Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 
FORM 10-Q

 
 
(Mark One)                                                                                                                                                                                         
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2016
or
◻ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-36473

 
Trinseo S.A.
(Exact name of registrant as specified in its charter)

 
 	 	
Luxembourg	N/A	
(State or other jurisdiction of
incorporation or organization)	(I.R.S. Employer
Identification Number)	
 
1000 Chesterbrook Boulevard
Suite 300
Berwyn, PA 19312
(Address of Principal Executive Offices)
(610) 240-3200
(Registrant’s telephone number)

 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ☒     No   ◻  
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ☒     No   ◻  
Indicate by check mark whether the Company is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 	 	 	 	
Large accelerated filer	◻	Accelerated filer	☒	
 	 	 	 	
Non-accelerated filer	◻   (Do not check if a smaller reporting company)	Smaller reporting company	◻	
 
Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ◻     No   ☒  
 
As of August 1, 2016, there were 46,406,333 of the registrant’s ordinary shares outstanding.

 

 
Table of Contents
 
TABLE OF CONTENTS

 	    	 	    	Page	 	
 	 	 	 	 	 	
Part I  	 	Financial Information	 	 	 	
 	 	 	 	 	 	
Item 1.  	 	Financial Statements	 	4  	 	
 	 	 	 	 	 	
 	 	Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015 (Unaudited)	 	4  	 	
 	 	 	 	 	 	
 	 	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2016 and 2015 (Unaudited)	 	5  	 	
 	 	 	 	 	 	
 	 	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2016 and 2015 (Unaudited)	 	6  	 	
 	 	 	 	 	 	
 	 	Condensed Consolidated Statements of Shareholders’ Equity for the six months ended June 30, 2016 and 2015 (Unaudited)	 	7  	 	
 	 	 	 	 	 	
 	 	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015 (Unaudited)	 	8  	 	
 	 	 	 	 	 	
 	 	Notes to Condensed Consolidated Financial Statements (Unaudited)	 	9  	 	
 	 	 	 	 	 	
Item 2.  	 	Management’s Discussion and Analysis of Financial Condition and Results of Operations	 	29  	 	
 	 	 	 	 	 	
Item 3.  	 	Quantitative and Qualitative Disclosures about Market Risk	 	45  	 	
 	 	 	 	 	 	
Item 4.  	 	Controls and Procedures	 	45  	 	
 	 	 	 	 	 	
Part II  	 	Other Information	 	 	 	
 	 	 	 	 	 	
Item 1.  	 	Legal Proceedings	 	45  	 	
 	 	 	 	 	 	
Item 1A.  	 	Risk Factors	 	46  	 	
 	 	 	 	 	 	
Item 2.  	 	Unregistered Sales of Equity Securities and Use of Proceeds	 	46  	 	
 	 	 	 	 	 	
Item 3.  	 	Defaults Upon Senior Securities	 	47  	 	
 	 	 	 	 	 	
Item 4.  	 	Mine Safety Disclosures	 	47  	 	
 	 	 	 	 	 	
Item 5.  	 	Other Information	 	47  	 	
 	 	 	 	 	 	
Item 6.  	 	Exhibits	 	47  	 	
 	 	 	 	 	 	
Signatures  	 	 	 	 	 	
 	 	 	 	 	 	
Exhibit Index  	 	 	 	 	 	

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Trinseo S.A.
Quarterly Report on Form 10-Q
For the quarterly period ended June 30, 2016
Unless otherwise indicated or required by context, as used in this Quarterly Report on Form 10-Q (“Quarterly Report”), the term “Trinseo” refers to Trinseo S.A. (NYSE: TSE), a public limited liability company (société anonyme) existing under the laws of Luxembourg, and not its subsidiaries. The terms “Company,” “we,” “us” and “our” refer to Trinseo and its consolidated subsidiaries, taken as a consolidated entity and as required by context, may also include our business as owned by our predecessor, The Dow Chemical Company, for any dates prior to June 17, 2010. The terms “Trinseo Materials Operating S.C.A.” and “Trinseo Materials Finance, Inc.” refer to Trinseo’s indirect subsidiaries, Trinseo Materials Operating S.C.A., a Luxembourg partnership limited by shares incorporated under the laws of Luxembourg, and Trinseo Materials Finance, Inc., a Delaware corporation, and not their subsidiaries. All financial data provided in this Quarterly Report is the financial data of the Company, unless otherwise indicated.
Prior to our formation, our business was wholly owned by The Dow Chemical Company. We refer to our predecessor business as “the Styron business.” On June 17, 2010, investment funds advised or managed by affiliates of Bain Capital Partners, LLC (“Bain Capital”) acquired the Styron business and Dow Europe Holding B.V., which we refer to as “Dow Europe,” or, together with other affiliates of The Dow Chemical Company, “Dow,” retained an ownership interest in the Styron business through an indirect ownership interest in us. We refer to our acquisition by Bain Capital as the “Acquisition.”
Definitions of capitalized terms not defined herein appear in the notes to our condensed consolidated financial statements.
Cautionary Note on Forward-Looking Statements
This Quarterly Report contains forward-looking statements including, without limitation, statements concerning plans, objectives, goals, projections, strategies, future events or performance, and underlying assumptions and other statements, which are not statements of historical facts. Forward-looking statements may be identified by the use of words like “expect,” “anticipate,” “intend,” “forecast,” “outlook,” “will,” “may,” “might,” “potential,” “likely,” “target,” “plan,” “contemplate,” “seek,” “attempt,” “should,” “could,” “would” or expressions of similar meaning. Forward-looking statements reflect management’s evaluation of information currently available and are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Specific factors that may impact performance or other predictions of future actions have, in many but not all cases, been identified in connection with specific forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in our Annual Report on Form 10-K for the year ended December 31, 2015 (“Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on March 11, 2016 under Part I, Item IA— “Risk Factors”, and elsewhere within this Quarterly Report.
As a result of these or other factors, our actual results may differ materially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Therefore, we caution you against relying on these forward-looking statements. The forward-looking statements included in this Quarterly Report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
Available Information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are available free of charge through the Investor Relations section of our website, www.trinseo.com , as soon as reasonably practicable after the reports are electronically filed or furnished with the U.S. Securities and Exchange Commission.  We provide this website and information contained in or connected to it for informational purposes only.  That information is not a part of this Quarterly Report.

