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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)                                                                                                                                                                                         

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

For the quarterly period ended September 30, 2022

or

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

For the transition period from                      to                     

Commission File Number: 001-36473

Trinseo PLC

(Exact name of registrant as specified in its charter)

Ireland

N/A

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

440 East Swedesford Road

Suite 301

Wayne, PA 19087

(Address of Principal Executive Offices)

(610) 240-3200

(Registrant’s telephone number)

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

  

Smaller reporting company

Emerging growth company

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

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

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

Title of Each Class

Trading symbol

Name of Exchange on which registered

Ordinary Shares, par value $0.01 per share

TSE

New York Stock Exchange

As of October 28, 2022, there were 34,973,747 of the registrant’s ordinary shares outstanding.

 

 

 

TABLE OF CONTENTS

`

    

    

    

    

 

    

    

Page

Part I

Financial Information

Item 1.

Financial Statements

Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 (Unaudited)

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (Unaudited)

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2022 and 2021 (Unaudited)

Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, 2022 and 2021 (Unaudited)

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (Unaudited)

Notes to Condensed Consolidated Financial Statements (Unaudited)

10 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

33 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

48 

Item 4.

Controls and Procedures

48 

Part II

Other Information

Item 1.

Legal Proceedings

49 

Item 1A.

Risk Factors

49 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

50 

Item 3.

Defaults Upon Senior Securities

51 

Item 4.

Mine Safety Disclosures

51 

Item 5.

Other Information

51 

Item 6.

Exhibits

51 

Exhibit Index

Signatures

2

Trinseo PLC

Quarterly Report on Form 10-Q

For the quarterly period ended September 30, 2022

Unless otherwise indicated or required by context, as used in this Quarterly Report on Form 10-Q (“Quarterly Report”), the term “Trinseo” refers to Trinseo PLC (NYSE: TSE), a public limited company existing under the laws of Ireland, and not its subsidiaries. The terms “Company,” “we,” “us” and “our” refer to Trinseo and its consolidated subsidiaries, taken as a consolidated entity. Trinseo PLC is the surviving entity of a cross-border merger with our predecessor company, Trinseo S.A., which merger was approved by shareholders in June 2021 and completed in October 2021. All financial data provided in this Quarterly Report is the financial data of Trinseo PLC, unless otherwise indicated. Prior to the formation of the Company, our business was wholly owned by The Dow Chemical Company (together with other affiliates, “Dow”). The Company may distribute cash to shareholders under Irish law via dividends or distributions made out of distributable profits.

Definitions of capitalized terms not defined herein appear within our Annual Report on Form 10-K for the year ended December 31, 2021 (“Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on February 23, 2022.

Cautionary Note on Forward-Looking Statements

This Quarterly Report contains, without limitation, statements concerning plans, objectives, goals, projections, forecasts, strategies, future events or performance, and underlying assumptions and other statements, which are not statements of historical facts. Forward-looking statements may be identified by the use of words like “expect,” “anticipate,” “believe,” “intend,” “forecast,” ”estimate,” “see,” “outlook,” “will,” “may,” “might,” “potential,” “likely,” “target,” “plan,” “contemplate,” “seek,” “attempt,” “should,” “could,” “would,” or expressions of similar meaning. Forward-looking statements reflect management’s evaluation of information currently available and are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict.

Specific factors that may impact performance or other predictions of future actions have, in many but not all cases, been identified in connection with specific forward-looking statements. Factors that might cause such a difference include, but are not limited to, our ability to successfully execute our transformation strategy and business strategy; our ability to integrate acquired businesses; global supply chain volatility, increased costs or disruption in the supply of raw materials; increased energy costs or costs for transportation of our products; the outcome of the European Commission request for information; the nature of investment opportunities presented to the Company from time to time; and those discussed in our Annual Report filed with the SEC on February 23, 2022 under Part I, Item IA— “Risk Factors,” within this Quarterly Report and in other filings and furnishings made by the Company with the SEC from time to time.

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

Available Information

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

3

PART I —FINANCIAL INFORMATION

Item 1. Financial Statements

TRINSEO PLC

Condensed Consolidated Balance Sheets

(In millions, except per share data)

(Unaudited)

September 30, 

December 31, 

    

2022

2021

Assets

    

    

Current assets

Cash and cash equivalents

$

242.8

$

573.0

Accounts receivable, net of allowance for doubtful accounts (September 30, 2022: $6.0; December 31, 2021: $4.1)

673.7

740.2

Inventories

 

614.0

 

621.0

Other current assets

 

40.5

 

44.3

Total current assets

 

1,571.0

 

1,978.5

Investments in unconsolidated affiliates

 

269.2

 

