Year Ended 2017 Summary
- Net Income of $328 million and diluted
EPS of $7.30
- Adjusted EPS of $8.13
- Adjusted EBITDA of $642 million
- Cash provided by operating activities
of $391 million and Free Cash Flow of $244 million
Fourth Quarter 2017
Summary
- Net Income of $118 million and diluted
EPS of $2.63
- Adjusted EPS of $2.14
- Adjusted EBITDA of $169 million
- Cash provided by operating activities
of $196 million and Free Cash Flow of $158 million
Trinseo (NYSE: TSE):
Three Months Ended Year Ended
December 31, December 31, $millions, except per
share data 2017 2016 2017
2016 Net Sales 1,102 917 4,448 3,717 Net Income 118 79 328
318 EPS(Diluted) ($) 2.63 1.72 7.30 6.70 Adjusted Net Income* 96 77
366 346 Adjusted EPS ($)* 2.14 1.68 8.13 7.28 EBITDA* 189 142 592
577 Adjusted EBITDA* 169 142 642 611
____________________
*For a reconciliation of EBITDA, Adjusted
EBITDA, and Adjusted Net Income to Net Income, as well as a
reconciliation of Adjusted EPS, see note 2 below.
Trinseo (NYSE: TSE), a global materials company and manufacturer
of plastics, latex binders and synthetic rubber, today reported its
fourth quarter and record full year 2017 financial results with net
sales of $1,102 million and $4,448 million, respectively; net
income of $118 million and $328 million, respectively; and earnings
per diluted share of $2.63 and $7.30, respectively. Fourth quarter
and full year Adjusted EBITDA was $169 million and $642 million,
respectively, and Adjusted EPS was $2.14 and $8.13,
respectively.
Net sales in the fourth quarter increased 20% versus prior year
driven primarily by the pass through of higher raw material costs
as well as currency. Fourth quarter net income of $118 million,
which included a pre-tax gain of approximately $22 million related
to changes made to certain Company pension plans, was $39 million
higher than prior year. Fourth quarter Adjusted EBITDA of $169
million was $27 million higher than prior year. The higher
operational profitability was due primarily to higher styrene,
polystyrene, polycarbonate, and Latex Binders margins as well as
higher Performance Plastics sales volume. These impacts were
partially offset by lower Synthetic Rubber sales volume.
Net sales in the full year increased 20% versus prior year
driven primarily by the pass through of higher raw material costs.
Full year net income of $328 million was $10 million higher than
prior year. This increase was driven by improved performance in the
Feedstocks, Basic Plastics, and Latex Binders segments due to
higher margin. These improvements were partially offset by lower
performance in the Americas Styrenics, Synthetic Rubber, and
Performance Plastics segments, in addition to a $65 million pre-tax
loss on extinguishment of debt in the current year. Adjusted EBITDA
in the full year of $642 million was $31 million higher than prior
year which was comprised of about $55 million of fundamental
business improvement, partially offset by about $24 million of
unfavorable net timing impacts.
Commenting on the Company’s performance, Chris Pappas, Trinseo
President and Chief Executive Officer, said, “We continue to be
encouraged by our performance. Our fourth quarter results were
above the guidance we provided during our third quarter call due to
strong operating conditions in several segments as well as pricing
initiatives that resulted in higher than expected margins. For the
second consecutive year we had record net income and Adjusted
EBITDA.”
Pappas continued, “We also had very strong cash generation
during the year, and we continue to return cash to shareholders.
During 2017 we repurchased approximately 1.4 million shares,
utilizing about $89 million of cash, and we increased the dividend
by 20%. In total, we returned nearly $150 million to shareholders
via these actions. In addition, we completed our first acquisition,
API Plastics, and we continue to make excellent progress on our
other growth initiatives, including the SSBR expansion and pilot
plant in Synthetic Rubber, and the ABS capacity in China, which are
now all in operation.”
Fourth Quarter Results and Commentary by Business
Segment
- Latex Binders net sales of $250
million for the quarter increased 4% versus prior year primarily
from the pass through of higher raw material costs. Lower sales
volume decreased revenue by 11%, excluding the divested Latin
America business, driven by lower sales volume in the North America
and Europe paper and carpet markets. Adjusted EBITDA of $33 million
was $9 million above prior year from higher margin in Asia due to
better market conditions, which was partially offset by lower sales
volume.
