	$	0.1	$	—	$	—	$	10.8	$	10.9	$	5.2	$	4.2	$	1.2	$	6.0	$	16.6
Deferred charges and other assets		—		—		5.6		—		5.6		—		—		3.0		—		3.0		—		—		1.3		11.5		12.8
Total asset derivatives	$	0.3	$	—	$	6.2	$	10.4	$	16.9	$	0.1	$	—	$	3.0	$	10.8	$	13.9
Gross derivative asset position																						5.2		4.2		2.5		17.5		29.4
Less: Counterparty netting																						(0.2)		—		—		—		(0.2)
Net derivative asset position																					$	5.0	$	4.2	$	2.5	$	17.5	$	29.2
Liability Derivatives:
Accounts payable	$	2.8	$	12.1	$	—	$	—	$	14.9	$	2.5	$	11.1	$	0.1	$	—	$	13.7	$	(0.2)	$	—	$	—	$	—	$	(0.2)
Other noncurrent obligations		—		—		—		48.3		48.3		—		—		—		28.3		28.3
Total liability derivatives	$	2.8	$	12.1	$	—	$	48.3	$	63.2	$	2.5	$	11.1	$	0.1	$	28.3	$	42.0
Gross derivative liability position																						(0.2)		—		—		—		(0.2)
Less: Counterparty netting																						0.2		—		—		—		0.2
Net derivative liability position																					$	—	$	—	$	—	$	—	$	—
Total net derivative position																					$	5.0	$	4.2	$	2.5	$	17.5	$	29.2


	December 31, 2018
	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	$	0.6	$	1.9	$	1.5	$	8.1	$	12.1
Deferred charges and other assets		—		—		3.2		—		3.2
Gross derivative asset position		0.6		1.9		4.7		8.1		15.3
Less: Counterparty netting		(0.5)		—		—		—		(0.5)
Net derivative asset position	$	0.1	$	1.9	$	4.7	$	8.1	$	14.8
Liability Derivatives:
Accounts payable	$	(2.1)	$	—	$	—	$	—	$	(2.1)
Other noncurrent obligations		—		—		—		(3.4)		(3.4)
Gross derivative liability position		(2.1)		—		—		(3.4)		(5.5)
Less: Counterparty netting		0.5		—		—		—		0.5
Net derivative liability position	$	(1.6)	$	—	$	—	$	(3.4)	$	(5.0)
Total net derivative position	$	(1.5)	$	1.9	$	4.7	$	4.7	$	9.8

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

Gross Amounts

Gross Amounts

Net Amounts

Recognized in the

Offset in the

Presented in the


Balance Sheet

Balance Sheet

Balance Sheet

Balance at March 31, 2018

Derivative assets - Current

$
11.4

$
(0.1)

$
11.3

Derivative assets - Non-Current

5.6

—

5.6

Derivative liabilities - Current

15.0

(0.1)

14.9

Derivative liabilities - Non-Current

48.3

—

48.3

Balance at December 31, 2017

Derivative assets - Current

$
11.5

$
(0.6)

$
10.9

Derivative assets - Non-Current

3.0

—

3.0

Derivative liabilities - Current

14.3

(0.6)

13.7

Derivative liabilities - Non-Current

28.3

—

28.3

Refer to Notes 9 and 17 of the condensed consolidated financial statements for further information regarding the fair value of the Company’s derivative instruments and the related changes in AOCI.

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NOTE 9—FAIR VALUE MEASUREMENTS

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

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

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

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

The following table summarizes the basis used to measure certain assets and liabilities at fair value on a recurring basis in the condensed consolidated balance sheets as of March 31, ~~2018~~2019 and December 31, ~~2017:~~2018:

March 31, 2018

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

$
—

$
0.3

$
—

$
0.3

Foreign exchange forward contracts—(Liabilities)

—

(2.8)

—

(2.8)

Foreign exchange cash flow hedges—(Liabilities)

—

(12.1)

—

(12.1)

Interest rate swaps—Assets

—

6.2

—

6.2

Cross-currency swaps—Assets

—

10.4

—

10.4

Cross-currency swaps—(Liabilities)

—

(48.3)

—

(48.3)

Total fair value

$
—

$
(46.3)

$
—

$
(46.3)


	March 31, 2019
	Quoted Prices in Active Markets for Identical Items		Significant Other Observable Inputs		Significant Unobservable Inputs
Assets at Fair Value	(Level 1)		(Level 2)		(Level 3)		Total
Foreign exchange forward contracts—Assets	$	—	$	5.0	$	—	$	5.0
Foreign exchange cash flow hedges—Assets		—		4.2		—		4.2
Interest rate swaps—Assets		—		2.5		—		2.5
Cross currency swaps—Assets		—		17.5		—		17.5
Total fair value	$	—	$	29.2	$	—	$	29.2


	December 31, 2017								December 31, 2018
	Quoted Prices in Active Markets for Identical Items		Significant Other Observable Inputs		Significant Unobservable Inputs				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		(Level 1)		(Level 2)		(Level 3)		Total
Foreign exchange forward contracts—Assets	$	—	$	0.1	$	—	$	0.1	$	—	$	0.1	$	—	$	0.1
Foreign exchange forward contracts—(Liabilities)		—		(2.5)		—		(2.5)		—		(1.6)		—		(1.6)
Foreign exchange cash flow hedges—(Liabilities)		—		(11.1)		—		(11.1)
Foreign exchange cash flow hedges—Assets										—		1.9		—		1.9
Interest rate swaps—Assets		—		3.0		—		3.0		—		4.7		—		4.7
Interest rate swaps—(Liabilities)		—		(0.1)		—		(0.1)
Cross-currency swaps—Assets		—		10.8		—		10.8
Cross-currency swaps—(Liabilities)		—		(28.3)		—		(28.3)
Cross currency swaps—Assets										—		8.1		—		8.1
Cross currency swaps—(Liabilities)										—		(3.4)		—		(3.4)
Total fair value	$	—	$	(28.1)	$	—	$	(28.1)	$	—	$	9.8	$	—	$	9.8

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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Fair Value of Debt Instruments

The following table presents the estimated fair value of the Company’s outstanding debt not carried at fair value as of March 31, ~~2018~~2019 and December 31, ~~2017, respectively:~~

2018:


	As of		As of		As of		As of
	March 31, 2018		December 31, 2017		March 31, 2019		December 31, 2018
2025 Senior Notes	$	495.2	$	518.8	$	476.4	$	438.3
2024 Term Loan B		701.7		705.7		680.5		658.9
Total fair value	$	1,196.9	$	1,224.5	$	1,156.9	$	1,097.2

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

There were no other significant financial instruments outstanding as of March 31, ~~2018~~2019 and December 31, ~~2017.~~2018.

NOTE 10—PROVISION FOR INCOME TAXES

Three Months Ended

March 31,


2018

2017

Effective income tax rate

17.1
%

20.0
%


	Three Months Ended
	March 31,
	2019			2018
Effective income tax rate		23.1	%		17.1	%

Provision for income taxes for the three months ended March 31, 2019 totaled $10.8 million, resulting in an effective tax rate of 23.1%. Provision for income taxes for the three months ended March 31, 2018 totaled $24.9 million, resulting in an effective tax rate of 17.1%. ~~Provision for income taxes for the three months ended March 31, 2017 totaled $29.3 million, resulting in an effective tax rate of 20.0%.~~

The decrease in the effective tax rate for the three months ended March 31, ~~2018~~2019 as compared to the same period in ~~2017~~2018 was primarily driven by a lower proportion of income before taxes attributable to non-U.S. jurisdictions, which includes losses not anticipated to provide a tax benefit to the ~~reduction~~Company in the U.S. federal corporate tax rate from 35% to 21%, effective January 1, 2018, in accordance with the enactment of the Tax Cuts and Jobs Act signed into law on December 22, 2017. The decrease related to the reduction in the U.S. federal corporate tax rate effective in 2018 was partially offset by the $9.3 million gain on sale of the Company’s 50% share in Sumika Styron Polycarbonate during the three months ended March 31, 2017, which was exempt from tax (refer to Note 4 for further information).future.

NOTE 11—COMMITMENTS AND CONTINGENCIES

Environmental Matters

Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based on current law, existing technologies and other information. Pursuant to the terms of the agreement associated with the Company’s formation, the pre-closing environmental conditions were retained by Dow, and Dow has agreed to indemnify the Company from and against all environmental liabilities incurred or relating to the predecessor periods. No environmental claims have been asserted or threatened against the Company, and the Company is not a potentially responsible party at any Superfund Sites. As of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company had no accrued obligations for environmental remediation ~~and~~or 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 1one to 4three 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

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would be less than the annual commitment as disclosed in the Notes to Consolidated Financial Statements included in the Annual ~~Report.~~Report.

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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. In addition, the Company commenced an internal investigation into the matter and has discovered instances of inappropriate activity. The Company is fully cooperating with the European Commission and has delivered all requested documents responsive to its information request.

Notwithstanding the delivery of the Company’s response to the European Commission, this matter remains open with the European Commission. Based on its findings, the European Commission may decide to: (i) require further information; (ii) conduct unannounced raids of the Company’s premises; (iii) adopt decisions imposing fines, interim measures to halt immediately any anti-competitive behavior, orders for the Company to cease anti-competitive activities, and/or certain behavioral or structural commitments from the Company; or (iv) take no further action. 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 12—PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

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


	Three Months Ended
	March 31,
	2019		2018
Defined Benefit Pension Plans
Service cost	$	3.2	$	3.1
Interest cost		1.3		1.3
Expected return on plan assets		(0.5)		(0.6)
Amortization of prior service credit		(0.3)		(0.3)
Amortization of net loss		0.8		1.0
Net settlement and curtailment loss		0.7		—
Net periodic benefit cost	$	5.2	$	4.5

Three Months Ended

March 31,


2018

2017

Defined Benefit Pension Plans

Service cost

$
3.1

$
4.6

Interest cost

1.3

1.1

Expected return on plan assets

(0.6)

(0.4)

Amortization of prior service credit

(0.3)

(0.5)

Amortization of net loss

1.0

1.4

Net settlement and curtailment loss(1)

—

0.1

Net periodic benefit cost

$
4.5

$
6.3

~~(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				Three Months Ended
	March 31,				March 31,
	2018		2017		2019		2018
Other Postretirement Plans
Service cost	$	—	$	0.1	$	—	$	—
Interest cost		0.1		0.1		0.1		0.1
Amortization of prior service cost		—		—		—		—
Amortization of net gain		—		—		(0.1)		—
Net periodic benefit cost	$	0.1	$	0.2	$	—	$	0.1

~~In accordance with recently issued accounting standards, service~~Service cost related to the Company’s defined benefit pension plans and other postretirement plans is included within “Cost of sales” and “Selling, general and administrative expenses” whereas all other components of net periodic benefit cost are included within “Other ~~income,~~expense (income), net” in the condensed consolidated statements of operations. ~~Refer to Note 2 for further information.~~

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As of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company’s benefit obligations included primarily in “Other noncurrent obligations” in the condensed consolidated balance sheets were ~~$195.2~~$191.6 million and ~~$188.7~~$189.2 million, respectively.

