TRINSEO PLC 2022 Year-to-Date Highlights
During the three months endedMarch 31, 2022 , Trinseo recognized net income from continuing operations of$17.1 million and Adjusted EBITDA of$177.6 million . This was a solid start to the year, where Trinseo has successfully continued providing quality products and unique solutions to our customers, despite the challenging business environment as geopolitical factors inEurope pressured supply chains, customer production and energy costs in the region. Refer to the discussion below for further information and refer to "Non-GAAP Performance Measures" for discussion of our use of non-GAAP measures in evaluating our performance and a reconciliation of these measures. Other highlights for the year are described below.
European Commission Request for Information
In 2018, Trinseo received a request for information from theEuropean Commission Directorate General for Competition (the "European Commission ") related to styrene monomer commercial activity in the European Economic Area, as well as subsequent requests for information. Trinseo has fully responded to all information requests from theEuropean Commission and continues to fully cooperate on this matter, which remains ongoing. As a result of further developments in this matter, during the three months endedMarch 31, 2022 , Trinseo recorded a reserve for an estimated liability of$35.6 million . Refer to Note 13 in the condensed consolidated financial statements for more information.
Acquisition of Heathland
OnJanuary 3, 2022 , the Company closed on the previously-announced acquisition ofHeathland B.V. ("Heathland") for an estimated purchase price of$29.3 million , including an initial cash purchase price of$22.9 million , subject to customary working capital and other closing adjustments, as well as$6.4 million of contingent cash consideration, representing the fair value of certain earn-out payments (the "Heathland Acquisition"). Heathland is based inUtrecht, the Netherlands , and is focused on converting post-consumer and post-industrial PMMA, PC, ABS, polystyrene, and other thermoplastic waste for use in a wide range of high-end applications. The acquisition of Heathland is consistent with Trinseo's strategy and enhances our footprint as a sustainable solutions provider. Refer to Note 3 in the condensed consolidated financial statements for more information.
Exploration of Divestiture of Styrenics Businesses
Trinseo has continued to progress our work on exploring the divesture of our styrenics businesses, including the formal sales process which was launched inJanuary 2022 . The scope of this potential divestiture is expected to include the Feedstocks and Polystyrene reporting segments as well as our 50% ownership
ofAmericas Styrenics . 30 Table of Contents Results of Operations Results of Operations for the Three Months EndedMarch 31, 2022 and 2021 Three Months Ended March 31, (in millions) 2022 % 2021 % Net sales$ 1,386.7 100 %$ 986.0 100 % Cost of sales 1,210.7 87 % 797.1 81 % Gross profit 176.0 13 % 188.9 19 % Selling, general and administrative expenses 96.7 7 % 56.5 6 % Equity in earnings of unconsolidated affiliates 21.6 2 % 22.9 2 % Other charges 36.3 3 % - - % Operating income 64.6 5 % 155.3 15 % Interest expense, net 21.9 2 % 12.0 1 % Acquisition purchase price hedge loss - - % 55.0 6 % Other expense, net 3.0 - % 2.4 - % Income from continuing operations before income taxes 39.7 3 % 85.9 8 % Provision for income taxes 22.6 2 % 20.1 2 % Net income from continuing operations$ 17.1 1 %$ 65.8 6 % Net income (loss) from discontinued operations, net of income taxes (0.4) - % 5.7 - % Net income$ 16.7 1 %$ 71.5 6 %
Three Months Ended -
Of the 41% increase in net sales, 26% was attributable to increased selling prices, mainly due to the pass through of higher raw material costs, such as styrene, along with higher energy costs. The majority of the remaining increase was due to contributions from our acquisitions in 2021, including the PMMA Acquisition, which closed onMay 3, 2021 , and the Aristech Surfaces Acquisition, which closed onSeptember 1, 2021 .
Cost of Sales
The 52% increase in cost of sales was primarily attributable to a 23% increase in raw material costs and a 27% increase related to the PMMA Acquisition and Aristech Surfaces Acquisition.
Gross Profit
The decrease in gross profit of 7% was primarily attributable to lower margins compared to the very high levels observed in the first quarter of 2021 in Feedstocks and lower sales volume to automotive applications in Base Plastics. These impacts were partially offset by additional gross profit from the 2021 acquisitions. See the segment discussion below for further information.