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PART I —FINANCIAL INFORMATIO  N
Item 1. Financial Statements   
TRINSEO S.A.
Condensed Consolidated Balance Sheet  s  
(In thousands, except per share data)
(Unaudited)

 	 	June 30, 	 	December 31,	 	
 	    	2016	 	2015	 	
Assets	    	 	 	 	 	    	 	
Current assets	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	
465,213	 	$	
431,261	 	
Accounts receivable, net of allowance for doubtful accounts (June 30, 2016: $2,862; December 31, 2015: $2,417)	 	 	
534,860	 	 	
494,556	 	
Inventories	 	 	
365,139	 	 	
353,097	 	
Other current assets	 	 	
27,096	 	 	
10,120	 	
Total current assets	 	 	
1,392,308	 	 	
1,289,034	 	
Investments in unconsolidated affiliates	 	 	
190,314	 	 	
182,836	 	
Property, plant and equipment, net of accumulated depreciation (June 30, 2016: $410,753; December 31, 2015: $375,315)	 	 	
505,319	 	 	
518,751	 	
Other assets	 	 	 	 	 	 	 	
Goodwill	 	 	
31,169	 	 	
31,064	 	
Other intangible assets, net	 	 	
171,644	 	 	
158,218	 	
Deferred income tax assets—noncurrent	 	 	
42,705	 	 	
51,395	 	
Deferred charges and other assets	 	 	
29,168	 	 	
27,596	 	
Total other assets	 	 	
274,686	 	 	
268,273	 	
Total assets	 	$	
2,362,627	 	$	
2,258,894	 	
Liabilities and shareholders’ equity	 	 	 	 	 	 	 	
Current liabilities	 	 	 	 	 	 	 	
Short-term borrowings and current portion of long-term debt	 	$	
5,000	 	$	
5,000	 	
Accounts payable	 	 	
330,413	 	 	
324,629	 	
Income taxes payable	 	 	
20,229	 	 	
20,804	 	
Accrued expenses and other current liabilities	 	 	
107,828	 	 	
98,836	 	
Total current liabilities	 	 	
463,470	 	 	
449,269	 	
Noncurrent liabilities	 	 	 	 	 	 	 	
Long-term debt, net of unamortized deferred financing fees	 	 	
1,183,287	 	 	
1,177,120	 	
Deferred income tax liabilities—noncurrent	 	 	
27,979	 	 	
25,764	 	
Other noncurrent obligations	 	 	
224,478	 	 	
217,727	 	
Total noncurrent liabilities	 	 	
1,435,744	 	 	
1,420,611	 	
Commitments and contingencies (Note 10)	 	 	 	 	 	 	 	
Shareholders’ equity	 	 	 	 	 	 	 	
Ordinary shares, $0.01 nominal value, 50,000,000 shares authorized (June 30, 2016: 48,778 shares issued and 46,403 shares outstanding; December 31, 2015: 48,778 shares issued and outstanding)	 	 	
488	 	 	
488	 	
Additional paid-in-capital	 	 	
565,590	 	 	
556,532	 	
Treasury shares, at cost (June 30, 2016: 2,374 shares; December 31, 2015: zero shares)	 	 	
(93,676)	 	 	 —	 	
Retained earnings (accumulated deficit)	 	 	
139,427	 	 	
(18,289)	 	
Accumulated other comprehensive loss	 	 	
(148,416)	 	 	
(149,717)	 	
Total shareholders’ equity	 	 	
463,413	 	 	
389,014	 	
Total liabilities and shareholders’ equity	 	$	
2,362,627	 	$	
2,258,894	 	
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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TRINSEO S.A.
Condensed Consolidated Statements of Operation  s  
(In thousands, except per share data)
(Unaudited)

