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NOTE A—BASIS OF PRESENTATION
The unaudited interim condensed consolidated financial statements of Trinseo S.A. and its subsidiaries (the “Company”) as of and for the periods ended June 30, 2014 and 2013 were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and reflect all adjustments, consisting only of normal recurring adjustments, which, in the opinion of management, are considered necessary for the fair statement of the results for the periods presented. Because they cover interim periods, the statements and related notes to the financial statements do not include all disclosures normally provided in annual financial statements and, therefore, these statements should be read in conjunction with the 2013 audited consolidated financial statements included within the Company’s Registration Statement on Form S-1 (Registration No. 333-194561), which was declared effective by the SEC on June 11, 2014 (as amended, the “Registration Statement”).
The December 31, 2013 consolidated balance sheet data presented herein was derived from the Company’s December 31, 2013 audited consolidated financial statements, but does not include all disclosures required by GAAP for annual periods.
Reverse Stock Split and Initial Public Offering
On May 30, 2014, the Company amended its Articles of Association to effect a 1-for-436.69219 reverse stock split of its issued and outstanding common stock (“reverse split”) and to increase its authorized shares to 50.0 billion. All share and per share data have been retroactively adjusted in the accompanying financial statements to give effect to the reverse split.
On June 17, 2014, the Company completed an initial public offering (the “IPO”) of 11,500,000 ordinary shares at a price of $19.00 per share, which included 1,500,000 of shares sold pursuant to the underwriters’ exercise of their over-allotment option. The Company received cash proceeds of $203.2 million from this transaction, net of underwriting discounts. See Note L for more information.
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NOTE B—RECENT ACCOUNTING GUIDANCE
In February 2013, the Financial Accounting Standards Board (“FASB”) issued amendments for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date, except for obligations addressed within existing guidance. This guidance requires an entity to measure those obligations as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. This guidance also requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations. The Company adopted this guidance on a retrospective basis effective January 1, 2014, and the adoption did not have a significant impact on the Company’s financial position or results of operations.
In July 2013, the FASB issued guidance to clarify the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The new guidance requires that unrecognized tax benefits be netted against all available same-jurisdiction losses or other tax carryforwards that would be utilized, rather than only against carryforwards that are created by the unrecognized tax benefits. The Company adopted this guidance prospectively effective January 1, 2014, and the adoption did not have a significant impact on the Company’s financial position or results of operations.
In April 2014, the FASB issued amendments to guidance for reporting discontinued operations and disposals of components of an entity. The amended guidance requires that a disposal representing a strategic shift that has (or will have) a major effect on an entity’s financial results or a business activity classified as held for sale should be reported as discontinued operations. The amendments also expand the disclosure requirements for discontinued operations and add new disclosures for individually significant dispositions that do not qualify as discontinued operations. The amendments are effective prospectively for fiscal years, and interim reporting periods within those years, beginning after December 15, 2014 (early adoption is permitted only for disposals that have not been previously reported). The implementation of the amended guidance is not expected to have a material impact on the Company’s consolidated financial position or results of operations.
In May 2014, the FASB and the International Accounting Standards Board (“IASB”) jointly issued new guidance which clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP and International Financial Reporting Standards (“IFRS”). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for public entities for annual and interim periods beginning after December 15, 2016. Early adoption is not permitted under GAAP and retrospective application is permitted, but not required. The Company is currently assessing the impact of adopting this guidance on its financial statements and results of operations.
In June 2014, the FASB issued updated guidance related to stock compensation. The updated guidance requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the periods for which the requisite service has already been rendered. The updated guidance is effective for annual and interim periods beginning after December 15, 2015 and can be applied either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented and to all newly granted or modified awards thereafter. Early adoption is permitted. This guidance is not relevant to the Company’s currently outstanding awards; however, the Company will continue to evaluate the applicability of this guidance to future awards as necessary.
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NOTE C—INVESTMENTS IN UNCONSOLIDATED AFFILIATES
The Company is supplemented by two strategic joint ventures: Americas Styrenics LLC (“AmSty”, a polystyrene joint venture with Chevron Phillips Chemical Company LP) and Sumika Styron Polycarbonate Limited (“Sumika Styron”, a polycarbonate joint venture with Sumitomo Chemical Company, Limited). Investments held in the unconsolidated affiliates are accounted for by the equity method.
At June 30, 2014 and December 31, 2013, respectively, the Company’s investment in AmSty was $128.1 million and $118.3 million. At June 30, 2014 and December 31, 2013, respectively, the Company’s investment in AmSty was $115.6 million and $130.8 million less than the Company’s 50% share of AmSty’s underlying net assets. This amount represents the difference between the book value of assets contributed to the joint venture at the time of formation (May 1, 2008) and the Company’s 50% share of the total recorded value of the joint venture’s assets and certain adjustments to conform with the Company’s accounting policies. This difference is being amortized over a weighted average remaining useful life of the contributed assets of approximately 6.2 years as of June 30, 2014. The Company received dividends from AmSty of $7.5 million and $12.5 million during the three and six months ended June 30, 2014, respectively. The Company received no dividends from AmSty during the three and six months ended June 30, 2013.
At June 30, 2014 and December 31, 2013, respectively, the Company’s investment in Sumika Styron was $34.6 million and $37.6 million. At June 30, 2014 and December 31, 2013, respectively, the Company’s investment in Sumika Styron was $19.8 million and $20.8 million greater than the Company’s 50% share of Sumika Styron’s underlying net assets. This amount represents the fair value of certain identifiable assets which have not been recorded on the historical financial statements of Sumika Styron. This difference is being amortized over the remaining useful life of the contributed assets of 11.3 years as of June 30, 2014. The Company received dividends from Sumika Styron of $1.0 million and $1.1 million during the six months ended June 30, 2014 and 2013, respectively. The Company did not receive dividends from Sumika Styron, however, during either of the three months ended June 30, 2014 and 2013.
Both of the unconsolidated affiliates are privately held companies; therefore, quoted market prices for their stock are not available. The summarized financial information of the Company’s unconsolidated affiliates is shown below:
Three Months Ended June 30, |
Six Months Ended June 30, |
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2014 | 2013 | 2014 | 2013 | |||||||||||||
Sales |
$ | 540,920 | $ | 568,815 | $ | 1,105,052 | $ | 1,167,469 | ||||||||
Gross profit |
$ | (2,529 | ) | $ | 24,407 | $ | 35,479 | $ | 23,402 | |||||||
Net income (loss) |
$ | (11,026 | ) | $ | 11,716 | $ | 10,494 | $ | (1,891 | ) |
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NOTE D—INVENTORIES
Inventories consisted of the following:
June 30, | December 31, | |||||||
2014 | 2013 | |||||||
Finished goods |
$ | 307,868 | $ | 302,379 | ||||
Raw materials and semi-finished goods |
182,965 | 191,081 | ||||||
Supplies |
35,362 | 36,731 | ||||||
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Total |
$ | 526,195 | $ | 530,191 | ||||
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NOTE E—GOODWILL AND INTANGIBLE ASSETS
Goodwill
The following table shows changes in the carrying amount of goodwill by segment from December 31, 2013 to June 30, 2014:
Emulsion Polymers | Plastics | |||||||||||||||||||
Latex | Synthetic Rubber |
Styrenics | Engineered Polymers |
Total | ||||||||||||||||
December 31, 2013 |
$ | 14,901 | $ | 10,205 | $ | 8,669 | $ | 3,498 | $ | 37,273 | ||||||||||
Foreign currency impact |
(122 | ) | (84 | ) | (71 | ) | (29 | ) | (306 | ) | ||||||||||
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June 30, 2014 |
$ | 14,779 | $ | 10,121 | $ | 8,598 | $ | 3,469 | $ | 36,967 | ||||||||||
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Other Intangible Assets
The following table provides information regarding the Company’s other intangible assets as of June 30, 2014 and December 31, 2013, respectively:
June 30, 2014 | December 31, 2013 | |||||||||||||||||||||||||||
Estimated Useful Life (Years) |
Gross Carrying Amount |
Accumulated Amortization |
Net | Gross Carrying Amount |
Accumulated Amortization |
Net | ||||||||||||||||||||||
Developed technology |
15 | $ | 208,818 | $ | (56,264 | ) | $ | 152,554 | $ | 210,546 | $ | (49,713 | ) | $ | 160,833 | |||||||||||||
Manufacturing Capacity Rights |
6 | 25,939 | (1,052 | ) | 24,887 | — | — | — | ||||||||||||||||||||
Software |
5 | 11,395 | (5,229 | ) | 6,166 | 11,034 | (4,099 | ) | 6,935 | |||||||||||||||||||
Software in development |
N/A | 5,477 | — | 5,477 | 3,746 | — | 3,746 | |||||||||||||||||||||
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Total |
$ | 251,629 | $ | (62,545 | ) | $ | 189,084 | $ | 225,326 | $ | (53,812 | ) | $ | 171,514 | ||||||||||||||
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In March 2014, the Company entered into an agreement with material supplier JSR Corporation, Tokyo (“JSR”) to acquire its current production capacity rights at the Company’s rubber production facility in Schkopau, Germany for a purchase price of €19.0 million (approximately $26.1 million). Prior to this agreement, JSR held 50% of the capacity rights of one of the Company’s three solution styrene-butadiene rubber (“SSBR”) production trains in Schkopau. As a result, effective March 31, 2014, the Company had full capacity rights to this production train. The €19.0 million purchase price was recorded in “Other intangible assets, net” in the condensed consolidated balance sheet as of March 31, 2014 to be amortized over its estimated useful life of approximately 6 years. Further, the purchase price was recorded within capital expenditures in investing activities in the condensed consolidated statement of cash flows for the six months ended June 30, 2014.
Amortization expense on other intangible assets totaled $5.1 million and $9.2 million for the three and six months ended June 30, 2014, respectively. Amortization expense on other intangible assets totaled $4.0 million and $7.8 million for the three and six months ended June 30, 2013, respectively.
Estimated Amortization Expense for the Next Five Years |
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Remainder of 2014 |
$ | 10,264 | ||
2015 |
20,519 | |||
2016 |
19,954 | |||
2017 |
19,117 | |||
2018 |
18,402 | |||
2019 |
18,255 |
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NOTE F—DEBT
Debt consisted of the following:
June 30, | December 31, | |||||||
2014 | 2013 | |||||||
Senior Secured Credit Facility |
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Revolving Facility |
$ | — | $ | — | ||||
Senior Notes |
1,325,000 | 1,325,000 | ||||||
Accounts Receivable Securitization Facility |
— | — | ||||||
Other indebtedness |
12,083 | 11,421 | ||||||
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Total debt |
1,337,083 | 1,336,421 | ||||||
Less: short-term borrowings and current portion of long-term debt |
(142,055 | ) | (8,754 | ) | ||||
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Total long-term debt |
$ | 1,195,028 | $ | 1,327,667 | ||||
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Senior Secured Credit Facility
In January 2013, the Company amended its credit agreement (“Senior Secured Credit Facility”) to, among other things, increase the Company’s revolving credit facility (“Revolving Facility”) borrowing capacity from $240.0 million to $300.0 million, decrease the borrowing rate of the Revolving Facility through a decrease in the applicable margin rate from 4.75% to 3.00% as applied to base rate loans (which shall bear interest at a rate per annum equal to the base rate plus the applicable margin (as defined therein)), or 5.75% to 4.00% as applied to LIBO rate loans (which shall bear interest at a rate per annum equal to the LIBO rate plus the applicable margin and the mandatory cost (as defined therein), if applicable), and extend the maturity date to January 2018. Concurrently, the Company repaid its then outstanding term loans under the Senior Secured Credit Facility (the “Term Loans”) of $1,239.0 million using the proceeds from its sale of $1,325.0 million aggregate principal amount of the 8.750% senior secured notes (“Senior Notes”) issued in January 2013 (refer below for further discussion).
Prior to the amendment, the Senior Secured Credit Facility required that the Company comply with certain affirmative and negative covenants, including restrictions with respect to payment of dividends and other distributions to shareholders, and financial covenants that include the maintenance of certain financial ratios. These ratios include both a maximum leverage ratio no greater than 5.25 to 1.00 and an interest coverage ratio no less than 2.00 to 1.00 for the most recent twelve-month period.
The amendment replaced the Company’s total leverage ratio requirement with a first lien net leverage ratio (as defined under the amended agreement) and removed the interest coverage ratio requirement. If the outstanding balance on the Revolving Facility exceeds 25% of the $300.0 million borrowing capacity (excluding undrawn letters of credit up to $10.0 million) at a quarter end, then the Company’s first lien net leverage ratio may not exceed 5.25 to 1.00 for the quarter ending March 31, 2013, 5.00 to 1.00 for the subsequent quarters through December 31, 2013, 4.50 to 1.00 for each of the quarters ending in 2014 and 4.25 to 1.00 for each of the quarters ending in 2015 and thereafter. As of June 30, 2014, the Company was in compliance with all debt covenant requirements under the Senior Secured Credit Facility.
As a result of this amendment and repayment of the Term Loans in January 2013, the Company recognized a $20.7 million loss on extinguishment of long-term debt during the first quarter of 2013, which consisted of the write-off of existing unamortized debt issuance cost and debt discount attributable to the Term Loans. Fees and expenses incurred in connection with this amendment were $5.5 million, which were capitalized within “Deferred charges and other assets” in the condensed consolidated balance sheet and are being amortized into “Interest expense, net” in the condensed consolidated statement of operations over the remaining term of the Revolving Facility using the straight-line method.
As of June 30, 2014, the Company had no outstanding borrowings, and had $292.8 million (net of $7.2 million outstanding letters of credit) of funds available for borrowings under the Revolving Facility.
Senior Notes
In January 2013, the Company issued $1,325.0 million 8.750% Senior Notes. Interest on the Senior Notes is payable semi-annually on February 1st and August 1st of each year, which commenced on August 1, 2013. The notes will mature on February 1, 2019, at which time the entire $1,325.0 million will be due and payable. The proceeds from the issuance of the Senior Notes were used to repay all of the Company’s outstanding Term Loans and related refinancing fees and expenses.