The Company made cash contributions and benefit payments to unfunded plans of approximately ~~$2.0~~$0.9 million during the three months ended March 31, ~~2018.~~2019. The Company expects to make additional cash contributions, including benefit payments to unfunded plans, of approximately ~~$4.5~~$5.2 million to its defined benefit plans for the remainder of ~~2018.~~

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2019.

NOTE 13—~~STOCK-BASED~~SHARE-BASED COMPENSATION

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

The following table summarizes the Company’s ~~stock-based~~share-based compensation expense for the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, as well as unrecognized compensation cost as of March 31, ~~2018:~~2019:


					As of							As of
	Three Months Ended				March 31, 2018			Three Months Ended				March 31, 2019
	March 31,				Unrecognized		Weighted	March 31,				Unrecognized		Weighted
	2018		2017		Compensation Cost		Average Years	2019		2018		Compensation Cost		Average Years
RSUs	$	2.2	$	1.9	$	14.9	2.2	$	2.1	$	2.2	$	17.3	2.4
Options		2.8		2.6		2.9	1.6		1.1		2.8		3.7	1.6
PSUs		0.5		0.2		6.7	2.5		0.9		0.5		11.2	2.4
Total stock-based compensation expense	$	5.5	$	4.7
Total share-based compensation expense								$	4.1	$	5.5

The following table summarizes awards granted and the respective weighted average grant date fair value for the three months ended March 31, ~~2018:~~2019:


	Three Months Ended				Three Months Ended
	March 31, 2018				March 31, 2019
	Awards Granted		Weighted Average Grant Date Fair Value per Award		Awards Granted		Weighted Average Grant Date Fair Value per Award
RSUs		97,676	$	81.20		187,029	$	51.01
Options		202,963		22.29		237,071		15.40
PSUs		50,289		88.51		117,053		54.01

Option Awards

The following are the weighted average assumptions used within the Black-Scholes pricing model for the Company’s option awards granted during the three months ended March 31, ~~2018:~~2019:


	Three Months Ended
	March 31,
	~~2018~~2019
Expected term (in years)	5.50
Expected volatility	~~32.00~~36.00	%
Risk-free interest rate	~~2.71~~2.53	%
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 traded history of the Company’s ordinary shares. Until such time that the Company can determine expected volatility based solely on the publicly traded history of its ordinary shares, expected volatility used in the Black-Scholes model for option awards granted is based on a combination of the Company’s historical volatility and similar companies’ ~~stock~~shares that are publicly traded. The expected term of option awards represents the period of time that option awards granted are expected to be outstanding. For the option awards granted during the three months ended March 31, ~~2018,~~2019, 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.

2019

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Performance Share Units (PSUs)

The following are the weighted average assumptions used within the Monte Carlo valuation model for PSUs granted during the three months ended March 31, ~~2018:~~

2019:


		Three Months Ended
		March 31,			Three Months Ended
		2018			March 31, 2019
Expected term (in years)		3.00			3.00
Expected volatility		36.00	%		36.40	%
Risk-free interest rate		2.42	%		2.58	%
Stock price	$	81.20
Share Price				$	50.95

Determining the fair value of PSUs requires considerable judgment, including estimating the expected volatility of the price of the Company’s ordinary shares, the correlation between the Company’s ~~stock~~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 ~~stock~~share price is the closing price of the Company’s ordinary shares on the grant date.

NOTE 14—~~ACQUISITIONS AND DIVESTITURES~~SEGMENTS

~~Acquisition of API Plastics~~

On July 10, 2017, the Company acquired 100% of the equity interests of API Applicazioni Plastiche Industriali S.p.A, or API Plastics, a privately held company. The gross purchase price for the acquisition was $90.6 million, inclusive of $8.4 million of cash acquired, yielding a net purchase price of $82.3 million, all of which was paid for during the year ended December 31, 2017 (noting no cash flows during the three months ended March 31, 2017). API Plastics, based in Mussolente, Italy, is a manufacturer of soft-touch polymers and bioplastics, such as thermoplastic elastomers (“TPEs”), whose results are included within our Performance Plastics segment.

The Company allocated the purchase price of the acquisition to identifiable assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. During the first quarter of 2018, there were no changes to the purchase price allocation for the acquisition of API Plastics. However, further adjustments may be necessary as a result of the Company’s on-going assessment of additional information related to the fair value of assets acquired and liabilities assumed, including goodwill, during the measurement period. During the three months ended March 31, 2018, transaction and integration costs related to advisory and professional fees incurred in conjunction with the API Plastics acquisition were $0.3 million, and were included within “Selling, general and administrative expenses” in the condensed consolidated statement of operations. Refer to the Annual Report for further information.

~~NOTE 15—SEGMENTS~~

~~Through December 31, 2017, the Company operated~~operates under ~~two divisions: Performance Materials and Basic Plastics & Feedstocks. The Performance Materials division included the following reporting~~six segments: Latex Binders, Synthetic Rubber, ~~and~~ Performance ~~Plastics. The Basic~~ Plastics, ~~& Feedstocks division included the following reporting segments: Basic Plastics,~~Polystyrene, Feedstocks, and Americas Styrenics.

Effective January 1, 2018, the Company realigned its reporting segments to reflect the new model under which the business will be managed and results will be reviewed by the chief executive officer, who is the Company’s chief operating decision maker. Under this new segmentation, the Company will no longer have divisions, but will continue to report operating results for six segments, four of which remain unchanged from the Company’s prior segmentation: Latex Binders, Synthetic Rubber, Feedstocks, and Americas Styrenics. The results of our Polystyrene business, which was previously included within the results of the Basic Plastics segment, are now reported as a stand-alone segment. Performance Plastics, which previously consisted of compounds, blends, and ABS products sold to the automotive market, now includes the remaining portion of the Company’s ABS business, as well as the results of the Company’s SAN and PC businesses. This segmentation change will provide enhanced clarity to investors by concentrating the Company’s more specialized plastics into a single reporting segment, while also reducing complexity as PC and ABS are the primary inputs into the downstream production of the Company’s compounds and blends. The information in the tables below has been retroactively adjusted to reflect the changes in reporting segments.

~~Table of Contents~~

The Latex Binders segment produces styrene-butadiene latex or (“SB ~~latex,~~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~~includes a variety of highly engineered compounds and blends, the Company’s acrylonitrile-butadiene-styrene (“ABS”), styrene-acrylonitrile (“SAN”), and ~~also~~polycarbonate (“PC”) businesses, and the Company’s soft-touch polymers and bioplastics business, which includes ~~our ABS, SAN, and PC businesses.~~thermoplastic elastomers (“TPEs”). The ~~Performance Plastics~~Polystyrene segment as recast, also included the results of our previously 50%-owned joint venture, Sumika Styron Polycarbonate, until the Company sold its share in the entity in January 2017 (refer to Note 4 for further information). Polystyrene is a stand-alone reporting segment, and includes a variety of general purpose polystyrenes ~~or GPPS, as well as HIPS, which is~~(“GPPS”) and polystyrene that has been modified with polybutadiene rubber to increase its impact resistant ~~properties.~~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, ABS resins, and solution styrene-butadiene rubber ~~or SSBR, etc.~~(“SSBR”). Lastly, the Americas Styrenics segment consists solely of the operations of ~~our~~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 months ended March 31, 2019 and 2018. Asset ~~capital expenditure,~~ and intersegment sales information by reporting segment is not regularly reviewed or included with the Company’s reporting to the chief operating decision maker. Therefore, this information has not been disclosed below. Refer to Note 3 for the Company’s net sales to external customers by segment for the three months ended March 31, 2019 and 2018.

Latex

Synthetic

Performance

Americas

Corporate

Three Months Ended

Binders

Rubber

Plastics

Polystyrene

Feedstocks

Styrenics

Unallocated

Total

March 31, 2018
















Sales to external customers

$
255.3

$
149.2

$
402.9

$
239.6

$
74.6

$
—

$
—

$
1,121.6

Equity in earnings (losses) of unconsolidated affiliates

—

—

—

—

—

45.5

—

45.5

Adjusted EBITDA(1)

27.5

25.5

65.5

9.6

41.5

45.5

Investment in unconsolidated affiliates

—

—

—

—

—

168.1

—

168.1

Depreciation and amortization

6.1

11.2

6.4

2.9

3.0

—

2.3

31.9

March 31, 2017

Sales to external customers

$
288.9

$
163.4

$
336.9

$
228.4

$
86.9

$
—

$
—

$
1,104.5

Equity in earnings (losses) of unconsolidated affiliates

—

—

0.8

—

—

18.5

—

19.3

Adjusted EBITDA(1)

36.8

46.3

52.2

13.6

41.9

18.5

Investment in unconsolidated affiliates

—

—

—

—

—

160.6

—

160.6

Depreciation and amortization

5.7

8.4

4.0

2.0

2.5

—

2.1

24.7

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	Latex		Synthetic		Performance						Americas
Three Months Ended (1)	Binders		Rubber		Plastics		Polystyrene		Feedstocks		Styrenics
March 31, 2019	$	17.5	$	8.8	$	35.5	$	16.8	$	17.2	$	32.2
March 31, 2018	$	27.5	$	25.5	$	65.5	$	9.6	$	41.5	$	45.5

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

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


	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2018		2017		2019		2018
Income before income taxes	$	145.2	$	146.6	$	46.6	$	145.2
Interest expense, net		14.9		18.2		10.2		14.9
Depreciation and amortization		31.9		24.7		33.9		31.9
Corporate Unallocated(2)		20.1		27.6		26.0		20.1
Adjusted EBITDA Addbacks(3)		3.0		(7.8)		11.3		3.0
Segment Adjusted EBITDA	$	215.1	$	209.3	$	128.0	$	215.1

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

(3)Adjusted EBITDA addbacks for the three months ended March 31, ~~2018~~2019 and ~~2017~~2018 are as follows:

Three Months Ended

March 31,


2018

2017

Net gain on disposition of businesses and assets (Note 4)

$
(0.5)

$
(9.9)

Restructuring and other charges (Note 16)

0.5

2.1

Acquisition transaction and integration costs (Note 14)

0.3

—

Other items(a)

2.7

—

Total Adjusted EBITDA Addbacks

$
3.0

$
(7.8)


	Three Months Ended
	March 31,
	2019		2018
Net gain on disposition of businesses and assets	$	(0.2)	$	(0.5)
Restructuring and other charges (Note 15)		0.4		0.5
Acquisition transaction and integration costs		—		0.3
Other items(a)		11.1		2.7
Total Adjusted EBITDA Addbacks	$	11.3	$	3.0

(a)

Other items for the three months ended March 31, 2019 and 2018 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.