 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	Six Months Ended	 	
 	 	June 30, 	 	June 30, 	 	
 	    	2016	    	2015	    	2016	    	2015	 	
Net sales	    	$	
969,694	    	$	
1,028,673	    	$	
1,863,778	    	$	
2,046,938	 	
Cost of sales	 	 	
799,954	 	 	
886,536	 	 	
1,554,366	 	 	
1,801,722	 	
Gross profit	 	 	
169,740	 	 	
142,137	 	 	
309,412	 	 	
245,216	 	
Selling, general and administrative expenses	 	 	
52,249	 	 	
50,739	 	 	
106,735	 	 	
102,514	 	
Equity in earnings of unconsolidated affiliates	 	 	
38,602	 	 	
40,841	 	 	
73,628	 	 	
77,548	 	
Operating income	 	 	
156,093	 	 	
132,239	 	 	
276,305	 	 	
220,250	 	
Interest expense, net	 	 	
18,814	 	 	
25,600	 	 	
37,710	 	 	
54,456	 	
Loss on extinguishment of long-term debt	 	 	 —	 	 	
95,150	 	 	 —	 	 	
95,150	 	
Other expense, net	 	 	
12,875	 	 	
3,233	 	 	
15,544	 	 	
6,784	 	
Income before income taxes	 	 	
124,404	 	 	
8,256	 	 	
223,051	 	 	
63,860	 	
Provision for income taxes	 	 	
28,600	 	 	
7,500	 	 	
50,500	 	 	
25,400	 	
Net income	 	$	
95,804	 	$	
756	 	$	
172,551	 	$	
38,460	 	
Weighted average shares- basic	 	 	
46,952	 	 	
48,771	 	 	
47,803	 	 	
48,770	 	
Net income per share- basic	 	$	
2.04	 	$	
0.02	 	$	
3.61	 	$	
0.79	 	
Weighted average shares- diluted	 	 	
47,857	 	 	
48,907	 	 	
48,554	 	 	
48,896	 	
Net income per share- diluted	 	$	
2.00	 	$	
0.02	 	$	
3.55	 	$	
0.79	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Repayment of equity per share	 	$	
0.30	 	$	 —	 	$	
0.30	 	$	 —	 	
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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TRINSEO S.A.
Condensed Consolidated Statements of Comprehensive Income (Loss  )  
(In thousands, unless otherwise stated)
(Unaudited)

 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	Six Months Ended	 	
 	 	June 30, 	 	June 30, 	 	
 	    	2016	    	2015	    	2016	    	2015	 	
Net income	    	$	
95,804	    	$	
756	    	$	
172,551	    	$	
38,460	 	
Other comprehensive income (loss), net of tax (tax amounts shown in millions below for the three and six months ended June 30, 2016 and 2015, respectively):	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cumulative translation adjustments	 	 	
(11,005)	 	 	
35,241	 	 	
2,418	 	 	
(78,914)	 	
Net gain (loss) on foreign exchange cash flow hedges	 	 	
6,029	 	 	
(1,440)	 	 	
(1,396)	 	 	
(405)	 	
Pension and other postretirement benefit plans:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net gain (loss) arising during period (net of tax of: 2016—$0 and ($0.5); 2015—$0 and $0)	 	 	 —	 	 	 —	 	 	
(800)	 	 	 —	 	
Amounts reclassified from accumulated other comprehensive income (loss)	 	 	
539	 	 	
791	 	 	
1,079	 	 	
1,628	 	
Total other comprehensive income (loss), net of tax	 	 	
(4,437)	 	 	
34,592	 	 	
1,301	 	 	
(77,691)	 	
Comprehensive income (loss)	 	$	
91,367	 	$	
35,348	 	$	
173,852	 	$	
(39,231)	 	
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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TRINSEO S.A.
Condensed Consolidated Statements of Shareholders’ Equit  y  
(In thousands)
(Unaudited)

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	    	    	    	Shareholders' Equity	 	
 	    	Ordinary Shares Outstanding	    	Ordinary Shares	    	Additional
Paid-In Capital	    	Treasury Shares	    	Accumulated Other Comprehensive Income (Loss)	    	Retained Earnings (Accumulated Deficit)	    	Total	 	
Balance at December 31, 2015	 	
48,778	 	$	
488	 	$	
556,532	 	$	 —	 	$	
(149,717)	 	$	
(18,289)	 	$	
389,014	 	
Adoption of new accounting standard (1)	 	 —	 	 	 —	 	 	
915	 	 	 —	 	 	 —	 	 	
(915)	 	 	 —	 	
Net income	 	 —	 	 	 —	 	 	 —	 	 	 —	 	 	 —	 	 	
172,551	 	 	
172,551	 	
Other comprehensive income	 	 —	 	 	 —	 	 	 —	 	 	 —	 	 	
1,301	 	 	 —	 	 	
1,301	 	
Stock-based compensation activity	 	
16	 	 	 —	 	 	
8,143	 	 	
686	 	 	 —	 	 	 —	 	 	
8,829	 	
Purchase of treasury shares	 	
(2,391)	 	 	 —	 	 	 —	 	 	
(94,362)	 	 	 —	 	 	 —	 	 	
(94,362)	 	
Repayment of equity on ordinary shares	 	 —	 	 	 —	 	 	 —	 	 	 —	 	 	 —	 	 	
(13,920)	 	 	
(13,920)	 	
Balance at June 30, 2016	 	
46,403	 	$	
488	 	$	
565,590	 	$	
(93,676)	 	$	
(148,416)	 	$	
139,427	 	$	
463,413	 	
Balance at December 31, 2014	 	
48,770	 	$	
488	 	$	
547,530	 	$	 —	 	$	
(75,217)	 	$	
(151,936)	 	$	
320,865	 	
Net income	 	—	 	 	—	 	 	—	 	 	 —	 	 	—	 	 	
38,460	 	 	
38,460	 	
Other comprehensive loss	 	—	 	 	—	 	 	—	 	 	 —	 	 	
(77,691)	 	 	—	 	 	
(77,691)	 	
Stock-based compensation activity	 	
8	 	 	—	 	 	
6,219	 	 	 —	 	 	—	 	 	—	 	 	
6,219	 	
Balance at June 30, 2015	 	
48,778	 	$	
488	 	$	
553,749	 	$	 —	 	$	
(152,908)	 	$	
(113,476)	 	$	
287,853	 	