Selling, General and Administrative Expenses (SG&A)
The$40.2 million , or 71%, increase in SG&A was primarily due to a$19.1 million increase in costs associated with the Company's strategic initiatives, including the potential divestiture of our Styrenics business, as well as$2.1 million of costs incurred in connection with the Company's enterprise resource planning system upgrade. Also contributing to the increase was a$10.0 million increase in personnel costs due to the addition of personnel from acquisitions, a$3.4 million increase in additional depreciation and amortization expense from the PMMA Acquisition and the Aristech Surfaces Acquisition, and a$1.6 million increase in bad debt expense. Slightly offsetting these increases was a decrease of$2.8 million related to acquisition transaction and integration costs incurred, primarily in connection with the PMMA Acquisition. 31
Table of Contents
Equity in Earnings of Unconsolidated Affiliates
The decrease in equity earnings of
Other Charges During the three months endedMarch 31, 2022 , the Company recorded an estimated liability of$35.6 million related to theEuropean Commission request for information, as described within Note 13 in the condensed consolidated financial statements. The Company also recorded impairment charges of$0.7 million related to our Boehlen styrene monomer assets, as described within Note 11 in the condensed consolidated financial statements.
Interest Expense, Net
The increase in interest expense, net of$9.9 million , or 83%, was primarily attributable to the Company's issuance of the 2029 Senior Notes, which were not issued until late in the first quarter of 2021 and the 2028 Term Loan B, issued in the second quarter of 2021. Refer to Note 8 in the condensed consolidated financial statements for further information.
Other Expense, Net
Other expense, net for the three months endedMarch 31, 2022 was$3.0 million , which included a$1.2 million of expense related to the non-service cost components of net periodic benefit cost as well as foreign exchange transaction losses of$1.4 million . These net foreign exchange transaction losses included$10.2 million of losses primarily from the remeasurement of our euro denominated payables due to the relative changes in rates between theU.S. dollar and the euro during the period, partially offset by$8.8 million of gains from our foreign exchange forward contracts. Other expense, net for the three months endedMarch 31, 2021 was$2.4 million , which included$1.8 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 . These net foreign exchange transaction losses included$19.9 million of losses primarily from the remeasurement of our euro-denominated payables due to the relative changes in rates between theU.S. dollar and the euro during the period, almost entirely offset by$19.7 million of gains from our foreign exchange forward contracts, excluding the acquisition purchase price hedge.
Provision for Income Taxes
Provision for income taxes for the three months endedMarch 31, 2022 totaled$22.6 million , resulting in an effective tax rate of 56.9%. Provision for income taxes for the three months endedMarch 31, 2021 totaled$20.1 million , resulting in an effective tax rate of 23.4%. The increase in provision for income taxes was primarily driven by the Company's forecasted jurisdictional mix of earnings, where losses expected to be generated in lower rate jurisdictions are being more than offset by income expected to be generated in higher tax jurisdictions.
Net Income (Loss) from Discontinued Operations, Net of Income Taxes
Net income (loss) from discontinued operations, net of income taxes during the three months endedMarch 31, 2022 and 2021 was$(0.4) million and$5.7 million , respectively, and was related the results of our Synthetic Rubber business. Refer to Note 4 in the condensed consolidated financial statements for further information. Outlook We expect a year of solid earnings due to healthy end market demand, cost synergy realization from our acquired businesses, and effective pricing and commercial excellence programs. These drivers help to mitigate the headwinds from supply chain constraints, higher energy costs, and current styrene production outages at our Terneuzen site and atAmericas Styrenics' St. James site. We remain focused on our transformation to a specialty material and sustainable solutions provider, including progressing on the sale process of the Styrenics businesses. 32 Table of Contents Selected Segment Information The following sections describe net sales, Adjusted EBITDA, and Adjusted EBITDA margin by segment for the three months endedMarch 31, 2022 and 2021. Inter-segment sales have been eliminated. Refer to Note 16 in the condensed consolidated financial statements for further information on our segments, as well as for a detailed definition of Adjusted EBITDA and a reconciliation of income from continuing operations before income taxes to segment Adjusted EBITDA. As discussed in the Annual Report, beginning in the second quarter of 2021, the Company reported the results of the Synthetic Rubber business, as discontinued operations in the condensed consolidated statement of operations for all periods presented, and therefore, it is no longer presented as a separate reportable segment. Refer to Note 4 in the condensed consolidated financial statements for further information.