NOTE ~~16—~~15—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.

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The following table provides detail of the Company’s restructuring charges for the three months ended March 31, ~~2018~~2019 and ~~2017:~~2018:


	Three Months Ended				Cumulative			Three Months Ended				Cumulative
	March 31,				Life-to-date			March 31,				Life-to-date
	2018		2017		Charges		Segment	2019		2018		Charges		Segment
Terneuzen Compounding Restructuring(1)
Asset impairment/accelerated depreciation	$	0.3	$	0.6	$	2.3		$	—	$	0.3	$	3.1
Employee termination benefits		0.1		—		0.7			—		0.1		1.0
Contract terminations		—		0.6		0.6			—		—		0.3
Decommissioning and other		—		—		0.8			0.2		—		1.6
Terneuzen Subtotal	$	0.4	$	1.2	$	4.4	Performance Plastics	$	0.2	$	0.4	$	6.0	Performance Plastics
Livorno Plant Restructuring(2)
Asset impairment/accelerated depreciation	$	—	$	—	$	14.3		$	—	$	—	$	14.7
Employee termination benefits		—		0.2		5.4			—		—		5.4
Contract terminations		—		—		0.3			—		—		0.3
Decommissioning and other		0.3		0.6		3.3			0.2		0.3		3.9
Livorno Subtotal	$	0.3	$	0.8	$	23.3	Latex Binders	$	0.2	$	0.3	$	24.3	Latex Binders
Other Restructurings		0.1		0.7			Various		—		0.1			Various
Total Restructuring Charges	$	0.8	$	2.7				$	0.4	$	0.8

(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

~~Table of Contents~~

facility in Terneuzen, The Netherlands. ~~The~~As of March 31, 2019, the new facility is ~~expected to be operational by the end of 2018, with substantive~~substantially complete, and some customer qualification activities are still ongoing. Substantive production at the existing facility is expected to cease ~~by December 2018,~~during the second quarter of 2019, followed by decommissioning activities in ~~2019.~~2019 and 2020. The Company expects to incur ~~incremental accelerated depreciation charges of approximately $0.9 million through the end of 2018, as well as~~ estimated ~~employee termination benefit charges and~~ decommissioning and other charges of approximately ~~$0.9~~$0.6 million throughout 2019, the majority of which are expected to be paid throughout 2019.

(2)

In August 2016, the Company announced its plan to cease manufacturing activities at its latex binders manufacturing facility in Livorno, Italy. Production at the facility ceased in October 2016 ~~followed by~~and decommissioning activities ~~which~~ began in the fourth quarter of 2016. In June 2018, the Company entered into a preliminary agreement to sell the land where the former facility is located, subject to certain activities being completed prior to closing. The sale is considered probable to close within one year following the balance sheet date; therefore, as of March 31, 2019 and December 31, 2018, the land is recorded as held-for-sale within “Other current assets” at a value of $11.8 million and $12.0 million, respectively (adjusted for foreign currency impact), and the deferred tax liability associated with that land is recorded as held-for-sale within “Accrued expenses and other current liabilities” at a value of $2.8 million and $2.9 million, respectively (adjusted for foreign currency impact), on the Company’s condensed consolidated balance sheets. In conjunction with the execution of this agreement, the Company ~~does not expect to incur additional employee termination benefit charges related to this restructuring.~~received $1.3 million of the purchase price as a prepayment, which is recorded within “Accrued expenses and other current liabilities” on the condensed consolidated balance sheets as of March 31, 2019 and December 31, 2018. The Company expects to incur a limited amount of additional decommissioning costs associated with this plant shutdown ~~in 2018,~~through the ~~cost~~closing date of the sale, which will be expensed as incurred.

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The following table provides a ~~rollforward~~roll forward of the liability balances associated with the Company’s restructuring activities as of March 31, ~~2018.~~2019. Employee termination benefit and contract termination charges are recorded within “Accrued expenses and other current liabilities” in the condensed consolidated balance ~~sheet.~~sheets.


	Balance at						Balance at		Balance at						Balance at
	December 31, 2017		Expenses		Deductions(1)		March 31, 2018		December 31, 2018		Expenses		Deductions(1)		March 31, 2019
Employee termination benefits	$	1.4	$	0.1	$	(0.6)	$	0.9	$	6.4	$	—	$	(1.0)	$	5.4
Contract terminations		0.6		—		—		0.6		0.3		—		—		0.3
Decommissioning and other		—		0.4		(0.4)		—		—		0.4		(0.4)		—
Total	$	2.0	$	0.5	$	(1.0)	$	1.5	$	6.7	$	0.4	$	(1.4)	$	5.7

(1)

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

NOTE ~~17—~~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  March 31, 2018 and 2017

Adjustments

Plans, Net

Hedges, Net

Total

Balance at December 31, 2017

$
(94.5)

$
(45.0)

$
(6.1)

$
(145.6)

Other comprehensive income (loss)

(2.1)

—

(1.0)

(3.1)

Amounts reclassified from AOCI to net income (1)

—

0.6

3.8

4.4

Balance at March 31, 2018

$
(96.6)

$
(44.4)

$
(3.3)

$
(144.3)

Balance as of December 31, 2016

$
(119.0)

$
(63.5)

$
12.3

$
(170.2)

Other comprehensive income (loss)

4.2

—

(2.3)

1.9

Amounts reclassified from AOCI to net income (1)

—

1.4

(2.5)

(1.1)

Balance as of March 31, 2017

$
(114.8)

$
(62.1)

$
7.5

$
(169.4)


	Cumulative		Pension & Other
	Translation		Postretirement Benefit			Cash Flow
Three Months Ended March 31, 2019 and 2018	Adjustments		Plans, Net			Hedges, Net	Total
Balance as of December 31, 2018	$	(111.8)	$	(39.4)	$	8.9	$	(142.3)
Other comprehensive income (loss)		(0.3)		(2.0)		1.0		(1.3)
Amounts reclassified from AOCI to net income (loss) (1)		—		1.0		(0.9)		0.1
Balance as of March 31, 2019	$	(112.1)	$	(40.4)	$	9.0	$	(143.5)

Balance as of December 31, 2017	$	(94.5)	$	(45.0)	$	(6.1)	$	(145.6)
Other comprehensive loss		(2.1)		—		(1.0)		(3.1)
Amounts reclassified from AOCI to net income (1)		—		0.6		3.8		4.4
Balance as of March 31, 2018	$	(96.6)	$	(44.4)	$	(3.3)	$	(144.3)

(1)

The following is a summary of amounts reclassified from AOCI to net income for the three months ended March 31, ~~2018~~2019 and ~~2017, respectively:~~2018:

~~Table of Contents~~


	Amount Reclassified from AOCI					Amount Reclassified from AOCI
AOCI Components	Three Months Ended March 31,				Statement of Operations	Three Months Ended March 31,				Statements of Operations
	2018		2017		Classification	2019		2018		Classification
Cash flow hedging items
Foreign exchange cash flow hedges	$	3.7	$	(2.5)	Cost of sales	$	(0.6)	$	3.7	Cost of sales
Interest rate swaps		0.1		—	Interest expense, net		(0.3)		0.1	Interest expense, net
Total before tax		3.8		(2.5)			(0.9)		3.8
Tax effect		—		—	Provision for income taxes		—		—	Provision for income taxes
Total, net of tax	$	3.8	$	(2.5)		$	(0.9)	$	3.8

Amortization of pension and other postretirement benefit plan items
Prior service credit	$	(0.2)	$	(0.4)	(a)	$	(0.3)	$	(0.2)	(a)
Net actuarial loss		1.1		1.6	(a)		0.9		1.1	(a)
Net settlement and curtailment loss		—		0.6	(a)		0.8		—	(a)
Total before tax		0.9		1.8			1.4		0.9
Tax effect		(0.3)		(0.4)	Provision for income taxes		(0.4)		(0.3)	Provision for income taxes
Total, net of tax	$	0.6	$	1.4		$	1.0	$	0.6

(a)

These AOCI components are included in the computation of net periodic benefit costs (see Note 12).

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NOTE ~~18—~~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 for the three months ended March 31, ~~2018~~2019 and ~~2017, respectively:~~2018:


	Three Months Ended				Three Months Ended
	March 31,				March 31,
(in millions, except per share data)	2018		2017		2019		2018
Earnings:
Net income	$	120.3	$	117.3	$	35.8	$	120.3
Shares:
Weighted average ordinary shares outstanding		43.4		44.1		41.3		43.4
Dilutive effect of RSUs, option awards, and PSUs*		1.0		1.2
Dilutive effect of RSUs, option awards, and PSUs(1)						0.5		1.0
Diluted weighted average ordinary shares outstanding		44.4		45.3		41.8		44.4
Income per share:
Income per share—basic	$	2.77	$	2.66	$	0.87	$	2.77
Income per share—diluted	$	2.71	$	2.59	$	0.86	$	2.71

(1)

* Refer to Note 13 for discussion of RSUs, option awards, and PSUs granted to certain Company directors and employees. The number of anti-dilutive shares that have been excluded from the computation of diluted earnings per share was 1.1 million and 0.2 million for the three months ended March 31, 2019 and 2018, respectively.

NOTE 18—LEASES

As discussed in Note 2, effective January 1, 2019, the Company adopted accounting guidance, Topic 842, issued by the FASB related to leases that outlines a comprehensive lease accounting model and supersedes the current lease guidance. The Company adopted this guidance using the modified retrospective approach and elected the optional transition method. As a result, comparative prior periods in the ~~computation~~Company’s financial statements are not adjusted for the impacts of ~~diluted~~the new standard. The Company’s accounting policy and practical expedient elections related to accounting for leases, including those elected as a result of the adoption of Topic 842, are summarized as follows:

Package of practical expedients – The Company will not reassess whether expired or existing contracts contain a lease, will not reassess the classification of expired or existing leases, and will not reassess whether lease initial direct costs would qualify for capitalization under the new lease accounting standards.