	(1)		See Notes 2 and 12 for discussion of adoption of Accounting Standards Update 2016-09.	
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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TRINSEO S.A.
Condensed Consolidated Statements of Cash Flow  s  
(In thousands)
(Unaudited)

 	 	 	 	 	 	 	 	
 	 	Six Months Ended	 	
 	 	June 30, 	 	
 	    	2016	    	2015	 	
Cash flows from operating activities	    	 	    	    	 	    	 	
Net income	 	$	
172,551	 	$	
38,460	 	
Adjustments to reconcile net income to net cash provided by operating activities	 	 	 	 	 	 	 	
Depreciation and amortization	 	 	
47,973	 	 	
44,281	 	
Amortization of deferred financing fees and issuance discount	 	 	
3,134	 	 	
4,478	 	
Deferred income tax	 	 	
10,684	 	 	
(10,617)	 	
Stock-based compensation expense	 	 	
8,816	 	 	
6,219	 	
Earnings of unconsolidated affiliates, net of dividends	 	 	
(12,287)	 	 	
(32,552)	 	
Unrealized net losses (gains) on foreign exchange forward contracts	 	 	
3,965	 	 	
(7,747)	 	
Loss on extinguishment of debt	 	 	 —	 	 	
95,150	 	
Prepayment penalty on long-term debt	 	 	 —	 	 	
(68,603)	 	
Loss on sale of businesses and other assets	 	 	
12,915	 	 	 —	 	
Changes in assets and liabilities	 	 	 	 	 	 	 	
Accounts receivable	 	 	
(52,954)	 	 	
(40,431)	 	
Inventories	 	 	
(16,685)	 	 	
45,892	 	
Accounts payable and other current liabilities	 	 	
(1,098)	 	 	
(12,134)	 	
Income taxes payable	 	 	
(1,005)	 	 	
17,821	 	
Other assets, net	 	 	
(7,060)	 	 	
(415)	 	
Other liabilities, net	 	 	
10,758	 	 	
(5,056)	 	
Cash provided by operating activities	 	 	
179,707	 	 	
74,746	 	
Cash flows from investing activities	 	 	 	 	 	 	 	
Capital expenditures	 	 	
(53,153)	 	 	
(43,594)	 	
Proceeds from capital expenditures subsidy	 	 	 —	 	 	
2,191	 	
Proceeds from the sale of businesses and other assets	 	 	
129	 	 	
689	 	
Distributions from unconsolidated affiliates	 	 	
4,809	 	 	 —	 	
Cash used in investing activities	 	 	
(48,215)	 	 	
(40,714)	 	
Cash flows from financing activities	 	 	 	 	 	 	 	
Deferred financing fees	 	 	 —	 	 	
(27,661)	 	
Short-term borrowings, net	 	 	
(126)	 	 	
(15,823)	 	
Repayments of term loans	 	 	
(2,500)	 	 	 —	 	
Purchase of treasury shares	 	 	
(94,362)	 	 	 —	 	
Stock-based compensation activity, net	 	 	
13	 	 	 —	 	
Net proceeds from issuance of 2021 Term Loan B	 	 	 —	 	 	
498,750	 	
Net proceeds from issuance of 2022 Senior Notes	 	 	 —	 	 	
716,625	 	
Repayments of 2019 Senior Notes	 	 	 —	 	 	
(1,192,500)	 	
Proceeds from Accounts Receivable Securitization Facility	 	 	 —	 	 	
25,000	 	
Repayments of Accounts Receivable Securitization Facility	 	 	 —	 	 	
(25,000)	 	
Cash used in financing activities	 	 	
(96,975)	 	 	
(20,609)	 	
Effect of exchange rates on cash	 	 	
(565)	 	 	
(3,104)	 	
Net change in cash and cash equivalents	 	 	
33,952	 	 	
10,319	 	
Cash and cash equivalents—beginning of period	 	 	
431,261	 	 	
220,786	 	
Cash and cash equivalents—end of period	 	$	
465,213	 	$	
231,105	 	
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

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TRINSEO S.A.
Notes to Condensed Consolidated Financial Statement  s  
(Dollars in thousands, unless otherwise stated)
(Unaudited)
NOTE 1—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, 2016 and 2015 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 2015 audited consolidated financial statements included within the Company’s Annual Report on Form 10-K (“Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on March 11, 2016.
The December 31, 2015 condensed consolidated balance sheet data presented herein was derived from the Company’s December 31, 2015 audited consolidated financial statements, but does not include all disclosures required by GAAP for annual periods.
Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications did not have a material impact on the Company’s financial position.  Refer to Note 2 for further discussion.
 