- Synthetic Rubber net sales of
$127 million for the quarter increased 2% versus prior year
primarily due to currency as well as the pass through of higher raw
material costs. These impacts were partially offset by lower sales
volume which was driven by customer destocking, shipment delays,
and a softer tire market. Adjusted EBITDA of $15 million was $14
million below prior year from lower sales volume as well as
favorable prior year net timing impacts.
- Performance Plastics net sales
of $227 million for the quarter was 37% above prior year including
a 9% increase from the acquisition of API Plastics. In addition,
net sales increased due to higher sales volume to the North America
automotive and Asia consumer electronics and automotive markets as
well as the pass through of higher raw material costs. Adjusted
EBITDA of $43 million was $11 million above prior year primarily
from higher sales volume.
- Basic Plastics net sales of $395
million for the quarter was 22% above prior year due mainly to the
pass through of higher raw material costs, currency, and higher ABS
sales volume. Adjusted EBITDA of $44 million was $11 million above
prior year due primarily to higher polystyrene and polycarbonate
margin in Europe, from more favorable market conditions, as well as
higher ABS sales volume.
- Feedstocks net sales of $103
million for the quarter was 61% above prior year due to higher
styrene-related sales volume as well as higher styrene prices.
Adjusted EBITDA of $24 million was $10 million above prior year
from higher styrene margin in Europe.
- Americas Styrenics Adjusted
EBITDA of $31 million for the quarter was flat versus prior year as
higher margin was offset by lower polystyrene sales volume.
Fourth Quarter and Full Year Cash Generation
Cash provided by operating activities for the fourth quarter was
$196 million and capital expenditures were $38 million, resulting
in Free Cash Flow for the quarter of $158 million. Fourth quarter
cash from operations and Free Cash Flow included a favorable impact
of approximately $34 million from lower working capital. Cash
provided by operating activities for the full year was $391 million
and capital expenditures were $147 million, resulting in Free Cash
Flow for the year of $244 million. Full year cash from operations
and Free Cash Flow included an unfavorable impact of approximately
$127 million from higher working capital primarily from increasing
raw material prices as well as additional working capital
requirements from growth initiatives such as the acquisition of API
Plastics, and the new SSBR and ABS capacity.
At the end of the year the Company had $433 million of cash
reflecting the expenditures of $82 million for the purchase of API
Plastics, net of cash acquired, as well as $128 million related to
the successful debt refinancing earlier in the year. For a
reconciliation of Free Cash Flow to cash provided by operating
activities, see note 3 below.
Outlook
- First quarter 2018 net income of $104
million to $113 million, and earnings per diluted share of $2.34 to
$2.52
- First quarter 2018 Adjusted EBITDA of
$175 million to $185 million and Adjusted EPS of $2.34 to
$2.52
The Company is updating previously issued guidance as
follows:
- Full year 2018 net income of $369
million to $386 million and earnings per diluted share of $8.26 to
$8.63
- Full year 2018 Adjusted EBITDA of $640
million to $660 million and Adjusted EPS of $8.26 to $8.63
Commenting on the outlook for the first quarter and full year
2018 Pappas said, “We expect strong performance in the first
quarter from higher styrene margins, including impacts from planned
and unplanned styrene production outages, as well as continued,
healthy fundamentals across our segments.”
Pappas continued, “Looking ahead to the full year performance,
we are increasing our prior 2018 net income and Adjusted EBITDA
guidance as we continue to see strong business fundamentals, and as
we expect a favorable impact from unplanned styrene outages in the
first quarter. In addition, we expect continued strong cash
generation for the year. As we move forward, we remain committed to
balancing future growth initiatives with returning capital to
shareholders. I am very proud of the company’s performance in 2017,
and we remain focused on achieving a very strong 2018 and
delivering returns to shareholders.”
For a reconciliation of fourth quarter and full year 2017, as
well as first quarter and full year 2018, net income to Adjusted
EBITDA and Adjusted EPS, see note 2 below. Additionally, refer to
the appendix within Exhibit 99.3 of our Form 8-K, dated February
19, 2018, for further details on how net timing impacts are defined
and calculated for our segments.
Conference Call and Webcast Information
Trinseo will host a conference call to discuss its fourth
quarter and full year 2017 financial results tomorrow, Tuesday,
February 20, 2018 at 10 AM Eastern Time.