Engineered Materials Segment
Our Engineered Materials segment consists of rigid thermoplastic compounds and
blends products sold into high growth and high value applications in markets
such as consumer electronics and medical, as well as soft thermoplastic
elastomers ("TPEs") products which are sold into markets such as footwear and
automotive. The Engineered Materials segment also includes polymethyl
methacrylates ("PMMA") and activated methyl methacrylates ("MMA") products,
which are sold into a variety of applications including automotive, building &
construction, medical, consumer electronics, and wellness, among others.
Three Months Ended
March 31,
($ in millions) 2022 2021 % Change
Net sales $ 295.2 $ 65.8 349 %
Adjusted EBITDA $ 34.7 $ 7.9 339 %
Adjusted EBITDA margin 12 % 12 %
Three Months Ended -
The 349% increase in net sales was primarily attributable to the contribution from the PMMA business and theAristech Surfaces acquisitions. Excluding these acquisitions, sales price, primarily from the pass through of higher raw materials and energy costs, positively impacted net sales by 19%, which was offset by a 17% decrease due to lower sales volumes as demand declined from very high levels in the prior year. Adjusted EBITDA increased$26.8 million , or 339%, of which$31.2 million , or 393% was attributable to the contribution from the PMMA business andAristech Surfaces acquisitions. Excluding these acquisitions, a$3.4 million , or 42%, decrease was due to lower sales volume as demand eased from very high prior year levels for consumer electronic and medical applications, as well as a$1.3 million decrease due to higher fixed costs.
Latex Binders Segment
Our Latex Binders segment produces styrene-butadiene latex ("SB latex") and
other latex polymers and binders primarily for coated paper and packaging board,
carpet and artificial turf backings, as well as a broad range of performance
latex binders products, including SB latex, styrene-acrylate latex ("SA latex"),
and vinylidene chloride latex for coatings, adhesives, sealants, and elastomers
("CASE") applications.
Three Months Ended
March 31,
($ in millions) 2022 2021 % Change
Net sales $ 306.7 $ 251.0 22 %
Adjusted EBITDA $ 30.2 $ 16.8 80 %
Adjusted EBITDA margin 10 % 7 %
33
Table of Contents
Three Months Ended -
The 22% increase in net sales was primarily due to a 29% increase in pricing from the pass through of raw material costs, mainly styrene and butadiene. Lower sales volume, mainly attributable to paper and carpet applications, decreased net sales by 4%. The$13.4 million , or 80%, increase in Adjusted EBITDA was primarily due to an increase of$18.9 million , or 112%, attributable to higher margins which was a result of favorable net timing. This effect more than offset the$2.0 million , or 12%, decrease due to lower sales volumes, as well as a$2.0 million , or 12%, decrease due to higher fixed costs.
Base Plastics Segment
Our Base Plastics segment consists of a variety of compounds and blends, the
majority of which are for automotive applications. The segment also includes our
acrylonitrile-butadiene-styrene ("ABS"), styrene-acrylonitrile ("SAN"), and
polycarbonate ("PC") businesses. The Base Plastics segment also includes the
results of Heathland, which was acquired in the first quarter of 2022. However,
this did not have a material impact on sales or Adjusted EBITDA for the period.
Three Months Ended
March 31,
($ in millions) 2022 2021 % Change
Net sales $ 396.5 $ 328.9 21 %
Adjusted EBITDA $ 68.6 $ 65.3 5 %
Adjusted EBITDA margin 17 % 20 %
Three Months Ended -
Of the 21% increase in net sales, 31% was due to higher pricing from the pass through of raw material costs and pricing actions. The increase from higher pricing was slightly offset by a 4% decrease due to foreign exchange rate impacts as well as a 7% decrease due to lower sales volume.
