TRINSEO S A : Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)


2020 Year-to-Date Highlights

During the three and six months ended June 30, 2020, Trinseo recognized net loss
of $128.4 million and $164.7 million, respectively, and Adjusted EBITDA of
$(8.3) million and $48.7 million, respectively. These results were significantly
impacted by the negative effects of the COVID-19 pandemic as well as unfavorable
net raw material timing, discussed in detail below. 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.

COVID-19 Pandemic


The Company noted adverse market and industry conditions beginning to emerge in
mid-March 2020 stemming from the COVID-19 pandemic. This pandemic has created an
environment with historically-low demand, mainly in our Performance Plastics and
Synthetic Rubber segments, resulting from reduced sales to automotive and tire
applications. Management estimates that the COVID-19 pre-tax impact on
profitability was approximately $60.0 million to $65.0 million during the three
months ended June 30, 2020, and approximately $65.0 million to $70.0 million
year-to-date. These impacts are partially offset by management actions taken to
reduce and control operating costs, and lower utility costs.

Through the second quarter, the Company has continued operations at the majority
of our manufacturing locations and has not experienced any material disruptions
in our supply chain, which has allowed us to continue meeting customer demand.
Our procurement and supply chain teams continue to update contingency plans in
the event of a significant disruption or shutdown so that future customer demand
can continue to be met with timeliness and quality. The Company has been
actively responding to this situation to adjust our business operations, and
will continue to monitor developments and take action as needed. Refer to the
"Outlook" section below for further information on the ongoing and potential
impacts of COVID-19 to the Company's operations and results in future periods.

With regard to capital resources and liquidity, the Company has continued to
implement liquidity-focused actions in response to COVID-19, including reduced
capital spending, operating expenses, and working capital. As a result of these
actions, the Company achieved strong cash generation and quarter-end liquidity.
The Company continues to maintain a strong balance sheet, has substantial
sources of liquidity available, no maintenance covenants on our debt agreements,
and no significant debt maturing until September 2024. Refer to the "Capital
Resources and Liquidity" section below for further information.



Impairment of Boehlen styrene monomer and Schkopau PBR Assets

In 2020, the Company continued our strategy, as described in the Company's
Annual Report for 2019, to focus efforts and increase investments in certain
product offerings serving the following applications, which are less cyclical
and offer significantly higher growth and margin potential: coatings, adhesives,
sealants, and elastomers ("CASE") applications within the Latex Binders segment;
engineered materials ("Engineered Materials") applications within the
Performance Plastics segment, which includes consumer electronics, medical, and
thermoplastic elastomers ("TPEs") applications; and solution styrene butadiene
rubber ("SSBR") within the Synthetic Rubber segment. As a result of continuing
this strategy and other management considerations, in March 2020, the Company
initiated a consultation process with the Economic Council and Works Councils of
Trinseo Deutschland regarding the disposition of our styrene monomer assets in
Boehlen, Germany and our polybutadiene rubber ("PBR," specifically nickel and
neodymium-PBR) assets in Schkopau, Germany. Based on the Company's evaluation of
these assets, we determined that their full carrying value was not recoverable
and, as a result, we recorded an impairment charge on the assets of
approximately $38.3 million in March 2020. This impairment charge is recorded
within "Impairment charges" on the condensed consolidated statements of
operations for the six months ended June 30, 2020. In May 2020, the Company made
the determination to mothball our PBR production assets in Schkopau, Germany.
The impacts of this decision and the resulting measures taken by the Company are
not material to our financial statements.

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                             Results of Operations

Results of Operations for the Three and Six Months Ended June 30, 2020 and 2019




                                   Three Months Ended                        Six Months Ended
                                       June 30,                                  June 30,
(in millions)               2020        %        2019       %        2020        %         2019        %
Net sales                 $   569.7     100 %   $ 951.8    100 %   $ 1,423.2     100 %   $ 1,964.9    100 %
Cost of sales                 576.8     101 %     865.6     91 %     1,360.6      96 %     1,781.2     91 %
Gross profit (loss)           (7.1)     (1) %      86.2      9 %        62.6       4 %       183.7      9 %
Selling, general and
administrative
expenses                       58.3      10 %      71.4      8 %       135.8      10 %       140.3      7 %
Equity in earnings of
unconsolidated
affiliates                     14.4       3 %      40.3      4 %        24.2       2 %        72.5      4 %
Impairment charges                -       - %         -      -          38.3       3 %           -      - %
Operating income
(loss)                       (51.0)     (9) %      55.1      6 %      (87.3)     (6) %       115.9      6 %
Interest expense, net          11.7       2 %       9.9      1 %        22.0       2 %        20.1      1 %
Other expense, net              1.0       - %       1.5      - %         2.6       - %         5.5      - %
Income (loss) before
income taxes                 (63.7)    (11) %      43.7      5 %     (111.9)     (8) %        90.3      5 %
Provision for income
taxes                          64.7      11 %      15.7      2 %        