Commenting on results will be Chris Pappas, President and
Chief Executive Officer, Barry Niziolek, Executive Vice
President and Chief Financial Officer, and David Stasse, Vice
President, Treasury and Investor Relations. The conference call
will be available by phone at:
Participant Toll-Free Dial-In Number: +1 (833)
241-7248Participant International Dial-In Number: +1 (647)
689-4212Conference ID / passcode: 5197679
The Company will also offer a live Webcast of the conference
call with question and answer session via the registration page of
the Trinseo Investor Relations website.
Trinseo has posted its fourth quarter and full year 2017
financial results, including management’s commentary, on the
Company’s Investor Relations website. The presentation slides will
also be made available in the webcast player prior to the
conference call. The Company will also furnish copies of the
financial results press release and presentation slides to
investors by means of a Form 8-K filing with the U.S.
Securities and Exchange Commission.
A replay of the conference call and transcript will be archived
on the Company’s Investor Relations website shortly following the
conference call. The replay will be available until February 20,
2019.
About Trinseo
Trinseo (NYSE: TSE) is a global materials solutions provider and
manufacturer of plastics, latex binders, and synthetic rubber. We
are focused on delivering innovative and sustainable solutions to
help our customers create products that touch lives every day —
products that are intrinsic to how we live our lives — across a
wide range of end-markets, including automotive, appliances,
consumer electronics, medical devices, electrical, building and
construction, textile, paper and board, footwear and tires. Trinseo
had approximately $4.4 billion in net sales in 2017, with 16
manufacturing sites around the world, and approximately 2,200
employees. For more information visit www.trinseo.com
Use of non-GAAP measures
In addition to using standard measures of performance and
liquidity that are recognized in accordance with accounting
principles generally accepted in the United States of America
(“GAAP”), we use additional measures of income excluding certain
GAAP items (“non-GAAP measures”), such as Adjusted EBITDA and,
Adjusted EPS and measures of liquidity excluding certain GAAP
items, such as Free Cash Flow. We believe these measures are useful
for investors and management in evaluating business trends and
performance each period. These income measures are also used to
manage our business and assess current period profitability, as
well as to provide an appropriate basis to evaluate the
effectiveness of our pricing strategies. Such measures are not
recognized in accordance with GAAP and should not be viewed as an
alternative to GAAP measures of performance or liquidity, as
applicable. The definitions of each of these measures, further
discussion of usefulness, and reconciliations of non-GAAP measures
to GAAP measures are provided herein.
Note on Forward-Looking Statements
This press release may contain “forward-looking statements”
within the meaning of the safe harbor provisions of the United
States Private Securities Litigation Reform Act of 1995. Words such
as “expect,” “estimate,” “project,” “budget,” “forecast,”
“outlook,” “guidance,” “anticipate,” “intend,” “plan,” “may,”
“will,” “could,” “should,” “believes,” “predicts,” “potential,”
“continue,” and similar expressions are intended to identify such
forward-looking statements. Forward-looking statements in this
press release may include, without limitation, forecasts of growth,
net sales, business activity, acquisitions, financings and other
matters that involve known and unknown risks, uncertainties and
other factors that may cause results, levels of activity,
performance or achievements to differ materially from results
expressed or implied by this press release. Such factors include,
among others: conditions in the global economy and capital markets,
volatility in costs or disruption in the supply of the raw