The$3.3 million , or 5%, increase in Adjusted EBITDA was primarily due to higher margins of$18.7 million , or 29%, particularly in ABS. Higher margins were partially offset by a decrease of$6.8 million , or 10%, due to lower volumes, mostly in automotive applications, as supply chain constraints caused by semi-conductor shortages and theUkraine conflict caused production issues for customers. Also offsetting the higher margins was a decrease of$4.3 million , or 7%, due to foreign exchange impacts, and a decrease of$4.7 million , or 7%,
due
to higher fixed costs.
Polystyrene Segment
Our product offerings in our Polystyrene segment include a variety of general
purpose polystyrenes ("GPPS") and polystyrene that has been modified with
polybutadiene rubber to increase its impact resistant properties ("HIPS"). These
products provide customers with performance and aesthetics at a low cost across
applications, including appliances, packaging, including food packaging and food
service disposables, consumer electronics, and building and construction
materials. In April 2021 , the Company announced our plans to build a full
commercial scale polystyrene recycling plant in Tessenderlo, Belgium , which is
expected to be operational in 2023.
Three Months Ended
March 31,
($ in millions) 2022 2021 % Change
Net sales $ 318.0 $ 266.9 19 %
Adjusted EBITDA $ 45.3 $ 47.4 (4) %
Adjusted EBITDA margin 14 % 18 %
34
Table of Contents
Three Months Ended -
Of the 19% increase in net sales, 18% of the increase was due to higher pricing primarily from the pass through of higher styrene costs as well as commercial excellence actions. The$2.1 million , or 4%, decrease in Adjusted EBITDA was primarily due to a decrease of$2.7 million , or 6%, due to higher fixed costs, and a decrease of$2.3 million , or 5%, due to lower volumes. These effects were partially offset by an increase due to higher margins of$1.8 million , or 4%, including impacts from commercial excellence actions, as well as an increase of$1.1 million , or 2%, due to foreign exchange rate impacts.
Feedstocks Segment
The Feedstocks segment includes the Company's production and procurement of styrene monomer outside ofNorth America , which is used as a key raw material for the production of polystyrene, expandable polystyrene, SAN resins, SA latex, SB latex, ABS resins, unsaturated polyethylene resins, and styrene-butadiene rubber. Three Months Ended March 31, ($ in millions) 2022 2021 % Change Net sales$ 70.3 $ 73.4 (4) % Adjusted EBITDA$ 4.1 $ 46.3 (91) % Adjusted EBITDA margin 6 % 63 %
Three Months Ended -
Of the 4% decrease in net sales, 29% was due to lower styrene-related sales volume. This effect was mostly offset by a 25% increase due to higher styrene prices.
The decrease of$42.2 million in Adjusted EBITDA was primarily attributed to a$48.0 million , or 104%, decrease due to lower styrene margins including impacts from higher utility costs caused by rise in natural gas prices inEurope . Slightly offsetting this decrease was an increase of$3.6 million , or 8%, due to foreign exchange impacts. Americas Styrenics Segment This segment consists solely of the equity earnings from of our 50%-owned joint venture,Americas Styrenics , a producer of both styrene monomer and polystyrene inNorth America . Styrene monomer is a basic building block of plastics and a key input to many of the Company's products, as well as a key raw material for the production of polystyrene. Major applications for the polystyrene productsAmericas Styrenics produces include appliances, food packaging, food service disposables, consumer electronics, and building and construction materials.
Three Months Ended
March 31,
($ in millions) 2022 2021 % Change
Adjusted EBITDA* $ 21.6 $ 22.9 (6) %
*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 -
The decrease in Adjusted EBITDA was mainly due to lower styrene profitability, as a result of lower margins as well as a production outage in the current period, which was mostly offset by higher polystyrene margins.
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;
35
Table of Contents
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 months endedMarch 31, 2022 and 2021: Three Months Ended March 31, (in millions) 2022 2021 Net income$ 16.7 $ 71.5
Net income (loss) from discontinued operations (0.4)
5.7
Net income from continuing operations 17.1
65.8 Interest expense, net 21.9 12.0 Provision for income taxes 22.6 20.1 Depreciation and amortization 53.0 23.1 EBITDA(a)$ 114.6 $ 121.0 Net gain on disposition of businesses and assets (0.3)
(0.2)
Restructuring and other charges(b) 0.4
0.3
Acquisition transaction and integration net costs (c) 3.2
6.0
Acquisition purchase price hedge loss (d) -
55.0
Asset impairment charges or write-offs(e) 0.7
-
European Commission request for information(f) 35.6
- Other items(g) 23.4 2.1 Adjusted EBITDA$ 177.6 $ 184.2
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 (a) 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.