52.8 4 % 26.5 1 %
Net income (loss) $ (128.4) (23) % $ 28.0 3 % $ (164.7) (12) % $ 63.8 3 %

Three Months Ended – June 30, 2020 vs. June 30, 2019

Net Sales

Of the 40% decrease in net sales, 18% was due to lower sales volume. These lower
sales volumes were primarily within the Performance Plastics and Synthetic
Rubber segments, resulting from reduced sales to automotive and tire
applications as a result of COVID-19. There were also lower sales volumes in the
Latex Binders segment, especially within graphical paper and textile
applications, and the Feedstocks segment, partially offset by higher sales
volume within the Polystyrene segment, including higher demand to essential
applications such as packaging and appliances. An additional 21% decrease was
attributable to lower selling prices mainly due to the pass through of lower raw
material costs.

Cost of Sales

Of the 33% decrease in cost of sales, 19% was due to lower raw material costs,
and 14% was due to the aforementioned lower sales volume within the Synthetic
Rubber, Performance Plastics, Feedstocks, and Latex Binders segments, partially
offset by higher sales volume within the Polystyrene segment.

Gross Profit (Loss)

The decrease in gross profit of 108% was primarily attributable to COVID-19
related volume impacts as well as significant unfavorable net raw material
timing impact in comparison to the prior year. In addition, as production
schedules were adjusted and inventory reduction measures were taken, there was
an impact of approximately $10.0 million related to lower production cost
absorption in comparison to the prior year. See the segment discussion below for
further information.

Selling, General and Administrative Expenses (SG&A)


The $13.1 million, or 18%, decrease in SG&A was due to several factors. Lower
advisory and professional fees, mainly related to the Company's transition of
business and technical services from Dow, which was largely completed in the
first quarter of 2020, resulted in a $10.6 million decrease. Also contributing
to the decrease were various management actions taken to control operating costs
in response to COVID-19. This includes a decrease of $3.1 million in costs
incurred for travel-related expenses, as well as an overall reduction in
personnel costs, partially offset by an increase in restructuring costs
associated with the corporate restructuring program.

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Equity in Earnings of Unconsolidated Affiliates

The decrease in equity earnings of $25.9 million was due to lower equity
earnings from Americas Styrenics, mainly attributable to lower styrene margins
in North America as well as volume-related impacts due to COVID-19.

Other Expense, Net


Other expense, net for the three months ended June 30, 2020 was $1.0 million,
which included $1.4 million of expense related to the non-service cost
components of net periodic benefit cost, partially offset by foreign exchange
transaction gains of $0.6 million. Net foreign transaction gains included $8.7
million of gains primarily from the remeasurement of our euro denominated
payables due to the relative changes in rates between the U.S. dollar and the
euro during the period, offset by $8.1 million of losses from our foreign
exchange forward contracts.

Other expense, net for the three months ended June 30, 2019 was $1.5 million,
which included $1.2 million of expense related to the non-service cost
components of net periodic benefit cost. This is partially offset by foreign
exchange transaction gains of $0.2 million. Net foreign transaction gains
included $2.6 million of foreign exchange transaction gains primarily from the
remeasurement of our euro denominated payables due to the relative changes in
rates between the U.S. dollar and the euro during the period, offset by $2.4
million of losses from our foreign exchange forward contracts.

Provision for Income Taxes

Provision for income taxes for the three months ended June 30, 2020 totaled
$64.7 million, resulting in an effective tax rate of (101.5)%. Provision for
income taxes for the three months ended June 30, 2019 totaled $15.7 million,
resulting in an effective tax rate of 36.0%.

The increase in provision for income taxes was primarily driven by the Company's
forecasted jurisdictional mix of earnings, where losses expected to be generated
in lower rate jurisdictions are being more than offset by income expected to be
generated in higher tax jurisdictions, resulting in a negative tax rate based on
the overall forecasted loss for the year.

Six Months Ended – June 30, 2020 vs. June 30, 2019

Net Sales

Of the 28% decrease in net sales, 13% was due to lower sales volume within the
Synthetic Rubber, Performance Plastics, and Feedstocks segments, due primarily
to COVID-19. In particular, we noted significant decreases in sales volumes
within our Performance Plastics and Synthetic Rubber segments, resulting from
reduced sales to automotive and tire applications. An additional 13% decrease
was attributable to lower selling prices mainly due to the pass through of
lower
raw material costs.

Cost of Sales

Of the 24% decrease in cost of sales, 12% was due to lower raw material costs,
primarily from styrene and butadiene, and 10% was due to the aforementioned
lower sales volume within the Synthetic Rubber, Performance Plastics, and
Feedstocks segments.

Gross Profit (Loss)


The decrease in gross profit of 66% was primarily attributable to lower sales
volumes due to COVID-19, and styrene margin compression in the Feedstocks
segment, as well as an unfavorable net raw material timing impact in comparison
to the prior year. See the segment discussion below for further information.