Lease and non-lease components as lessee – For leases across all asset classes in which the Company is a lessee (discussed below), the Company will not separate non-lease components from lease components and instead will account for these items as a single lease component.

Portfolio approach – The Company has elected to utilize the portfolio approach under which it will not have to consider the components to apply lease accounting. Specifically, the Company will leverage the portfolio approach in determining the discount rate within multiple asset classes, and in determining the lease term considerations for immaterial asset classes, including, but not limited to, motor vehicles and plant, office, and information technology equipment.

Land easements – The Company will not reassess whether existing or expired land easements that were not previously accounted for as leases are or contain a lease under the new lease accounting standards.

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Use of hindsight and short-term lease exemption – The Company is not electing to utilize either the practical expedient related to the use of hindsight or the election to exclude short-term leases from balance sheet presentation.

The Company routinely enters into leasing arrangements for a variety of assets including buildings/offices, warehouses and tanks for product storage, railcars and other vehicles for product transportation, motor vehicles, and other equipment. The Company determines if a contract is or contains a lease based on its relevant terms in accordance with Topic 842, including whether it conveys to the Company the right to obtain substantially all the economic benefits of the identified leased asset and to direct its use.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company’s lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the lease commencement date to determine the appropriate discount rate by multiple asset classes, pursuant to the aforementioned portfolio approach methodology. Variable lease payments that are not based on an index or that result from changes to an index subsequent to the initial measurement of the corresponding lease liability are not included in the measurement of lease ROU assets or liabilities and instead are recognized in earnings ~~per share~~in the period in which the obligation for those payments is incurred. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise any such options. Lease expense is recognized on a straight‐line basis over the expected lease term.

The Company's ROU assets and lease liabilities are classified on its condensed consolidated balance sheets as follows:


	As of
	March 31,
	2019		Location on Balance Sheet
Operating lease ROU assets	$	68.1	Right-of-use assets - operating
Finance lease ROU assets		0.6	Property, plant, and equipment, net of accumulated depreciation
Operating lease liabilities - current portion		(15.2)	Current lease liabilities - operating
Operating lease liabilities - noncurrent portion		(53.2)	Noncurrent lease liabilities - operating
Finance lease liabilities - current portion		(0.1)	Short-term borrowings and current portion of long-term debt
Finance lease liabilities - noncurrent portion		(0.5)	Long-term debt, net of unamortized deferred financing fees

The components of the Company's lease costs are classified on its condensed consolidated statements of operations as follows:


	Three Months Ended
	March 31,
	2019
Finance lease cost:
Amortization of lease ROU assets*	$	—
Interest on lease liabilities*		—

Operating lease cost		4.6
Variable lease cost*		—
Total lease cost	$	4.6

*For the three months ended March 31, ~~2018 and 2017 were 0.2 million and 0.2 million, respectively.~~

2019, amounts totaled less than $0.1 million.

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The table below shows the cash and non-cash activity related to the Company’s lease liabilities during the period:


	Three Months Ended
	March 31,
	2019
Cash paid related to lease liabilities:
Operating cash flows from operating leases	$	3.8
Operating cash flows from finance leases*		—
Financing cash flows from finance leases*		—

Non-cash lease liability activity:
ROU assets obtained in exchange for new operating lease liabilities	$	72.5
ROU assets obtained in exchange for new finance lease liabilities		0.6

*For the three months ended March 31, 2019, amounts totaled less than $0.1 million.

As of March 31, 2019, the maturities of the Company's operating and finance lease liabilities were as follows:


	Maturity of lease liabilities by year
	Remainder of 2019		2020		2021		2022		2023		Thereafter		Total Lease Payments		Less Imputed Interest		Lease Liability
Operating Leases	$	13.1	$	14.2	$	8.4	$	7.0	$	6.8	$	34.6	$	84.1	$	(15.7)	$	68.4
Finance Leases	$	—	$	0.1	$	0.1	$	0.1	$	0.1	$	0.4	$	0.8	$	(0.2)	$	0.6

As of March 31, 2019, the weighted average remaining lease term of the Company's operating and finance leases was 9.2 and 16.2 years, respectively, and the weighted average discount rate used to determine the lease liability for operating and finance leases was 4.8% and 4.6%, respectively.

As of March 31, 2019, the Company has additional operating leases that have not yet commenced of $3.2 million. The leases will commence in fiscal year 2020 with lease terms of 0.5 to 5.0 years.

Disclosures related to periods prior to adoption of Topic 842

As discussed above, the Company adopted Topic 842 effective January 1, 2019 using a modified retrospective approach. As required, the following disclosure is provided for periods prior to adoption. The Company’s total future minimum annual rentals in effect at December 31, 2018 for noncancelable operating leases, which were accounted for under the previous leasing standard, Accounting Standards Codification 840, were as follows:


Annual Commitment
2019		2020		2021		2022		2023		Thereafter		Total
$	17.5	$	14.4	$	9.0	$	10.6	$	5.4	$	16.0	$	72.9

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

~~2018~~2019 Year-to-Date Highlights

InDuring the ~~first quarter of 2018,~~three months ended March 31, 2019, Trinseo recognized ~~record~~ net income of ~~$120.3~~$35.8 million and Adjusted EBITDA of ~~$195.0~~$102.0 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.

~~New Segmentation~~Chief Financial Officer Transition

~~Through December 31, 2017,~~On April 29, 2019, the Company ~~operated under six reporting segments:~~named David Stasse as Executive Vice President and Chief Financial Officer, effective July 1, 2019, replacing Barry Niziolek who previously announced his plans to retire. Mr. Stasse is currently serving as the Company’s Vice President, Treasury and Investor Relations.

Trinseo to Acquire Latex Binders ~~Synthetic Rubber, Performance Plastics, Basic Plastics, Feedstocks, and Americas Styrenics. Effective January 1, 2018,~~Assets in Germany

On May 2, 2019, the Company ~~realigned~~announced that it has signed a definitive agreement with Dow to acquire its ~~reporting segments to reflect the new model under which the business will be managed and results will be reviewed by the chief executive officer, who is the Company’s chief operating decision maker.~~

~~Under this new segmentation, we will continue to report operating results for six segments, four of~~latex binders production assets in Rheinmünster, Germany, which will ~~remain unchanged~~provide Trinseo with manufacturing assets capable of producing applications for the adhesives and construction markets. The transaction is expected to close in the second half of 2019, following European Union regulatory approval and customary closing conditions. This transaction will not require any upfront cash outlay from Trinseo; however, Trinseo expects to assume approximately €40.0 million in pension liabilities for transferred employees in exchange for the ~~Company’s prior segmentation: Latex Binders, Synthetic Rubber, Feedstocks, and Americas Styrenics.~~ The results of our Polystyrene business, which was previously included within the results of the Basic Plastics segment, is now reported as a stand-alone segment. Performance Plastics, which previously consisted of compounds, blends, and ABS products sold to the automotive market, now includes the remaining portion of our ABS business, as well as the results of our SAN and PC businesses. This segmentation change will provide enhanced clarity to investors by concentrating the Company’s more specialized plastics into a single reporting segment, while also reducing complexity as PC and ABS are the primary inputs into the downstream production of our compounds and blends.

~~Prior period financial information included within this Quarterly Report has been recast from its previous presentation to reflect the Company’s new organizational structure.~~

~~SSBR Capacity Expansion and Pilot Plant~~

During the first quarter of 2018, the Company completed the initial phase of its 50kT SSBR capacity expansion at its Schkopau, Germany facility, and also opened a new SSBR pilot plant at this same facility which will expedite the product development process from lab sample to commercialization by delivering sufficient quantities of new formulations without the need to interrupt production in our industrial lines.

~~Share Repurchases and Dividends~~

During the three months ended March 31, 2018, under existing authority from its board of directors, the Company purchased 306,613 ordinary shares from its shareholders through open market transactions for an aggregate purchase price of $23.8 million. Additionally, during the three months ended March 31, 2018, the Company’s board of directors declared quarterly dividends for an aggregate value of $0.36 per ordinary share, or $15.8 million.

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assets described above.

Results of Operations

Results of Operations for the Three Months Ended March 31, ~~2018~~2019 and ~~2017~~2018

The table below sets forth our historical results of operations and these results as a percentage of net sales for the periods indicated. As a result of recently adopted accounting guidance related to pension accounting, certain prior period financial information included in the sections below has been recast to conform to current year presentation. Refer to Note 2 in the condensed consolidated financial statements for further information.

References to portfolio adjustments below represent the impacts of the Company’s acquisition and divestiture activity, including the sale of our joint venture Sumika Styron Polycarbonate and the acquisition of API Plastics, both of which occurred during 2017. Refer to the condensed consolidated financial statements for further information.


	Three Months Ended								Three Months Ended
	March 31,								March 31,
(in millions)	2018		%		2017		%		2019		%		2018		%
Net sales	$	1,121.6	100	%	$	1,104.5	100	%	$	1,013.1	100	%	$	1,121.6	100	%
Cost of sales		946.4	84	%		905.5	82	%		915.7	90	%		946.4	84	%
Gross profit		175.2	16	%		199.0	18	%		97.4	10	%		175.2	16	%
Selling, general and administrative expenses		64.4	6	%		59.6	5	%		68.8	7	%		64.4	6	%
Equity in earnings of unconsolidated affiliates		45.5	4	%		19.3	2	%		32.2	3	%		45.5	4	%
Operating income		156.3	14	%		158.7	15	%		60.8	6	%		156.3	14	%
Interest expense, net		14.9	1	%		18.2	2	%		10.2	1	%		14.9	1	%
Other income, net		(3.8)	—	%		(6.1)	(1)	%
Other expense (income), net										4.0	—	%		(3.8)	—	%
Income before income taxes		145.2	13	%		146.6	14	%		46.6	5	%		145.2	13	%
Provision for income taxes		24.9	2	%		29.3	3	%		10.8	1	%		24.9	2	%
Net income	$	120.3	11	%	$	117.3	11	%	$	35.8	4	%	$	120.3	11	%

Three Months Ended – March 31, ~~2018~~2019 vs. March 31, ~~2017~~2018

Net Sales

Of the ~~2% increase,~~ 10% ~~of the increase~~decrease in net sales, 15% was due to ~~currency impacts as the euro strengthened in comparison to the U.S. dollar on a quarter-to-date basis. This increase was offset by a 5% decrease due to~~ lower ~~sales volume, primarily in the Latex Binders, Feedstocks, and Synthetic Rubber segments (discussed further below), as well as a 5% decrease due to~~selling prices resulting from the pass through of lower raw material costs, primarily ~~related to styrene monomer and butadiene.~~

~~Cost of Sales~~

~~Of the 5% increase, 10% of the increase~~from styrene. An additional 3% decrease was due to currency impacts as the euro ~~strengthened~~weakened in comparison to the U.S. dollar onduring the period. These decreases were partially offset by a ~~quarter-to-date basis,~~9% increase in net sales due to higher sales volume within the Polystyrene, Feedstocks, Performance Plastics, and ~~1% of the increase was related to the acquisition of API Plastics. Partially offsetting these increases was a 4% decrease due to~~Latex Binders segments, partially offset by lower sales volume ~~primarily in~~within the ~~Latex Binders, Feedstocks, and~~ Synthetic Rubber ~~segments, as well as a 4% decrease due to lower raw materials costs, primarily related to styrene monomer and butadiene.~~segment. See the segment discussion below for further information.