Restructuring and other charges for the three months ended
primarily relate to the employee termination benefit charges incurred in
connection with the Company's transformational restructuring program, (b) announced in the second quarter of 2021. Restructuring and other charges for
the three months ended
restructuring activities. Refer to Note 17 in the condensed consolidated
financial statements for further information regarding restructuring
activities.
Amounts for the three months ended
and Aristech Surfaces Acquisitions. Refer to Note 3 in the condensed
consolidated financial statements for further information.
Acquisition purchase price hedge loss for the three months ended
hedge arrangement on the euro-denominated purchase price of the
36
Table of Contents
Arkema PMMA business. Refer to Note 10 in the condensed consolidated financial
statements for further information.
Amount for the three months ended
described within Note 11 in the condensed consolidated financial statements.
Amount for the three months ended
information, as described in Note 13 in the condensed consolidated financial
statements.
Other items for the three months ended
fees incurred in conjunction with certain of the Company's strategic (g) initiatives, as well as our transition to a new enterprise resource planning
system. Other items for the three months ended March 31, 2021 primarily
relate to 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 three
months ended March 31, 2022 and 2021. We have derived the summarized cash flow
information from our unaudited financial statements.
Three Months Ended
March 31,
(in millions) 2022 2021
Net cash provided by (used in):
Operating activities - continuing operations $ (5.2) $ 40.7
Operating activities - discontinued operations 0.2 10.3
Operating activities (5.0)
51.0
Investing activities - continuing operations (46.1)
(11.2)
Investing activities - discontinued operations (0.9)
(1.4) Investing activities (47.0) (12.6) Financing activities (70.6) 450.8
Effect of exchange rates on cash (1.7)
(9.5)
Net change in cash, cash equivalents, and restricted cash
Operating Activities Net cash used in operating activities from continuing operations during the three months endedMarch 31, 2022 totaled$5.2 million . Solid earnings, including$7.5 million of dividends received fromAmericas Styrenics , were more than offset by a significant working capital build during the quarter. This working capital build was driven by significantly increasing raw material and utility prices, coupled with a build of inventory ahead of planned turnaround activities. Net cash provided by operating activities from discontinued operations during the three months endedMarch 31, 2022 totaled$0.2 million . Net cash provided by operating activities from continuing operations during the three months endedMarch 31, 2021 totaled$40.7 million , inclusive of$15.0 million of dividends received fromAmericas Styrenics . Net cash used in operating assets and liabilities for the three months endedMarch 31, 2021 totaled$84.5 million , noting an increase in accounts receivable of$138.8 million as well as an increase in inventories of$82.5 million . These effects were partially offset by an increase in accounts payable and other current liabilities of$114.9 million , an increase in other liabilities of$12.3 million , and an increase in income taxes payable of$4.9 million . The increases in accounts receivable, inventories, and accounts payable and other current liabilities during the period were primarily attributable to increased sales volume across all segments except for Feedstocks as well as increased prices, including both raw material prices and selling prices due to our pass through pricing arrangements. Net cash provided by operating activities from discontinued operations during the three months endedMarch 31, 2021 totaled$10.3 million , and was primarily attributable to raw material cost increases and higher inventory related to discontinued operations. 37 Table of Contents Investing Activities
Net cash used in investing activities from continuing operations during the three months endedMarch 31, 2022 totaled$46.1 million , which was primarily attributable to net cash paid for asset or business acquisitions of$22.2 million (see Note 3), and capital expenditures, including cash spent for our ongoing ERP upgrade, of$23.9 million . Net cash used in investing activities from discontinued operations during the three months endedMarch 31, 2022 totaled$0.9 million . Net cash used in investing activities from continuing operations during the three months endedMarch 31, 2021 totaled$11.2 million , which was entirely attributable to capital expenditures. Net cash used in investing activities from discontinued operations during the three months endedMarch 31, 2021 totaled$1.4 million , which was entirely attributable to capital expenditures.