Selling, General and Administrative Expenses (SG&A)

The $4.5 million, or 3%, decrease in SG&A was due to several factors. Lower
advisory and professional fees, mainly related to the Company's transition of
business and technical services from Dow, which was largely completed in the
first quarter of 2020, resulted in a $4.3 million decrease. Also contributing to
the decrease were various management

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actions taken to control operating costs in response to COVID-19. This includes
a $4.9 million decrease in travel-related expenses. We also noted a $2.1 million
decrease due to currency impacts on our euro-based expenses, as the euro
weakened in comparison to the U.S. dollar. Partially offsetting these decreases
was an increase of $2.9 million related to increased depreciation and an
increase in bad debt expense of $1.9 million. The remaining change in overall
SG&A is primarily attributable to an increase in restructuring costs from our
corporate restructuring program, partially offset by a reduction in personnel
costs.

Equity in Earnings of Unconsolidated Affiliates


The decrease in equity earnings of $48.3 million was due to lower equity
earnings from Americas Styrenics, mainly attributable to lower styrene margins,
volume-related impacts from COVID-19, and the impact from the planned turnaround
at its St. James, Louisiana styrene facility in the first quarter of 2020.

Impairment charges

During the six months ended June 30, 2020, the Company recorded combined
impairment charges of $38.3 million on our Boehlen styrene monomer assets and
Schkopau PBR assets. Refer to Note 9 for further information

Other Expense, Net

Other expense, net for the six months ended June 30, 2020 was $2.6 million,
which included $2.8 million of expense related to the non-service cost
components of net periodic benefit cost, as well as foreign exchange transaction
gains of $0.4 million. Net foreign transaction gains included $5.3 million of
foreign exchange transaction losses primarily from the remeasurement of our euro
denominated payables due to the relative changes in rates between the U.S.
dollar and the euro during the period, offset by $5.7 million of gains from our
foreign exchange forward contracts.

Other expense, net for the six months ended June 30, 2019 was $5.5 million,
which included $3.5 million of expense related to the non-service cost
components of net periodic benefit cost, as well as foreign exchange transaction
losses of $0.2 million. Net foreign transaction losses included $0.5 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 $0.3 million of gains
from our foreign exchange forward contracts. Other expense, net also included
$1.9 million of other miscellaneous expenses during the period.

Provision for Income Taxes


Provision for income taxes for the six months ended June 30, 2020 totaled $52.8
million, resulting in an effective tax rate of (47.2)%. Provision for income
taxes for the six months ended June 30, 2019 totaled $26.5 million, resulting in
an effective tax rate of 29.3%.

The increase in provision for income taxes was primarily driven by the Company's
forecasted jurisdictional mix of earnings, where losses expeceted to be
generated in lower rate jurisdictions are being more than offset by income
expected to be generated in higher tax jurisdictions, resulting in a negative
tax rate based on the overall forecasted loss for the year. The provision for
income taxes was also impacted by the tax benefit related to the $38.3 million
pre-tax impairment charges recorded during the period related to the Company's
assets in Boehlen and Schkopau, Germany. Refer to Note 9 in the condensed
consolidated financial statements for further information.

Outlook

As described above in "2020 Year-to-Date Highlights," the COVID-19 pandemic has
created significant worldwide volatility, uncertainty and disruption, including
impacts to our business and the end markets in which we operate. The Company's
actions taken in response to this pandemic, as well as our outlook for
operations, demand, and liquidity are described herein. Due to the significant
uncertainty underlying the duration, magnitude, long-term economic impact of and
expectations for recovery from the COVID-19 pandemic, there are inherent
limitations underlying our future projections. Refer to the "Item 1A. Risk
Factors" section below for further information regarding the risks related to
the pandemic.

The Company has taken proactive steps to minimize the potential impact of the
COVID-19 crisis to our stakeholders as well as the financial impacts to the
Company. Our primary focus in this environment has been


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maintaining a safe and healthy workplace for our employees and other
stakeholders, which led to the formation of a COVID-19 crisis response team and
implementation of a pandemic response plan. These actions have allowed us to
ensure worker safety, optimize production schedules at our plants, and keep our
supply chain intact while also proactively developing and maintaining
contingency plans and enabling the safe operation of our plants.

We have implemented actions to reduce cost and improve efficiency, including the
continuation of our Business Excellence initiatives and the corporate
restructuring program announced in the fourth quarter of 2019. In April 2020,
the reorganization of our executive leadership team was also announced. We have
also taken actions to maximize our already strong liquidity position, including
the reduction of capital spending, operating expenses, and working capital.

Operationally, the Company has continued manufacturing at most of our locations
and we have not experienced any material disruptions in our supply chain. We
have seen resiliency in a number of our businesses, including sustained demand
for polystyrene and latex binders for food packaging, polycarbonate for
isolation sheeting, and engineered materials for medical applications. As noted
previously, the Company experienced a historically-low demand environment in the
second quarter of 2020, especially in our Performance Plastics, Synthetic
Rubber, and Latex Binders segments, driven by automotive, tire, graphical paper,
and textile applications, which reached a low point in April. However, we saw
significant end market improvement as the quarter progressed, particularly in
June, and we are hopeful that this momentum will continue through the third
quarter. However, we caution that the rate of recovery remains unknown.