~~Gross Profit~~

The decrease was primarily attributable to raw material timing impacts, which provided a net favorable impact in the prior year in comparison to a net unfavorable impact in the current year, as well as lower sales volume and margins particularly within the Latex Binders and Synthetic Rubber segments (discussed further below).

~~Selling, General and Administrative Expenses~~

The $4.8 million year-over-year increase is comprised of several offsetting factors. Higher advisory and professional fees resulted in an approximate $2.0 million increase, primarily related to fees incurred in conjunction with the Company’s recently initiated project to complete the transition of business and technical services from Dow, as well as fees related to certain growth initiatives. Additionally, increases of $2.0 million and $0.8 million, respectively, were noted due to the acquisition of API Plastics, which did not occur until the third quarter of 2017, and higher stock-based

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~~compensation expense. Partially offsetting these increases~~

Cost of Sales

Of the 3% decrease in cost of sales, 7% was due to lower raw material costs, primarily from styrene. An additional 4% decrease was due to currency impacts as the euro weakened in comparison to the U.S. dollar during the period. These decreases were partially offset by a 7% increase due to higher sales volume within the Polystyrene, Feedstocks, Performance Plastics, and Latex Binders segments, partially offset by lower ~~restructuring charges, which decreased by $1.9 million, noting lower accelerated depreciation and contract termination charges~~sales volume within the Synthetic Rubber segment. An additional 2% increase was due to increased fixed costs during the period.

Gross Profit

The decrease in gross profit of 44% was primarily attributable to margin compression during the period in the ~~current year related~~Feedstocks, Performance Plastics, and Latex Binders segments. This was due to a combination of factors, including macroeconomic dynamics in China, weakness in certain key markets such as automotive and tires, and lower styrene margins from a higher level of unplanned industry outages in the ~~upgrade~~prior year. See the segment discussion below for further information.

Selling, General and ~~replacement of~~Administrative Expenses (SG&A)

The $4.4 million, or 7%, increase in SG&A is due to several factors. Higher advisory and professional fees resulted in an $8.8 million increase in costs incurred in conjunction with the Company’s ~~compounding facility~~transition of business and technical services from Dow. Offsetting these increased costs was a decrease of $1.4 million in ~~Terneuzen, The Netherlands,~~share-based compensation expense as well as ~~lower overall decommissioning and employee termination benefit~~a $0.4 million decrease in restructuring charges ~~related~~during the three months ended March 31, 2019 compared to the prior year. Additionally, a decrease of $1.7 million was due to currency impacts on our ~~decision~~euro-based expenses, as the euro weakened in comparison to ~~cease manufacturing operations at our latex facility in Livorno, Italy (refer to Note 16 in~~ the ~~condensed consolidated financial statements for further information).~~U.S. dollar.

Equity in Earnings of Unconsolidated Affiliates

The ~~increase~~decrease in equity earnings ~~primarily resulted from higher~~of $13.3 million was due to lower equity earnings from Americas Styrenics ~~which increased from $18.5 million in 2017~~during the period, mainly attributable to ~~$45.5 million in 2018, primarily due to~~lower styrene margins as well as the ~~impact from an extended prior year~~planned styrene maintenance outage at its St. James, LA ~~facility.~~facility in the first quarter of 2019.

Interest Expense, Net

The decrease in interest expense, net of $4.7 million, or 32%, was primarily attributable to ~~a reduction in interest rates~~the benefits received from the ~~Company’s debt refinancing~~cross currency swaps that the Company entered into in September 2017, which are now recorded as a benefit within interest expense as a result of our adoption of new hedging accounting guidance during the ~~third~~second quarter of ~~2017.~~2018.

Other ~~Income,~~Expense (Income), Net

Other expense, net for the three months ended March 31, 2019 was $4.0 million, which included $2.3 million of expense related to the non-service cost components of net periodic benefit cost, as well as foreign exchange transaction losses of $0.4 million. Net foreign transaction losses included $3.1 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, partially offset by $2.7 million of gains from our foreign exchange forward contracts. Other expense, net also included $1.5 million of other miscellaneous expenses during the period.

Other income, net for the three months ended March 31, 2018 was $3.8 million, which primarily ~~includes~~included net foreign exchange transaction gains for the period of $5.1 million. Net foreign exchange transactions gains included $10.4 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, offset by $5.3 million of losses from our foreign exchange forward contracts. ~~Additionally,~~Other income, net also included $1.7 million of expense ~~is included within “Other income, net” for all of~~related to the non-service cost components of net periodic benefit cost.

~~Other~~

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Provision for Income Taxes

Provision for income ~~net~~taxes for the three months ended March 31, ~~2017 was $6.1~~2019 totaled $10.8 million, ~~primarily due to a $9.3 million gain related to the sale~~resulting in an effective tax rate of ~~the Company’s 50% share in Sumika Styron Polycarbonate in January 2017 (refer to Note 4 in the condensed consolidated financial statements for further information)~~23.1%. Net foreign exchange transaction losses for the period were $1.1 million, which included $0.6 million of foreign exchange transactions 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 $1.7 million of losses from our foreign exchange forward contracts. Additionally, $2.0 million of expense is included within “Other income, net” for all of the non-service cost components of net periodic benefit cost.

~~Provision for Income Taxes~~

Provision for income taxes for the three months ended March 31, 2018 totaled $24.9 million, resulting in an effective tax rate of 17.1%. ~~Provision for income taxes for the three months ended March 31, 2017 totaled $29.3 million, resulting in an effective tax rate of 20.0%.~~

The decrease in provision for income taxes ~~for the three months ended March 31, 2018 as compared to the same period in 2017~~ was primarily driven by the ~~reduction in the U.S. federal corporate tax rate from 35% to 21%, effective January 1, 2018, in accordance with the enactment of the Tax Cuts and Jobs Act signed into law on December 22, 2017.~~

~~Included~~$98.6 million decrease in income before ~~incomes~~income taxes. This decrease was partially offset by a lower proportion of income before taxes ~~for~~attributable to non-U.S. jurisdictions, which includes losses not anticipated to provide a tax benefit to the ~~three months ended March 31, 2017 was~~Company in the ~~$9.3 million gain on sale~~future.

Outlook

As discussed above, generally weaker economic conditions, including continued weak automotive and tire markets and the weak economic environment in China, impacted the first quarter 2019 results versus the prior year. We have seen signs of improved demand across some of our ~~50% share~~markets and the Company expects a modest improvement in ~~Sumika Styron Polycarbonate, which was exempt from tax.~~

~~Outlook~~

~~Overall, we expect continued strong performance across our portfolio during the~~ second quarter ~~and through the remainder of 2018. Styrene margins have remained healthy to start the second quarter and business fundamentals remain solid which should lead to robust~~ profitability in comparison to the first ~~half~~quarter. Results for full year 2019 will be influenced by the timing and magnitude of a market recovery. Amid these market conditions, the ~~year. In addition, we continue~~Company has initiated a number of working capital and cost initiatives to ~~expect strong~~improve our operating results, and remains focused on cash generation ~~for the year~~ and ~~remain focused on the right balance of growth and returning cash to shareholders.~~

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cost management.

Selected Segment Information

As discussed above, effective January 1, 2018, the Company realigned its organizational structure to include the following reporting segments: Latex Binders, Synthetic Rubber, Performance Plastics, Polystyrene, Feedstocks, and Americas Styrenics. The following sections describe net sales, Adjusted EBITDA, and Adjusted EBITDA margin by segment for the three months ended March 31, ~~2018~~2019 and ~~2017, which have been recast to reflect the Company’s new organizational structure.~~2018. Inter-segment sales have been eliminated. Refer to Note 1514 in the condensed consolidated financial statements for further information on ~~these changes,~~our segments, as well as for a detailed definition of Adjusted EBITDA and a reconciliation of income before income taxes to segment Adjusted EBITDA.

Latex Binders Segment

Our Latex Binders segment produces styrene-butadiene latex (“SB ~~latex~~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								Three Months Ended
	March 31,								March 31,
($ in millions)	2018			2017			% Change		2019			2018			% Change
Net sales	$	255.3		$	288.9		(12)	%	$	223.9		$	255.3		(12)	%
Adjusted EBITDA	$	27.5		$	36.8		(25)	%	$	17.5		$	27.5		(36)	%
Adjusted EBITDA margin		11	%		13	%				8	%		11	%

Three Months Ended – March 31, ~~2018~~2019 vs. March 31, ~~2017~~2018

Of the 12% decrease in net sales, 9%14% was due to lower pricing from the pass through of lower raw material costs, primarily from styrene, and 2% was due to currency impacts as the euro weakened in comparison to the U.S. dollar during the period. Partially offsetting these decreases was a 5% increase due to higher sales volume ~~particularly~~as increases to the paper, board and carpet markets in North America and Europe ~~and 9% of~~were partially offset by a decrease to the paper market in Asia primarily from a customer outage.