247.8

Property, plant and equipment, net of accumulated depreciation (September 30, 2022: $579.3; December 31, 2021: $556.5)

 

638.3

719.0

Other assets

Goodwill

 

691.9

 

710.1

Other intangible assets, net

 

764.7

 

823.8

Right-of-use assets - operating, net

74.8

85.3

Deferred income tax assets

 

62.6

 

77.6

Deferred charges and other assets

 

59.4

 

70.1

Total other assets

 

1,653.4

 

1,766.9

Total assets

$

4,131.9

$

4,712.2

Liabilities and shareholders’ equity

Current liabilities

Short-term borrowings and current portion of long-term debt

$

16.7

$

18.5

Accounts payable

 

442.2

 

590.3

Current lease liabilities - operating

17.9

18.4

Income taxes payable

 

25.4

 

52.1

Accrued expenses and other current liabilities

 

215.4

 

235.1

Total current liabilities

 

717.6

 

914.4

Noncurrent liabilities

Long-term debt, net of unamortized deferred financing fees

 

2,297.8

 

2,305.6

Noncurrent lease liabilities - operating

59.3

69.2

Deferred income tax liabilities

 

91.5

 

103.2

Other noncurrent obligations

 

267.6

 

306.7

Total noncurrent liabilities

 

2,716.2

 

2,784.7

Commitments and contingencies (Note 13)

Shareholders’ equity

Ordinary shares, $0.01 nominal value, 4,000.0 shares authorized (September 30, 2022: 39.2 shares issued and 35.1 shares outstanding; December 31, 2021: 38.9 shares issued and 37.9 shares outstanding)

0.4

0.4

Preferred shares, €0.01 nominal value, 1,000.0 shares authorized (no shares issued or outstanding)

Deferred ordinary shares, 1.00 nominal value, 0.025 shares authorized (September 30, 2022: 0.025 shares issued and outstanding; December 31, 2021: 0.025 shares issued and outstanding)

Additional paid-in-capital

 

483.7

 

468.1

Treasury shares, at cost (September 30, 2022: 4.1 shares; December 31, 2021: 1.0 shares)

(200.0)

(50.0)

Retained earnings

 

641.0

 

741.8

Accumulated other comprehensive loss

 

(227.0)

 

(147.2)

Total shareholders’ equity

 

698.1

 

1,013.1

Total liabilities and shareholders’ equity

$

4,131.9

$

4,712.2

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

4

TRINSEO PLC

Condensed Consolidated Statements of Operations

(In millions, except per share data)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

 

    

2022

    

2021

    

2022

    

2021

    

 

Net sales

    

$

1,178.1

    

$

1,269.3

    

$

3,990.3

    

$

3,529.0

Cost of sales

 

1,217.6

 

1,101.0

 

3,714.8

 

2,951.7

Gross profit (loss)

 

(39.5)

 

168.3

 

275.5

 

577.3

Selling, general and administrative expenses

 

80.5

 

76.4

 

262.8

 

230.4

Equity in earnings of unconsolidated affiliates

 

22.8

 

17.1

 

83.8

 

70.2

Other charges

1.9

1.2

39.5

3.0

Operating income (loss)

 

(99.1)

 

107.8

 

57.0

 

414.1

Interest expense, net

 

30.4

 

23.0

 

77.7

 

56.6

Acquisition purchase price hedge loss

 

 

22.0

Other expense (income), net

 

0.5

 

(0.1)

1.6

8.4

Income (loss) from continuing operations before income taxes

 

(130.0)

 

84.9

 

(22.3)

 

327.1

Provision for (benefit from) income taxes

 

(12.1)

 

5.5

 

41.4

 

48.9

Net income (loss) from continuing operations

(117.9)

79.4

(63.7)

278.2

Net income (loss) from discontinued operations, net of income taxes

(1.9)

13.7

(1.9)

38.0

Net income (loss)

$

(119.8)

$

93.1

$

(65.6)

$

316.2

Weighted average shares- basic

35.2

38.8

36.3

38.7

Net income (loss) per share- basic:

Continuing operations

$

(3.35)

$

2.04

$

(1.76)

$

7.19

Discontinued operations

(0.06)

0.35

(0.05)

0.98

Net income (loss) per share- basic

$

(3.41)

$

2.39

$

(1.81)

$

8.17

Weighted average shares- diluted

 

35.2

 

39.5

 

36.3

 

39.6

Net income (loss) per share- diluted:

Continuing operations

$

(3.35)

$

2.01

$

(1.76)

$

7.03

Discontinued operations

(0.06)

0.35

(0.05)

0.96

Net income (loss) per share- diluted

$

(3.41)

$

2.36

$

(1.81)

$

7.99

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

5

TRINSEO PLC

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In millions)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2022