The Company may redeem all or part of the Senior Notes at any time prior to August 1, 2015 by paying a make-whole premium, plus accrued and unpaid interest to the redemption date. The Company may redeem all or part of the Senior Notes at any time after August 1, 2015 at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interest, if any, on the notes redeemed, to the applicable date of redemption, if redeemed during the twelve-month period beginning on of the year indicated below:
12-month period commencing August 1 in Year |
Percentage | |||
2015 |
104.375 | % | ||
2016 |
102.188 | % | ||
2017 and thereafter |
100.000 | % |
In addition, at any time prior to August 1, 2015, the Company may redeem up to 35% of the original principal amount of the notes at a redemption price equal to 108.750% of the face amount thereof plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds that the Company raises in certain equity offerings. The Company may also redeem, during any 12-month period commencing from the issue date until August 1, 2015, up to 10% of the original principal amount of the Senior Notes at a redemption price equal to 103% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of redemption. In July 2014, using proceeds from the Company’s IPO (see Note L), the Company redeemed $132.5 million in aggregate principal amount of the Senior Notes, including a 103% call premium totaling $4.0 million, together with accrued and unpaid interest thereon of $5.2 million. As a result of this redemption, during the third quarter of 2014 the Company expects to incur a loss on the extinguishment of debt of approximately $7.4 million, which includes the above $4.0 million call premium and an approximately $3.4 million write-off of related unamortized debt issuance costs. The $132.5 million in aggregate principal amount of the Senior Notes was classified as a current liability within “Short-term borrowings and current portion of long-term debt” in the condensed consolidated balance sheet as of June 30, 2014. Pursuant to the Indenture, the Company may redeem another 10% of the original principal amount of the Senior Notes prior to August 1, 2015.
The Senior Notes rank equally in right of payment with all of the Company’s existing and future senior secured debt and pari passu with the Company and the Guarantors’ (as defined below) indebtedness that is secured by first-priority liens, including the Company’s Senior Secured Credit Facility (as defined above), to the extent of the value of the collateral securing such indebtedness and ranking senior in right of payment to all of the Company’s existing and future subordinated debt. However, claims under the Senior Notes effectively rank behind the claims of holders of debt, including interest, under the Senior Secured Credit Facility in respect of proceeds from any enforcement action with respect to the collateral or in any bankruptcy, insolvency or liquidation proceeding. The Senior Notes are unconditionally guaranteed on a senior secured basis by each of the Company’s existing and future wholly-owned subsidiaries that guarantee the Senior Secured Credit Facility (other than the Company’s subsidiaries in France and Spain) (the “Guarantors”). The note guarantees rank equally in right of payment with all of the Guarantors’ existing and future senior secured debt and senior in right of payment to all of the Guarantors’ existing and future subordinated debt. The notes are structurally subordinated to all of the liabilities of each of the Company’s subsidiaries that do not guarantee the notes.
The indenture contains covenants that, among other things, limit the Company’s ability and the ability of the Company’s restricted subsidiaries to incur additional indebtedness, pay dividends or make other distributions, subject to certain exceptions. If the Senior Notes are assigned an investment grade by the rating agencies and the Company is not in default, certain covenants will be suspended. If the ratings on the Senior Notes decline to below investment grade, the suspended covenants will be reinstated. As of June 30, 2014, the Company was in compliance with all debt covenant requirements under the indenture.
Fees and expenses incurred in connection with the issuance of Senior Notes were approximately $42.0 million, which were capitalized and included in “Deferred charges and other assets” in the condensed consolidated balance sheet, and are being amortized into “Interest expense, net” in the condensed consolidated statement of operations over the term of the Senior Notes using the effective interest rate method.
Accounts Receivable Securitization Facility
In May 2013, the Company amended its existing accounts receivable securitization facility (“Accounts Receivable Securitization Facility”) which increased its borrowing capacity from $160.0 million to $200.0 million, extended the maturity date to May 2016 and allows for the expansion of the pool of eligible accounts receivable to include previously excluded U.S. and Netherlands subsidiaries. As a result of the amendment, the Company incurred $0.7 million in fees, which were capitalized within “Deferred charges and other assets” in the condensed consolidated balance sheet and are being amortized into “Interest expense, net” in the condensed consolidated statement of operations using the straight-line method over the remaining term.
The Accounts Receivable Securitization Facility is subject to interest charges against the amount of outstanding borrowings as well as the amount of available, but undrawn borrowings. As a result of the amendment to the Accounts Receivable Securitization Facility, in regards to outstanding borrowings, fixed interest charges decreased from 3.25% plus commercial paper rates to 2.60% plus variable commercial paper rates. In regards to available, but undrawn borrowings, fixed interest charges decreased from 1.50% to 1.40%.
As of June 30, 2014 and December 31, 2013, there were no amounts outstanding under the Accounts Receivable Securitization Facility, with approximately $199.8 million and $143.8 million, respectively, of accounts receivable available to support this facility, based on the pool of eligible accounts receivable.
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NOTE G—FOREIGN EXCHANGE FORWARD CONTRACTS
The Company manages its exposures to changes in foreign currency exchange rates where possible by paying expenses in the same currency in which we generate sales in a particular country as well as using derivative contracts which are not designated for hedge accounting treatment. During 2012, the Company entered into foreign exchange forward contracts with a notional U.S. dollar equivalent of $82.0 million that were not designated as hedging instruments in order to manage volatility in foreign currency exposures. As these foreign exchange forward contracts were not designated for hedge accounting treatment, changes in the fair value of underlying instruments are recognized in “Other expense, net” in the condensed consolidated statement of operations.
These contracts were settled in February and May 2013, with no new contracts entered since that time. The Company recognized losses of $1.0 million and $0.6 million during the three and six months ended June 30, 2013, respectively.
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NOTE H—FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date.
Level 1—Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3—Valuation is based upon other unobservable inputs that are significant to the fair value measurement.
The following tables present the estimated fair value of the Company’s outstanding debt not carried at fair value as of June 30, 2014 and December 31, 2013, respectively:
Quoted Prices in Active Markets for Identical Items (Level 1) |
Significant Other Observable Inputs (Level 2) |
Total | ||||||||||
June 30, 2014 |
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Senior Notes |
$ | — | $ | 1,431,000 | $ | 1,431,000 | ||||||
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Total fair value |
$ | — | $ | 1,431,000 | $ | 1,431,000 | ||||||
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Quoted Prices in Active Markets for Identical Items (Level 1) |
Significant Other Observable Inputs (Level 2) |
Total | ||||||||||
December 31, 2013 |
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Senior Notes |
$ | — | $ | 1,366,406 | $ | 1,366,406 | ||||||
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Total fair value |
$ | — | $ | 1,366,406 | $ | 1,366,406 | ||||||
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There were no other significant financial instruments outstanding as of June 30, 2014 and December 31, 2013.
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NOTE I—PROVISION FOR INCOME TAXES
Three Months Ended June 30, |
Six Months Ended June 30, |
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2014 | 2013 | 2014 | 2013 | |||||||||||||
Effective income tax rate |
(13.9)% | (8.3)% | (195.0)% | (5.7)% |
Provision for income taxes for the three and six months ended June 30, 2014 were $5.5 million, resulting in a negative effective tax rate of 13.9%, and $18.2 million, resulting in a negative effective tax rate of 195.0%, respectively. Provision for income taxes for the three and six months ended June 30, 2013 were $2.2 million, resulting in a negative effective tax rate of 8.3%, and $2.1 million, resulting in a negative effective tax rate of 5.7%, respectively.
The increase in provision for income taxes for the six months ended June 30, 2014 was primarily driven by the decrease in loss before income taxes from $35.7 million of loss for the six months ended June 30, 2013 to $9.3 million of loss for the six months ended June 30, 2014. During the periods ended June 30, 2013, the Company incurred a loss on extinguishment of debt of $20.7 million, which provided a $4.3 million tax benefit in those periods. This one time item did not recur in the periods ended June 30, 2014.
Although the Company had losses before income taxes for the three and six months ended June 30, 2014, it generated losses of approximately $73.6 million and $97.2 million during these respective periods mostly within our holding companies incorporated in Luxembourg which did not provide a tax benefit as management does not believe that the Company will utilize these losses in the foreseeable future. Included in these losses were payments made during the three months ended June 30, 2014 of $32.5 million related to an agreement with Dow to terminate the Latex JV Option Agreement and a portion of the fees related to the termination of the Advisory Agreement with Bain Capital of approximately $18.6 million (see Note N for further discussion on both of these payments). These non deductible expenses unfavorably impacted the effective tax rate during the three and six months ended June 30, 2014.
Offsetting the unfavorable impact to the effective tax rate was a tax benefit recognized for the three and six months ended June 30, 2014 as the Company effectively settled its 2010 and 2011 audit with the IRS and received a refund of $3.2 million in July 2014. As a result, the Company recorded a previously unrecognized tax benefit in the amount of $2.7 million, including penalties and interest, relating to its 2011 tax return filing. Additionally, the tax benefit generated from the Advisory Agreement termination fee noted above was $1.2 million for the periods ended June 30, 2014. No similar tax benefits were recorded in the periods ended June 30, 2013.
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NOTE J—COMMITMENTS AND CONTINGENCIES
Environmental Matters
Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based on current law, existing technologies and other information. At June 30, 2014 and December 31, 2013, the Company had no accrued obligations for environmental remediation and restoration costs. Pursuant to the terms of the Styron sales and purchase agreement, the pre-closing environmental conditions were retained by Dow and the Company has been indemnified by Dow from and against all environmental liabilities incurred or relating to the predecessor periods. There are several properties which the Company now owns on which Dow has been conducting remediation to address historical contamination. Those properties include Allyn’s Point, Connecticut, Dalton, Georgia, and Livorno, Italy. There are other properties with historical contamination that are owned by Dow that the Company leases for its operations, including its facilities in Midland, Michigan, Schkopau, Germany, Terneuzen, The Netherlands, and Guaruja, Brazil. No environmental claims have been asserted or threatened against the Company, and the Company is not a potentially responsible party at any Superfund Sites.
Inherent uncertainties exist in the Company’s potential environmental liabilities primarily due to unknown conditions whether future claims may fall outside the scope of the indemnity, changing governmental regulations and legal standards regarding liability, and evolving technologies for handling site remediation and restoration. In connection with the Company’s existing indemnification, the possibility is considered remote that environmental remediation costs will have a material adverse impact on the consolidated financial statements.
Purchase Commitments
In the normal course of business, the Company has certain raw material purchase contracts where it is required to purchase certain minimum volumes at current market prices. These commitments range from 1 to 7 years. In certain raw material purchase contracts, the Company has the right to purchase less than the required minimums and pay a liquidated damages fee, or, in case of a permanent plant shutdown, to terminate the contracts. In such cases, these obligations would be less than the annual commitment as disclosed in the 2013 consolidated financial statements.
The Company has service agreements with Dow which contain fixed annual fees. See Note N for further discussion.
Litigation Matters
From time to time, the Company may be subject to various legal claims and proceedings incidental to the normal conduct of business, relating to such matters as product liability, antitrust/competition, past waste disposal practices and release of chemicals into the environment. While it is impossible at this time to determine with certainty the ultimate outcome of these routine claims, the Company does not believe that the ultimate resolution of these claims will have a material adverse effect on the Company’s results of operations, financial condition or cash flow.
Legal costs, including those legal costs expected to be incurred in connection with a loss contingency, are expensed as incurred.
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NOTE K—PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
The components of net periodic benefit costs for all significant plans were as follows:
Three Months Ended June 30, |
Six Months Ended June 30, |
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2014 | 2013 | 2014 | 2013 | |||||||||||||
Defined Benefit Pension Plans |
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Service cost |
$ | 3,529 | $ | 3,679 | $ | 7,044 | $ | 7,357 | ||||||||
Interest cost |
1,943 | 1,660 | 3,876 | 3,321 | ||||||||||||
Expected return on plan assets |
(624 | ) | (428 | ) | (1,245 | ) | (856 | ) | ||||||||
Amortization of prior service credit |
(257 | ) | (526 | ) | (513 | ) | (1,052 | ) | ||||||||
Amortization of net loss |
598 | 812 | 1,065 | 1,624 | ||||||||||||
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Net periodic benefit cost |
$ | 5,189 | $ | 5,197 | $ | 10,227 | $ | 10,394 | ||||||||
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Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Other Postretirement Plans |
||||||||||||||||
Service cost |
$ | 75 | $ | 71 | $ | 150 | $ | 141 | ||||||||
Interest cost |
78 | 65 | 156 | 131 | ||||||||||||
Amortization of prior service cost |
26 | — | 52 | — | ||||||||||||
Amortization of net gain |
(37 | ) | — | (74 | ) | — | ||||||||||
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Net periodic benefit cost |
$ | 142 | $ | 136 | $ | 284 | $ | 272 | ||||||||
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As of June 30, 2014 and December 31, 2013, the Company’s benefit obligations included in “Other noncurrent obligations” in the condensed consolidated balance sheets were $167.1 million and $163.2 million, respectively. The net periodic benefit costs are recognized in the condensed consolidated statement of operations as “Cost of sales” and “Selling, general and administrative expenses.”
The Company made cash contributions of approximately $2.7 million and $6.9 million during the three and six months ended June 30, 2014, respectively. The Company expects to make additional cash contributions, including benefit payments to unfunded plans, of approximately $9.1 million to its defined benefit plans for the remainder of 2014.
Affiliation Agreements and Successor Plans
A majority of Company employees are participants in various defined benefit pension and other postretirement plans which are administered and sponsored by Trinseo. In connection with the Acquisition, the Company and Dow entered into affiliation agreements in certain jurisdictions (the “Affiliation Agreements”) allowing employees who transferred from Dow to the Company as of June 17, 2010 to remain in the Dow operated pension plans (“Dow Plans”) until the Company established its own pension plans. The Affiliation Agreements ended on December 31, 2012. Effective January 1, 2013, all remaining employees of the Company who were previously participants of the Dow Plans in Switzerland and the Netherlands transferred to separately administered and sponsored pension plans of the Company (the “Successor Plans”). The benefit obligation and related plan assets in the Dow Plans belonging to the Company’s employees were transferred to the Successor Plans. As a result of the transfer, the Company recognized prior service credits and net losses of approximately $26.8 million and $1.4 million, respectively, in other comprehensive income for the six months ended June 30, 2013.
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NOTE L—STOCKHOLDERS’ EQUITY
On May 30, 2014, the Company amended its Articles of Association to effect a 1-for-436.69219 reverse split of its issued and outstanding common stock and to increase its authorized shares of common stock to 50.0 billion. Pursuant to the reverse split, every 436.69219 shares of the Company’s then issued and outstanding common stock was converted into one share of common stock. The reverse split did not change the par value of the Company’s common stock. The condensed consolidated financial statements have been retroactively adjusted to give effect to the reverse split.
On June 17, 2014, the Company completed the IPO of 11,500,000 ordinary shares at a price of $19.00 per share. The number of ordinary shares at closing included 1,500,000 of shares sold pursuant to the underwriters’ over-allotment option. The Company received cash proceeds of $203.2 million from this transaction, net of underwriting discounts. These net proceeds were used by the Company for: i) the July 2014 repayment of $132.5 million in aggregate principal amount of the 8.750% Senior Notes due 2019, together with accrued and unpaid interest thereon of $5.2 million and a call premium of $4.0 million (see Note F); ii) the payment of approximately $23.3 million in connection with the termination of the Advisory Agreement with Bain Capital (see Note N); iii) the payment of approximately $4.6 million of advisory, accounting, legal and printing expenses directly related to the offering which were recorded to additional paid-in capital in the condensed consolidated balance sheet; and iv) general corporate purposes.