NOTE 2—RECENT ACCOUNTING GUIDANCE
In May 2014, the Financial Accounting Standards Board (“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. Additionally, the FASB has issued certain clarifying updates to this guidance, which the Company will consider as part of our adoption. This guidance is effective for public entities for annual and interim periods beginning after December 15, 2017.  The Company is currently assessing the impact of adopting this guidance on its financial position and results of operations.
In April 2015, the FASB issued guidance that requires deferred financing fees related to a recognized debt liability be presented in the balance sheet as a direct reduction of the carrying value of that debt liability, consistent with debt discounts. The recognition and measurement guidance for deferred financing fees are not affected. The Company adopted this guidance effective January 1, 2016. Balances as of December 31, 2015 presented herein have been retrospectively adjusted, with $25.7 million of unamortized deferred financing fees being reclassified from “Deferred charges and other assets” and netted against “Long-term debt, net of unamortized deferred financing fees” on the condensed consolidated balance sheet. In accordance with this guidance, unamortized deferred financing fees related to the Company’s revolving debt facilities were not reclassified as a reduction of long-term debt, and remain included within “Deferred charges and other assets” on the condensed consolidated balance sheets.
In July 2015, the FASB issued guidance which simplifies the subsequent measurement of inventory by replacing the lower of cost or market test with a lower of cost or net realizable value (“NRV”) test. NRV is calculated as the estimated selling price less reasonably predictable costs of completion, disposal and transportation.  This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016, and prospective adoption is required.  The Company does not expect the impact of adopting this guidance to be material to its financial position and results of operations.
In February 2016, the FASB issued new guidance related to leases that outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new guidance requires lessees to recognize on the balance sheet lease liabilities and corresponding right-of-use assets for all leases with terms of greater than 12 months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. This new guidance is effective for public companies for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The new guidance must be adopted using a modified retrospective transition, and provides for certain practical

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expedients.  The Company is currently assessing the impact of adopting this guidance on its financial position and results of operations.
In March 2016, the FASB issued new guidance that simplifies several aspects of accounting for share-based payments. The Company adopted this guidance effective April 1, 2016.  Under this guidance, excess tax benefits associated with share-based payment awards are recognized in the statement of operations when the awards vest or settle, rather than in shareholders’ equity, and all tax-related cash flows resulting from share-based payments are reported as operating activities on the statement of cash flows.  In addition, this guidance modified the minimum statutory withholding requirements to allow entities to withhold an amount up to the employees’ maximum individual tax rate in the relevant jurisdiction without triggering liability classification of the award, while also clarifying that all cash payments made to taxing authorities on employees’ behalf for withheld shares are to be reported as financing activities on the statement of cash flows.  The adoption of these changes did not materially impact the Company’s financial position and result of operations. Additionally, as part of this adoption, the Company made an accounting policy election to recognize forfeitures as incurred, rather than estimating the forfeitures in advance.  The impact of this change was applied utilizing a modified retrospective approach, with an adjustment of $0.9 million recorded during the three months ended June 30, 2016 to decrease opening retained earnings and increase opening additional paid-in-capital .
 
NOTE 3—INVESTMENTS IN UNCONSOLIDATED AFFILIATES
The Company is supplemented by two strategic joint ventures , the results of which are included within the Basic Plastics & Feedstocks reporting segment: Americas Styrenics LLC (“Americas Styrenics”, a styrene and polystyrene joint venture with Chevron Phillips Chemical Company LP) and Sumika Styron Polycarbonate Limited (“Sumika Styron Polycarbonate”, a polycarbonate joint venture with Sumitomo Chemical Company, Limited). Investments held in the unconsolidated affiliates are accounted for by the equity method.
As of June 30, 2016 and December 31, 2015, respectively, the Company’s investment in Americas Styrenics was $154.5 million and $143.9 million, which was $79.7 million and $91.9 million less than the Company’s 50% share of the underlying net assets of Americas Styrenics . 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 4.3 years as of June 30, 2016. The Company received dividends from Americas Styrenics of $30.0 million and $60.0 million during the three and six months ended June 30, 2016, respectively, compared to $30.0 million and $45.0 million during the three and six months ended June 30, 2015, respectively.
As of June 30, 2016 and December 31, 2015, respectively, the Company’s investment in Sumika Styron Polycarbonate was $35.8 million and $39.0 million, which was $16.2 million and $19.8 million greater than the Company’s 50% share of the underlying net assets of Sumika Styron Polycarbonate. This amount primarily represents the fair value of certain identifiable assets which have not been recorded on the historical financial statements of Sumika Styron Polycarbonate. This difference is being amortized over the remaining useful life of the contributed assets of 9.3 years as of June 30, 2016. The Company received dividends from Sumika Styron Polycarbonate of zero and $6.2 million during the three and six months ended June 30, 2016, respectively. The Company received no dividends from Sumika Styron Polycarbonate during the three and six months ended June 30, 2015.
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	 	Six Months Ended	 	
 	 	June 30, 	 	June 30, 	 	
 	    	2016	    	2015	    	2016	    	2015	 	
Sales	    	$	
405,351	    	$	
500,803	    	$	
781,603	    	$	
940,373	 	
Gross profit	 	$	
87,867	 	$	
91,692	 	$	
156,271	 	$	
169,363	 	
Net income	 	$	
71,015	 	$	
74,461	 	$	
123,812	 	$	
140,481	 	

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NOTE 4—INVENTORIES
Inventories consisted of the following:

 	 	June 30, 	 	December 31,	 	
 	    	2016	    	2015	 	
Finished goods	    	$	
178,449	    	$	
170,380	 	
Raw materials and semi-finished goods	 	 	
156,396	 	 	
151,444	 	
Supplies	 	 	
30,294	 	 	
31,273	 	
Total	 	$	
365,139	 	$	
353,097	 	

NOTE 5—GOODWILL AND INTANGIBLE ASSETS
Goodwill
The following table shows changes in the carrying amount of goodwill by segment from December 31, 2015 to June 30, 2016:

 	 	Performance Materials	 	 	 	 	 	 	 	
 	 	 	 	 	Synthetic	 	Performance	 	Basic Plastics	 	 	 	 	
 	    	Latex	    	Rubber	    	Plastics	    	& Feedstocks	    	Total	 	
Balance at December 31, 2015	 	$	
12,412	 	$	
8,501	 	$	
2,914	 	$	
7,237	 	$	
31,064	 	
Divestiture (Note 15)	 	 	
(418)	 	 	 —	 	 	 —	 	 	 —	 	 	
(418)	 	
Foreign currency impact	 	 	
209	 	 	
143	 	 	
49	 	 	
122	 	 	
523	 	
Balance at June 30, 2016	 	$	
12,203	 	$	
8,644	 	$	
2,963	 	$	
7,359	 	$	
31,169	 	
Other Intangible Assets
The following table provides information regarding the Company’s other intangible assets as of June 30, 2016 and December 31, 2015, respectively:

 	 	 	 	June 30, 2016	 	December 31, 2015	 	
 	 	Estimated	 	Gross	 	 	 	 	 	 	 	Gross	 	 	 	 	 	 	 	
 	 	Useful Life	 	Carrying	 	Accumulated	 	 	 	 	Carrying	 	Accumulated	 	 	 	 	
 	   	(Years)	   	Amount	   	Amortization	   	Net	   	Amount	   	Amortization	   	Net	 	
Developed technology	 	
15	 	$	
175,574	 	$	
(70,067)	 	$	
105,507	 	$	
172,675	 	$	
(62,870)	 	$	
109,805	 	
Manufacturing Capacity Rights	 	
6	 	 	
21,100	 	 	
(7,698)	 	 	
13,402	 	 	
20,750	 	 	
(5,888)	 	 	
14,862	 	
Software	 	5 - 10	 	 	
49,349	 	 	
(11,807)	 	 	
37,542	 	 	
18,006	 	 	
(9,494)	 	 	
8,512	 	
Software in development	 	N/A	 	 	
15,004	 	 	 —	 	 	
15,004	 	 	
24,516	 	 	 —	 	 	
24,516	 	
Other	 	N/A	 	 	
189	 	 	 —	 	 	
189	 	 	
523	 	 	 —	 	 	
523	 	
Total	 	 	 	$	
261,216	 	$	
(89,572)	 	$	
171,644	 	$	
236,470	 	$	
(78,252)	 	$	
158,218	 	
As of June 30, 2016, the Company had $15.0 million capitalized as software in development, primarily related to our project to upgrade our legacy enterprise resource planning (“ERP”) environment to the latest version of SAP. During the second quarter of 2016, we began a phased implementation of this ERP environment by geographic region, which we anticipate will be completed by the end of 2016.
Amortization expense on other intangible assets totaled $5.8 million and $10.1 million for the three and six months ended June 30, 2016, respectively, and $4.4 million and $8.9 million for the three and six months ended June 30, 2015, respectively.

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The following table details the Company’s estimated amortization expense for the next five years, excluding any amortization expense related to software currently in development:

Estimated Amortization Expense for the Next Five Years	 	
Remainder of 2016	   	$	
11,935	 	
2017	 	 	
23,581	 	
2018	 	 	
22,890	 	
2019	 	 	
22,706	 	
2020	 	 	
19,765	 	
2021	 	 	
14,234	 	

NOTE 6—DEBT
Debt consisted of the following:

 	 	June 30, 	 	December 31,	 	
 	    	2016	    	2015	 	
Senior Credit Facility	    	 	 	    	 	 	 	
2020 Revolving Facility	 	$	 —	 	$	 —	 	
2021 Term Loan B	 	 	
493,954	 	 	
496,365	 	
2022 Senior Notes	 	 	 	 	 	 	 	
USD Notes	 	 	
300,000	 	 	
300,000	 	
Euro Notes	 	 	
416,438	 	 	
409,538	 	
Accounts Receivable Securitization Facility	 	 	 —	 	 	 —	 	
Other indebtedness	 	 	
1,784	 	 	
1,895	 	
Total debt	 	 	
1,212,176	 	 	
1,207,798	 	
Less: current portion	 	 	
(5,000)	 	 	
(5,000)	 	
Less: unamortized deferred financing fees (1)	 	 	
(23,889)	 	 	
(25,678)	 	
Total long-term debt, net of unamortized deferred financing fees	 	$	
1,183,287	 	$	
1,177,120	 	

	(1)		As discussed in Note 2, effective January 1, 2016, the Company retroactively adopted new accounting guidance that requires deferred financing fees related to a debt liability be presented in the balance sheet as a direct reduction of the carrying value of that debt liability rather than as deferred assets. This caption reflects this reclassification for both the current and prior periods.  Note that this caption does not include deferred financing fees related to the 2020 Revolving Facility and the Accounts Receivable Securitization Facility, which are included within “Deferred charges and other assets” on the condensed consolidated balance sheets .	
2018 Senior Secured Credit Facility
On June 17, 2010, the Company entered into a credit agreement, which was subsequently amended from time to time, and was to mature in January 2018 (“2018 Senior Secured Credit Facility”).  The 2018 Senior Secured Credit Facility included a revolving credit facility (“2018 Revolving Facility”), which, as a result of an amendment in January 2013, included a borrowing capacity of $300.0 million.
In May 2015, upon completion of the refinancing transactions discussed below, the Company terminated the 2018 Senior Secured Credit Facility.  Immediately prior to this termination, the Company had no outstanding borrowings under the 2018 Revolving Facility. As a result of this termination, the Company recognized a $0.7 million loss on extinguishment of long-term debt during the three and six months ended June 30, 2015, comprised entirely of the write-off of a portion of the existing unamortized deferred financing fees related to the 2018 Revolving Facility.
Senior Credit Facility
On May 5, 2015, Trinseo Materials Operating S.C.A. and Trinseo Materials Finance, Inc. (together, the “Issuers” or the “Borrowers”), both wholly-owned subsidiaries of the Company, entered into a senior secured credit agreement (the “Credit Agreement”), which provides senior secured financing of up to $825.0 million (the “Senior Credit Facility”).  The Senior Credit Facility provides for senior secured financing consisting of a (i) $325.0 revolving credit