    

2021

    

2022

    

2021

Net income (loss)

    

$

(119.8)

$

93.1

    

$

(65.6)

    

$

316.2

    

Other comprehensive income (loss), net of tax:

 

Cumulative translation adjustments (net of tax of $0.0, $0.0, $3.9, $0.0)

(45.0)

(1.7)

(84.1)

 

(2.0)

Net gain (loss) on cash flow hedges (net of tax of $0.0, $0.0, $0.6, $0.0)

(5.6)

1.2

(3.8)

5.6

Pension and other postretirement benefit plans:

Net gain arising during period (net of tax of $0.8, $1.0, $1.6, $1.0)

2.4

9.3

10.0

9.3

Amounts reclassified from accumulated other comprehensive income

(0.9)

(1.2)

(1.9)

0.9

Total other comprehensive income (loss), net of tax

 

(49.1)

 

7.6

 

(79.8)

 

13.8

Comprehensive income (loss)

$

(168.9)

$

100.7

$

(145.4)

$

330.0

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

6

TRINSEO PLC

Condensed Consolidated Statements of Shareholders’ Equity

(In millions, except per share data)

(Unaudited)

    

Shares

    

Shareholders' Equity

  

Ordinary Shares Outstanding

Treasury Shares

Deferred Ordinary Shares

  

Ordinary Shares

Deferred Ordinary Shares

Additional
Paid-In Capital

  

Treasury Shares

  

Accumulated Other Comprehensive Income (Loss)

  

Retained Earnings

  

Total

Balance at December 31, 2021

 

37.9

1.0

$

0.4

$

$

468.1

$

(50.0)

$

(147.2)

$

741.8

$

1,013.1

Net income

 

16.7

 

16.7

Other comprehensive loss

 

(2.5)

 

(2.5)

Share-based compensation activity

 

0.2

7.6

 

7.6

Purchase of treasury shares

(0.9)

0.9

(50.0)

(50.0)

Dividends on ordinary shares ($0.32 per share)

(12.1)

(12.1)

Balance at March 31, 2022

 

37.2

1.9

$

0.4

$

$

475.7

$

(100.0)

$

(149.7)

$

746.4

$

972.8

Net income

 

 

 

 

 

 

37.4

 

37.4

Other comprehensive loss

 

 

 

 

 

(28.2)

 

 

(28.2)

Share-based compensation activity

 

0.1

 

 

4.4

 

 

 

 

4.4

Purchase of treasury shares

(1.0)

1.0

(50.0)

(50.0)

Dividends on ordinary shares ($0.32 per share)

(11.8)

(11.8)

Balance at June 30, 2022

 

36.3

2.9

$

0.4

$

$

480.1

$

(150.0)

$

(177.9)

$

772.0

$

924.6

Net loss

 

(119.8)

 

(119.8)

Other comprehensive loss

 

(49.1)

 

(49.1)

Share-based compensation activity

 

3.6

 

3.6

Purchase of treasury shares

(1.2)

1.2

(50.0)

(50.0)

Dividends on ordinary shares ($0.32 per share)

(11.2)

(11.2)

Balance at September 30, 2022

 

35.1

4.1

$

0.4

$

$

483.7

$

(200.0)

$

(227.0)

$

641.0

$

698.1

7

    

Shares

    

Shareholders' Equity

  

Ordinary Shares Outstanding

Treasury Shares

Deferred Ordinary Shares

  

Ordinary Shares

Deferred Ordinary Shares

Additional
Paid-In Capital

  

Treasury Shares

  

Accumulated Other Comprehensive Income (Loss)

  

Retained Earnings

  

Total

Balance at December 31, 2020

 

38.4

10.4

$

0.5

$

579.6

$

(542.9)

$

(186.1)

$

739.2

$

590.3

Net income

 

71.5

 

71.5

Other comprehensive income

 

6.1

 

6.1

Share-based compensation activity

 

0.3

(0.3)

(1.1)

12.9

 

11.8

Dividends on ordinary shares ($0.08 per share)

(3.4)

(3.4)

Balance at March 31, 2021

 

38.7

10.1

$

0.5

$

578.5

$

(530.0)

$

(180.0)

$

807.3

$

676.3

Net income

 

 

 

 

 

 

151.6

 

151.6

Other comprehensive income

 

 

 

 

 

0.1

 

 

0.1

Share-based compensation activity

 

0.1

(0.1)

 

 

0.2

 

4.7

 

 

 

4.9

Dividends on ordinary shares ($0.08 per share)

(3.1)

(3.1)

Balance at June 30, 2021

 

38.8

10.0

$

0.5

$

578.7

$

(525.3)

$

(179.9)