materials utilized for our products; loss of market share to other
producers of styrene-based chemical products; compliance with
environmental, health and safety laws; changes in laws and
regulations applicable to our business; our inability to continue
technological innovation and successful introduction of new
products; system security risk issues that could disrupt our
internal operations or information technology services; the loss of
customers; the market price of the Company’s ordinary shares
prevailing from time to time; the nature of other investment
opportunities presented to the Company from time to time; and the
Company’s cash flows from operations. Additional risks and
uncertainties are set forth in the Company’s reports filed with the
United States Securities and Exchange Commission, which are
available at http://www.sec.gov/ as well as the Company’s web site
at http://www.trinseo.com. As a result of the foregoing
considerations, you are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date
of this press release. All forward-looking statements are qualified
in their entirety by this cautionary statement. The Company
undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
TRINSEO S.A. Condensed Consolidated
Statements of Operations (In millions, except per share
data) (Unaudited) Three Months Ended
Year Ended December 31, 2017
December 31, 2016 December 31,2017
December 31,2016 Net sales $ 1,101.9 $ 917.5 $
4,448.1 $ 3,716.6 Cost of sales 918.0 779.6 3,794.1 3,129.0 Gross
profit 183.9 137.9 654.0 587.6 Selling, general and administrative
expenses 57.5 60.9 239.0 241.5 Equity in earnings of unconsolidated
affiliates 30.6 34.4 123.7 144.7 Operating income 157.0 111.4 538.7
490.8 Interest expense, net 14.8 18.4 70.1 75.0 Loss on
extinguishment of long-term debt — — 65.3 — Other expense (income),
net (1.9) (6.0) (7.8) 10.5 Income before income taxes 144.1 99.0
411.1 405.3 Provision for income taxes 26.4 20.5 82.8 87.0 Net
income $ 117.7 $ 78.5 $ 328.3 $ 318.3 Weighted average shares-
basic 43.7 44.6 43.8 46.5 Net income per share- basic $ 2.69 $ 1.76
$ 7.49 $ 6.84 Weighted average shares- diluted 44.7 45.8 45.0 47.5
Net income per share- diluted $ 2.63 $ 1.72 $ 7.30 $ 6.70
Dividends per share $ 0.36 $ 0.30 $ 1.38 $ 0.90
TRINSEO S.A. Condensed
Consolidated Balance Sheets (In millions, except per share
data) (Unaudited) December 31, 2017
2016 Assets Current assets Cash and cash equivalents
$ 432.8 $ 465.1 Accounts receivable, net of allowance for doubtful
accounts 685.5 564.4 Inventories 510.4 385.3 Other current assets
17.5 18.1 Total current assets 1,646.2 1,432.9 Investments
in unconsolidated affiliates 152.5 191.4 Property, plant and
equipment, net of accumulated depreciation 627.0 510.0 Other assets
Goodwill 72.5 38.0 Other intangible assets, net 207.5 177.3
Deferred income tax assets 35.5 43.8 Deferred charges and other
assets 30.8 27.9 Total other assets 346.3 287.0 Total assets $
2,772.0 $ 2,421.3
Liabilities and shareholders’
equity Current liabilities Short-term borrowings and current
portion of long-term debt $ 7.0 $ 5.0 Accounts payable 436.8 378.0
Income taxes payable 35.9 23.8 Accrued expenses and other current
liabilities 146.9 135.4 Total current liabilities 626.6 542.2
Noncurrent liabilities Long-term debt, net of unamortized deferred
financing fees 1,165.0 1,160.4 Deferred income tax liabilities 49.2
24.8 Other noncurrent obligations 256.4 246.2 Total noncurrent
liabilities 1,470.6 1,431.4 Commitments and contingencies
Shareholders’ equity
Ordinary shares, $0.01 nominal value,
50,000.0 shares authorized (December 31, 2017: 48.8 shares issued
and 43.4 shares outstanding ; December 31, 2016: 48.8 shares issued
and 44.3 shares outstanding)
0.5 0.5 Additional paid-in-capital 578.8 573.7 Treasury shares, at
cost (December 31, 2017: 5.4 shares; December 31, 2016: 4.5 shares)
(286.8 ) (217.5 ) Retained Earnings 527.9 261.2 Accumulated other
comprehensive loss (145.6 ) (170.2 ) Total shareholders’ equity
674.8 447.7 Total liabilities and shareholders’ equity $ 2,772.0 $
2,421.3
TRINSEO S.A.