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facility, with a $25.0 million swingline subfacility and a $35.0 million letter of credit subfacility (the “2020 Revolving Facility”) maturing in May 2020 and (ii) $500.0 million senior secured term loan B facility maturing in November 2021 (the “2021 Term Loan B”). Amounts under the 2020 Revolving Facility are available in U.S. dollars and euros.
The 2021 Term Loan B bears an interest rate of LIBOR plus 3.25%, subject to a 1.00% LIBOR floor, and was issued at a 0.25% original issue discount.  Further, the 2021 Term Loan B requires scheduled quarterly payments in amounts equal to 0.25% of the original principal amount of the 2021 Term Loan B, with the balance to be paid at maturity. As of June 30, 2016, $5.0 million of these scheduled future payments were classified as current debt on the Company’s condensed consolidated balance sheet.
Loans under the 2020 Revolving Facility, at the Borrowers’ option, may be maintained as (a) LIBO rate loans, which bear interest at a rate per annum equal to the LIBO rate plus the applicable margin (as defined in the Credit Agreement), if applicable, or (b) base rate loans which shall bear interest at a rate per annum equal to the base rate plus the applicable margin (as defined in the Credit Agreement).  As of June 30, 2016, the Borrowers will be required to pay a quarterly commitment fee in respect of any unused commitments under the 2020 Revolving Facility equal to 0.375% per annum.
As of June 30, 2016, the Company had no outstanding borrowings, and had $308.9 million (net of $16.1 million outstanding letters of credit) of funds available for borrowing under the 2020 Revolving Facility. The Senior Credit Facility contains certain customary affirmative, negative and financial covenants. As of June 30, 2016, the Company was in compliance with all debt covenant requirements under the Senior Credit Facility. Refer to the Annual Report for further information.
2019 Senior Notes
In January 2013, the Company issued $1,325.0 million 8.750% senior notes due to mature on February 1, 2019 (the “2019 Senior Notes”). In July 2014, using proceeds from the Company’s initial public offering in June 2014 (the “IPO”), the Company redeemed $132.5 million in aggregate principal amount of the 2019 Senior Notes .
On May 13, 2015, using the net proceeds from the issuance of the 2021 Term Loan B, together with the net proceeds from the issuance of the 2022 Senior Notes (defined and discussed below) and available cash, the Company redeemed all outstanding borrowings under the 2019 Senior Notes, totaling $1,192.5 million in principal, together with a call premium of $68.6 million (with a redemption price of 103% on the first $132.5 million and 106.097% on the remaining balance) and accrued and unpaid interest thereon of $29.6 million.
As a result of this redemption, during the three and six months ended June 30, 2015, the Company recorded a loss on extinguishment of long-term debt of $94.5 million, which includes the above $68.6 million call premium and $25.9 million write-off of unamortized deferred financing fees related to the 2019 Senior Notes.
2022 Senior Notes
On May 5, 2015, the Issuers executed an indenture (the “Indenture”) pursuant to which they issued $300.0 million aggregate principal amount of 6.750% senior notes due May 1, 2022 (the “USD Notes”) and €375.0 million aggregate principal amount of 6.375% senior notes due May 1, 2022 (the “Euro Notes”, and together with the USD Notes, the “2022 Senior Notes”).  Interest on the 2022 Senior Notes is payable semi-annually on May 1 and November 1 of each year, commencing on November 1, 2015.
The Indenture contains certain provisions allowing the Issuers’ to redeem the 2022 Senior Notes prior to their maturity. Additionally, the Indenture contains certain customary covenants, which the Company was in compliance with as of June 30, 2016. Refer to the Annual Report for further information .  
Accounts Receivable Securitization Facility
The Company’s accounts receivable securitization facility (“Accounts Receivable Securitization Facility”) has a borrowing capacity of $200.0 million and was set to mature in May 2016. In February 2016, the Company amended the facility to extend the maturity date to May 2019.
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 commitments. In regards to outstanding borrowings, fixed interest charges are 2.60% plus variable commercial paper rates, while for available, but undrawn commitments, fixed interest charges are 1.40%.

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As of June 30, 2016 and December 31, 2015, there were no amounts outstanding under the Accounts Receivable Securitization Facility, with approximately $129.7 million and $123.4 million, respectively, of accounts receivable available to support this facility, based on the pool of eligible accounts receivable.
 