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NOTE M—STOCK-BASED COMPENSATION
Restricted Stock Awards
On June 17, 2010, Bain Capital Everest Manager Holding SCA, which we refer to as the “Parent”, authorized the issuance of up to 750,000 shares in time-based and performance-based restricted stock to certain key members of management. Any related compensation associated with these awards is allocated to the Company from the Parent. With the adoption of the Company’s 2014 Omnibus Incentive Plan (see discussion below), no further grants will be issued under the Parent’s restricted stock awards plan.
Time-based Restricted Stock Awards
For the six month period ended June 30, 2014, there were no grants of time-based restricted stock awards. Total compensation expense for time-based restricted stock awards was $2.2 million for each of the three months ended June 30, 2014 and 2013, respectively, and $4.7 million and $3.9 million for the six months ended June 30, 2014 and 2013, respectively. As of June 30, 2014, there was $7.6 million of total unrecognized compensation cost related to time-based restricted stock awards. This cost is expected to be recognized over a weighted-average period of 3.0 years.
Performance-based Restricted Stock Awards
For the six month period ended June 30, 2014, there were no grants of performance-based restricted stock awards. In previous periods, the performance-based restricted stock awards contained provisions wherein vesting was subject to the full satisfaction of both time and performance vesting criterion. The performance component of the awards could only be satisfied if certain targets were achieved based on various returns realized by the Company’s shareholders on a change in control or an IPO. The time vesting requirements for the performance-based restricted stock generally vested in the same manner as the related time-based award. In previous periods, the Company has not recorded any compensation expense related to these awards as the likelihood of achieving the existing performance condition of a change in control or IPO was not deemed to be probable.
Prior to the completion of the Company’s IPO, on June 10, 2014 the Parent entered into agreements to modify the outstanding performance-based restricted stock awards held by the Company’s employees to remove the performance-based vesting condition associated with such awards related to the achievement of certain investment returns (while maintaining the requirement for a change in control or IPO). This modification also changed the time-based vesting requirement associated with such shares to provide that any shares which would have satisfied the time-based vesting condition previously applicable to such shares on or prior to June 30, 2017 will instead vest on June 30, 2017, subject to the holder remaining continuously employed by us through such date. Any such shares that are subject to a time-based vesting condition beyond June 30, 2017 will remain subject to the time-based vesting condition previously applicable to such awards. Henceforth, these awards will be described as the Company’s modified time-based restricted stock awards.
On June 17, 2014, with the completion of the Company’s IPO, the remaining performance condition associated with these modified time-based restricted stock awards was achieved. As a result, the Company will now begin recognizing compensation expense related to these awards based on the vesting described above. However, the compensation expense related to these modified time-based restricted stock awards was not material for the six months ended June 30, 2014. As of June 30, 2014, there was $13.8 million of total unrecognized compensation cost related to these awards, which will be recognized over a weighted-average period of 3.2 years.
Management Retention Awards
During the year ended December 31, 2012, the Parent agreed to retention awards with certain officers. These awards generally vest over one to four years, and are payable upon vesting subject to the participant’s continued employment with the Company on the vesting date. Compensation expense related to these retention awards is equivalent to the value of the award, and is being recognized ratably over the applicable service period. Total compensation expense for these retention awards was $0.2 million and $0.3 million for the three months ended June 30, 2014 and 2013, respectively, and $0.5 million and $0.7 million for the six months ended June 30, 2014 and 2013, respectively. As of June 30, 2014, there was $0.8 million in unrecognized compensation cost related to these retention awards. This cost is expected to be recognized over a period of 1.6 years.
2014 Omnibus Incentive Plan
In connection with the IPO, the Company’s board of directors approved the Trinseo S.A. 2014 Omnibus Incentive Plan (“2014 Omnibus Plan”), adopted on May 28, 2014, under which the maximum number of shares of common stock that may be delivered upon satisfaction of awards granted under such plan is 4.5 million shares. Following the IPO, all equity-based awards granted by the Company will be granted under the 2014 Omnibus Plan. The 2014 Omnibus Plan provides for awards of stock options, share appreciation rights, restricted stock, unrestricted stock, stock units, performance awards, cash awards and other awards convertible into or otherwise based on shares of the Company’s common stock. For a full description of all provisions of this plan, refer to the Company’s Registration Statement, to which the 2014 Omnibus Plan in full has been filed as an exhibit.
In connection with the IPO, two of the Company’s newly appointed independent directors (Messrs. Cote and De Leener) received a grant of 4,736 restricted stock units, respectively, under the 2014 Omnibus Plan with a grant date fair value of $0.1 million, which will vest in full on the first anniversary of the date of grant, subject to the director’s continued service as a member of the Company’s board through such date. For the three and six months ended June 30, 2014, the compensation expense related these restricted stock units was not material to the Company’s results of operations.
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NOTE N—RELATED PARTY AND DOW TRANSACTIONS
In connection with the Acquisition, the Company entered into the Advisory Agreement wherein Bain Capital provides management and consulting services and financial and other advisory services to the Company. Pursuant to this agreement, we paid Bain Capital fees (including out-of-pocket expenses) of $0.8 million and $1.2 million for the three months ended June 30, 2014 and 2013, respectively, and $2.0 million and $2.4 million for the six months ended June 30, 2014 and 2013, respectively. The Advisory Agreement terminated upon consummation of the Company’s IPO in June 2014 and pursuant to the terms of the Advisory Agreement, the Company paid $23.3 million of termination fees representing acceleration of the advisory fees for the remainder of the original term. The termination fee was paid in June 2014 using the proceeds from the IPO, and was recorded as an expense within “Selling, general and administrative expenses” in the condensed consolidated statements of operations for the three and six months ended June 30, 2014.
Bain Capital also provides advice pursuant to a 10-year Transaction Services Agreement with fees payable equaling 1% of the transaction value of each financing, acquisition or similar transaction. In connection with the IPO, Bain Capital received $2.2 million of transaction fees, which were recorded within “Additional paid-in-capital” on the condensed consolidated balance sheet as of June 30, 2014 (see Note L). Bain Capital also received fees of approximately $13.9 million related to the issuance of the Senior Notes and the amendment to the Senior Secured Credit Facility in January 2013, which were included in the financing fees capitalized and included in “Deferred charges and other assets” in the condensed consolidated balance sheet (see Note F for further discussion).
In connection with the Acquisition in 2010, certain of the Company’s affiliates entered into a latex joint venture option agreement (the “Latex JV Option Agreement”) with Dow, pursuant to which Dow was granted an irrevocable option to purchase 50% of the issued and outstanding interests in a joint venture to be formed by Dow and the Company’s affiliates with respect to the SB Latex business in Asia, Latin America, the Middle East, Africa, Eastern Europe, Russia and India. On May 30, 2014, the Company’s affiliates entered into an agreement with Dow to terminate the Latex JV Option Agreement, Dow’s rights to the option, and all other obligations thereunder, in exchange for a termination payment of $32.5 million. This termination payment was made on May 30, 2014, and the termination of the Latex JV Option Agreement became effective as of such date. This termination payment was recorded as an expense within “Other expense, net” in the condensed consolidated statements of operations for the three and six months ended June 30, 2014.
|
NOTE O—SEGMENTS
The Company operates four segments under two principal business units. The Emulsion Polymers business unit includes a Latex segment and a Synthetic Rubber segment. The Plastics business unit includes a Styrenics segment and an Engineered Polymers segment.
The Latex segment produces styrene-butadiene latex (“SB latex”) primarily for coated paper and packaging board, carpet and artificial turf backings, as well as a number of performance latex applications. The Synthetic Rubber segment produces synthetic rubber products used predominantly in tires, with additional applications in polymer modification and technical rubber goods, including conveyer and fan belts, hoses, seals and gaskets. The Styrenics and Engineered Polymers segments offer complementary plastics products with formulations developed for durable applications, such as consumer electronics, automotive and construction. Through these two segments, the Company provides a broad set of plastics product solutions to its customers.
Emulsion Polymers | Plastics | |||||||||||||||||||||||
Three Months Ended |
Latex | Synthetic Rubber |
Styrenics | Engineered Polymers |
Corporate Unallocated |
Total | ||||||||||||||||||
June 30, 2014 |
||||||||||||||||||||||||
Sales to external customers |
$ | 320,682 | $ | 164,926 | $ | 589,739 | $ | 265,588 | $ | — | $ | 1,340,935 | ||||||||||||
Equity in earnings (losses) of unconsolidated affiliates |
— | — | 6,806 | (1,428 | ) | — | 5,378 | |||||||||||||||||
EBITDA(1) |
24,818 | 37,034 | 27,168 | 5,116 | ||||||||||||||||||||
Investment in unconsolidated affiliates |
— | — | 128,107 | 34,631 | — | 162,738 | ||||||||||||||||||
Depreciation and amortization |
7,336 | 8,474 | 7,360 | 3,166 | 877 | 27,213 | ||||||||||||||||||
June 30, 2013 |
||||||||||||||||||||||||
Sales to external customers |
$ | 344,962 | $ | 156,174 | $ | 597,327 | $ | 263,296 | $ | — | $ | 1,361,759 | ||||||||||||
Equity in earnings (losses) of unconsolidated affiliates |
— | — | 9,246 | (317 | ) | — | 8,929 | |||||||||||||||||
EBITDA(1) |
22,047 | 27,946 | 17,572 | (2,922 | ) | |||||||||||||||||||
Investment in unconsolidated affiliates |
— | — | 113,695 | 37,282 | — | 150,977 | ||||||||||||||||||
Depreciation and amortization |
6,660 | 7,407 | 7,306 | 1,792 | 768 | 23,933 | ||||||||||||||||||
Emulsion Polymers | Plastics | |||||||||||||||||||||||
Six Months Ended |
Latex | Synthetic Rubber |
Styrenics | Engineered Polymers |
Corporate Unallocated |
Total | ||||||||||||||||||
June 30, 2014 |
||||||||||||||||||||||||
Sales to external customers |
$ | 646,988 | $ | 341,639 | $ | 1,184,080 | $ | 527,360 | $ | — | $ | 2,700,067 | ||||||||||||
Equity in earnings (losses) of unconsolidated affiliates |
— | — | 22,342 | (2,014 | ) | — | 20,328 | |||||||||||||||||
EBITDA(1) |
50,331 | 80,134 | 69,435 | 2,757 | ||||||||||||||||||||
Investment in unconsolidated affiliates |
— | — | 128,107 | 34,631 | — | 162,738 | ||||||||||||||||||
Depreciation and amortization |
13,639 | 15,645 | 14,749 | 4,940 | 1,968 | 50,941 | ||||||||||||||||||
June 30, 2013 |
||||||||||||||||||||||||
Sales to external customers |
$ | 701,718 | $ | 332,590 | $ | 1,199,297 | $ | 519,739 | $ | — | $ | 2,753,344 | ||||||||||||
Equity in earnings (losses) of unconsolidated affiliates |
— | — | 12,378 | (650 | ) | — | 11,728 | |||||||||||||||||
EBITDA(1) |
48,773 | 58,605 | 42,963 | (3,717 | ) | |||||||||||||||||||
Investment in unconsolidated affiliates |
— | — | 113,695 | 37,282 | — | 150,977 | ||||||||||||||||||
Depreciation and amortization |
13,471 | 14,439 | 14,904 | 3,473 | 1,513 | 47,800 |
(1) | Reconciliation of EBITDA to net loss is as follows: |
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Total Segment EBITDA |
$ | 94,136 | $ | 64,643 | $ | 202,657 | $ | 146,624 | ||||||||
Corporate unallocated |
(73,492 | ) | (32,886 | ) | (95,631 | ) | (68,470 | ) | ||||||||
Less: Interest expense, net |
32,602 | 33,738 | 65,420 | 66,046 | ||||||||||||
Less: Provision for income taxes |
5,450 | 2,150 | 18,200 | 2,050 | ||||||||||||
Less: Depreciation and amortization |
27,213 | 23,933 | 50,941 | 47,800 | ||||||||||||
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Net loss |
$ | (44,621 | ) | $ | (28,064 | ) | $ | (27,535 | ) | $ | (37,742 | ) | ||||
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Corporate unallocated includes certain corporate overhead costs, loss on extinguishment of long-term debt, and certain other income and expenses.
The primary measure of segment operating performance is EBITDA, which is defined as net income (loss) before interest, income taxes, depreciation and amortization. EBITDA is a key metric that is used by management to evaluate business performance in comparison to budgets, forecasts, and prior year financial results, providing a measure that management believes reflects the Company’s core operating performance. EBITDA is useful for analysis purposes; however, it should not be considered an alternative to the Company’s reported GAAP results, as there are limitations in using such financial measures. Other companies in the industry may define EBITDA differently than the Company, and 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 the Company’s performance.
Asset and capital expenditure information is not accounted for at the segment level and consequently is not reviewed or included with the Company’s internal management reporting. Therefore, the Company has not disclosed asset and capital expenditure information for each reportable segment.
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NOTE P—DIVESTITURES
EPS Divestiture
In June 2013, the Company’s board of directors approved the sale of its expandable polystyrene (“EPS”) business within the Company’s Styrenics segment, under a sale and purchase agreement which was signed in July 2013. The sale closed on September 30, 2013 and the Company received $15.2 million of sales proceeds during the third quarter of 2013, subject to a $0.7 million working capital adjustment, which was paid by the Company during the first quarter of 2014 and is reflected within investing activities in the condensed consolidated statement of cash flows the six months ended June 30, 2014.
EPS business results of operations were not classified as discontinued operations as the Company will have significant continuing cash flows as a result of a long-term supply agreement of styrene monomer to the EPS business, which was entered into contemporaneously with the sale and purchase agreement. The supply agreement will have an initial term of approximately 10 years from the closing date of the sale and will continue year-to-year thereafter. Under the supply agreement, we will supply a minimum of approximately 77 million pounds and maximum of approximately 132 million pounds of styrene monomer annually or equivalent to 70% to 100% of the EPS business’s historical production consumption.
Livorno Land Sale
In April 2014, the Company completed the sale of a portion of land at its manufacturing site in Livorno, Italy for a purchase price of €4.95 million (approximately $6.8 million). As a result, the Company recognized a gain on sale of $0.1 million within “Other expense, net” in the condensed consolidated statements of operations for the three and six months ended June 30, 2014. As of December 31, 2013, this land was classified as held-for-sale within the caption “Other current assets” in the condensed consolidated balance sheet.
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NOTE Q—RESTRUCTURING
Restructuring in Engineered Polymers Business
During the second quarter of 2014, the Company announced a planned restructuring within its Engineered Polymers business to exit the commodity market for polycarbonate in North America and to terminate existing arrangements with Dow regarding manufacturing services for the Company at Dow’s Freeport, Texas facility. The Company also entered into a new long-term supply contract with a third party to supply polycarbonate in North America. These revised arrangements are expected to become operational in the fourth quarter of 2014. In addition, the Company has executed revised supply contracts for certain raw materials that are processed at its polycarbonate manufacturing facility in Stade, Germany, which is expected to take effect beginning January 1, 2015. These revised agreements are expected to facilitate improvements in future results of operations for the Engineered Polymers segment.
