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TRINSEO PLC Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/05/2022 | 02:06pm EDT

2022 Year-to-Date Highlights

During the three months ended March 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 in Europe 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 the European 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 the European 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 ended March 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


On January 3, 2022, the Company closed on the previously-announced acquisition
of Heathland 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 in Utrecht,
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 in
January 2022. The scope of this potential divestiture is expected to include the
Feedstocks and Polystyrene reporting segments as well as our 50% ownership
of
Americas Styrenics.

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                             Results of Operations

    Results of Operations for the Three Months Ended March 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 - March 31, 2022 vs. March 31, 2021

Net Sales

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 on May 3, 2021, and the Aristech Surfaces Acquisition,
which closed on September 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.

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Equity in Earnings of Unconsolidated Affiliates

The decrease in equity earnings of $1.3 million was due to lower equity earnings from Americas Styrenics.


Other Charges

During the three months ended March 31, 2022, the Company recorded an estimated
liability of $35.6 million related to the European 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 ended March 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 the U.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 ended March 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 the U.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 ended March 31, 2022 totaled
$22.6 million, resulting in an effective tax rate of 56.9%. Provision for income
taxes for the three months ended March 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 ended March 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 at Americas 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.

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                          Selected Segment Information

The following sections describe net sales, Adjusted EBITDA, and Adjusted EBITDA
margin by segment for the three months ended March 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 - March 31, 2022 vs. March 31, 2021


The 349% increase in net sales was primarily attributable to the contribution
from the PMMA business and the Aristech 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 and Aristech
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 %


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  Table of Contents

Three Months Ended - March 31, 2022 vs. March 31, 2021


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 - March 31, 2022 vs. March 31, 2021

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 the Ukraine 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 %


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Three Months Ended - March 31, 2022 vs. March 31, 2021


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 of North America, which is used as a key raw material
for the production of polystyrene, expandable polystyrene, SAN resins, SA latex,
SB latex, ABS resins, unsaturated polyethylene resins, and styrene-butadiene
rubber.

                             Three Months Ended
                                 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 - March 31, 2022 vs. March 31, 2021

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 in Europe.
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
in North America. Styrene monomer is a basic building block of plastics and a
key input to many of the Company's products, as well as a key raw material for
the production of polystyrene. Major applications for the polystyrene products
Americas Styrenics produces include appliances, food packaging, food service
disposables, consumer electronics, and building and construction materials.
                         Three Months Ended
                             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 - March 31, 2022 vs. March 31, 2021

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;


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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 ended March 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 March 31, 2022

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 March 31, 2021 primarily relate to the Company's other

restructuring activities. Refer to Note 17 in the condensed consolidated

    financial statements for further information regarding restructuring
    activities.

Amounts for the three months ended March 31, 2022 and 2021 relate to expenses (c) incurred for the Company's acquisition and integration of the PMMA business

    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 March 31, (d) 2021 was due to the change in fair value of the Company's forward currency

    hedge arrangement on the euro-denominated purchase price of the


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Arkema PMMA business. Refer to Note 10 in the condensed consolidated financial

statements for further information.

Amount for the three months ended March 31, 2022 primarily relate to the (e) impairment of the Company's styrene monomer assets in Boehlen, Germany, as

described within Note 11 in the condensed consolidated financial statements.

Amount for the three months ended March 31, 2022 relate to the estimated (f) liability recorded in connection with the European Commission request for

information, as described in Note 13 in the condensed consolidated financial

statements.

Other items for the three months ended March 31, 2022 primarily relate to

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 $ (124.3) $ 479.7



Operating Activities

Net cash used in operating activities from continuing operations during the
three months ended March 31, 2022 totaled $5.2 million. Solid earnings,
including $7.5 million of dividends received from Americas 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 ended March 31, 2022 totaled $0.2 million.

Net cash provided by operating activities from continuing operations during the
three months ended March 31, 2021 totaled $40.7 million, inclusive of $15.0
million of dividends received from Americas Styrenics. Net cash used in
operating assets and liabilities for the three months ended March 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 ended March 31, 2021 totaled
$10.3 million, and was primarily attributable to raw material cost increases and
higher inventory related to discontinued operations.

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Investing Activities
Net cash used in investing activities from continuing operations during the
three months ended March 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 ended March 31, 2022
totaled $0.9 million.

Net cash used in investing activities from continuing operations during the
three months ended March 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 ended March 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 ended March 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 ended March
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 $ (5.0) $ 51.0 Capital expenditures

                                   (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 March 31, 2022 and 2021.

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


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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).


At March 31, 2022 and December 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 of March 31, 2022 and December 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 was Ireland as of March
31, 2022, all of which is readily convertible into other foreign currencies,
including the U.S. dollar. Our intention is not to permanently reinvest our
foreign cash and cash equivalents. Accordingly, we record deferred income tax
liabilities related to the unremitted earnings of our subsidiaries.

The following table outlines our outstanding indebtedness as of March 31, 2022
and December 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 March 31, 2022, interest expense on "Other indebtedness" totaled less than $0.1 million.


As of March 31, 2022, our Senior Credit Facility included the 2026 Revolving
Facility, which is scheduled to mature in May 2026 and had a borrowing capacity
of $375.0 million. As of March 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 of March 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 $700.0 million, maturing in September 2024), and our 2028 Term Loan B (with original principal of $750.0 million, maturing in May 2028).


Our 2025 Senior Notes, as issued under the Indenture executed in 2017, include
$500.0 million aggregate principal amount of 5.375% senior notes that mature on
September 1, 2025.

Our 2029 Senior Notes, as issued under the Indenture executed in 2021, include
$450.0 million aggregate principal amount of 5.125% senior notes that mature on
April 1, 2029.

We also continue to maintain our Accounts Receivable Securitization Facility,
which matures in November 2024 and has an outstanding borrowing capacity of
$150.0 million. As of March 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

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

The Senior Credit Facility and Indentures also limit the ability of the
Borrowers and Issuers, respectively, to pay dividends or make other
distributions to Trinseo PLC, which could then be used to make distributions to
shareholders. During the three months ended March 31, 2022, the Company declared
dividends of $0.32 per ordinary share, totaling $12.1 million, all of which was
accrued as of March 31, 2022 and which was paid in April 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 of March 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 in Ukraine and the corresponding sanctions and other measures
being imposed by various governments have impacted global markets, particularly
in Europe, 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 in Ukraine, Russia or Belarus, and we have
temporarily suspended sales and deliveries to Russia and Belarus, 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.

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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.

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Financials (USD)
Sales 2022 5 363 M - -
Net income 2022 - - -
Net Debt 2022 1 722 M - -
P/E ratio 2022 -
Yield 2022 3,21%
Capitalization 1 453 M 1 453 M -
EV / Sales 2022 0,59x
EV / Sales 2023 0,62x
Nbr of Employees 3 054
Free-Float 93,5%
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Managers and Directors
Frank A. Bozich President, Chief Executive Officer & Director
David Phillip Stasse Chief Financial Officer & Executive Vice President
K'Lynne Johnson Chairman
Natalia Scherbakoff Director-Technology & Innovation
Angelo N. Chaclas Secretary, SVP, Chief Legal & Compliance Officer
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