Condensed Consolidated Statements of
Cash Flows
(In millions)
(Unaudited)
Year EndedDecember 31, 2017 2016
Cash flows from operating activities Cash provided by
operating activities $ 391.3 $ 403.7
Cash flows from
investing activities Capital expenditures (147.4 ) (123.9 )
Cash paid to acquire a business, net of cash acquired (82.3 ) —
Proceeds from the sale of businesses and other assets 46.2 2.0
Distributions from unconsolidated affiliates 0.9 4.8 Other
investing cash outflows — (0.2 ) Cash used in investing activities
(182.6 ) (117.3 )
Cash flows from financing
activities Deferred financing fees (21.5 ) — Short-term
borrowings, net (0.3 ) (0.3 ) Purchase of treasury shares (88.9 )
(215.1 ) Dividends paid (58.0 ) (27.3 ) Proceeds from exercise of
option awards 9.3 0.2 Withholding taxes paid on restricted share
units (0.3 ) (0.1 ) Net proceeds from issuance of 2024 Term Loan B
700.0 — Repayments of 2024 Term Loan B (1.8 ) — Repayments of 2021
Term Loan B (492.5 ) (5.0 ) Net proceeds from issuance of 2025
Senior Notes 500.0 — Repayments of 2022 Senior Notes (746.0 ) —
Prepayment penalty on long-term debt (53.0 ) — Cash used in
financing activities (253.0 ) (247.6 ) Effect of exchange rates on
cash 12.0 (5.0 ) Net change in cash and cash equivalents (32.3 )
33.8 Cash and cash equivalents—beginning of period 465.1 431.3 Cash
and cash equivalents—end of period $ 432.8 $ 465.1
TRINSEO
S.A. Notes to Condensed Consolidated Financial
Information (Unaudited)
Note 1: Net sales
by Segment
Three Months Ended Year Ended
December 31, December 31, December 31,
December 31, (In millions) 2017
2016 2017 2016 Latex Binders $ 250.3 $ 240.8 $
1,097.1 $ 925.3 Synthetic Rubber 126.8 124.4 582.8 450.7
Performance Plastics 226.5 165.6 808.3 693.4 Basic Plastics 395.5
323.0 1,552.2 1,352.7 Feedstocks 102.8 63.7 407.7 294.5 Americas
Styrenics* — — — —
Total Net Sales $ 1,101.9
$ 917.5 $ 4,448.1 $
3,716.6
____________________
* The results of this segment are
comprised entirely of earnings from Americas Styrenics, our
50%-owned equity method investment. As such, we do not separately
report net sales of Americas Styrenics within our consolidated
statement of operations.
Note 2: Reconciliation of Non-GAAP
Performance Measures to Net income
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 with meaningful information
regarding the Company’s operational performance. We believe the use
of EBITDA as a metric assists our board of directors, management
and investors in comparing our operating performance on a
consistent basis.
We also present Adjusted EBITDA as a non-GAAP financial
performance measure, which we define as income from continuing
operations before interest expense, net; income tax provision;
depreciation and amortization expense; loss on extinguishment of
long-term debt; asset impairment charges; gains or losses on the
dispositions of businesses and assets; restructuring; 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.
Lastly, we present Adjusted Net Income and Adjusted EPS as
additional performance measures. Adjusted Net Income is calculated
as Adjusted EBITDA (defined beginning with net income, above), less
interest expense, less the provision for income taxes and
depreciation and amortization, tax affected for various discrete
items, as appropriate. Adjusted EPS is calculated as Adjusted Net
Income per weighted average diluted shares outstanding for a given
period. We believe that Adjusted Net Income and Adjusted EPS
provide transparent and useful information to management,
investors, analysts and other stakeholders in evaluating and
assessing our operating results from period-to-period after
removing the impact of certain transactions and activities that
affect comparability and that are not considered part of our core
operations.
There are limitations to using the financial performance
measures noted above. These performance measures are not intended
to represent net income or other measures of financial performance.
As such, they should not be used as alternatives to net income as
indicators of operating performance. Other companies in our
industry may define these performance measures differently than we
do. As a result, it may be difficult to use these or
similarly-named financial measures that other companies may use, to
compare the performance of those companies to our performance. We
compensate for these limitations by providing reconciliations of
these performance measures to our net income, which is determined
in accordance with GAAP.