For the three and six months ended June 30, 2014, the Company recorded restructuring charges of $1.5 million relating to the accelerated depreciation of the related assets at Dow’s Freeport, Texas facility and other charges. These charges were included in “Selling, general and administrative expenses” in the condensed consolidated statements of operations, and were allocated entirely to the Engineered Polymers segment. The Company is likely to incur additional charges, not to exceed $10.0 million, in conjunction with the reimbursement of Dow’s expected decommissioning and demolition costs from its Freeport, Texas facility which will be expensed as incurred. Decommissioning and demolition is expected to commence in second half of 2014.
Altona Plant Shutdown
In July 2013, the Company’s board of directors approved the plan to close the Company’s latex manufacturing facility in Altona, Australia. This restructuring plan was a strategic business decision to improve the results of the overall Latex segment. The facility manufactured SB latex used in the carpet and paper markets. Production at the facility ceased in the third quarter of 2013, followed by decommissioning, with demolition expected throughout 2014. As a result of the plant closure, the Company recorded restructuring charges of $10.8 million for the year ended December 31, 2013 ($6.5 million of which were recorded in the three and six month periods ended June 30, 2013). These charges consisted of property, plant and equipment and other asset impairment charges, employee termination benefit charges, contract termination charges, and incurred decommissioning charges, of which approximately $4.8 million remained accrued on the Company’s consolidated balance sheet as of December 31, 2013. For the three and six months ended June 30, 2014, the Company recorded additional restructuring charges of approximately $1.5 million and $2.1 million, respectively, related to incremental employee termination benefit charges, contract termination charges, and decommissioning costs. These charges were included in “Selling, general and administrative expenses” in the condensed consolidated statements of operations, and were allocated entirely to the Latex segment. The remaining employee termination benefits, contract termination costs, and decommissioning costs are recorded in “Accrued expenses and other current liabilities” in the condensed consolidated balance sheet.
The following table provides a rollforward of the liability balances associated with the Altona plant shutdown:
Balance at December 31, 2013 |
Expenses | Deductions* | Balance at June 30, 2014 |
|||||||||||||
Employee termination benefit charges |
$ | 1,408 | $ | 302 | $ | (1,327 | ) | $ | 383 | |||||||
Contract termination charges |
3,388 | 1,409 | (1,534 | ) | 3,263 | |||||||||||
Other** |
26 | 548 | (504 | ) | 70 | |||||||||||
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|
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|
|
|
|
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Total |
$ | 4,822 | $ | 2,259 | $ | (3,365 | ) | $ | 3,716 | |||||||
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* | Includes primarily payments made against the existing accrual, as well as immaterial impacts of foreign currency remeasurement. |
** | Includes decommissioning charges primarily related to labor service costs. |
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NOTE R—ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The components of accumulated other comprehensive income (loss), net of income taxes, consisted of:
Currency Translation Adjustment, Net |
Employee Benefits, Net |
Total | ||||||||||
December 31, 2013 |
$ | 116,146 | $ | (27,768 | ) | $ | 88,378 | |||||
Other comprehensive income (loss) |
(10,352 | ) | 580 | (9,772 | ) | |||||||
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|
|||||||
June 30, 2014 |
$ | 105,794 | $ | (27,188 | ) | $ | 78,606 | |||||
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|
|||||||
December 31, 2012 |
$ | 62,807 | $ | (38,234 | ) | $ | 24,573 | |||||
Other comprehensive income (loss) |
(10,839 | ) | 20,132 | 9,293 | ||||||||
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|
|
|
|
|
|||||||
June 30, 2013 |
$ | 51,968 | $ | (18,102 | ) | $ | 33,866 | |||||
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NOTE T—SUBSEQUENT EVENTS
In July 2014, using proceeds from the Company’s IPO, the Company redeemed $132.5 million in aggregate principal amount of its 8.750% Senior Notes due 2019. See Note F for additional information.
|
NOTE U—SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
In connection with the issuance of the Senior Notes by Trinseo Materials Operating S.C.A. and Trinseo Materials Finance, Inc. (the “Issuers”), this supplemental guarantor financial statement disclosure is included in accordance with Rule 3-10 of Regulation S-X. The Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis, in each case, subject to certain exceptions, by Trinseo S.A. (the “Parent Guarantor”) and by certain subsidiaries (together, the “Guarantor Subsidiaries”).
Each of the Guarantor Subsidiaries is 100 percent owned by the Company. None of the other subsidiaries of the Company, either direct or indirect, guarantee the Senior Notes (together, the “Non-Guarantor Subsidiaries”). The Guarantor Subsidiaries of the Senior Notes, excluding the Parent Guarantor, will be automatically released from those guarantees upon the occurrence of certain customary release provisions.
The following supplemental condensed consolidating financial information is presented to comply with the Company’s requirements under Rule 3-10 of Regulation S-X:
• | the Condensed Consolidating Balance Sheets as of June 30, 2014 and December 31, 2013; |
• | the Condensed Consolidating Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2014 and 2013; and |
• | the Condensed Consolidating Statements of Cash Flows for the six months ended June 30, 2014 and 2013. |
The Condensed Consolidating Financial Statements are presented using the equity method of accounting for its investments in 100 percent owned subsidiaries. Under the equity method, the investments in subsidiaries are recorded at cost and adjusted for the share of the subsidiaries cumulative results of operations, capital contributions, distributions and other equity changes. The elimination entries principally eliminate investments in subsidiaries and intercompany balances and transactions. The financial information in this footnote should be read in conjunction with the Condensed Consolidated Financial Statements presented and other notes related thereto contained within this Quarterly Report.
In connection with the preparation of the Issuers’ Registration Statement on Form S-4 (Registration No. 333-191460), and all related amendments (the “Form S-4”), the Company determined its subsidiary Styron Italia S.R.L. (“Styron Italy”), which had previously been a Guarantor Subsidiary of the Senior Notes, did not meet the “full and unconditional” guarantee requirements under Rule 3-10 of Regulation S-X (“Rule 3-10”) in order for this entity to be presented as a guarantor entity within the supplemental guarantor condensed consolidating financial statements. Therefore, the Company removed Styron Italy as a Guarantor Subsidiary under both the Indenture and Credit Agreement, through the provisions allowable under such agreements, in order to comply with Rule 3-10. The supplemental guarantor condensed consolidating financial statements presented below now reflect Styron Italy as a Non-Guarantor Subsidiary for all periods presented. The revision to the supplemental condensed consolidating statement of comprehensive income (loss) and statement of cash flows for the six month period ended June 30, 2013 are reflected below.
The Company also identified an incorrect presentation of an intercompany loan between an Issuer and Non-Guarantor Subsidiary in the supplemental condensed consolidating statement of cash flows for the six months ended June 30, 2013 presented in the Issuers’ initial Form S-4. The impact of this misclassification to the Issuers was a $4.0 million overstatement of cash flows from investing activities with an offsetting understatement of cash flow from financing activities and the impact to Non-Guarantor Subsidiaries was a $4.0 million reclassification between captions within cash flows from financing activities. This error did not change the total cash flows reported for either the Issuers or Non-Guarantor Subsidiaries and had no impact on the consolidated financial statements of the Company or any debt covenants. The revision to the supplemental condensed consolidating statement of cash flows for the six months ended June 30, 2013 is reflected below.
The Company assessed the materiality of these items on its previously issued supplemental condensed consolidating financial information in accordance with SEC Staff Accounting Bulletin No. 99 and No. 108, and concluded that the errors were not material to any prior period.
The impact of the revisions noted above is reflected in the following tables:
Supplemental Condensed Consolidating Statements of Comprehensive Income (Loss):
Parent Guarantor | Issuers | Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | ||||||||||||||||||||||||||||||||||||
As Reported |
As Revised |
As Reported |
As Revised |
As Reported |
As Revised |
As Reported |
As Revised |
As Reported |
As Revised |
|||||||||||||||||||||||||||||||
Six Months Ended June 30, 2013 |
||||||||||||||||||||||||||||||||||||||||
Net sales |
$ | — | $ | — | $ | — | $ | — | $ | 2,493,615 | $ | 2,492,478 | $ | 656,638 | $ | 766,674 | $ | (396,909 | ) | $ | (505,808 | ) | ||||||||||||||||||
Operating income (loss) |
(5,266 | ) | (5,266 | ) | (1,983 | ) | (1,983 | ) | 53,683 | 53,351 | 9,452 | 9,784 | 920 | 920 | ||||||||||||||||||||||||||
Net income (loss) |
(37,742 | ) | (37,742 | ) | (23,328 | ) | (23,328 | ) | (10,013 | ) | (10,006 | ) | (1,484 | ) | (1,673 | ) | 34,825 | 35,007 |
Supplemental Condensed Consolidating Statements of Cash Flows:
Parent Guarantor | Issuers | Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | ||||||||||||||||||||||||||||||||||||
As Reported |
As Revised |
As Reported |
As Revised |
As Reported |
As Revised |
As Reported |
As Revised |
As Reported |
As Revised |
|||||||||||||||||||||||||||||||
Six Months Ended June 30, 2013 |
||||||||||||||||||||||||||||||||||||||||
Cash flows from operating activities |
$ | (29 | ) | $ | (29 | ) | $ | 61,692 | $ | 61,692 | $ | (19,911 | ) | $ | (17,783 | ) | $ | (48,240 | ) | $ | (50,368 | ) | $ | — | $ | — | ||||||||||||||
Cash flows from investing activities |
— | — | — | (4,000 | ) | (220,820 | ) | (218,353 | ) | 3,660 | 1,193 | 200,809 | 204,809 | |||||||||||||||||||||||||||
Cash flows from financing activities |
36 | 36 | (90,003 | ) | (86,003 | ) | 188,834 | 184,224 | 60,518 | 65,128 | (200,809 | ) | (204,809 | ) |
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
(In thousands)
June 30, 2014 | ||||||||||||||||||||||||
Parent Guarantor |
Issuers | Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||||||
Assets |
||||||||||||||||||||||||
Current assets |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | 2,857 | $ | 2,439 | $ | 267,815 | $ | 50,433 | $ | — | $ | 323,544 | ||||||||||||
Accounts receivable, net |
— | 49 | 250,423 | 524,680 | — | 775,152 | ||||||||||||||||||
Intercompany receivables |
— | 505,580 | 1,349,191 | 134,327 | (1,989,098 | ) | — | |||||||||||||||||
Inventories |
— | — | 433,033 | 96,137 | (2,975 | ) | 526,195 | |||||||||||||||||
Deferred income tax assets |
— | — | 4,633 | 5,308 | — | 9,941 | ||||||||||||||||||
Other current assets |
— | 270 | 7,916 | 11,196 | — | 19,382 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current assets |
2,857 | 508,338 | 2,313,011 | 822,081 | (1,992,073 | ) | 1,654,214 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Investments in unconsolidated affiliates |
— | — | 162,738 | — | — | 162,738 | ||||||||||||||||||
Property, plant and equipment, net |
— | — | 456,142 | 130,278 | — | 586,420 | ||||||||||||||||||
Other assets |
||||||||||||||||||||||||
Goodwill |
— | — | 36,967 | — | — | 36,967 | ||||||||||||||||||
Other intangible assets, net |
— | — | 188,911 | 173 | — | 189,084 | ||||||||||||||||||
Investments in subsidiaries |
508,555 | 1,291,864 | 626,186 | — | (2,426,605 | ) | — | |||||||||||||||||
Intercompany notes receivable— noncurrent |
— | 1,355,675 | 17,593 | — | (1,373,268 | ) | — | |||||||||||||||||
Deferred income tax assets—noncurrent |
— | — | 33,064 | 5,877 | — | 38,941 | ||||||||||||||||||
Deferred charges and other assets |
14 | 44,581 | 26,824 | 687 | 646 | 72,752 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total other assets |
508,569 | 2,692,120 | 929,545 | 6,737 | (3,799,227 | ) | 337,744 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total assets |
$ | 511,426 | $ | 3,200,458 | $ | 3,861,436 | $ | 959,096 | $ | (5,791,300 | ) | $ | 2,741,116 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Liabilities and shareholders’ equity |
||||||||||||||||||||||||
Current liabilities |
||||||||||||||||||||||||
Short-term borrowings and current portion of long-term debt |
$ | — | $ | 132,500 | $ | — | $ | 9,555 | $ | — | $ | 142,055 | ||||||||||||
Accounts payable |
64 | 2,154 | 441,654 | 63,164 | — | 507,036 | ||||||||||||||||||
Intercompany payables |
1,295 | 780,468 | 527,708 | 678,598 | (1,988,069 | ) | — | |||||||||||||||||
Income taxes payable |
— | 4 | 7,147 | 2,916 | (34 | ) | 10,033 | |||||||||||||||||
Deferred income tax liabilities |
— | — | 1,112 | 315 | — | 1,427 | ||||||||||||||||||
Accrued expenses and other current liabilities |
458 | 57,009 | 61,361 | 15,217 | — | 134,045 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current liabilities |
1,817 | 972,135 | 1,038,982 | 769,765 | (1,988,103 | ) | 794,596 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Noncurrent liabilities |
||||||||||||||||||||||||
Long-term debt |
— | 1,192,500 | 2,528 | — | — | 1,195,028 | ||||||||||||||||||
Intercompany notes payable—noncurrent |
— | — | 1,343,860 | 29,408 | (1,373,268 | ) | — | |||||||||||||||||
Deferred income tax liabilities—noncurrent |
— | 2,441 | 21,428 | 8,753 | — | 32,622 | ||||||||||||||||||
Other noncurrent obligations |
— | — | 196,678 | 12,583 | — | 209,261 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total noncurrent liabilities |
— | 1,194,941 | 1,564,494 | 50,744 | (1,373,268 | ) | 1,436,911 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Commitments and contingencies (Note J) |
||||||||||||||||||||||||
Shareholders’ equity |
509,609 | 1,033,382 | 1,257,960 | 138,587 | (2,429,929 | ) | 509,609 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities and shareholders’ equity |
$ | 511,426 | $ | 3,200,458 | $ | 3,861,436 | $ | 959,096 | $ | (5,791,300 | ) | $ | 2,741,116 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
(In thousands)
December 31, 2013 | ||||||||||||||||||||||||
Parent Guarantor |
Issuers | Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||||||
Assets |
||||||||||||||||||||||||
Current assets |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | 2 | $ | 954 | $ | 154,770 | $ | 40,777 | $ | — | $ | 196,503 | ||||||||||||
Accounts receivable, net |
— | — | 272,745 | 444,739 | (2 | ) | 717,482 | |||||||||||||||||
Intercompany receivables |
— | 554,795 | 1,242,405 | 93,841 | (1,891,041 | ) | — | |||||||||||||||||
Inventories |
— | — | 439,952 | 93,019 | (2,780 | ) | 530,191 | |||||||||||||||||
Deferred income tax assets |
— | — | 5,077 | 4,743 | — | 9,820 | ||||||||||||||||||
Other current assets |
— | 3,954 | 4,386 | 14,410 | — | 22,750 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current assets |
2 | 559,703 | 2,119,335 | 691,529 | (1,893,823 | ) | 1,476,746 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Investments in unconsolidated affiliates |
— | — | 155,887 | — | — | 155,887 | ||||||||||||||||||
Property, plant and equipment, net |
— | — | 476,137 | 130,290 | — | 606,427 | ||||||||||||||||||
Other assets |
||||||||||||||||||||||||
Goodwill |
— | — | 37,273 | — | — | 37,273 | ||||||||||||||||||
Other intangible assets, net |
— | — | 171,352 | 162 | — | 171,514 | ||||||||||||||||||
Investments in subsidiaries |
343,429 | 1,232,608 | 615,153 | — | (2,191,190 | ) | — | |||||||||||||||||