Financing Activities
Net cash used in financing activities during the three months endedMarch 31, 2022 totaled$70.6 million . This activity was primarily due to$51.9 million of payments related to the repurchase of ordinary shares,$12.4 million of dividends paid,$3.6 million of net repayments of short-term borrowings, and$3.6 million of net principal payments related to our 2024 Term Loan B and 2028 Term Loan B during the period. This activity was partially offset by$1.7 million in proceeds from the exercise of option awards during the period. Net cash provided by financing activities during the three months endedMarch 31, 2021 totaled$450.8 million . This activity was primarily due to$450.0 million in proceeds from the issuance of the 2029 Senior Notes as well as$9.0 million in proceeds from the exercise of option awards. This activity was partially offset by$3.3 million of dividends payments,$2.8 million of net repayments of short-term borrowings, and$1.3 million of deferred financing fees related to the issuance of our 2029 Senior Notes during the period.
Free Cash Flow
We use Free Cash Flow as a non-GAAP measures to evaluate and discuss the
Company's liquidity position and results. Free Cash Flow is defined as cash from
operating activities, less capital expenditures. We believe that Free Cash Flow
provides an indicator of the Company's ongoing ability to generate cash through
core operations, as it excludes the cash impacts of various financing
transactions as well as cash flows from business combinations that are not
considered organic in nature. We also believe that Free Cash Flow provides
management and investors with useful analytical indicator of our ability to
service our indebtedness, pay dividends (when declared), and meet our ongoing
cash obligations.
Free Cash Flow is not intended to represent cash flows from operations as
defined by GAAP, and therefore, should not be used as an alternative for that
measure. Other companies in our industry may define Free Cash Flow differently
than we do. As a result, it may be difficult to use this or similarly-named
financial measures that other companies may use, to compare the liquidity and
cash generation of those companies to our own. We compensate for these
limitations by providing a reconciliation to cash provided by operating
activities from continuing operations, which is determined in accordance with
GAAP.
Three Months Ended
March 31,
(in millions) 2022 2021
Cash provided by (used in) operating activities
(24.8) (12.6)
Free Cash Flow $ (29.8) $ 38.4 Refer to the discussion above for significant impacts to cash provided by
operating activities for the three months ended
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
38
Table of Contents
payments and ordinary share repurchases, when deemed appropriate. Our sources of liquidity include cash on hand, cash flow from operations from continuing operations, and amounts available under the Senior Credit Facility and the Accounts Receivable Securitization Facility (discussed further below).
AtMarch 31, 2022 andDecember 31, 2021 , we had$2,365.2 million and$2,368.8 million , respectively, in outstanding indebtedness and$1,045.9 million and$1,064.1 million , respectively, in working capital (calculated as current assets from continuing operations less current liabilities from continuing operations). In addition, as ofMarch 31, 2022 andDecember 31, 2021 , we had$445.0 million and$560.6 million , respectively, of foreign cash and cash equivalents on our balance sheet, outside of our country of domicile, which wasIreland as ofMarch 31, 2022 , all of which is readily convertible into other foreign currencies, including theU.S. dollar. Our intention is not to permanently reinvest our foreign cash and cash equivalents. Accordingly, we record deferred income tax liabilities related to the unremitted earnings of our subsidiaries. The following table outlines our outstanding indebtedness as ofMarch 31, 2022 andDecember 31, 2021 and the associated interest expense, including amortization of deferred financing fees and debt discounts. Effective interest rates for the borrowings included in the table below exclude the impact of deferred financing fee amortization, certain other fees charged to interest expense (such as fees for unused commitment fees during the period), and the impacts of derivatives designated as hedging instruments. For definitions of capitalized terms not included herein, refer to our Annual Report on Form 10-K ("Annual Report"). As of and for the Three Months Ended As of and for the Year Ended March 31, 2022 December 31, 2021 Effective Effective Interest Interest Interest Interest ($ in millions) Balance Rate Expense Balance Rate Expense Senior Credit Facility 2024 Term Loan B$ 668.6 2.1 %$ 5.1 $ 670.4 2.1 %$ 20.6 2028 Term Loan B 741.1 2.6 % 5.7 742.8 2.6 % 15.2 2026 Revolving Facility - - % 0.4 - - % 2.1 2029 Senior Notes 450.0 5.1 % 6.2 450.0 5.1 % 19.0 2025 Senior Notes 500.0 5.4 % 5.0 500.0 5.4 % 20.7 Accounts Receivable Securitization Facility - - % 0.4 - 2.0 % 1.8 Other indebtedness* 5.5 1.4 % - 5.6 2.2 % - Total$ 2,365.2 $ 22.8 $ 2,368.8 $ 79.4
*For the three months ended
As ofMarch 31, 2022 , our Senior Credit Facility included the 2026 Revolving Facility, which is scheduled to mature inMay 2026 and had a borrowing capacity of$375.0 million . As ofMarch 31, 2022 , the Company had$368.6 million of funds available for borrowing (net of$6.4 million outstanding letters of credit) under the 2026 Revolving Facility. Further, as ofMarch 31, 2022 , the Company is required to pay a quarterly commitment fee in respect of any unused commitments under the 2026 Revolving Facility equal to 0.375% per annum.