Additionally, we have seen styrene margin improvement in Europe given the
impacts of lower fuel demand on raw material prices and reduced propylene oxide
styrene monomer operating rates.


Amid this market volatility and uncertainty, the Company has continued to
maintain a strong financial position with ample access to capital resources and
liquidity to manage the anticipated impact of the COVID-19 pandemic on our
business operations for the foreseeable future. In particular, we note that in
April we announced the drawdown of $100.0 million on our 2022 Revolving Facility
as a precautionary measure. As noted above, we have increased confidence there
will be continued end market improvement in the coming months, as a result of
which, we repaid the entire $100.0 million on our 2022 Revolving Facility on
July 24, 2020.

Refer to the “Capital Resources and Liquidity” section below for more
information.


                          Selected Segment Information

The following sections describe net sales, Adjusted EBITDA, and Adjusted EBITDA
margin by segment for the three and six months ended June 30, 2020 and 2019.
Inter-segment sales have been eliminated. Refer to Note 15 in the condensed
consolidated financial statements for further information on our segments, as
well as for a detailed definition of Adjusted EBITDA and a reconciliation of
income before income taxes to segment Adjusted EBITDA.

Latex Binders Segment

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


                              Three Months Ended                          Six Months Ended
                                   June 30,                                   June 30,
($ in millions)               2020           2019         % Change       2020          2019         % Change
Net sales                   $   164.9$ 230.2           (28) %    $ 384.0$ 454.1           (15) %
Adjusted EBITDA             $    17.0$  20.6           (17) %    $  38.6$  38.1              1 %
Adjusted EBITDA margin             10 %           9 %                        10 %           8 %

Three Months Ended – June 30, 2020 vs. June 30, 2019


Of the 28% decrease in net sales, 20% was due to lower pricing from the pass
through of lower raw material costs and 7% due to lower sales volume, primarily
from reductions in graphical paper and textile applications sales as demand
was
impacted by COVID-19.

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The $3.6 million, or 17%, decrease in Adjusted EBITDA was primarily due to lower
sales volume of, $5.3 million, or 26%. This was partially offset by higher
margins due to lower raw material and utility costs, which resulted in a $1.1
million, or 5%, increase as well as a $1.1 million, or 5%, increase due to lower
fixed costs.

Six Months Ended – June 30, 2020 vs. June 30, 2019


Of the 15% decrease in net sales, 14% was due to lower pricing from the pass
through of lower raw material costs, primarily from styrene and butadiene. Lower
sales volume to the graphical paper and textile markets were offset by sales
from the recently acquired site in Rheinmünster, Germany.

The $0.5 million, or 1%, increase in Adjusted EBITDA was primarily due to higher
margins attributable mainly to lower utility costs, which resulted in a $2.5
million, or 7%, increase. These impacts were offset by a $1.7 million, or 4%,
decrease due to higher fixed costs as well as a $0.3 million, or 1%, decrease
due to reduced sales volume.



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 solution styrene-butadiene rubber ("SSBR"), while
also producing core products, such as emulsion styrene-butadiene rubber
("ESBR").


                              Three Months Ended                           Six Months Ended
                                   June 30,                                   June 30,
($ in millions)               2020           2019         % Change        2020          2019         % Change
Net sales                   $    36.4$ 112.1           (68) %    $  138.0$ 236.7           (42) %
Adjusted EBITDA             $  (27.7)$  12.9          (315) %    $ (12.5)$  21.7          (158) %
Adjusted EBITDA margin           (76) %          12 %                        (9) %           9 %

Three Months Ended – June 30, 2020 vs. June 30, 2019


Of the 68% decrease in net sales, 56% was due to decreased sales volumes from
weaker demand in the global tire market due to COVID-19. An additional decrease
of 11% was due to lower pricing from the pass through of lower raw material
costs, mainly from styrene and butadiene.

The $40.6 million, or 315%, decrease in Adjusted EBITDA was primarily due to
lower sales volume as described above, which resulted in a $27.2 million, or
211%, decrease. An additional $9.8 million, or 76%, decrease was due to lower
margins, mainly from net timing impacts, and an additional $3.9 million, or 30%,
decrease due to higher fixed costs from a lower level of fixed cost absorption
due to a planned maintenance turnaround.

Six Months Ended – June 30, 2020 vs. June 30, 2019


Of the 42% decrease in net sales, 31% was due to decreased sales volume from
weaker demand in the global tire market due to COVID-19. An additional decrease
of 9% was due to lower pricing from the pass through of lower raw material
costs, mainly from styrene and butadiene.

The $34.2 million, or 158%, decrease in Adjusted EBITDA was primarily due to
lower sales volume as described above, which resulted in a $32.1 million, or
148%, decrease. An additional $7.0 million, or 32%, decrease was due to lower
margins, mainly from net raw material timing impacts. These impacts were
partially offset by an increase of $5.2 million, or 24%, due to lower fixed
costs.