Intercompany notes receivable— noncurrent |
— | 1,359,637 | 17,739 | — | (1,377,376 | ) | — | |||||||||||||||||
Deferred income tax assets—noncurrent |
— | — | 36,260 | 6,678 | — | 42,938 | ||||||||||||||||||
Deferred charges and other assets |
— | 48,801 | 33,607 | 990 | 598 | 83,996 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total other assets |
343,429 | 2,641,046 | 911,384 | 7,830 | (3,567,968 | ) | 335,721 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total assets |
$ | 343,431 | $ | 3,200,749 | $ | 3,662,743 | $ | 829,649 | $ | (5,461,791 | ) | $ | 2,574,781 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Liabilities and shareholders’ equity |
||||||||||||||||||||||||
Current liabilities |
||||||||||||||||||||||||
Short-term borrowings and current portion of long-term debt |
$ | — | $ | 3,646 | $ | — | $ | 5,108 | $ | — | $ | 8,754 | ||||||||||||
Accounts payable |
— | 2,570 | 436,147 | 70,378 | (2 | ) | 509,093 | |||||||||||||||||
Intercompany payables |
158 | 763,022 | 550,741 | 576,354 | (1,890,275 | ) | — | |||||||||||||||||
Income taxes payable |
— | — | 9,407 | 276 | — | 9,683 | ||||||||||||||||||
Deferred income tax liabilities |
— | — | 784 | 2,119 | — | 2,903 | ||||||||||||||||||
Accrued expenses and other current liabilities |
71 | 58,977 | 66,061 | 11,020 | — | 136,129 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current liabilities |
229 | 828,215 | 1,063,140 | 665,255 | (1,890,277 | ) | 666,562 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Noncurrent liabilities |
||||||||||||||||||||||||
Long-term debt |
— | 1,325,000 | 2,667 | — | — | 1,327,667 | ||||||||||||||||||
Intercompany notes payable—noncurrent |
— | — | 1,347,773 | 29,602 | (1,377,375 | ) | — | |||||||||||||||||
Deferred income tax liabilities—noncurrent |
— | 1,600 | 17,115 | 8,217 | — | 26,932 | ||||||||||||||||||
Other noncurrent obligations |
— | — | 198,479 | 11,939 | — | 210,418 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total noncurrent liabilities |
— | 1,326,600 | 1,566,034 | 49,758 | (1,377,375 | ) | 1,565,017 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Commitments and contingencies (Note J) |
||||||||||||||||||||||||
Shareholders’ equity |
343,202 | 1,045,934 | 1,033,569 | 114,636 | (2,194,139 | ) | 343,202 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities and shareholders’ equity |
$ | 343,431 | $ | 3,200,749 | $ | 3,662,743 | $ | 829,649 | $ | (5,461,791 | ) | $ | 2,574,781 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
Three Months Ended June 30, 2014 | ||||||||||||||||||||||||
Parent Guarantor |
Issuers | Guarantor Subsidiaries |
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||||||
Net sales |
$ | — | $ | — | $ | 1,236,394 | $ | 358,624 | $ | (254,083 | ) | $ | 1,340,935 | |||||||||||
Cost of sales |
— | 211 | 1,156,891 | 344,556 | (253,133 | ) | 1,248,525 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Gross profit |
— | (211 | ) | 79,503 | 14,068 | (950 | ) | 92,410 | ||||||||||||||||
Selling, general and administrative expenses |
2,590 | 16,444 | 49,108 | 6,066 | — | 74,208 | ||||||||||||||||||
Equity in earnings of unconsolidated affiliates |
— | — | 5,378 | — | — | 5,378 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
(2,590 | ) | (16,655 | ) | 35,773 | 8,002 | (950 | ) | 23,580 | |||||||||||||||
Interest expense, net |
— | 31,628 | 328 | 646 | — | 32,602 | ||||||||||||||||||
Intercompany interest expense (income), net |
3 | (20,898 | ) | 18,031 | 2,861 | 3 | — | |||||||||||||||||
Other expense (income) |
727 | 23,894 | 101 | 5,441 | (14 | ) | 30,149 | |||||||||||||||||
Equity in loss (earnings) of subsidiaries |
41,301 | (23,627 | ) | 30,980 | — | (48,654 | ) | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before income taxes |
(44,621 | ) | (27,652 | ) | (13,667 | ) | (946 | ) | 47,715 | (39,171 | ) | |||||||||||||
Provision for (benefit from) income taxes |
— | 1,017 | 4,019 | 741 | (327 | ) | 5,450 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) |
$ | (44,621 | ) | $ | (28,669 | ) | $ | (17,686 | ) | $ | (1,687 | ) | $ | 48,042 | $ | (44,621 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income (loss) |
$ | (53,212 | ) | $ | (37,260 | ) | $ | (26,536 | ) | $ | (1,428 | ) | $ | 65,224 | $ | (53,212 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
Three Months Ended June 30, 2013 | ||||||||||||||||||||||||
Parent Guarantor |
Issuers | Guarantor Subsidiaries |
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||||||
Net sales |
$ | — | $ | — | $ | 1,223,278 | $ | 393,342 | $ | (254,861 | ) | $ | 1,361,759 | |||||||||||
Cost of sales |
— | 217 | 1,165,656 | 384,801 | (254,424 | ) | 1,296,250 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Gross profit |
— | (217 | ) | 57,622 | 8,541 | (437 | ) | 65,509 | ||||||||||||||||
Selling, general and administrative expenses |
3,112 | 272 | 45,994 | 5,396 | — | 54,774 | ||||||||||||||||||
Equity in earnings of unconsolidated affiliates |
— | — | 8,929 | — | — | 8,929 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
(3,112 | ) | (489 | ) | 20,557 | 3,145 | (437 | ) | 19,664 | |||||||||||||||
Interest expense, net |
— | 31,830 | 1,258 | 650 | — | 33,738 | ||||||||||||||||||
Intercompany interest expense (income), net |
2 | (22,235 | ) | 18,990 | 3,182 | 61 | — | |||||||||||||||||
Other expense (income) |
2 | (3,238 | ) | 11,290 | 4,144 | (358 | ) | 11,840 | ||||||||||||||||
Equity in loss (earnings) of subsidiaries |
24,948 | 12,888 | 23,886 | — | (61,722 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before income taxes |
(28,064 | ) | (19,734 | ) | (34,867 | ) | (4,831 | ) | 61,582 | (25,914 | ) | |||||||||||||
Provision for (benefit from) income taxes |
— | — | 3,268 | (918 | ) | (200 | ) | 2,150 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) |
$ | (28,064 | ) | $ | (19,734 | ) | $ | (38,135 | ) | $ | (3,913 | ) | $ | 61,782 | $ | (28,064 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income (loss) |
$ | (9,149 | ) | $ | (819 | ) | $ | (20,060 | ) | $ | (3,073 | ) | $ | 23,952 | $ | (9,149 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
Six Months Ended June 30, 2014 | ||||||||||||||||||||||||
Parent Guarantor |
Issuers | Guarantor Subsidiaries |
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||||||
Net sales |
$ | — | $ | — | $ | 2,463,957 | $ | 705,921 | $ | (469,811 | ) | $ | 2,700,067 | |||||||||||
Cost of sales |
— | 368 | 2,303,968 | 674,279 | (469,587 | ) | 2,509,028 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Gross profit |
— | (368 | ) | 159,989 | 31,642 | (224 | ) | 191,039 | ||||||||||||||||
Selling, general and administrative expenses |
5,296 | 17,130 | 91,184 | 10,628 | — | 124,238 | ||||||||||||||||||
Equity in earnings of unconsolidated affiliates |
— | — | 20,328 | — | — | 20,328 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
(5,296 | ) | (17,498 | ) | 89,133 | 21,014 | (224 | ) | 87,129 | |||||||||||||||
Interest expense, net |
— | 63,216 | 641 | 1,563 | — | 65,420 | ||||||||||||||||||
Intercompany interest expense (income), net |
5 | (40,728 | ) | 34,678 | 6,013 | 32 | — | |||||||||||||||||
Other expense (income) |
727 | 20,806 | (723 | ) | 10,248 | (14 | ) | 31,044 | ||||||||||||||||
Equity in loss (earnings) of subsidiaries |
21,507 | (59,013 | ) | 3,813 | — | 33,693 | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before income taxes |
(27,535 | ) | (1,779 | ) | 50,724 | 3,190 | (33,935 | ) | (9,335 | ) | ||||||||||||||
Provision for (benefit from) income taxes |
— | 1,017 | 13,201 | 4,057 | (75 | ) | 18,200 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) |
$ | (27,535 | ) | $ | (2,796 | ) | $ | 37,523 | $ | (867 | ) | $ | (33,860 | ) | $ | (27,535 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income (loss) |
$ | (37,307 | ) | $ | (12,568 | ) | $ | 28,098 | $ | (1,214 | ) | $ | (14,316 | ) | $ | (37,307 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
Six Months Ended June 30, 2013 | ||||||||||||||||||||||||
Parent Guarantor |
Issuers | Guarantor Subsidiaries |
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||||||
Net sales |
$ | — | $ | — | $ | 2,492,478 | $ | 766,674 | $ | (505,808 | ) | $ | 2,753,344 | |||||||||||
Cost of sales |
— | 578 | 2,367,050 | 746,132 | (506,728 | ) | 2,607,032 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Gross profit |
— | (578 | ) | 125,428 | 20,542 | 920 | 146,312 | |||||||||||||||||
Selling, general and administrative expenses |
5,266 | 1,405 | 83,805 | 10,758 | — | 101,234 | ||||||||||||||||||
Equity in earnings of unconsolidated affiliates |
— | — | 11,728 | — | — | 11,728 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
(5,266 | ) | (1,983 | ) | 53,351 | 9,784 | 920 | 56,806 | ||||||||||||||||
Interest expense, net |
— | 62,561 | 2,477 | 1,008 | — | 66,046 | ||||||||||||||||||
Intercompany interest expense (income), net |
3 | (43,109 | ) | 36,756 | 6,346 | 4 | — | |||||||||||||||||
Loss on extinguishment of long-term debt |
— | 20,744 | — | — | — | 20,744 | ||||||||||||||||||
Other expense (income) |
(1 | ) | 3,661 | (4,272 | ) | 6,501 | (181 | ) | 5,708 | |||||||||||||||
Equity in loss (earnings) of subsidiaries |
32,474 | (22,688 | ) | 24,904 | — | (34,690 | ) | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before income taxes |
(37,742 | ) | (23,152 | ) | (6,514 | ) | (4,071 | ) | 35,787 | (35,692 | ) | |||||||||||||
Provision for (benefit from) income taxes |
— | 176 | 3,492 | (2,398 | ) | 780 | 2,050 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) |
$ | (37,742 | ) | $ | (23,328 | ) | $ | (10,006 | ) | $ | (1,673 | ) | $ | 35,007 | $ | (37,742 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income (loss) |
$ | (28,449 | ) | $ | (14,035 | ) | $ | (1,585 | ) | $ | (801 | ) | $ | 16,421 | $ | (28,449 | ) | |||||||
|
|
|
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|
|
|
|
|
|
|
|
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(In thousands)
Six Months Ended June 30, 2014 | ||||||||||||||||||||||||
Parent Guarantor |
Issuers | Guarantor Subsidiaries |
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||||||
Cash flows from operating activities |
||||||||||||||||||||||||
Cash provided by (used in) operating activities |
$ | (119 | ) | $ | (54,821 | ) | $ | 18,723 | $ | 44,081 | $ | — | $ | 7,864 | ||||||||||
Cash flows from investing activities |
||||||||||||||||||||||||
Capital expenditures |
— | — | (49,676 | ) | (6,068 | ) | — | (55,744 | ) | |||||||||||||||
Proceeds from the sale of property, plant and equipment |
— | — | — | 5,434 | — | 5,434 | ||||||||||||||||||
Payment for working capital adjustment from sale of business |
— | — | (700 | ) | — | — | (700 | ) | ||||||||||||||||
Distributions from unconsolidated affiliates |
— | — | 978 | — | — | 978 | ||||||||||||||||||
Investments in subsidiaries |
(196,400 | ) | (10,000 | ) | (7,226 | ) | — | 213,626 | — | |||||||||||||||
Intercompany investing activities |
— | 2,000 | (89,900 | ) | — | 87,900 | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash provided by (used in) investing activities |
(196,400 | ) | (8,000 | ) | (146,524 | ) | (634 | ) | 301,526 | (50,032 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash flows from financing activities |
||||||||||||||||||||||||
Proceeds from initial public offering, net of offering costs |
199,152 | — | — | — | — | 199,152 | ||||||||||||||||||
Intercompany short-term borrowings, net |
222 | 67,924 | 21,670 | (12,916 | ) | (76,900 | ) | — | ||||||||||||||||
Short-term borrowings, net |
— | (3,646 | ) | (140 | ) | (25,616 | ) | — | (29,402 | ) | ||||||||||||||
Contributions from parent companies |
— | — | 206,400 | 7,226 | (213,626 | ) | — | |||||||||||||||||
Proceeds from issuance of intercompany long-term debt |
— | — | 13,000 | (2,000 | ) | (11,000 | ) | — | ||||||||||||||||
Proceeds from issuance of Accounts Receivable Securitization Facility |
— | — | — | 178,603 | — | 178,603 | ||||||||||||||||||
Repayments of Accounts Receivable Securitization Facility |
— | — | — | (179,170 | ) | — | (179,170 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash provided by (used in) financing activities |
199,374 | 64,278 | 240,930 | (33,873 | ) | (301,526 | ) | 169,183 | ||||||||||||||||
Effect of exchange rates on cash |
— | 28 | (84 | ) | 82 | — | 26 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net change in cash and cash equivalents |
2,855 | 1,485 | 113,045 | 9,656 | — | 127,041 | ||||||||||||||||||
Cash and cash equivalents—beginning of period |
2 | 954 | 154,770 | 40,777 | — | 196,503 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash and cash equivalents—end of period |
$ | 2,857 | $ | 2,439 | $ | 267,815 | $ | 50,433 | $ | — | $ | 323,544 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(In thousands)
Six Months Ended June 30, 2013 | ||||||||||||||||||||||||
Parent Guarantor |
Issuers | Guarantor Subsidiaries |
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||||||
Cash flows from operating activities |
||||||||||||||||||||||||
Cash provided by (used in) operating activities |
$ | (29 | ) | $ | 61,692 | $ | (17,783 | ) | $ | (50,368 | ) | $ | — | $ | (6,488 | ) | ||||||||
Cash flows from investing activities |
||||||||||||||||||||||||
Capital expenditures |
— | — | (25,174 | ) | (3,948 | ) | — | (29,122 | ) | |||||||||||||||
Proceeds from capital expenditures subsidy |
— | — | 6,575 | — | — | 6,575 | ||||||||||||||||||
Advance payment refunded |
— | — | — | (2,711 | ) | — | (2,711 | ) | ||||||||||||||||
Distributions from unconsolidated affiliates |
— | — | 1,055 | — | — | 1,055 | ||||||||||||||||||
Intercompany investing activities |
— | (4,000 | ) | (200,809 | ) | — | 204,809 | — | ||||||||||||||||
Decrease in restricted cash |
— | — | — | 7,852 | — | 7,852 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash provided by (used in) investing activities |
— | (4,000 | ) | (218,353 | ) | 1,193 | 204,809 | (16,351 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash flows from financing activities |
||||||||||||||||||||||||
Deferred financing fees |
— | (46,284 | ) | — | — | — | (46,284 | ) | ||||||||||||||||
Intercompany short-term borrowings, net |
36 | (2,178 | ) | 184,355 | 18,596 | (200,809 | ) | — | ||||||||||||||||
Short-term borrowings, net |
— | (3,541 | ) | (131 | ) | (14,176 | ) | — | (17,848 | ) | ||||||||||||||
Proceeds from issuance of intercompany long-term debt |
— | — | — | 4,000 | (4,000 | ) | — | |||||||||||||||||
Repayments of Term Loans |
— | (1,239,000 | ) | — | — | — | (1,239,000 | ) | ||||||||||||||||
Proceeds from issuance of Senior Notes |
— | 1,325,000 | — | — | — | 1,325,000 | ||||||||||||||||||
Proceeds from issuance of Accounts Receivable Securitization Facility |
— | — | — | 222,592 | — | 222,592 | ||||||||||||||||||
Repayments of Accounts Receivable Securitization Facility |
— | — | — | (165,884 | ) | — | (165,884 | ) | ||||||||||||||||
Proceeds from the draw of revolving debt |
— | 405,000 | — | — | — | 405,000 | ||||||||||||||||||
Repayments on the revolving debt |
— | (525,000 | ) | — | — | — | (525,000 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash provided by (used in) financing activities |
36 | (86,003 | ) | 184,224 | 65,128 | (204,809 | ) | (41,424 | ) | |||||||||||||||
Effect of exchange rates on cash |
— | 31 | (1,295 | ) | (206 | ) | — | (1,470 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net change in cash and cash equivalents |
7 | (28,280 | ) | (53,207 | ) | 15,747 | — | (65,733 | ) | |||||||||||||||
Cash and cash equivalents—beginning of period |
3 | 29,411 | 182,088 | 24,855 | — | 236,357 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash and cash equivalents—end of period |
$ | 10 | $ | 1,131 | $ | 128,881 | $ | 40,602 | $ | — | $ | 170,624 | ||||||||||||
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|
In February 2013, the Financial Accounting Standards Board (“FASB”) issued amendments for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date, except for obligations addressed within existing guidance. This guidance requires an entity to measure those obligations as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. This guidance also requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations. The Company adopted this guidance on a retrospective basis effective January 1, 2014, and the adoption did not have a significant impact on the Company’s financial position or results of operations.