Three Months Ended Year Ended (In millions,
except per share data) December 31,2017
December 31,2016 December 31,2017
December 31,2016 Net income $
117.7 $ 78.5 $ 328.3 $
318.3 Interest expense, net 14.8 18.4 70.1 75.0 Provision
for income taxes 26.4 20.5 82.8 87.0 Depreciation and amortization
30.3 24.7 110.6 96.4 EBITDA
$ 189.2
$ 142.1
$
591.8
$ 576.7 Loss on extinguishment of long-term debt — —
65.3 — Loss on extinguishment of long-term debt Net loss (gain) on
disposition of businesses and assets (a) — 1.8 (9.7 ) 15.1 Other
expense (income), net Restructuring and other charges (b) 1.2 4.9
6.0 23.5 Selling, general, and administrative expenses Acquisition
transaction and integration costs (c) (0.1 ) — 4.7 — Cost of sales;
Selling, general and administrative expenses Asset impairment
charges or write-offs (d) — — 4.3 — Cost of sales; Selling, general
and administrative expenses Other items (e) (21.6 ) (6.8 ) (19.9 )
(4.4 ) Cost of sales; Selling, general and administrative expenses;
Other expense (income), net Adjusted EBITDA
$ 168.7
$
142.0
$ 642.5
$ 610.9
Adjusted EBITDA to
Adjusted Net Income:
Adjusted EBITDA
$ 168.7
$ 142.0
$ 642.5
$ 610.9 Interest expense, net 14.8 18.4 70.1 75.0 Provision
for income taxes — Adjusted (f) 28.4 22.0 98.2 94.6 Depreciation
and amortization — Adjusted (g) 30.0 24.7 108.6 95.4 Adjusted Net
Income
$ 95.5
$ 76.9
$ 365.6
$ 345.9
Adjusted EPS
$ 2.14
$ 1.68
$ 8.13
$
7.28
Adjusted EBITDA by
Segment:
Latex Binders $ 33.3 $ 24.3 $ 138.5 $ 94.3 Synthetic Rubber 15.0
29.1 83.3 110.9 Performance Plastics 42.6 32.5 122.4 136.2 Basic
Plastics 43.9 33.1 156.7 148.2 Feedstocks 24.2 14.2 110.5 80.2
Americas Styrenics 30.6 30.9 122.9 135.8 Corporate unallocated
(20.9 ) (22.1 ) (91.8 ) (94.7 ) Adjusted EBITDA
$ 168.7
$ 142.0
$ 642.5
$ 610.9
____________________
(a) Net gain on disposition of businesses and assets during
the year ended December 31, 2017 relates primarily to the sale of
our 50% share in Sumika Styron Polycarbonate to Sumitomo Chemical
Company Limited. Net loss on disposition of businesses and assets
during the year ended December 31, 2016 presented above relates to
impairment charges recorded for the loss on sale of the Company’s
primary operating entity in Brazil, which included both latex
binders and automotive businesses. (b) Restructuring and
other charges for the 2017 periods presented above primarily relate
to employee termination benefit and decommissioning charges
incurred in connection with the decision to cease manufacturing
activities at our latex binders manufacturing facility in Livorno,
Italy, as well as employee termination benefit charges related to
the upgrade and replacement of the Company’s compounding facility
in Terneuzen, The Netherlands. Restructuring and other charges for
the 2016 periods presented above primarily relate to approximately
$20.0 million in charges incurred during the year ended December
31, 2016 in connection with the Livorno, Italy action discussed
above, approximately $3.9 million of which was incurred during the
three months ended December 31, 2016. The remaining restructuring
charges for 2016 relate to the Company’s decision to divest our
operations in Brazil as well as the closure of our Allyn’s Point
latex binders manufacturing facility. Note that the
accelerated depreciation charges incurred as part of both the
upgrade and replacement of the Company’s compounding facility in
Terneuzen, The Netherlands as well as the closure of our Allyn’s
Point facility are included within the “Depreciation and
amortization” caption above, and therefore are not included as a
separate adjustment within this caption. (c) Acquisition
transaction and integration costs for the 2017 periods presented
above relate to advisory and professional fees incurred in
conjunction with the Company’s acquisition of API Plastics, which
closed in July 2017. These costs also include a non-cash fair value
inventory adjustment recorded in conjunction with this acquisition.
(d) Asset impairment charges or write-offs for the year
ended December 31, 2017 relate to the impairment of certain
long-lived assets within the Company’s Performance Plastics
segment. (e) Other items for the 2017 periods presented
above primarily relate to a curtailment gain recorded as a result
of changes to certain of the Company’s pension plans in Europe,
offset by fees incurred in conjunction with the Company’s debt
refinancing which was completed during the third quarter of 2017.