Also included in our Senior Credit Facility is our 2024 Term Loan B (with
original principal of
Our 2025 Senior Notes, as issued under the Indenture executed in 2017, include$500.0 million aggregate principal amount of 5.375% senior notes that mature onSeptember 1, 2025 . Our 2029 Senior Notes, as issued under the Indenture executed in 2021, include$450.0 million aggregate principal amount of 5.125% senior notes that mature onApril 1, 2029 . We also continue to maintain our Accounts Receivable Securitization Facility, which matures inNovember 2024 and has an outstanding borrowing capacity of$150.0 million . As ofMarch 31, 2022 , there were no amounts outstanding under this facility and the Company had approximately$145.7 million of accounts receivable available to support this 39
Table of Contents
facility, based on the pool of eligible accounts receivable. Refer to Note 8 in the consolidated financial statements for further information on the facility.
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 . andTrinseo Materials Finance, Inc. (the "Issuers" of our 2029 Senior Notes and 2025 Senior Notes and "Borrowers" under our Senior Credit Facility) are dependent upon the cash generation and receipt of distributions and dividends or other payments from our subsidiaries and joint venture in order to satisfy their debt obligations. There are no known significant restrictions by third parties on the ability of subsidiaries of the Company to disburse or dividend funds to the Issuers and the Borrowers in order to satisfy these obligations. However, as the Company's subsidiaries are located in a variety of jurisdictions, the Company can give no assurances that our subsidiaries will not face transfer restrictions in the future due to regulatory or other reasons beyond our control. The Senior Credit Facility and Indentures also limit the ability of the Borrowers and Issuers, respectively, to pay dividends or make other distributions to Trinseo PLC, which could then be used to make distributions to shareholders. During the three months endedMarch 31, 2022 , the Company declared dividends of$0.32 per ordinary share, totaling$12.1 million , all of which was accrued as ofMarch 31, 2022 and which was paid inApril 2022 . These dividends are well within the available capacity under the terms of the restrictive covenants contained in the Senior Credit Facility and Indentures. Further, additional capacity continues to be available under the terms of these covenants to support expected future dividends to shareholders, should the Company continue to declare them. Our ability to generate cash from operations to pay our indebtedness and meet other liquidity needs is subject to certain risks described herein and under Part I, Item 1A-"Risk Factors" of our Annual Report, as well as the risk factors included in Part II, Item 1A herein. As ofMarch 31, 2022 , 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. The ongoing war inUkraine and the corresponding sanctions and other measures being imposed by various governments have impacted global markets, particularly inEurope , leading to: (i) high volatility and increasing prices for natural gas and other energy supplies, (ii) changing trade flow patterns, and (iii) increasing levels of economic and geopolitical uncertainty globally. We do not have manufacturing operations inUkraine ,Russia orBelarus , and we have temporarily suspended sales and deliveries toRussia andBelarus , which sales do not constitute a material portion of our business. However, a significant escalation or expansion of economic disruption caused by this conflict, including supply disruptions, higher costs of raw materials or energy could have a material adverse effect on our results of operations, financial condition and cash flows. We are actively monitoring the broader economic impact from the crisis, in particular on the price and availability of raw materials and energy. 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. 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. 40
Table of Contents
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.
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.
© Edgar Online, source