In July 2013, the FASB issued guidance to clarify the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The new guidance requires that unrecognized tax benefits be netted against all available same-jurisdiction losses or other tax carryforwards that would be utilized, rather than only against carryforwards that are created by the unrecognized tax benefits. The Company adopted this guidance prospectively effective January 1, 2014, and the adoption did not have a significant impact on the Company’s financial position or results of operations.
In April 2014, the FASB issued amendments to guidance for reporting discontinued operations and disposals of components of an entity. The amended guidance requires that a disposal representing a strategic shift that has (or will have) a major effect on an entity’s financial results or a business activity classified as held for sale should be reported as discontinued operations. The amendments also expand the disclosure requirements for discontinued operations and add new disclosures for individually significant dispositions that do not qualify as discontinued operations. The amendments are effective prospectively for fiscal years, and interim reporting periods within those years, beginning after December 15, 2014 (early adoption is permitted only for disposals that have not been previously reported). The implementation of the amended guidance is not expected to have a material impact on the Company’s consolidated financial position or results of operations.
In May 2014, the FASB and the International Accounting Standards Board (“IASB”) jointly issued new guidance which clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP and International Financial Reporting Standards (“IFRS”). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for public entities for annual and interim periods beginning after December 15, 2016. Early adoption is not permitted under GAAP and retrospective application is permitted, but not required. The Company is currently assessing the impact of adopting this guidance on its financial statements and results of operations.
In June 2014, the FASB issued updated guidance related to stock compensation. The updated guidance requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the periods for which the requisite service has already been rendered. The updated guidance is effective for annual and interim periods beginning after December 15, 2015 and can be applied either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented and to all newly granted or modified awards thereafter. Early adoption is permitted. This guidance is not relevant to the Company’s currently outstanding awards; however, the Company will continue to evaluate the applicability of this guidance to future awards as necessary.
|
The summarized financial information of the Company’s unconsolidated affiliates is shown below:
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Sales |
$ | 540,920 | $ | 568,815 | $ | 1,105,052 | $ | 1,167,469 | ||||||||
Gross profit |
$ | (2,529 | ) | $ | 24,407 | $ | 35,479 | $ | 23,402 | |||||||
Net income (loss) |
$ | (11,026 | ) | $ | 11,716 | $ | 10,494 | $ | (1,891 | ) |
|
Inventories consisted of the following:
June 30, | December 31, | |||||||
2014 | 2013 | |||||||
Finished goods |
$ | 307,868 | $ | 302,379 | ||||
Raw materials and semi-finished goods |
182,965 | 191,081 | ||||||
Supplies |
35,362 | 36,731 | ||||||
|
|
|
|
|||||
Total |
$ | 526,195 | $ | 530,191 | ||||
|
|
|
|
|
The following table shows changes in the carrying amount of goodwill by segment from December 31, 2013 to June 30, 2014:
Emulsion Polymers | Plastics | |||||||||||||||||||
Latex | Synthetic Rubber |
Styrenics | Engineered Polymers |
Total | ||||||||||||||||
December 31, 2013 |
$ | 14,901 | $ | 10,205 | $ | 8,669 | $ | 3,498 | $ | 37,273 | ||||||||||
Foreign currency impact |
(122 | ) | (84 | ) | (71 | ) | (29 | ) | (306 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
June 30, 2014 |
$ | 14,779 | $ | 10,121 | $ | 8,598 | $ | 3,469 | $ | 36,967 | ||||||||||
|
|
|
|
|
|
|
|
|
|
The following table provides information regarding the Company’s other intangible assets as of June 30, 2014 and December 31, 2013, respectively:
June 30, 2014 | December 31, 2013 | |||||||||||||||||||||||||||
Estimated Useful Life (Years) |
Gross Carrying Amount |
Accumulated Amortization |
Net | Gross Carrying Amount |
Accumulated Amortization |
Net | ||||||||||||||||||||||
Developed technology |
15 | $ | 208,818 | $ | (56,264 | ) | $ | 152,554 | $ | 210,546 | $ | (49,713 | ) | $ | 160,833 | |||||||||||||
Manufacturing Capacity Rights |
6 | 25,939 | (1,052 | ) | 24,887 | — | — | — | ||||||||||||||||||||
Software |
5 | 11,395 | (5,229 | ) | 6,166 | 11,034 | (4,099 | ) | 6,935 | |||||||||||||||||||
Software in development |
N/A | 5,477 | — | 5,477 | 3,746 | — | 3,746 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total |
$ | 251,629 | $ | (62,545 | ) | $ | 189,084 | $ | 225,326 | $ | (53,812 | ) | $ | 171,514 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Amortization Expense for the Next Five Years |
||||
Remainder of 2014 |
$ | 10,264 | ||
2015 |
20,519 | |||
2016 |
19,954 | |||
2017 |
19,117 | |||
2018 |
18,402 | |||
2019 |
18,255 |
|
Debt consisted of the following:
June 30, | December 31, | |||||||
2014 | 2013 | |||||||
Senior Secured Credit Facility |
||||||||
Revolving Facility |
$ | — | $ | — | ||||
Senior Notes |
1,325,000 | 1,325,000 | ||||||
Accounts Receivable Securitization Facility |
— | — | ||||||
Other indebtedness |
12,083 | 11,421 | ||||||
|
|
|
|
|||||
Total debt |
1,337,083 | 1,336,421 | ||||||
Less: short-term borrowings and current portion of long-term debt |
(142,055 | ) | (8,754 | ) | ||||
|
|
|
|
|||||
Total long-term debt |
$ | 1,195,028 | $ | 1,327,667 | ||||
|
|
|
|
The Company may redeem all or part of the Senior Notes at any time prior to August 1, 2015 by paying a make-whole premium, plus accrued and unpaid interest to the redemption date. The Company may redeem all or part of the Senior Notes at any time after August 1, 2015 at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interest, if any, on the notes redeemed, to the applicable date of redemption, if redeemed during the twelve-month period beginning on of the year indicated below:
12-month period commencing August 1 in Year |
Percentage | |||
2015 |
104.375 | % | ||
2016 |
102.188 | % | ||
2017 and thereafter |
100.000 | % |
|
The following tables present the estimated fair value of the Company’s outstanding debt not carried at fair value as of June 30, 2014 and December 31, 2013, respectively:
Quoted Prices in Active Markets for Identical Items (Level 1) |
Significant Other Observable Inputs (Level 2) |
Total | ||||||||||
June 30, 2014 |
||||||||||||
Senior Notes |
$ | — | $ | 1,431,000 | $ | 1,431,000 | ||||||
|
|
|
|
|
|
|||||||
Total fair value |
$ | — | $ | 1,431,000 | $ | 1,431,000 | ||||||
|
|
|
|
|
|
Quoted Prices in Active Markets for Identical Items (Level 1) |
Significant Other Observable Inputs (Level 2) |
Total | ||||||||||
December 31, 2013 |
||||||||||||
Senior Notes |
$ | — | $ | 1,366,406 | $ | 1,366,406 | ||||||
|
|
|
|
|
|
|||||||
Total fair value |
$ | — | $ | 1,366,406 | $ | 1,366,406 | ||||||
|
|
|
|
|
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Effective income tax rate |
(13.9)% | (8.3)% | (195.0)% | (5.7)% |
|
The components of net periodic benefit costs for all significant plans were as follows:
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Defined Benefit Pension Plans |
||||||||||||||||
Service cost |
$ | 3,529 | $ | 3,679 | $ | 7,044 | $ | 7,357 | ||||||||
Interest cost |
1,943 | 1,660 | 3,876 | 3,321 | ||||||||||||
Expected return on plan assets |
(624 | ) | (428 | ) | (1,245 | ) | (856 | ) | ||||||||
Amortization of prior service credit |
(257 | ) | (526 | ) | (513 | ) | (1,052 | ) | ||||||||
Amortization of net loss |
598 | 812 | 1,065 | 1,624 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net periodic benefit cost |
$ | 5,189 | $ | 5,197 | $ | 10,227 | $ | 10,394 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Other Postretirement Plans |
||||||||||||||||
Service cost |
$ | 75 | $ | 71 | $ | 150 | $ | 141 | ||||||||
Interest cost |
78 | 65 | 156 | 131 | ||||||||||||
Amortization of prior service cost |
26 | — | 52 | — | ||||||||||||
Amortization of net gain |
(37 | ) | — | (74 | ) | — | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net periodic benefit cost |
$ | 142 | $ | 136 | $ | 284 | $ | 272 |
|
Emulsion Polymers | Plastics | |||||||||||||||||||||||
Three Months Ended |
Latex | Synthetic Rubber |
Styrenics | Engineered Polymers |
Corporate Unallocated |
Total | ||||||||||||||||||
June 30, 2014 |
||||||||||||||||||||||||
Sales to external customers |
$ | 320,682 | $ | 164,926 | $ | 589,739 | $ | 265,588 | $ | — | $ | 1,340,935 | ||||||||||||
Equity in earnings (losses) of unconsolidated affiliates |
— | — | 6,806 | (1,428 | ) | — | 5,378 | |||||||||||||||||
EBITDA(1) |
24,818 | 37,034 | 27,168 | 5,116 | ||||||||||||||||||||
Investment in unconsolidated affiliates |
— | — | 128,107 | 34,631 | — | 162,738 | ||||||||||||||||||
Depreciation and amortization |
7,336 | 8,474 | 7,360 | 3,166 | 877 | 27,213 | ||||||||||||||||||
June 30, 2013 |
||||||||||||||||||||||||
Sales to external customers |
$ | 344,962 | $ | 156,174 | $ | 597,327 | $ | 263,296 | $ | — | $ | 1,361,759 | ||||||||||||
Equity in earnings (losses) of unconsolidated affiliates |
— | — | 9,246 | (317 | ) | — | 8,929 | |||||||||||||||||
EBITDA(1) |
22,047 | 27,946 | 17,572 | (2,922 | ) | |||||||||||||||||||
Investment in unconsolidated affiliates |
— | — | 113,695 | 37,282 | — | 150,977 | ||||||||||||||||||
Depreciation and amortization |
6,660 | 7,407 | 7,306 | 1,792 | 768 | 23,933 | ||||||||||||||||||
Emulsion Polymers | Plastics | |||||||||||||||||||||||
Six Months Ended |
Latex | Synthetic Rubber |
Styrenics | Engineered Polymers |
Corporate Unallocated |
Total | ||||||||||||||||||
June 30, 2014 |
||||||||||||||||||||||||
Sales to external customers |
$ | 646,988 | $ | 341,639 | $ | 1,184,080 | $ | 527,360 | $ | — | $ | 2,700,067 | ||||||||||||
Equity in earnings (losses) of unconsolidated affiliates |
— | — | 22,342 | (2,014 | ) | — | 20,328 | |||||||||||||||||
EBITDA(1) |
50,331 | 80,134 | 69,435 | 2,757 | ||||||||||||||||||||
Investment in unconsolidated affiliates |
— | — | 128,107 | 34,631 | — | 162,738 | ||||||||||||||||||
Depreciation and amortization |
13,639 | 15,645 | 14,749 | 4,940 | 1,968 | 50,941 | ||||||||||||||||||
June 30, 2013 |
||||||||||||||||||||||||
Sales to external customers |
$ | 701,718 | $ | 332,590 | $ | 1,199,297 | $ | 519,739 | $ | — | $ | 2,753,344 | ||||||||||||
Equity in earnings (losses) of unconsolidated affiliates |
— | — | 12,378 | (650 | ) | — | 11,728 | |||||||||||||||||
EBITDA(1) |
48,773 | 58,605 | 42,963 | (3,717 | ) | |||||||||||||||||||
Investment in unconsolidated affiliates |
— | — | 113,695 | 37,282 | — | 150,977 | ||||||||||||||||||
Depreciation and amortization |
13,471 | 14,439 | 14,904 | 3,473 | 1,513 | 47,800 |
(1) | Reconciliation of EBITDA to net loss is as follows: |
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Total Segment EBITDA |
$ | 94,136 | $ | 64,643 | $ | 202,657 | $ | 146,624 | ||||||||
Corporate unallocated |
(73,492 | ) | (32,886 | ) | (95,631 | ) | (68,470 | ) | ||||||||
Less: Interest expense, net |
32,602 | 33,738 | 65,420 | 66,046 | ||||||||||||
Less: Provision for income taxes |
5,450 | 2,150 | 18,200 | 2,050 | ||||||||||||
Less: Depreciation and amortization |
27,213 | 23,933 | 50,941 | 47,800 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss |
$ | (44,621 | ) | $ | (28,064 | ) | $ | (27,535 | ) | $ | (37,742 | ) | ||||
|
|
|
|
|
|
|
|
|
The following table provides a rollforward of the liability balances associated with the Altona plant shutdown:
Balance at December 31, 2013 |
Expenses | Deductions* | Balance at June 30, 2014 |
|||||||||||||
Employee termination benefit charges |
$ | 1,408 | $ | 302 | $ | (1,327 | ) | $ | 383 | |||||||
Contract termination charges |
3,388 | 1,409 | (1,534 | ) | 3,263 | |||||||||||
Other** |
26 | 548 | (504 | ) | 70 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 4,822 | $ | 2,259 | $ | (3,365 | ) | $ | 3,716 | |||||||
|
|
|
|
|
|
|
|
* | Includes primarily payments made against the existing accrual, as well as immaterial impacts of foreign currency remeasurement. |