Performance Plastics Segment

Our Performance Plastics segment includes a variety of highly engineered
compounds and blends, our acrylonitrile-butadiene-styrene (“ABS”),
styrene-acrylonitrile (“SAN”), and polycarbonate (“PC”) businesses, and
engineered materials applications, which includes consumer electronics, medical,
and thermoplastic elastomers (“TPEs”) applications.




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                              Three Months Ended                          Six Months Ended
                                   June 30,                                   June 30,
($ in millions)               2020           2019         % Change       2020          2019         % Change
Net sales                   $   189.0$ 347.5           (46) %    $ 494.2$ 716.8           (31) %
Adjusted EBITDA             $   (5.6)$  34.2          (116) %    $  31.2$  69.9           (55) %
Adjusted EBITDA margin            (3) %          10 %                         6 %          10 %

Three Months Ended – June 30, 2020 vs. June 30, 2019

Of the 46% decrease in net sales, 33% was due to lower sales volume, where
COVID-19 caused significant headwinds in automotive applications as many
customers in Europe and North America shut down production in the first half of
the quarter. An additional 12% decrease was due to lower pricing from the pass
through of lower raw material costs, primarily styrene.

The $39.8 million, or 116%, decrease in Adjusted EBITDA was primarily due to the
lower sales volume noted above, primarily to automotive applications, which
resulted in a $37.0 million, or 108%, decrease. This decrease was also due to
lower margins from unfavorable net raw material timing, which resulted in an
$8.0 million, or 23% decrease. These impacts were partially offset by a $5.4
million, or 16%, increase due to lower fixed costs.

Six Months Ended – June 30, 2020 vs. June 30, 2019

Of the 31% decrease in net sales, 22% was due to lower sales volume,
attributable to weak market conditions driven by COVID-19. An additional 8%
decrease was due to lower pricing from the pass through of lower raw material
costs, primarily styrene.

The $38.7 million, or 55%, decrease in Adjusted EBITDA was primarily due to the
aforementioned lower sales volume, which resulted in a $42.3 million, or 61%,
decrease. This was partially offset by a $5.6 million, or 8%, increase due
to
lower fixed costs.

Polystyrene Segment

Our product offerings in our Polystyrene segment include a variety of general
purpose polystyrenes ("GPPS") and polystyrene that has been modified with
polybutadiene rubber to increase its impact resistant properties ("HIPS"). These
products provide customers with performance and aesthetics at a low cost across
applications, including appliances, packaging, including food packaging and food
service disposables, consumer electronics, and building and construction
materials.


                              Three Months Ended                          Six Months Ended
                                   June 30,                                   June 30,
($ in millions)               2020           2019         % Change       2020          2019         % Change
Net sales                   $   155.8$ 207.1           (25) %    $ 338.6$ 435.6           (22) %
Adjusted EBITDA             $    14.8$  16.2            (9) %    $  26.6$  32.9           (19) %
Adjusted EBITDA margin              9 %           8 %                         8 %           8 %

Three Months Ended – June 30, 2020 vs. June 30, 2019


Of the 25% decrease in net sales, 39% was due to lower pricing from the pass
through of lower styrene costs to our customers. This was partially offset by an
increase of 15% due to increased sales volume, from sales to essential
applications such as packaging and appliances as well as the impact of prior
year destocking.

The $1.4 million, or 9%, decrease in Adjusted EBITDA was primarily due to lower
margins as a result of unfavorable net raw material timing, which resulted in a
decrease of $4.4 million, or 28%. Additionally, higher fixed costs from lower
production cost absorption resulted in a $1.1 million, or 7%, decrease and
currency impacts resulted in a $0.3 million, or 2%, decrease as the euro
weakened in comparison to the U.S. dollar during the period. These impacts more
than offset increased sales volume, which resulted in a $4.5 million, or 28%
increase.

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Six Months Ended – June 30, 2020 vs. June 30, 2019

Of the 22% decrease in net sales, 21% was due to lower pricing from the pass
through of lower styrene costs to our customers.

The $6.3 million, or 19%, decrease in Adjusted EBITDA was primarily due to a
$3.6 million, or 11% decrease in margins from unfavorable net raw material
timing. Additionally, a decrease of $1.8 million, or 6%, was due to higher fixed
costs as a result of lower production 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
for the production of polystyrene, expandable polystyrene, SAN resins,
styrene-acrylate latex (“SA latex”), SB latex, ABS resins, unsaturated
polyethylene resins, and styrene-butadiene rubber.


                              Three Months Ended                           Six Months Ended
                                   June 30,                                   June 30,
($ in millions)               2020           2019         % Change        2020          2019         % Change
Net sales                   $    23.6$  54.9           (57) %    $   68.4$ 121.7           (44) %
Adjusted EBITDA             $   (3.5)$ (0.6)            483 %    $ (19.8)$  16.6          (219) %
Adjusted EBITDA margin           (15) %         (1) %                       (29) %          14 %

Three Months Ended – June 30, 2020 vs. June 30, 2019


Of the 57% decrease in net sales, 42% was due to lower pricing from the pass
through of lower styrene prices and 15% was due to lower styrene-related sales
volume.