Adjusted EBITDA decreased by $10.0 million, or 36%, including a 43% decrease ~~was~~ due to ~~the pass through of~~ lower margins from raw material ~~costs.~~dynamics as well as competitive market conditions. These decreases were partially offset by a 6% increase due to ~~currency impacts as the euro strengthened in comparison to the U.S. dollar on a quarter-to-date basis.~~

~~Adjusted EBITDA decreased by 25% primarily due to lower~~higher sales volume, including impacts related to paper production unit closures and coated paper market declines, which resulted in a 20% decrease. Additionally, lower margins due mainly to raw material dynamics resulted in a 16% decrease in Adjusted EBITDA. These decreases were partially offset by a 6% increase due to fixed cost improvements, as well as a 4% increase due to ~~currency impacts as the euro strengthened in comparison to the U.S. dollar on a quarter-to-date basis.~~fixed cost improvements.

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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~~solution styrene-butadiene rubber ~~or Li-PBR,~~(“SSBR”), nickel polybutadiene rubber ~~or Ni-PBR,~~(“Ni-PBR”), and neodymium polybutadiene rubber ~~or Nd-PBR,~~(“Nd-PBR”), while also producing core products, such as emulsion styrene-butadiene rubber (“ESBR”).


	Three Months Ended
	March 31,
($ in millions)	2019			2018			% Change
Net sales	$	124.6		$	149.2		(16)	%
Adjusted EBITDA	$	8.8		$	25.5		(65)	%
Adjusted EBITDA margin		7	%		17	%

Three Months Ended – March 31, 2019 vs. March 31, 2018

Of the 16% decrease in net sales, 10% was due to lower sales volume, primarily related to decreased sales of SSBR and ESBR, and 5% was due to currency impacts as the euro weakened in comparison to the U.S. dollar during the period. An additional 2% decrease was due to lower pricing from the pass through of lower raw material costs, primarily from styrene.

Adjusted EBITDA decreased by $16.7 million, or ~~ESBR.~~65%. Lower margins resulted in a 33% decrease due to unfavorable raw material timing impacts, net of price lag, and lower sales volume resulted in a 28% decrease. In addition, higher fixed costs, due to a lower level of fixed cost absorption, resulted in an 8% decrease.

Performance Plastics Segment

Our Performance Plastics segment consists of a variety of compounds and blends, our ABS, SAN, PC businesses, and our soft-touch polymers and bioplastics business, which includes thermoplastic elastomers (“TPEs”). We are a producer of highly engineered compounds and blends for automotive end markets, as well as consumer electronics, medical, electrical, lighting, building and construction, appliances, and footwear.


	Three Months Ended
	March 31,
($ in millions)	2019			2018			% Change
Net sales	$	369.3		$	402.9		(8)	%
Adjusted EBITDA	$	35.5		$	65.5		(46)	%
Adjusted EBITDA margin		10	%		16	%

Three Months Ended – March 31, 2019 vs March 31, 2018

Of the 8% decrease in net sales, 12% was due to lower pricing from the pass through of lower styrene costs as well as lower polycarbonate prices due to lower industry operating rates. An additional 3% decrease was due to currency impacts as the euro weakened in comparison to the U.S. dollar during the period. These decreases to net sales were partially offset by a 7% increase attributable to higher sales volume.

Adjusted EBITDA decreased by $30.0 million, or 46%, due to several factors. Lower margins resulted in a $33.8 million, or 52%, decrease in Adjusted EBITDA, due to a combination of drivers, including a slowdown in the automotive industry and general market uncertainty in China due to ongoing trade dynamics. In addition, polycarbonate margins were particularly impacted due to lower industry operating rates from increased supply impacting an already weakened market. Adjusted EBITDA decreased an additional $7.3 million, or 11%, due to increased fixed costs from a lower level of fixed cost absorption. These impacts were partially offset by higher sales volume, which resulted in a $10.6 million, or 16%, increase in Adjusted EBITDA.

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Three Months Ended

March 31,

($ in millions)


2018


2017

% Change

Net sales

$
149.2


$
163.4


(9)
%

Adjusted EBITDA

$
25.5

$
46.3


(45)
%

Adjusted EBITDA margin

17
%

28
%

~~Three Months Ended – March 31, 2018 vs. March 31, 2017~~

Net sales decreased 9% from the prior year, primarily due to the pass through of lower raw material cost, particularly butadiene, which resulted in a 15% decrease. Additionally, 6% of the net sales decrease resulted from lower sales volume, primarily related to ESBR sales volume as export sales opportunities were favorable in the prior year. These decreases were partially offset by a 13% increase due to currency impacts as the euro strengthened in comparison to the U.S. dollar on a quarter-to-date basis.

The majority of the decrease in Adjusted EBITDA was due to unfavorable raw material timing, primarily resulting from rapidly increasing butadiene prices in the prior year, as well as lower margins on export sales due to very favorable conditions in the prior year, which resulted in a combined $19.2 million, or 42% decrease, in the current period. An overall decrease in sales volume, particularly lower ESBR sales volume, partially offset by record SSBR sales volume, resulted in a 6% decrease. Currency impacts resulted in a 3% increase as the euro strengthened in comparison to the U.S. dollar on a quarter-to-date basis.

~~Performance Plastics Segment~~

Our Performance Plastics segment consists of compounds and blends, and also includes our ABS, SAN, and PC businesses. We are a producer of highly engineered compounds and blends for various markets including automotive, consumer electronics, medical, electrical and lighting. In July 2017, the Company completed the acquisition of API Plastics, the results of which are reported within the Performance Plastics segment. Additionally, the Performance Plastics segment, as recast, also includes the results of our previously 50%-owned joint venture Sumika Styron Polycarbonate prior to its sale in January 2017. Refer to Notes 4 and 14 in the condensed consolidated financial statements for further information.

Three Months Ended

March 31,

($ in millions)


2018


2017

% Change

Net sales

$
402.9


$
336.9


20
%

Adjusted EBITDA

$
65.5

$
52.2


25
%

Adjusted EBITDA margin

16
%

15
%

~~Three Months Ended – March 31, 2018 vs. March 31, 2017~~

Of the 20% increase in net sales, 12% of the increase was due to currency impacts as the euro strengthened in comparison to the U.S. dollar on a quarter-to-date basis, and 3% of the increase was due to higher polycarbonate pricing as well as the pass through of higher raw material costs to our customers. Additionally, the Company’s acquisition of API Plastics resulted in a 4% increase in net sales.

The overall 25% increase in Adjusted EBITDA was the result of several factors. Higher margins, primarily from polycarbonate due to very tight market conditions, resulted in a 6% increase, and portfolio adjustments resulted in a net 2% increase for the period. Additionally, improved fixed costs resulted in an 8% increase, while currency impacts resulted in a 12% increase, as the euro strengthened in comparison to the U.S. dollar on a quarter-to-date basis. Partially offsetting these increases was a 2% decrease due to slightly lower sales volume.

Polystyrene Segment

Our product offerings in our Polystyrene segment include a variety of general purpose polystyrenes ~~or GPPS,~~(“GPPS”) and ~~HIPS, which is~~ polystyrene that has been modified with polybutadiene rubber to increase its impact resistant ~~properties.~~

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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.


	Three Months Ended								Three Months Ended
	March 31,								March 31,
($ in millions)	2018			2017			% Change		2019			2018			% Change
Net sales	$	239.6		$	228.4		5	%	$	228.5		$	239.6		(5)	%
Adjusted EBITDA	$	9.6		$	13.6		(29)	%	$	16.8		$	9.6		75	%
Adjusted EBITDA margin		4	%		6	%				7	%		4	%

Three Months Ended – March 31, ~~2018~~2019 vs. March 31, ~~2017~~2018

Of the 5% ~~increase~~decrease in net sales, ~~10%~~26% was due to lower pricing from the pass through of ~~the~~lower styrene costs to our customers, offset by a 25% increase ~~was~~attributable to higher sales volume from customer restocking and more favorable market conditions. Net sales decreased an additional 4% due to currency impacts as the euro ~~strengthened~~weakened in comparison to the U.S. dollar ~~on a quarter-to-date basis. This~~during the period.

The $7.2 million, or 75%, increase was partially offset by a 4% decrease in net sales due to the pass through of lower raw material costs to our customers, as well as a 1% decrease due to lower sales volume, particularly related to sales in Europe.

~~The 29% decrease~~ in Adjusted EBITDA was primarily due to ~~net unfavorable raw material timing, noting a net favorable timing impact in the prior year due to increasing raw material costs. This unfavorable raw material timing,~~increased sales volume, which ~~was partially offset by higher margins in Europe in the current year,~~ resulted in a ~~30% decrease. Additionally, increased fixed costs~~$6.9 million, or 72%, increase as well as higher margins, which resulted in a ~~3% decrease.~~$3.6 million, or 38%, increase. These ~~decreases~~impacts were partially offset by a ~~4% increase~~$2.8 million, or 29%, decrease in Adjusted EBITDA due to ~~currency impacts as the euro strengthened in comparison to the U.S. dollar on~~ a ~~quarter-to-date basis.~~lower level of fixed cost absorption.

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~~for the production of ~~the Company’s products, including~~ polystyrene, expandable polystyrene, SAN resins, SA latex, SB latex, ABS resins, ~~SSBR, etc.~~unsaturated polyethylene resins, and styrene-butadiene rubber.


	Three Months Ended								Three Months Ended
	March 31,								March 31,
($ in millions)	2018			2017			% Change		2019			2018			% Change
Net sales	$	74.6		$	86.9		(14)	%	$	66.8		$	74.6		(10)	%
Adjusted EBITDA	$	41.5		$	41.9		(1)	%	$	17.2		$	41.5		(59)	%
Adjusted EBITDA margin		56	%		48	%				26	%		56	%

Three Months Ended – March 31, ~~2018~~2019 vs. March 31, ~~2017~~2018

Of the ~~14%~~10% decrease in net sales, 26% was due to lower ~~styrene related sales volume resulted in a 15% decrease, and~~pricing from the pass through of lower ~~raw material costs resulted in a 10% decrease. These decreases were partially offset by a 10% increase~~styrene prices and 3% was due to currency impacts as the euro ~~strengthened~~weakened in comparison to the U.S. dollar ~~on a quarter-to-date basis.~~during the period. These decreases were partially offset by an 18% increase due to higher sales volume.

The decrease of $24.3 million, or 59%, in Adjusted EBITDA was ~~flat year over year,~~primarily due to lower margins, as ~~higher styrene production volume in the current year offset favorable raw material timing~~there were a significant number of unplanned industry outages in the prior ~~year.~~year, which resulted in a net $25.2 million, or 61%, decrease. This was slightly offset by a $1.0 million, or 2%, increase due to fixed cost improvements.