** | Includes decommissioning charges primarily related to labor service costs. |
|
The components of accumulated other comprehensive income (loss), net of income taxes, consisted of:
Currency Translation Adjustment, Net |
Employee Benefits, Net |
Total | ||||||||||
December 31, 2013 |
$ | 116,146 | $ | (27,768 | ) | $ | 88,378 | |||||
Other comprehensive income (loss) |
(10,352 | ) | 580 | (9,772 | ) | |||||||
|
|
|
|
|
|
|||||||
June 30, 2014 |
$ | 105,794 | $ | (27,188 | ) | $ | 78,606 | |||||
|
|
|
|
|
|
|||||||
December 31, 2012 |
$ | 62,807 | $ | (38,234 | ) | $ | 24,573 | |||||
Other comprehensive income (loss) |
(10,839 | ) | 20,132 | 9,293 | ||||||||
|
|
|
|
|
|
|||||||
June 30, 2013 |
$ | 51,968 | $ | (18,102 | ) | $ | 33,866 | |||||
|
|
|
|
|
|
|
Supplemental Condensed Consolidating Statements of Comprehensive Income (Loss):
Parent Guarantor | Issuers | Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | ||||||||||||||||||||||||||||||||||||
As Reported |
As Revised |
As Reported |
As Revised |
As Reported |
As Revised |
As Reported |
As Revised |
As Reported |
As Revised |
|||||||||||||||||||||||||||||||
Six Months Ended June 30, 2013 |
||||||||||||||||||||||||||||||||||||||||
Net sales |
$ | — | $ | — | $ | — | $ | — | $ | 2,493,615 | $ | 2,492,478 | $ | 656,638 | $ | 766,674 | $ | (396,909 | ) | $ | (505,808 | ) | ||||||||||||||||||
Operating income (loss) |
(5,266 | ) | (5,266 | ) | (1,983 | ) | (1,983 | ) | 53,683 | 53,351 | 9,452 | 9,784 | 920 | 920 | ||||||||||||||||||||||||||
Net income (loss) |
(37,742 | ) | (37,742 | ) | (23,328 | ) | (23,328 | ) | (10,013 | ) | (10,006 | ) | (1,484 | ) | (1,673 | ) | 34,825 | 35,007 |
Supplemental Condensed Consolidating Statements of Cash Flows:
Parent Guarantor | Issuers | Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | ||||||||||||||||||||||||||||||||||||
As Reported |
As Revised |
As Reported |
As Revised |
As Reported |
As Revised |
As Reported |
As Revised |
As Reported |
As Revised |
|||||||||||||||||||||||||||||||
Six Months Ended June 30, 2013 |
||||||||||||||||||||||||||||||||||||||||
Cash flows from operating activities |
$ | (29 | ) | $ | (29 | ) | $ | 61,692 | $ | 61,692 | $ | (19,911 | ) | $ | (17,783 | ) | $ | (48,240 | ) | $ | (50,368 | ) | $ | — | $ | — | ||||||||||||||
Cash flows from investing activities |
— | — | — | (4,000 | ) | (220,820 | ) | (218,353 | ) | 3,660 | 1,193 | 200,809 | 204,809 | |||||||||||||||||||||||||||
Cash flows from financing activities |
36 | 36 | (90,003 | ) | (86,003 | ) | 188,834 | 184,224 | 60,518 | 65,128 | (200,809 | ) | (204,809 | ) |
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
(In thousands)
June 30, 2014 | ||||||||||||||||||||||||
Parent Guarantor |
Issuers | Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||||||
Assets |
||||||||||||||||||||||||
Current assets |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | 2,857 | $ | 2,439 | $ | 267,815 | $ | 50,433 | $ | — | $ | 323,544 | ||||||||||||
Accounts receivable, net |
— | 49 | 250,423 | 524,680 | — | 775,152 | ||||||||||||||||||
Intercompany receivables |
— | 505,580 | 1,349,191 | 134,327 | (1,989,098 | ) | — | |||||||||||||||||
Inventories |
— | — | 433,033 | 96,137 | (2,975 | ) | 526,195 | |||||||||||||||||
Deferred income tax assets |
— | — | 4,633 | 5,308 | — | 9,941 | ||||||||||||||||||
Other current assets |
— | 270 | 7,916 | 11,196 | — | 19,382 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current assets |
2,857 | 508,338 | 2,313,011 | 822,081 | (1,992,073 | ) | 1,654,214 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Investments in unconsolidated affiliates |
— | — | 162,738 | — | — | 162,738 | ||||||||||||||||||
Property, plant and equipment, net |
— | — | 456,142 | 130,278 | — | 586,420 | ||||||||||||||||||
Other assets |
||||||||||||||||||||||||
Goodwill |
— | — | 36,967 | — | — | 36,967 | ||||||||||||||||||
Other intangible assets, net |
— | — | 188,911 | 173 | — | 189,084 | ||||||||||||||||||
Investments in subsidiaries |
508,555 | 1,291,864 | 626,186 | — | (2,426,605 | ) | — | |||||||||||||||||
Intercompany notes receivable— noncurrent |
— | 1,355,675 | 17,593 | — | (1,373,268 | ) | — | |||||||||||||||||
Deferred income tax assets—noncurrent |
— | — | 33,064 | 5,877 | — | 38,941 | ||||||||||||||||||
Deferred charges and other assets |
14 | 44,581 | 26,824 | 687 | 646 | 72,752 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total other assets |
508,569 | 2,692,120 | 929,545 | 6,737 | (3,799,227 | ) | 337,744 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total assets |
$ | 511,426 | $ | 3,200,458 | $ | 3,861,436 | $ | 959,096 | $ | (5,791,300 | ) | $ | 2,741,116 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Liabilities and shareholders’ equity |
||||||||||||||||||||||||
Current liabilities |
||||||||||||||||||||||||
Short-term borrowings and current portion of long-term debt |
$ | — | $ | 132,500 | $ | — | $ | 9,555 | $ | — | $ | 142,055 | ||||||||||||
Accounts payable |
64 | 2,154 | 441,654 | 63,164 | — | 507,036 | ||||||||||||||||||
Intercompany payables |
1,295 | 780,468 | 527,708 | 678,598 | (1,988,069 | ) | — | |||||||||||||||||
Income taxes payable |
— | 4 | 7,147 | 2,916 | (34 | ) | 10,033 | |||||||||||||||||
Deferred income tax liabilities |
— | — | 1,112 | 315 | — | 1,427 | ||||||||||||||||||
Accrued expenses and other current liabilities |
458 | 57,009 | 61,361 | 15,217 | — | 134,045 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current liabilities |
1,817 | 972,135 | 1,038,982 | 769,765 | (1,988,103 | ) | 794,596 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Noncurrent liabilities |
||||||||||||||||||||||||
Long-term debt |
— | 1,192,500 | 2,528 | — | — | 1,195,028 | ||||||||||||||||||
Intercompany notes payable—noncurrent |
— | — | 1,343,860 | 29,408 | (1,373,268 | ) | — | |||||||||||||||||
Deferred income tax liabilities—noncurrent |
— | 2,441 | 21,428 | 8,753 | — | 32,622 | ||||||||||||||||||
Other noncurrent obligations |
— | — | 196,678 | 12,583 | — | 209,261 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total noncurrent liabilities |
— | 1,194,941 | 1,564,494 | 50,744 | (1,373,268 | ) | 1,436,911 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Commitments and contingencies (Note J) |
||||||||||||||||||||||||
Shareholders’ equity |
509,609 | 1,033,382 | 1,257,960 | 138,587 | (2,429,929 | ) | 509,609 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities and shareholders’ equity |
$ | 511,426 | $ | 3,200,458 | $ | 3,861,436 | $ | 959,096 | $ | (5,791,300 | ) | $ | 2,741,116 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
(In thousands)
December 31, 2013 | ||||||||||||||||||||||||
Parent Guarantor |
Issuers | Guarantor Subsidiaries |
Non-Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||||||
Assets |
||||||||||||||||||||||||
Current assets |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | 2 | $ | 954 | $ | 154,770 | $ | 40,777 | $ | — | $ | 196,503 | ||||||||||||
Accounts receivable, net |
— | — | 272,745 | 444,739 | (2 | ) | 717,482 | |||||||||||||||||
Intercompany receivables |
— | 554,795 | 1,242,405 | 93,841 | (1,891,041 | ) | — | |||||||||||||||||
Inventories |
— | — | 439,952 | 93,019 | (2,780 | ) | 530,191 | |||||||||||||||||
Deferred income tax assets |
— | — | 5,077 | 4,743 | — | 9,820 | ||||||||||||||||||
Other current assets |
— | 3,954 | 4,386 | 14,410 | — | 22,750 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current assets |
2 | 559,703 | 2,119,335 | 691,529 | (1,893,823 | ) | 1,476,746 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Investments in unconsolidated affiliates |
— | — | 155,887 | — | — | 155,887 | ||||||||||||||||||
Property, plant and equipment, net |
— | — | 476,137 | 130,290 | — | 606,427 | ||||||||||||||||||
Other assets |
||||||||||||||||||||||||
Goodwill |
— | — | 37,273 | — | — | 37,273 | ||||||||||||||||||
Other intangible assets, net |
— | — | 171,352 | 162 | — | 171,514 | ||||||||||||||||||
Investments in subsidiaries |
343,429 | 1,232,608 | 615,153 | — | (2,191,190 | ) | — | |||||||||||||||||
Intercompany notes receivable— noncurrent |
— | 1,359,637 | 17,739 | — | (1,377,376 | ) | — | |||||||||||||||||
Deferred income tax assets—noncurrent |
— | — | 36,260 | 6,678 | — | 42,938 | ||||||||||||||||||
Deferred charges and other assets |
— | 48,801 | 33,607 | 990 | 598 | 83,996 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total other assets |
343,429 | 2,641,046 | 911,384 | 7,830 | (3,567,968 | ) | 335,721 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total assets |
$ | 343,431 | $ | 3,200,749 | $ | 3,662,743 | $ | 829,649 | $ | (5,461,791 | ) | $ | 2,574,781 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Liabilities and shareholders’ equity |
||||||||||||||||||||||||
Current liabilities |
||||||||||||||||||||||||
Short-term borrowings and current portion of long-term debt |
$ | — | $ | 3,646 | $ | — | $ | 5,108 | $ | — | $ | 8,754 | ||||||||||||
Accounts payable |
— | 2,570 | 436,147 | 70,378 | (2 | ) | 509,093 | |||||||||||||||||
Intercompany payables |
158 | 763,022 | 550,741 | 576,354 | (1,890,275 | ) | — | |||||||||||||||||
Income taxes payable |
— | — | 9,407 | 276 | — | 9,683 | ||||||||||||||||||
Deferred income tax liabilities |
— | — | 784 | 2,119 | — | 2,903 | ||||||||||||||||||
Accrued expenses and other current liabilities |
71 | 58,977 | 66,061 | 11,020 | — | 136,129 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total current liabilities |
229 | 828,215 | 1,063,140 | 665,255 | (1,890,277 | ) | 666,562 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Noncurrent liabilities |
||||||||||||||||||||||||
Long-term debt |
— | 1,325,000 | 2,667 | — | — | 1,327,667 | ||||||||||||||||||
Intercompany notes payable—noncurrent |
— | — | 1,347,773 | 29,602 | (1,377,375 | ) | — | |||||||||||||||||
Deferred income tax liabilities—noncurrent |
— | 1,600 | 17,115 | 8,217 | — | 26,932 | ||||||||||||||||||
Other noncurrent obligations |
— | — | 198,479 | 11,939 | — | 210,418 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total noncurrent liabilities |
— | 1,326,600 | 1,566,034 | 49,758 | (1,377,375 | ) | 1,565,017 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Commitments and contingencies (Note J) |
||||||||||||||||||||||||
Shareholders’ equity |
343,202 | 1,045,934 | 1,033,569 | 114,636 | (2,194,139 | ) | 343,202 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total liabilities and shareholders’ equity |
$ | 343,431 | $ | 3,200,749 | $ | 3,662,743 | $ | 829,649 | $ | (5,461,791 | ) | $ | 2,574,781 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
Three Months Ended June 30, 2014 | ||||||||||||||||||||||||
Parent Guarantor |
Issuers | Guarantor Subsidiaries |
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||||||
Net sales |
$ | — | $ | — | $ | 1,236,394 | $ | 358,624 | $ | (254,083 | ) | $ | 1,340,935 | |||||||||||
Cost of sales |
— | 211 | 1,156,891 | 344,556 | (253,133 | ) | 1,248,525 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Gross profit |
— | (211 | ) | 79,503 | 14,068 | (950 | ) | 92,410 | ||||||||||||||||
Selling, general and administrative expenses |
2,590 | 16,444 | 49,108 | 6,066 | — | 74,208 | ||||||||||||||||||
Equity in earnings of unconsolidated affiliates |
— | — | 5,378 | — | — | 5,378 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
(2,590 | ) | (16,655 | ) | 35,773 | 8,002 | (950 | ) | 23,580 | |||||||||||||||
Interest expense, net |
— | 31,628 | 328 | 646 | — | 32,602 | ||||||||||||||||||
Intercompany interest expense (income), net |
3 | (20,898 | ) | 18,031 | 2,861 | 3 | — | |||||||||||||||||
Other expense (income) |
727 | 23,894 | 101 | 5,441 | (14 | ) | 30,149 | |||||||||||||||||
Equity in loss (earnings) of subsidiaries |
41,301 | (23,627 | ) | 30,980 | — | (48,654 | ) | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before income taxes |
(44,621 | ) | (27,652 | ) | (13,667 | ) | (946 | ) | 47,715 | (39,171 | ) | |||||||||||||
Provision for (benefit from) income taxes |
— | 1,017 | 4,019 | 741 | (327 | ) | 5,450 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) |
$ | (44,621 | ) | $ | (28,669 | ) | $ | (17,686 | ) | $ | (1,687 | ) | $ | 48,042 | $ | (44,621 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income (loss) |
$ | (53,212 | ) | $ | (37,260 | ) | $ | (26,536 | ) | $ | (1,428 | ) | $ | 65,224 | $ | (53,212 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