The decrease of $2.9 million in Adjusted EBITDA was primarily due to a decrease
in margins of $5.0 million, mainly from unfavorable net raw material timing.
This impact was partially offset by lower fixed costs which resulted in a $2.5
million increase.

Six Months Ended – June 30, 2020 vs. June 30, 2019


Of the 44% decrease in net sales, 23% was due to lower pricing from the pass
through of lower styrene prices and 19% was due to lower styrene-related sales
volume.


The decrease of $36.4 million in Adjusted EBITDA was primarily due to lower
margins in Europe and Asia from weaker market conditions as well as unfavorable
net raw material timing, which resulted in a $40.5 million decrease. This was
partially offset by lower fixed costs which resulted in an increase of $3.2
million.



Americas Styrenics Segment

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


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                               Three Months Ended                          Six Months Ended
                                   June 30,                                   June 30,
($ in millions)               2020            2019        % Change        2020          2019        % Change
Adjusted EBITDA*            $    14.4$  40.3          (64) %    $   24.2$  72.5          (67) %


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

Three Months Ended – June 30, 2020 vs. June 30, 2019

The decrease in Adjusted EBITDA was mainly due to lower styrene margins in North
America
as well as lower sales volume due to COVID-19.

Six Months Ended – June 30, 2020 vs. June 30, 2019

The decrease in Adjusted EBITDA was mainly due to lower styrene margins in North
America, volume-related impacts from COVID-19, and the impact from the planned
turnaround at its St. James, Louisiana styrene facility in the first quarter of
2020.

                         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.

Adjusted EBITDA is calculated as follows for the three and six months ended June
30, 2020 and 2019:


                                                Three Months Ended         Six Months Ended
                                                     June 30,                 June 30,
(in millions)                                    2020          2019        2020        2019
Net income (loss)                             $   (128.4)$   28.0$ (164.7)$  63.8
Interest expense, net                                11.7         9.9         22.0       20.1
Provision for income taxes                           64.7        15.7         52.8       26.5
Depreciation and amortization                        34.8        34.7         71.1       68.7
EBITDA(a)                                     $    (17.2)$   88.3$  (18.8)$ 179.1
Net gain on disposition of businesses and
assets                                                  -           -        (0.4)      (0.2)
Restructuring and other charges(b)                    6.3       (0.3)          8.1        0.1
Acquisition transaction and integration
net costs                                           (0.4)         0.7        (0.3)        0.7
Asset impairment charges or write-offs(c)               -           -      
  38.3          -
Other items(d)                                        3.0        14.1         21.8       25.1
Adjusted EBITDA                               $     (8.3)$  102.8$    48.7$ 204.8

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
(a) 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


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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.

Restructuring and other charges for the three and six months ended June 30,

2020 primarily relate to employee termination benefit charges as well as

contract termination charges incurred in connection with the Company’s

corporate restructuring program announced in the fourth quarter of 2019. The

restructuring and other charges for the three and six months ended June 30,
(b) 2019 primarily relate to decommissioning and employee termination benefit

charges incurred in connection with the upgrade and replacement of our

compounding facility in Terneuzen, The Netherlands as well as our decision to

cease manufacturing activities at our latex binders manufacturing facility in

Livorno, Italy. Refer to Note 16 in the condensed consolidated financial

statements for further information regarding restructuring activities.

Asset impairment charges or write-offs for the six months ended June 30, 2020
(c) relate to the impairment of the Company’s styrene monomer assets in Boehlen,

Germany and PBR assets in Schkopau, Germany. Refer to Note 9 in the condensed

    consolidated financial statements for further information.


    Other items for the three and six months ended June 30, 2020 and 2019

primarily relate to advisory and professional fees incurred in conjunction

with our initiative to transition business services from Dow, including
(d) certain administrative services such as accounts payable, logistics, and IT

services. Also included within other items for the three and six months ended

June 30, 2020 and 2019 are fees incurred in conjunction with certain of the

    Company's strategic initiatives.


                        Liquidity and Capital Resources

Cash Flows

The table below summarizes our primary sources and uses of cash for the six
months ended June 30, 2020 and 2019. We have derived the summarized cash flow
information from our unaudited financial statements.