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Americas Styrenics Segment

~~The Americas Styrenics~~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.

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	Three Months Ended						Three Months Ended
	March 31,						March 31,
($ in millions)	2018		2017		% Change		2019		2018		% Change
Adjusted EBITDA*	$	45.5	$	18.5	146	%	$	32.2	$	45.5	(29)	%

*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 – March 31, ~~2018~~2019 vs. March 31, ~~2017~~2018

The ~~increase~~decrease in Adjusted EBITDA was mainly due to ~~an extended production~~lower styrene margins as well as the planned styrene maintenance outage ~~in the prior year~~ at ~~the Americas Styrenics~~its St. James, LA facility ~~as well as higher styrene spot sales margins~~ in the ~~current year, including impacts from a stronger export market.~~first quarter of 2019.

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; 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, 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.

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Adjusted EBITDA is calculated as follows for the three months ended March 31, ~~2018~~2019 and ~~2017, respectively:~~2018:


	Three Months Ended				Three Months Ended
	March 31,				March 31,
(in millions)	2018		2017		2019		2018
Net income	$	120.3	$	117.3	$	35.8	$	120.3
Interest expense, net		14.9		18.2		10.2		14.9
Provision for income taxes		24.9		29.3		10.8		24.9
Depreciation and amortization		31.9		24.7		33.9		31.9
EBITDA(a)	$	192.0	$	189.5	$	90.7	$	192.0
Net gain on disposition of businesses and assets~~(b)~~		(0.5)		(9.9)		(0.2)		(0.5)
Restructuring and other charges~~(c)~~(b)		0.5		2.1		0.4		0.5
Acquisition transaction and integration costs~~(d)~~		0.3		—		—		0.3
Other items~~(e)~~(c)		2.7		—		11.1		2.7
Adjusted EBITDA	$	195.0	$	181.7	$	102.0	$	195.0

(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.

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(b)

Net gain on disposition of businesses and assets during the three months ended March 31, 2017 relates 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. Refer to Note 4 in the condensed consolidated financial statements for further information.

~~(c)~~

Restructuring and other charges for the three months ended March 31, ~~2018~~2019 and ~~2017~~2018 primarily relate to decommissioning, contract termination, and employee termination benefit charges incurred in connection with the upgrade and replacement of ~~the Company’s~~our compounding facility in Terneuzen, The Netherlands as well as ~~the Company’s~~our decision to cease manufacturing activities at our latex binders manufacturing facility in Livorno, Italy. Refer to Note 1615 in the condensed consolidated financial statements for further ~~information.~~information regarding restructuring activities.

~~(d)~~

Acquisition transaction and integration costs for the three months ended March 31, 2018 relate to advisory and professional fees incurred in conjunction with the Company’s acquisition of API Plastics. Refer to Note 14 in the condensed consolidated financial statements for further information.

~~(e)~~(c)

Other items for the three months ended March 31, 2019 and 2018 primarily relate to advisory and professional fees incurred in conjunction with ~~the Company’s~~our initiative to transition business services from Dow, including certain administrative services such as accounts payable, logistics, and IT services.

Liquidity and Capital Resources

Cash Flows

The table below summarizes our primary sources and uses of cash for the three months ended March 31, ~~2018~~2019 and ~~2017, respectively.~~2018. We have derived the summarized cash flow information from our unaudited financial statements.


	Three Months Ended				Three Months Ended
	March 31,				March 31,
(in millions)	2018		2017		2019		2018
Net cash provided by (used in):
Operating activities	$	40.8	$	(25.7)	$	153.2	$	40.8
Investing activities		(30.1)		6.9		(24.3)		(30.1)
Financing activities		(48.0)		(38.0)		(60.4)		(48.0)
Effect of exchange rates on cash		3.4		1.8		(1.6)		3.4
Net change in cash and cash equivalents	$	(33.9)	$	(55.0)
Net change in cash, cash equivalents, and restricted cash					$	66.9	$	(33.9)

Operating Activities

Net cash provided by operating activities during the three months ended March 31, 2019 totaled $153.2 million, inclusive of $12.5 million in dividends from Americas Styrenics. Net cash provided by operating assets and liabilities for

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the three months ended March 31, 2019 totaled $105.4 million, noting a decrease in inventories of $57.7 million as well as an increase in accounts payable and other current liabilities of $49.4 million. These fluctuations were partially offset by an increase in accounts receivable of $4.8 million. The decrease in inventories was due to actions taken to reduce inventory levels as well as decreased raw material prices, while the increase in accounts payable and other current liabilities was primarily due to timing of vendor payments. Accounts receivable at the end of the first quarter increased relative to the end of 2018 primarily due to increased sales volume.

Net cash provided by operating activities during the three months ended March 31, 2018 totaled $40.8 million, inclusive of $30.0 million in dividends from Americas Styrenics. Net cash used in operating assets and liabilities for the three months ended March 31, 2018 totaled $104.6 million, noting increases in accounts receivable of $32.7 million and inventories of $70.3 million. Accounts receivable at the end of the first quarter increased relative to the end of 2017 primarily due to the pass through of increased raw material prices to our customers as well as increased sales volume. The increase in inventories was primarily due to an increase in forecasted sales volume as well as inventory build in anticipation of planned turnarounds during the second quarter.

Investing Activities

Net cash used in ~~operating~~investing activities during the three months ended March 31, ~~2017~~2019 totaled ~~$25.7~~$24.3 million, ~~inclusive~~primarily resulting from capital expenditures of $7.5 million in dividends from Americas Styrenics, as well as dividends from Sumika Styron Polycarbonate, $8.9 million of which were classified as operating activities, with the remaining $0.8 million classified as investing activities. Refer to Note 4 in the condensed consolidated financial statements for further information. Net cash used in operating assets and liabilities for the three months ended March 31, 2017 totaled $172.5 million, noting increases in accounts receivable of $133.3 million and inventories of $91.6 million, offset by an increase in accounts payable and other current liabilities of $49.9$25.0 million. The increase in accounts receivable was primarily due to higher net sales (due to increased raw material prices) and lower collections, due to timing, during the first quarter of 2017 compared to the fourth quarter of 2016. The increase in inventories was primarily due to increases in raw material prices. The increase in accounts payable and other current liabilities was due to increases in raw material prices as well as timing of vendor payments.

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~~Investing Activities~~

Net cash used in investing activities during the three months ended March 31, 2018 totaled $30.1 million, primarily resulting from capital expenditures of $30.6 million.

Financing Activities

Net cash ~~provided by investing~~used in financing activities during the three months ended March 31, ~~2017~~2019 totaled ~~$6.9~~$60.4 million. This activity was primarily due to $37.4 million ~~primarily from proceeds received~~ of ~~$42.1 million~~payments related to the ~~sale~~repurchase of ~~the Company’s 50% share in Sumika Styron Polycarbonate~~ordinary shares, $17.4 million of dividends paid, and $1.8 million of net principal payments related to ~~Sumitomo Chemical Company Limited, offset by capital expenditures of $36.0 million~~our 2024 Term Loan B during the period.

~~Financing Activities~~ Additionally, net cash used in financing activities included $3.8 million of withholding taxes paid related to the vesting of certain RSUs during the period.

Net cash used in financing activities during the three months ended March 31, 2018 totaled $48.0 million. This activity was primarily due to $23.8 million of payments related to the repurchase of ordinary shares, $16.2 million of dividends paid, and $1.8 million of principal payments related to our 2024 Term Loan B during the period. Additionally, net cash used in financing activities included $8.0 million of withholding taxes paid related to the vesting of certain RSUs during the period, partially offset by $1.9 ~~million of proceeds received from the exercise of option awards.~~

Net cash used in financing activities during the three months ended March 31, 2017 totaled $38.0 million. This activity was primarily due to $26.6 million of payments related to the repurchase of ordinary shares during the period and $13.3 million of dividends paid, as well as $1.3 million of principal payments related to our 2021 Term Loan B. Partially offsetting these uses of cash was $3.4 million of proceeds received from the exercise of option awards.

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.

Three Months Ended

March 31,

(in millions)

2018

2017

Cash provided by (used in) operating activities

$
40.8

$
(25.7)

Capital expenditures

(30.6)

(36.0)

Free Cash Flow

$
10.2

$
(61.7)

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	Three Months Ended
	March 31,
(in millions)	2019		2018
Cash provided by operating activities	$	153.2	$	40.8
Capital expenditures		(25.0)		(30.6)
Free Cash Flow	$	128.2	$	10.2

Refer to the discussion above for significant impacts to cash provided by ~~(used in)~~ operating activities for the three months ended March 31, ~~2018~~2019 and ~~2017, respectively.~~2018.

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 ~~to our shareholders.~~and ordinary share repurchases, when deemed appropriate. 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 (discussed further below).

As of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, we had ~~$1,197.9~~$1,191.2 million and ~~$1,199.7~~$1,192.4 million, respectively, in

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outstanding indebtedness and ~~$1,101.2~~$1,057.3 million and ~~$1,019.6~~$1,094.3 million, respectively, in working capital. In addition, as of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, we had ~~$121.0~~$120.8 million and ~~$128.3~~$113.7 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.

The following table outlines our outstanding indebtedness as of March 31, ~~2018~~2019 and December 31, ~~2017~~2018 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, ~~and~~ 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 ~~the~~ our Annual ~~Report.~~

Report.


	As of and for the Three Months Ended						As of and for the Year Ended						As of and for the Three Months Ended						As of and for the Year Ended
	March 31, 2018						December 31, 2017						March 31, 2019						December 31, 2018
			Effective						Effective						Effective						Effective
			Interest		Interest				Interest		Interest				Interest		Interest				Interest		Interest
($ in millions)	Balance		Rate		Expense		Balance		Rate		Expense		Balance		Rate		Expense		Balance		Rate		Expense
Senior Credit Facility
2024 Term Loan B	$	696.5	4.2	%	$	7.9	$	698.3	3.9	%	$	9.6	$	689.5	4.5	%	$	8.1	$	691.3	4.1	%	$	31.6
2022 Revolving Facility		—	—			0.7		—	—			1.0		—	—			0.7		—	—			2.9
2020 Senior Credit Facility
2021 Term Loan B		—	—			—		—	4.3	%		15.9
2020 Revolving Facility		—	—			—		—	—			2.3
2025 Senior Notes		500.0	5.4	%		7.0		500.0	5.4	%		9.4		500.0	5.4	%		3.0		500.0	5.4	%		16.1
2022 Senior Notes
USD Notes		—	—			—		—	6.8	%		14.4
Euro Notes		—	—			—		—	6.4	%		18.8
Accounts Receivable Securitization Facility		—	—			0.4		—	—			2.8		—	—			0.4		—	—			1.5
Other indebtedness*		1.4	4.8	%		—		1.4	4.8	%		0.1		1.7	4.8	%		—		1.1	4.8	%		0.1
Total	$	1,197.9			$	16.0	$	1,199.7			$	74.3	$	1,191.2			$	12.2	$	1,192.4			$	52.2

*For the three months ended March 31, ~~2018,~~2019, interest expense on “Other indebtedness” totaled less than $0.1 million.