Three Months Ended June 30, 2013 | ||||||||||||||||||||||||
Parent Guarantor |
Issuers | Guarantor Subsidiaries |
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||||||
Net sales |
$ | — | $ | — | $ | 1,223,278 | $ | 393,342 | $ | (254,861 | ) | $ | 1,361,759 | |||||||||||
Cost of sales |
— | 217 | 1,165,656 | 384,801 | (254,424 | ) | 1,296,250 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Gross profit |
— | (217 | ) | 57,622 | 8,541 | (437 | ) | 65,509 | ||||||||||||||||
Selling, general and administrative expenses |
3,112 | 272 | 45,994 | 5,396 | — | 54,774 | ||||||||||||||||||
Equity in earnings of unconsolidated affiliates |
— | — | 8,929 | — | — | 8,929 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income (loss) |
(3,112 | ) | (489 | ) | 20,557 | 3,145 | (437 | ) | 19,664 | |||||||||||||||
Interest expense, net |
— | 31,830 | 1,258 | 650 | — | 33,738 | ||||||||||||||||||
Intercompany interest expense (income), net |
2 | (22,235 | ) | 18,990 | 3,182 | 61 | — | |||||||||||||||||
Other expense (income) |
2 | (3,238 | ) | 11,290 | 4,144 | (358 | ) | 11,840 | ||||||||||||||||
Equity in loss (earnings) of subsidiaries |
24,948 | 12,888 | 23,886 | — | (61,722 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before income taxes |
(28,064 | ) | (19,734 | ) | (34,867 | ) | (4,831 | ) | 61,582 | (25,914 | ) | |||||||||||||
Provision for (benefit from) income taxes |
— | — | 3,268 | (918 | ) | (200 | ) | 2,150 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) |
$ | (28,064 | ) | $ | (19,734 | ) | $ | (38,135 | ) | $ | (3,913 | ) | $ | 61,782 | $ | (28,064 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income (loss) |
$ | (9,149 | ) | $ | (819 | ) | $ | (20,060 | ) | $ | (3,073 | ) | $ | 23,952 | $ | (9,149 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
Six Months Ended June 30, 2014 | ||||||||||||||||||||||||
Parent Guarantor |
Issuers | Guarantor Subsidiaries |
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||||||
Net sales |
$ | — | $ | — | $ | 2,463,957 | $ | 705,921 | $ | (469,811 | ) | $ | 2,700,067 | |||||||||||
Cost of sales |
— | 368 | 2,303,968 | 674,279 | (469,587 | ) | 2,509,028 | |||||||||||||||||
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Gross profit |
— | (368 | ) | 159,989 | 31,642 | (224 | ) | 191,039 | ||||||||||||||||
Selling, general and administrative expenses |
5,296 | 17,130 | 91,184 | 10,628 | — | 124,238 | ||||||||||||||||||
Equity in earnings of unconsolidated affiliates |
— | — | 20,328 | — | — | 20,328 | ||||||||||||||||||
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Operating income (loss) |
(5,296 | ) | (17,498 | ) | 89,133 | 21,014 | (224 | ) | 87,129 | |||||||||||||||
Interest expense, net |
— | 63,216 | 641 | 1,563 | — | 65,420 | ||||||||||||||||||
Intercompany interest expense (income), net |
5 | (40,728 | ) | 34,678 | 6,013 | 32 | — | |||||||||||||||||
Other expense (income) |
727 | 20,806 | (723 | ) | 10,248 | (14 | ) | 31,044 | ||||||||||||||||
Equity in loss (earnings) of subsidiaries |
21,507 | (59,013 | ) | 3,813 | — | 33,693 | — | |||||||||||||||||
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Income (loss) before income taxes |
(27,535 | ) | (1,779 | ) | 50,724 | 3,190 | (33,935 | ) | (9,335 | ) | ||||||||||||||
Provision for (benefit from) income taxes |
— | 1,017 | 13,201 | 4,057 | (75 | ) | 18,200 | |||||||||||||||||
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Net income (loss) |
$ | (27,535 | ) | $ | (2,796 | ) | $ | 37,523 | $ | (867 | ) | $ | (33,860 | ) | $ | (27,535 | ) | |||||||
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Comprehensive income (loss) |
$ | (37,307 | ) | $ | (12,568 | ) | $ | 28,098 | $ | (1,214 | ) | $ | (14,316 | ) | $ | (37,307 | ) | |||||||
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SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
Six Months Ended June 30, 2013 | ||||||||||||||||||||||||
Parent Guarantor |
Issuers | Guarantor Subsidiaries |
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||||||
Net sales |
$ | — | $ | — | $ | 2,492,478 | $ | 766,674 | $ | (505,808 | ) | $ | 2,753,344 | |||||||||||
Cost of sales |
— | 578 | 2,367,050 | 746,132 | (506,728 | ) | 2,607,032 | |||||||||||||||||
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Gross profit |
— | (578 | ) | 125,428 | 20,542 | 920 | 146,312 | |||||||||||||||||
Selling, general and administrative expenses |
5,266 | 1,405 | 83,805 | 10,758 | — | 101,234 | ||||||||||||||||||
Equity in earnings of unconsolidated affiliates |
— | — | 11,728 | — | — | 11,728 | ||||||||||||||||||
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Operating income (loss) |
(5,266 | ) | (1,983 | ) | 53,351 | 9,784 | 920 | 56,806 | ||||||||||||||||
Interest expense, net |
— | 62,561 | 2,477 | 1,008 | — | 66,046 | ||||||||||||||||||
Intercompany interest expense (income), net |
3 | (43,109 | ) | 36,756 | 6,346 | 4 | — | |||||||||||||||||
Loss on extinguishment of long-term debt |
— | 20,744 | — | — | — | 20,744 | ||||||||||||||||||
Other expense (income) |
(1 | ) | 3,661 | (4,272 | ) | 6,501 | (181 | ) | 5,708 | |||||||||||||||
Equity in loss (earnings) of subsidiaries |
32,474 | (22,688 | ) | 24,904 | — | (34,690 | ) | — | ||||||||||||||||
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Income (loss) before income taxes |
(37,742 | ) | (23,152 | ) | (6,514 | ) | (4,071 | ) | 35,787 | (35,692 | ) | |||||||||||||
Provision for (benefit from) income taxes |
— | 176 | 3,492 | (2,398 | ) | 780 | 2,050 | |||||||||||||||||
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Net income (loss) |
$ | (37,742 | ) | $ | (23,328 | ) | $ | (10,006 | ) | $ | (1,673 | ) | $ | 35,007 | $ | (37,742 | ) | |||||||
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Comprehensive income (loss) |
$ | (28,449 | ) | $ | (14,035 | ) | $ | (1,585 | ) | $ | (801 | ) | $ | 16,421 | $ | (28,449 | ) | |||||||
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SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(In thousands)
Six Months Ended June 30, 2014 | ||||||||||||||||||||||||
Parent Guarantor |
Issuers | Guarantor Subsidiaries |
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||||||
Cash flows from operating activities |
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Cash provided by (used in) operating activities |
$ | (119 | ) | $ | (54,821 | ) | $ | 18,723 | $ | 44,081 | $ | — | $ | 7,864 | ||||||||||
Cash flows from investing activities |
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Capital expenditures |
— | — | (49,676 | ) | (6,068 | ) | — | (55,744 | ) | |||||||||||||||
Proceeds from the sale of property, plant and equipment |
— | — | — | 5,434 | — | 5,434 | ||||||||||||||||||
Payment for working capital adjustment from sale of business |
— | — | (700 | ) | — | — | (700 | ) | ||||||||||||||||
Distributions from unconsolidated affiliates |
— | — | 978 | — | — | 978 | ||||||||||||||||||
Investments in subsidiaries |
(196,400 | ) | (10,000 | ) | (7,226 | ) | — | 213,626 | — | |||||||||||||||
Intercompany investing activities |
— | 2,000 | (89,900 | ) | — | 87,900 | — | |||||||||||||||||
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Cash provided by (used in) investing activities |
(196,400 | ) | (8,000 | ) | (146,524 | ) | (634 | ) | 301,526 | (50,032 | ) | |||||||||||||
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Cash flows from financing activities |
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Proceeds from initial public offering, net of offering costs |
199,152 | — | — | — | — | 199,152 | ||||||||||||||||||
Intercompany short-term borrowings, net |
222 | 67,924 | 21,670 | (12,916 | ) | (76,900 | ) | — | ||||||||||||||||
Short-term borrowings, net |
— | (3,646 | ) | (140 | ) | (25,616 | ) | — | (29,402 | ) | ||||||||||||||
Contributions from parent companies |
— | — | 206,400 | 7,226 | (213,626 | ) | — | |||||||||||||||||
Proceeds from issuance of intercompany long-term debt |
— | — | 13,000 | (2,000 | ) | (11,000 | ) | — | ||||||||||||||||
Proceeds from issuance of Accounts Receivable Securitization Facility |
— | — | — | 178,603 | — | 178,603 | ||||||||||||||||||
Repayments of Accounts Receivable Securitization Facility |
— | — | — | (179,170 | ) | — | (179,170 | ) | ||||||||||||||||
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Cash provided by (used in) financing activities |
199,374 | 64,278 | 240,930 | (33,873 | ) | (301,526 | ) | 169,183 | ||||||||||||||||
Effect of exchange rates on cash |
— | 28 | (84 | ) | 82 | — | 26 | |||||||||||||||||
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Net change in cash and cash equivalents |
2,855 | 1,485 | 113,045 | 9,656 | — | 127,041 | ||||||||||||||||||
Cash and cash equivalents—beginning of period |
2 | 954 | 154,770 | 40,777 | — | 196,503 | ||||||||||||||||||
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Cash and cash equivalents—end of period |
$ | 2,857 | $ | 2,439 | $ | 267,815 | $ | 50,433 | $ | — | $ | 323,544 | ||||||||||||
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SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(In thousands)
Six Months Ended June 30, 2013 | ||||||||||||||||||||||||
Parent Guarantor |
Issuers | Guarantor Subsidiaries |
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | |||||||||||||||||||
Cash flows from operating activities |
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Cash provided by (used in) operating activities |
$ | (29 | ) | $ | 61,692 | $ | (17,783 | ) | $ | (50,368 | ) | $ | — | $ | (6,488 | ) | ||||||||
Cash flows from investing activities |
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Capital expenditures |
— | — | (25,174 | ) | (3,948 | ) | — | (29,122 | ) | |||||||||||||||
Proceeds from capital expenditures subsidy |
— | — | 6,575 | — | — | 6,575 | ||||||||||||||||||
Advance payment refunded |
— | — | — | (2,711 | ) | — | (2,711 | ) | ||||||||||||||||
Distributions from unconsolidated affiliates |
— | — | 1,055 | — | — | 1,055 | ||||||||||||||||||
Intercompany investing activities |
— | (4,000 | ) | (200,809 | ) | — | 204,809 | — | ||||||||||||||||
Decrease in restricted cash |
— | — | — | 7,852 | — | 7,852 | ||||||||||||||||||
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Cash provided by (used in) investing activities |
— | (4,000 | ) | (218,353 | ) | 1,193 | 204,809 | (16,351 | ) | |||||||||||||||
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Cash flows from financing activities |
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Deferred financing fees |
— | (46,284 | ) | — | — | — | (46,284 | ) | ||||||||||||||||
Intercompany short-term borrowings, net |
36 | (2,178 | ) | 184,355 | 18,596 | (200,809 | ) | — | ||||||||||||||||
Short-term borrowings, net |
— | (3,541 | ) | (131 | ) | (14,176 | ) | — | (17,848 | ) | ||||||||||||||
Proceeds from issuance of intercompany long-term debt |
— | — | — | 4,000 | (4,000 | ) | — | |||||||||||||||||
Repayments of Term Loans |
— | (1,239,000 | ) | — | — | — | (1,239,000 | ) | ||||||||||||||||
Proceeds from issuance of Senior Notes |
— | 1,325,000 | — | — | — | 1,325,000 | ||||||||||||||||||
Proceeds from issuance of Accounts Receivable Securitization Facility |
— | — | — | 222,592 | — | 222,592 | ||||||||||||||||||
Repayments of Accounts Receivable Securitization Facility |
— | — | — | (165,884 | ) | — | (165,884 | ) | ||||||||||||||||
Proceeds from the draw of revolving debt |
— | 405,000 | — | — | — | 405,000 | ||||||||||||||||||
Repayments on the revolving debt |
— | (525,000 | ) | — | — | — | (525,000 | ) | ||||||||||||||||
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Cash provided by (used in) financing activities |
36 | (86,003 | ) | 184,224 | 65,128 | (204,809 | ) | (41,424 | ) | |||||||||||||||
Effect of exchange rates on cash |
— | 31 | (1,295 | ) | (206 | ) | — | (1,470 | ) | |||||||||||||||
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Net change in cash and cash equivalents |
7 | (28,280 | ) | (53,207 | ) | 15,747 | — | (65,733 | ) | |||||||||||||||
Cash and cash equivalents—beginning of period |
3 | 29,411 | 182,088 | 24,855 | — | 236,357 | ||||||||||||||||||
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Cash and cash equivalents—end of period |
$ | 10 | $ | 1,131 | $ | 128,881 | $ | 40,602 | $ | — | $ | 170,624 | ||||||||||||
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