Other items for the year ended December 31, 2016 primarily includes
other income of $6.9 million from the effective settlement of
certain value-added tax positions, which were recorded during the
fourth quarter of 2016, offset by $2.5 million of fees incurred in
conjunction with the Company’s secondary offerings completed during
the year. (f) Adjusted to remove the tax impact of loss on
extinguishment of long term debt and the items noted in (a), (b),
(c), (d), (e) and (g). For the full year and fourth quarter, the
income tax expense (benefit) related to these items was determined
utilizing the applicable rates in the taxing jurisdictions in which
these adjustments occurred. The three months and year ended
December 31, 2017 exclude net benefits of $9.7 million and $0.8
million related to adjustments in reserves for uncertain tax
positions and provision to return adjustments, respectively,
partially offset by the exclusion of net detriments of $3.0 million
related to jurisdictional tax rate changes, including the impact of
U.S. tax reform. The three months and year ended December 31, 2016
exclude a net benefit of $0.6 million and $0.9 million,
respectively, related to adjustments in reserves for uncertain tax
positions. The three months and year ended December 31, 2016 also
excluded $0.5 million and $1.6 million, respectively, in benefits
recognized related to provision to return adjustments. (g)
For the full year ended December 31, 2017, the amount excludes
accelerated depreciation of $2.0 million related to the upgrade and
replacement of the Company’s compounding facility in Terneuzen, The
Netherlands. For the full year ended December 31, 2016, the amount
excludes accelerated depreciation of $0.5 million related to the
closure of our Allyn’s Point facility.
For the same reasons discussed above, we are providing the
following reconciliation of forecasted net income to forecasted
Adjusted EBITDA and Adjusted EPS for the three months ended
March 31, 2018, as well as for the full year ended
December 31, 2018. See “Note on forward-looking statements”
above for a discussion of the limitations of these forecasts.
Three Months Ended Year Ended (In
millions, except per share data) March 31,2018
December 31,2018 Adjusted EBITDA $ 175 – 185 $ 640 –
660 Interest expense, net (15) (60) Provision for income taxes (25)
– (26) (87) – (90) Depreciation and amortization (31) (124)
Reconciling items to Adjusted EBITDA (h) — —
Net Income 104
– 113 369 – 386 Reconciling items to Adjusted Net Income (h) — —
Adjusted Net Income 104 – 113 369 – 386 Weighted average
shares- diluted (i) 44.7 44.7 Adjusted EPS $ 2.34 – 2.52 8.26 –
8.63
____________________
(h) Reconciling items to Adjusted EBITDA and Adjusted Net
Income are not typically forecasted by the Company based on their
nature as being primarily driven by transactions that are not part
of the core operations of the business. As such, for the forecasted
three months ended March 31, 2018 and full year ended December 31,
2018, we have not included estimates for these items. (i)
Weighted average shares calculated for the purpose of forecasting
Adjusted EPS do not forecast significant future share transactions
or events, such as repurchases, significant stock-based
compensation award grants, and changes in the Company’s share
price. These are all factors which could have a significant impact
on the calculation of Adjusted EPS during actual future periods.
Note 3: Reconciliation of Non-GAAP
Liquidity Measures to Cash from Operations
The Company uses Free Cash Flow to evaluate and discuss its
liquidity position and results. Free Cash Flow is defined as cash
from operating activities, less capital expenditures. We believe
that Free Cash Flow provides an indicator of the Company’s ongoing
ability to generate cash through core operations, as it excludes
the cash impacts of various financing transactions as well as cash
flows from business combinations that are not considered organic in
nature. We also believe that Free Cash Flow provides management and
investors with a useful analytical indicator of our ability to
service our indebtedness, pay dividends (when declared), and meet
our ongoing cash obligations.
Free Cash Flow is not intended to represent cash flows from
operations as defined by GAAP, and therefore, should not be used as
an alternative for that measure. Other companies in our industry
may define Free Cash Flow differently than we do. As a result, it
may be difficult to use this or similarly-named financial measures
that other companies may use, to compare the liquidity and cash
generation of those companies to our own. The Company compensates
for these limitations by providing the reconciliation below, which
is determined in accordance with GAAP.
Free Cash Flow
Three Months Ended Year Ended December
31, December 31, December 31, December 31,
(in millions) 2017 2016 2017
2016 Cash provided by operating activities $ 196.5 $ 79.0 $
391.3 $ 403.7 Capital expenditures (38.5 ) (41.2 ) (147.4 ) (123.9
) Free Cash Flow $ 158.0 $ 37.8 $ 243.9 $ 279.8
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version on businesswire.com: http://www.businesswire.com/news/home/20180219005548/en/
Press contacts:TrinseoDonna St. Germain, +1
610-240-3307stgermain@trinseo.comorMakovskyDoug Hesney, +1
212-508-9661dhesney@makovsky.comorInvestor
Contact:TrinseoDavid Stasse, +1
610-240-3207dstasse@trinseo.com
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