Trinseo Reports Third Quarter 2017 Financial Results; Updates 2017 Full Year Outlook and Provides Initial 2018 Full Year Outlook
BERWYN, Pa., Nov 02, 2017 (BUSINESS WIRE) --
Copyright Business Wire 2017
--Net Income of $33 million and diluted EPS of $0.74
--Adjusted EPS of $2.18
--Adjusted EBITDA of $166 million
--Cash provided by operating activities of $158 million and Free Cash Flow of $124 million inclusive of approximately $50 million cash sourced from working capital
Trinseo (NYSE: TSE):
Trinseo
(NYSE: TSE), a global materials company and manufacturer of plastics,
latex binders and synthetic rubber, today reported its third quarter
2017 financial results with net sales of $1,097 million, net income of
$33 million, and earnings per diluted share of $0.74. Third quarter
Adjusted EPS was $2.18 and Adjusted EBITDA was $166 million.
Net sales in the third quarter increased 17% versus prior year driven
primarily by the pass through of higher raw material costs. Third
quarter net income of $33 million, which included a pre-tax charge of
approximately $66 million related to the Company's recent debt
refinancing, was $34 million lower than prior year. Third quarter
Adjusted EBITDA of $166 million was $23 million higher than prior year.
The higher operational profitability was due primarily to higher styrene
margins from unplanned outages, including an approximately $15 million
impact from Hurricane Harvey, as well as higher polycarbonate and Latex
Binders margins. These impacts were partially offset by unfavorable raw
material timing, net of favorable price lag, in the current year due
mainly to decreasing butadiene costs.
Commenting on the Company's performance, Chris Pappas, Trinseo President
and Chief Executive Officer, said, "Business fundamentals remain strong
across our segments. Our third quarter operating results were above
expectations due to unplanned styrene outages, including the impact of
Hurricane Harvey. During the quarter we executed a successful debt
refinancing which is expected to decrease our annual cash interest by
about $25 million. In addition, we started our new ABS plant in China,
closed on the acquisition of API Plastics, and continued to make
progress on our SSBR expansion and pilot plant."
Third Quarter Results and Commentary by Business Segment
--
Latex Binders net sales of $266 million for the quarter
increased 10% versus prior year primarily from the pass through of
higher raw material costs. Lower sales volume decreased revenue by 4%,
excluding the divested Latin America business, driven by lower sales
volume in the North America paper and carpet markets. Adjusted EBITDA
of $32 million was $2 million above prior year from higher margins in
Asia due to better market conditions, which was partially offset by
lower sales volume.
--
Synthetic Rubber net sales of $119 million for the quarter
increased 5% versus prior year primarily due to the pass through of
higher raw material costs, which was partially offset by customer
destocking in SSBR. Adjusted EBITDA of negative $6 million was $34
million below prior year from unfavorable net timing impacts of $25
million, due to rapidly declining butadiene prices, in addition to
SSBR expansion-related costs as well as lower sales volume.
--
Performance Plastics net sales of $207 million for the quarter
was 18% above prior year from higher sales volume to the North America
automotive and Asia consumer electronics markets as well as the pass
through of higher raw material costs. Adjusted EBITDA of $29 million
was $1 million below prior year primarily from margin compression,
partially offset by higher sales volume.
--
Basic Plastics net sales of $394 million for the quarter was
22% above prior year from higher polystyrene and copolymer sales
volume as well as the pass through of higher styrene cost. Adjusted
EBITDA of $42 million was $8 million above prior year due primarily to
higher polycarbonate margin, from very tight market conditions, as
well as higher copolymer volume.
--
Feedstocks net sales of $111 million for the quarter was 37%
above prior year due to the pass through of higher styrene prices.
Adjusted EBITDA of $46 million was $33 million above prior year from
higher styrene margin due to unplanned production outages, including
approximately $15 million related to Hurricane Harvey.
--
Americas Styrenics Adjusted EBITDA of $44 million for the
quarter was $10 million above prior year due to higher styrene sales
volume, including impacts from a stronger export market.
Third Quarter Cash Generation
Cash provided by operating activities for the quarter was $158 million
and capital expenditures were $34 million, resulting in Free Cash Flow
for the quarter of $124 million. Third quarter cash from operations and
Free Cash Flow included a favorable impact of approximately $50 million
from lower working capital primarily from decreasing raw material
prices. At the end of the quarter, the Company had $319 million of cash
after the third quarter expenditures of $80 million for the purchase of
API Plastics as well as debt refinancing related expenditures of $53
million for a call premium to retire our previous senior notes and $36
million for an overall reduction of debt. For a reconciliation of Free
Cash Flow to cash provided by (used in) operating activities, see note 3
below.
Outlook
--
Fourth quarter 2017 net income of $68 million to $77 million and
earnings per diluted share of $1.53 to $1.71
--
Fourth quarter 2017 Adjusted EBITDA of $130 million to $140 million
and Adjusted EPS of $1.53 to $1.71
--
Full year 2017 net income of $280 million to $288 million and earnings
per diluted share of $6.23 to $6.41
--
Full year 2017 Adjusted EBITDA of $605 million to $615 million and
Adjusted EPS of $7.53 to $7.71
--
Full year 2018 net income of $343 million to $367 million and earnings
per diluted share of $7.66 to $8.20
--
Full year 2018 Adjusted EBITDA of $620 million to $650 million and
Adjusted EPS of $7.66 to $8.20
Commenting on the outlook for the fourth quarter and full year 2017
Pappas said, "Third quarter operating results were above expectations
due to stronger than expected styrene margins, and this has continued
into the fourth quarter. We expect strong business fundamentals through
the end of the year and have therefore updated our full-year outlook."
Continuing with comments on the outlook for full year 2018 Pappas said,
"Profitability should be higher in 2018 due mainly to Performance
Materials growth initiatives and continued, strong supply and demand
dynamics in Basic Plastics & Feedstocks."
For a reconciliation of fourth quarter and full year 2017, as well as
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 November 2, 2017, 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 third quarter 2017
financial results on Friday, November 3, 2017 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:
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 third quarter 2017 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 November 3, 2018.
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 $3.7 billion in net
sales in 2016, with 16 manufacturing sites around the world, and nearly
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 and liquidity excluding certain GAAP items ("non-GAAP
measures"), such as Adjusted EBITDA, Adjusted EPS, and Free Cash Flow.
We believe these measures are useful for investors and management in
evaluating business trends and performance each period. These
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. 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," "outlook," "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.
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.
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 and year ended December 31, 2017,
as well as for the year ended December 31, 2018. See "Note on
forward-looking statements" above for a discussion of the limitations of
these forecasts.
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.
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SOURCE: Trinseo">
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