BERWYN, Pa.--(BUSINESS WIRE)--Aug 2, 2018--Trinseo (NYSE: TSE):

*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 second quarter 2018 financial results with net sales of $1,237 million, net income of $98 million, and earnings per diluted share of $2.24. Second quarter Adjusted EPS was $2.40 and Adjusted EBITDA was $170 million.

Net sales in the second quarter increased 8% versus prior year due to higher sales volume across all segments except for Feedstocks as well as favorable currency, as the euro strengthened in comparison to the U.S. dollar, which had a positive impact across all segments. These impacts were partially offset by lower prices due to the pass through of lower butadiene cost, which was partially offset by the pass through of higher styrene cost. Second quarter net income of $98 million was $38 million higher than prior year. Second quarter Adjusted EBITDA of $170 million was $44 million higher than prior year. The higher profitability was from higher styrene margins, favorable currency impacts, as well as favorable net timing in the current year, due to increasing raw material costs, in comparison to unfavorable net timing in the prior year. Lower margins outside of the Feedstocks segment, including impacts from raw material costs, were more than offset by higher sales volume across nearly all segments except Feedstocks.

Commenting on the Company’s performance, Chris Pappas, Trinseo President and Chief Executive Officer, said, “We started the year with record profitability in the first quarter and continued that momentum with strong profitability in the second quarter, with total company performance in line with guidance. In addition, we had strong cash generation and returned $52 million to shareholders via share repurchases and dividends.”

Second Quarter Results and Commentary by Business Segment

Latex Binders net sales of $281 million for the quarter decreased 4% versus prior year. Higher sales volume to the carpet and adhesives & construction markets was more than offset by the pass through of lower butadiene cost. Adjusted EBITDA of $36 million was flat to prior year. Higher sales volume as well as favorable currency impacts were offset by unfavorable raw material impacts, including increasing butadiene cost in Asia. Synthetic Rubber net sales of $155 million for the quarter decreased 11% versus prior year. Higher SSBR and ESBR sales volumes as well as favorable currency impacts were more than offset by the pass through of lower butadiene cost. Adjusted EBITDA of $31 million was $3 million above prior year. Favorable net timing impacts were partially offset by lower margins across several products, including impacts from higher raw material and utility costs. Performance Plastics net sales of $413 million for the quarter was 22% above prior year due to higher sales volume, mainly from our China ABS expansion, as well as favorable currency impacts. In addition, API Plastics contributed a 4% increase in net sales. Adjusted EBITDA of $49 million was $1 million above prior year, and included an approximate $10 million unfavorable impact from planned maintenance activities. Polystyrene net sales of $286 million for the quarter was 22% above prior year due primarily to higher sales volume in Asia, currency, as well as the pass through of higher raw material costs. Adjusted EBITDA of $14 million was $7 million above prior year due to favorable net timing impacts as well as higher sales volume in Asia. Feedstocks net sales of $102 million for the quarter was 5% below prior year due to lower styrene related sales volume. This was partially offset by currency impacts as well as the pass through of higher styrene prices. Adjusted EBITDA of $32 million was $33 million above prior year due mainly to higher styrene margins as well as favorable net timing. Americas Styrenics Adjusted EBITDA of $33 million for the quarter was $3 million above prior year due mainly to higher styrene margin, including an unfavorable impact in the prior year from lower margin spot sales following a maintenance outage.

Second Quarter Cash Generation

Cash provided by operating activities for the quarter was $142 million and capital expenditures were $29 million, resulting in Free Cash Flow for the quarter of $113 million. Second quarter cash from operations and Free Cash Flow included approximately $13 million of lower working capital. At the end of the quarter, the Company had $451 million of cash after $37 million of share repurchases during the quarter. For a reconciliation of Free Cash Flow to cash provided by operating activities, see note 3 below.

Outlook

Third quarter 2018 net income of $88 million to $96 million and earnings per diluted share of $2.00 to $2.19 Third quarter 2018 Adjusted EBITDA of $150 million to $160 million and Adjusted EPS of $2.00 to $2.19 Full year 2018 net income of $393 million to $410 million and earnings per diluted share of $8.95 to $9.32 Full year 2018 Adjusted EBITDA of $665 million to $685 million and Adjusted EPS of $9.15 to $9.52

Commenting on the outlook for the third quarter and full year 2018 Pappas said, “While we expect continued solid performance and cash generation in the third quarter, profitability should be sequentially lower due to seasonality, a lower level of planned styrene outages resulting in decreasing styrene margins, and a somewhat softer tire market demand.”

Pappas continued, "Looking ahead to the full year performance, we are affirming our previous guidance and we remain focused on strong cash generation.”

For a reconciliation of third 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 August 2, 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 second quarter 2018 financial results on Friday, August 3, 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: +1 866-393-4306 Participant International Dial-In Number: +1 734-385-2616 Conference ID: 1082289

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 second quarter 2018 financial results 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 August 3, 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, consumer electronics, appliances, medical devices, lighting, electrical, carpet, paper and board, building and construction, 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.

Recast of Financial Statements for New Accounting Standard

On January 1, 2018, the Company adopted pension accounting guidance that requires employers to present the service cost component of net periodic benefit cost in the same statement of operations line item as other employee compensation costs arising from services rendered during the period. As a result of this adoption, for the three and six months ended June 30, 2017, the Company reclassified net periodic benefit cost of $1.3 million and $2.5 million, respectively, from “Cost of sales”, and $0.7 million and $1.5 million, respectively, from “Selling, general, and administrative expenses”, to “Other expense (income), net” within the condensed consolidated statement of operations.

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 Net Income, Adjusted EBITDA, 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 in the Notes to Condensed Consolidated Financial Information presented 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,” “anticipate,” “target,” “outlook,” “guidance,” “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; the inability of the Company to execute on its business strategy; volatility in costs or disruption in the supply of the raw materials utilized for our products; loss of market share to other producers of chemical products; compliance with laws and regulations impacting our business; 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 as well as the Company’s web site at . 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.

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