Our Senior Credit Facility includes the 2022 Revolving Facility, which matures in September 2022, and has a borrowing capacity of $375.0 million. As of March 31, ~~2018,~~2019, the Company had no outstanding borrowings, and had ~~$359.9~~$360.7 million (net of ~~$15.1~~$14.3 million outstanding letters of credit) of funds available for borrowing under the 2022 Revolving Facility. Further, as of March 31, ~~2018,~~2019, the ~~Borrowers are~~Company is required to pay a quarterly commitment fee in respect of any unused commitments under the 2022 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), which requires scheduled quarterly payments in amounts equal to 0.25% of the original principal. ~~During the quarter ended March 31, 2018, the~~The stated interest rate on our 2024 Term Loan B is LIBOR plus 2.00% (subject to a 0.00% LIBOR floor).

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The Company made net principal payments of $1.8 million on the 2024 Term Loan B during the three months ended March 31, 2019, with an additional $7.0 million of scheduled future payments classified as current debt on the Company’s condensed consolidated balance sheet as of March 31, ~~2018.~~2019.

Our 2025 Senior Notes, as issued under the Indenture, include $500.0 million aggregate principal amount of 5.375% senior notes that mature on September 1, ~~2015.~~2025. Interest on the 2025 Senior Notes is payable semi-annually on May 3 and November 3 of each year, ~~commencing~~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 ~~the~~ our Annual Report for further information.

We also continue to maintain our Accounts Receivable Securitization Facility which ~~matures in May 2019 and contains~~has a borrowing capacity of $150.0 ~~million.~~million and matures in September 2021. As of March 31, ~~2018,~~2019, there were no amounts outstanding under this facility, and the Company had accounts receivable available to support this facility in excess of ~~its~~our borrowing capacity, based on the pool of eligible accounts receivable.

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The Senior Credit Facility and Indenture contain certain customary affirmative, negative and financial covenants. As of March 31, 2018, the Company was in compliance with all of these debt covenant requirements. Refer to the Annual Report for further information on the details of these covenant requirements.

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 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~~our 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 three months ended March 31, ~~2018,~~2019, the Company declared ~~total~~ dividends of ~~$0.36~~$0.40 per ordinary share, ~~(totaling $15.8 million),~~totaling $16.6 million, all of which remains accrued as of March 31, ~~2018~~2019 and the majority of which will be paid in April ~~2018.~~2019. 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 ~~2018.~~2019. During the three months ended March 31, 2019, under existing authority from our board of directors, the Company purchased approximately 0.7 million ordinary shares from our shareholders through open market transactions for an aggregate purchase price of $37.4 million. We believe that funds provided by operations, our existing cash, ~~and~~ cash equivalent, and restricted cash balances, borrowings available under our 2022 Revolving Facility and 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.~~conditions, while also providing the Company the ability to return capital to our shareholders via dividend payments and share repurchases. Nevertheless, our ability to generate future cash and to pay our indebtedness and fund other liquidation needs is subject to certain risks described under ~~“Part~~Part I, Item 1A-“Risk Factors” of our Annual ~~Report.~~Report. As of March 31, ~~2018,~~2019, 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

There have been no 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.~~Report.

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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.~~Report. There have been no material revisions to the significant accounting policies or critical accounting policies and estimates as filed in our Annual Report, other than the impacts to our

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significant accounting policies from the adoption of ~~recent revenue~~lease accounting guidance ~~effective~~adopted January 1, ~~2018,~~2019, discussed further within Notes 2 and 318 to the condensed consolidated financial statements.

~~Off-balance~~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 “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.~~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 March 31, ~~2018.~~2019. 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

There was no change 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 March 31, ~~2018~~2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

~~As discussed in Note 14 to the condensed consolidated financial statements, in July 2017, the Company completed the acquisition~~

Table of API Plastics. As permitted by the SEC, management 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 is in the process of integrating API Plastics into its internal control over financial reporting structure and expects to complete this integration by June 2018.Contents

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, ~~2017,~~2018, 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

The following table contains information regarding purchases of our ordinary shares made during the quarter ended March 31, ~~2018~~2019 by or on behalf of the Company or any “affiliated purchaser,” as defined by Rule 10b-18(a)(3) of the Securities Exchange Act of 1934:


Issuer Purchases of Equity Securities	Issuer Purchases of Equity Securities							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			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
January 1 - January 31, 2018		89,972	$	77.23	89,972	1,420,116	(1)
February 1 - February 28, 2018		61,884	$	77.60	61,884	1,358,232	(1)
March 1 - March 31, 2018		161,124	$	77.54	161,124	1,197,108	(1)
January 1 - January 31, 2019									252,000	$	48.29	252,000	987,333	(1)
February 1 - February 28, 2019									228,000	$	50.12	228,000	759,333	(1)
March 1 - March 31, 2019									220,000	$	47.28	220,000	539,333	(1)
Total		312,980	$	77.46	312,980				700,000	$	48.57	700,000

(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.~~$1,000.00. 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. The Company concluded on the repurchase of the initial 2.0 million ordinary shares under this board authorization in October 2018. On November 8, 2018 the Company subsequently announced that the board of directors had authorized the Company to repurchase, subject to market and other conditions, the 2.0 million shares remaining under the 2017 share repurchase authorization.

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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.

3839

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EXHIBIT INDEX

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)~~2018)

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	Amendment to the Credit Agreement dated September 6, 2017 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 May 22, 2018 (incorporated herein by reference to Exhibit 10.2 to the Quarterly Report filed on Form 10-Q, File No. 001-36473, filed August 3, 2018)

10.3	Form of ~~Cross-Currency~~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)

~~10.3†~~10.4	~~Amended~~Deed of Amendment and ~~Restated Employment Agreement~~Restatement, dated September 28, 2018, entered into by and among Trinseo ~~US Holding, Inc.~~Europe GmbH, Trinseo Export GmbH, Trinseo Deutschland Anlagengesellschaft mbH, Trinseo Netherlands B.V., Trinseo ~~S.A.~~LLC, Trinseo U.S. Receivables Company SPV LLC, Styron Receivables Funding Designated Activity Company, Trinseo Finance Luxembourg S.à r.l., Luxembourg, Zweigniederlassung Horgen, Regency Assets Designated Activity Company, HSBC Bank plc, Trinseo Holding S.à r.l., TMF Administration Services Limited and ~~Christopher D. Pappas, dated December 21, 2017~~the Law Debenture Trust Corporation plc (incorporated herein by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q, File No. 001-36473, filed on November 9, 2018)

~~10.4†~~10.5	Employment Agreement between Trinseo ~~Europe GmbH~~LLC and ~~Alice Heezen,~~Frank A. Bozich, dated ~~March 26,~~December 11, 2018

~~10.5†~~	~~Form of Restricted Stock Unit Award Agreement for Executives~~

~~10.6†~~	~~Form of Non-Statutory Stock Option Award Agreement for Executives~~

~~10.7†~~	~~Form of Performance Award Stock Unit Agreement for Executives~~

~~10.8†~~	~~Form of Restricted Stock Unit Award Agreement for Employees~~

~~10.9†~~	~~Form of Non-Statutory Stock Option Award Agreement for Employees~~ (incorporated herein by reference to Exhibit 10.1 to Current Report filed on form 8-K, File No. 001-36473, filed on January 30, 2019)

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

Table of Contents

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

~~Table of Contents~~

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

† Filed herewith.

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: May 3, ~~2018~~2019

	TRINSEO S.A.

	By:	/s/ ~~Christopher D. Pappas~~Frank Bozich
	Name:	~~Christopher D. Pappas~~Frank Bozich
	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)


	Three Months Ended
	March 31, 2017(1)
	Latex		Synthetic		Performance
	Binders		Rubber		Plastics		Polystyrene		Feedstocks		Total
United States	$	76.0	$	—	$	82.8	$	0.2	$	3.8	$	162.8
Europe		119.5		163.4		199.4		140.1		34.7		657.1
Asia-Pacific		89.0		—		32.7		88.1		48.4		258.2
Rest of World		4.4		—		22.0		—		—		26.4
Total	$	288.9	$	163.4	$	336.9	$	228.4	$	86.9	$	1,104.5


	Gain (Loss) Recognized in				Gain (Loss) Recognized in
	AOCI on Balance Sheet				Statement of Operations
	Three Months Ended March 31,								Statement of Operations
	2018		2017		2018		2017		Classification
Designated as Cash Flow Hedges
Foreign exchange cash flow hedges	$	(0.5)	$	(4.8)	$	(3.7)	$	2.5	Cost of sales
Interest rate swaps		3.3		—		(0.1)		—	Interest expense, net
Total	$	2.8	$	(4.8)	$	(3.8)	$	2.5
Net Investment Hedges
Euro Notes	$	—	$	(5.0)	$	—	$	—
Cross-currency swaps (CCS)		(20.4)		—		—		—
Total	$	(20.4)	$	(5.0)	$	—	$	—
Not Designated as Cash Flow Hedges
Foreign exchange forward contracts	$	—	$	—	$	(5.3)	$	(1.7)	Other income, net
Total	$	—	$	—	$	(5.3)	$	(1.7)


	Gross Amounts		Gross Amounts		Net Amounts
	Recognized in the		Offset in the		Presented in the
	Balance Sheet		Balance Sheet		Balance Sheet
Balance at March 31, 2018
Derivative assets - Current	$	11.4	$	(0.1)	$	11.3
Derivative assets - Non-Current		5.6		—		5.6
Derivative liabilities - Current		15.0		(0.1)		14.9
Derivative liabilities - Non-Current		48.3		—		48.3

Balance at December 31, 2017
Derivative assets - Current	$	11.5	$	(0.6)	$	10.9
Derivative assets - Non-Current		3.0		—		3.0
Derivative liabilities - Current		14.3		(0.6)		13.7
Derivative liabilities - Non-Current		28.3		—		28.3