                                                               Six Months Ended
                                                                  June 30,
(in millions)                                                 2020        2019
Net cash provided by (used in):
Operating activities                                         $  75.8$   234.0
Investing activities                                            15.4       (46.9)
Financing activities                                            34.4      (101.9)
Effect of exchange rates on cash                               (0.5)       

(1.6)

Net change in cash, cash equivalents, and restricted cash $ 125.1 $

 83.6




Operating Activities
Net cash provided by operating activities during the six months ended June 30,
2020 totaled $75.8 million. Net cash provided by operating assets and
liabilities for the six months ended June 30, 2020 totaled $161.8 million, which
was driven by the Company's liquidity-focused actions during the period,
including reduced capital spending, operating expenses, and working capital. As
a result of these initiatives as well as the impact of lower raw material prices
and sales volumes, inventories decreased $123.1 million and accounts receivable
decreased $129.9 million. Also contributing to the cash provided by operating
activities during the period was the increase in income taxes payable of $54.0
million, due to the Company's effective tax rate during the period. These
impacts were partially offset by the decrease in accounts payable and other
current liabilities, which was attributable to the aforementioned lower raw
material prices and sales volumes as well as the timing of vendor payments.

Net cash provided by operating activities during the six months ended June 30,
2019 totaled $234.0 million, inclusive of $52.5 million in dividends from
Americas Styrenics. Net cash provided by operating assets and liabilities for
the six months ended June 30, 2019 totaled $107.7 million, noting decreases in
inventories of $50.7 million and accounts

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receivable of $24.1 million, and an increase in accounts payable and other
current liabilities of $45.1 million. This activity was partially offset by a
decrease in income taxes payable of $11.2 million. The decrease in inventories
was primarily due to decreased raw material prices. Accounts receivable at the
end of the second quarter decreased relative to the end of 2018 primarily due to
decreased raw material prices as well as lower volumes. The increase in accounts
payable was due to timing of vendor payments, while the decrease in income taxes
payable was primarily due to the overall reduction in earnings before income
taxes.

Investing Activities
Net cash provided by investing activities during the six months ended June 30,
2020 totaled $15.4 million, primarily resulting from proceeds from the
settlement of hedging instruments of $51.6 million (see Note 8) as well as
proceeds from the sale of businesses and other assets (primarily our land in
Livorno, Italy - see Note 16) of $11.9 million. These impacts were partially
offset by capital expenditures of $48.2 million, which management has taken
specific actions to control and reduce in response to COVID-19.

Net cash used in investing activities during the six months ended June 30, 2019
totaled $46.9 million, primarily resulting from capital expenditures of $47.6
million.

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

Net cash used in financing activities during the six months ended June 30, 2019
totaled $101.9 million. This activity was primarily due to $59.1 million of
payments related to the repurchase of ordinary shares, $33.8 million of
dividends paid, $3.5 million of net principal payments related to our 2024 Term
Loan B during the period, and $2.3 million of net repayments of short-term
borrowings. Additionally, net cash used in financing activities included $4.0
million of withholding taxes paid related to the vesting of certain RSUs during
the period, partially offset by $0.8 million of proceeds received from the
exercise of option awards.



Free Cash Flow and Liquidity

We use Free Cash Flow and Liquidity as non-GAAP measures to evaluate and discuss
the Company's liquidity position and results. Free Cash Flow is defined as cash
from operating activities, less capital expenditures. Liquidity is defined as
total cash and cash equivalents plus unused borrowing capacity on the Company's
existing revolving debt and accounts receivable securitization facilities, as
applicable. 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 and Liquidity provide management and investors
with useful analytical indicators of our ability to service our indebtedness,
pay dividends (when declared), and meet our ongoing cash obligations.

Free Cash Flow and Liquidity are not intended to represent cash flows from
operations as defined by GAAP, and therefore, should not be used as alternatives
for that measure. Other companies in our industry may define Free Cash Flow and
Liquidity differently than we do. As a result, it may be difficult to use these
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 the following detail, which is determined in
accordance with GAAP.

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Free Cash Flow for the six months ended June 30, 2020 and 2019 is as follows:


                                           Six Months Ended
                                              June 30,
(in millions)                              2020        2019

Cash provided by operating activities $ 75.8$ 234.0
Capital expenditures

                       (48.2)      (47.6)
Free Cash Flow                           $   27.6$  186.4

Refer to the discussion above for significant impacts to cash provided by
operating activities for the six months ended June 30, 2020 and 2019.

Liquidity as of June 30, 2020 and December 31, 2019 is as follows:


                                                                           As of
                                                              June 30,           December 31,
(in millions)                                                   2020                  2019
Cash and cash equivalents                                 $           581.8    $            456.2
Available borrowings under the Accounts Receivable
Securitization Facility                                               110.3                 137.6
Available borrowings under the 2022 Revolving Facility                261.0
                361.0
Liquidity                                                 $           953.1    $            954.8

Refer to the discussion below for further information on the components of
Liquidity.

Capital Resources and Liquidity


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

As of June 30, 2020 and December 31, 2019, we had $1,292.0 million and $1,194.7
million, respectively, in outstanding indebtedness and $903.9 million and $963.5
million, respectively, in working capital. In addition, as of June 30, 2020 and
December 31, 2019, we had $82.0 million and $153.5 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 June 30, 2020
and December 31, 2019 and the associated interest expense, including
amortization of deferred financing fees and debt discounts. Effective interest
rates for the borrowings included in the table below exclude the impact of
deferred financing fee amortization, certain other fees charged to interest
expense (such as fees for unused commitment fees during the period), and the
impacts of derivatives designated as hedging instruments. For definitions of
capitalized terms not included herein, refer to our Annual Report.

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                                    As of and for the Six Months Ended              As of and for the Year Ended
                                              June 30, 2020                               December 31, 2019
                                                  Effective                                    Effective
                                                   Interest       Interest                     Interest      Interest
($ in millions)                   Balance            Rate         Expense        Balance         Rate        Expense
Senior Credit Facility
2024 Term Loan B               $       680.8              2.5 %  $     12.8$      684.3          4.3 %  $     31.5
2022 Revolving Facility                100.0              2.8 %         2.0               -            -           3.2
2025 Senior Notes                      500.0              5.4 %         8.6           500.0          5.4 %        12.1
Accounts Receivable
Securitization Facility                    -                -           0.8               -            -           1.5
Other indebtedness *                    11.2              3.8 %           -            10.4          2.1 %         0.1
Total                          $     1,292.0$     24.2$    1,194.7$     48.4

*For the six months ended June 30, 2020, 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 June 30,
2020, the Company had $100.0 million of outstanding borrowings and $261.0
million of funds available for borrowing (net of $14.0 million outstanding
letters of credit) under the 2022 Revolving Facility. Further, as of June 30,
2020, the 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. The 2022 Revolving Facility contains a springing covenant which applies
when 30% ($112.5 million) or more is drawn from the facility, and would require
the Company to meet a first lien net leverage ratio not to exceed 2.0x at the
end of each financial quarter. As of June 30, 2020 the first lien net leverage
ratio (as defined in our secured credit agreement) was 0.5x.

On July 24, the Company repaid the $100.0 million of outstanding borrowings on
the 2022 Revolving Facility.


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. The stated interest rate on our 2024 Term Loan B is LIBOR plus 2.00%
(subject to a 0.00% LIBOR floor). The Company made net principal payments of
$3.4 million on the 2024 Term Loan B during the six months ended June 30, 2020,
with an additional $7.0 million of scheduled future payments classified as
current debt on the Company's condensed consolidated balance sheet as of June
30, 2020.

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,
2025. Interest on the 2025 Senior Notes is payable semi-annually on May 3 and
November 3 of each year, which commenced on May 3, 2018. These notes may be
redeemed prior to their maturity at the option of the Company under certain
circumstances at specific redemption prices. Refer to our Annual Report for
further information.

We continue to maintain our Accounts Receivable Securitization Facility which
has a borrowing capacity of $150.0 million and matures in September 2021. As of
June 30, 2020, there were no amounts outstanding under this facility, and the
Company had approximately $110.3 million of accounts receivable available to
support this facility, based on the pool of eligible accounts receivable.

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

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

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subsidiaries are located in a variety of jurisdictions, the Company can give no
assurances that our subsidiaries will not face transfer restrictions in the
future due to regulatory or other reasons beyond our control.


The Senior Credit Facility and 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 six months ended June 30, 2020, the Company declared dividends of
$0.80 per ordinary share, totaling $30.9 million, of which $16.1 million,
inclusive of dividend equivalents, was accrued as of June 30, 2020 and the
majority of which was paid in July 2020. These dividends are within the
available capacity under the terms of the restrictive covenants contained in the
Senior Credit Facility and Indenture. Further, additional capacity continues to
be available under the terms of these covenants to support expected future
dividends to shareholders, should the Company continue to declare them.

The Company's cash flow generation in recent years has been strong, with
positive cash flows expected to continue for full year 2020, despite the
challenges presented by extremely weak economic conditions due to COVID-19.
During the six months ended June 30, 2020, under authority from our board of
directors, the Company purchased approximately 0.8 million ordinary shares from
our shareholders through open market transactions for an aggregate purchase
price of $25.0 million. We believe that funds provided by operations, our
existing cash, 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.

Further, we also believe that our financial resources will allow us to manage
the anticipated impact of the COVID-19 pandemic on our business operations for
the foreseeable future, which could include lower demand, reductions in revenue
or delays in payments from customers and other third parties. Our ability to
generate cash from operations to pay our indebtedness and meet other liquidity
needs is subject to certain risks described herein and under Part I, Item
1A-"Risk Factors" of our Annual Report. As of June 30, 2020, we were in
compliance with all the covenants and default provisions under our debt
agreements. Refer to our Annual Report for further information on the details of
the covenant requirements.

               Contractual Obligations and Commercial Commitments

During the second quarter of 2020, the Company entered into a long-term contract
to purchase butadiene directly from Dow's existing butadiene extraction
facilities in Boehlen, Terneuzen and other locations. This contract has a
five-year term with automatic two-year renewal provisions, and contains annual
minimum purchase and maximum sale volume commitments. Other than entry into this
contract, 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.

                   Critical Accounting Policies and Estimates

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

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

                         Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

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                        Recent Accounting Pronouncements

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

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