NOTE 7—DERIVATIVE INSTRUMENTS
The Company’s ongoing business operations expose it to various risks, including fluctuating foreign exchange rates.  To manage these risks, the Company periodically enters into derivative financial instruments such as foreign exchange forward contracts.  The Company does not hold or enter into financial instruments for trading or speculative purposes. All derivatives are recorded on the condensed consolidated balance sheets at fair value.
Foreign Exchange Forward Contracts
Certain subsidiaries have assets and liabilities denominated in currencies other than their respective functional currencies, which creates foreign exchange risk. The Company’s principal strategy in managing its exposure to changes in foreign currency exchange rates is to naturally hedge the foreign currency-denominated liabilities on our balance sheet against corresponding assets of the same currency such that any changes in liabilities due to fluctuations in exchange rates are offset by changes in their corresponding foreign currency assets. In order to further reduce its exposure, the Company also uses foreign exchange forward contracts to economically hedge the impact of the variability in exchange rates on our assets and liabilities denominated in certain foreign currencies. These derivative contracts are not designated for hedge accounting treatment.
As of June 30, 2016, the Company had open foreign exchange forward contracts with a notional U.S. dollar equivalent absolute value of $155.2 million. The following table displays the notional amounts of the most significant net foreign exchange hedge positions outstanding as of June 30, 2016.

 	 	June 30, 	 	
Buy / (Sell) 	 	2016	 	
Chinese Yuan	 	$	
(56,386)	 	
Indonesian Rupiah	 	$	
(30,436)	 	
Swiss Franc	 	$	
24,283	 	
Japanese Yen	 	$	
(10,346)	 	
British Pound	 	$	
(9,332)	 	
Euro	 	$	
(6,064)	 	
Foreign Exchange Cash Flow Hedges
The Company also enters into forward contracts with the objective of managing the currency risk associated with forecasted U.S. dollar-denominated raw materials purchases by one of its subsidiaries whose functional currency is the euro. By entering into these forward contracts, which are designated as cash flow hedges, the Company buys a designated amount of U.S. dollars and sells euros at the prevailing market rate to mitigate the risk associated with the fluctuations in the euro-to-U.S. dollar foreign currency exchange rates. The qualifying hedge contracts are marked-to-market at each reporting date and any unrealized gains or losses are included in accumulated other comprehensive income (AOCI) to the extent effective, and reclassified to cost of sales in the period during which the transaction affects earnings or it becomes probable that the forecasted transaction will not occur.
Open foreign exchange cash flow hedges as of June 30, 2016 have maturities occurring over a period of 18 months, and have a net notional U.S. dollar equivalent of $270.0 million.
Net Investment Hedge
The Company’s outstanding debt includes €375.0 million of Euro Notes (see Note 6 for details) .  As of June 30, 2016, the Company has designated a portion ( €280.0 million) of the principal amount of these Euro Notes as a hedge of the foreign currency exposure of the Issuers’ net investment in certain European subsidiaries. As this debt was deemed to be a highly effective hedge, changes in the Euro Notes’ carrying value resulting from fluctuations in the euro exchange rate were recorded as cumulative foreign currency translation loss of   $2.1 million within accumulated other comprehensive loss as of  June 30, 2016 .

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Summary of Derivative Instruments
Information regarding changes in the fair value of the Company’s derivative instruments, net of tax, including those not designated for hedge accounting treatment, is as follows:

 	 	Gain (Loss) Recognized in	 	Gain (Loss) Recognized in	 	 	
 	 	AOCI on Balance Sheet	 	Statement of Operations	 	 	
 	 	Three Months Ended June 30, 	 	Statement of Operations	
 	 	2016	 	2015	 	2016	 	2015	 	Classification	
Designated as Cash Flow Hedges	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Foreign exchange cash flow hedges	    	$	
6,029	    	$	
(1,440)	    	$	
(735)	    	$	
76	    	Cost of sales	
Total	 	$	
6,029	 	$	
(1,440)	 	$	
(735)	 	$	
76	 	 	
Net Investment Hedges	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Euro Notes	 	$	
3,798	 	$	
(2,438)	 	$	 —	 	$	 —	 	Other expenses, net	
Total	 	$	
3,798	 	$	
(2,438)	 	$	 —	 	$	 —	 	 	
Not Designated as Cash Flow Hedges	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Foreign exchange forward contracts	 	$	 —	 	$	 —	 	$	
(2,138)	 	$	
7,264	 	Other expenses, net	
Total	 	$	 —	 	$	 —	 	$	
(2,138)	 	$	
7,264	 	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Gain (Loss) Recognized in	 	Gain (Loss) Recognized in	 	 	
 	 	AOCI on Balance Sheet	 	Statement of Operations	 	 	
 	 	Six Months Ended June 30, 	 	Statement of Operations	
 	 	2016	 	2015	 	2016	 	2015	 	Classification	
Designated as Cash Flow Hedges	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Foreign exchange cash flow hedges	    	$	
(1,396)	    	$	
(405)	    	$	
370	    	$	
76	    	Cost of sales	
Total	 	$	
(1,396)	 	$	
(405)	 	$	
370	 	$	
76	 	 	
Net Investment Hedges	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Euro Notes	 	$	
(2,487)	 	$	
(2,438)	 	$	 —	 	$	 —	 	Other expenses, net	
Total	 	$	
(2,487)	 	$	
(2,438)	 	$	 —	 	$	 —	 	 	
Not Designated as Cash Flow Hedges	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Foreign exchange forward contracts	 	$	 —	 	$	 —	 	$	
995	 	$	
(13,698)	 	Other expenses, net	
Total	 	$	 —	 	$	 —	 	$	
995	 	$	
(13,698)	 	 	
The Company recorded losses of $2.1 million and gains of $1.0 million during the three and six months ended June 30, 2016, respectively, and gains of $7.3 million and losses of $13.7 million during the three and six months ended June 30, 2015, respectively, from settlements and changes in the fair value of outstanding forward contracts (not designated as hedges) . The gains and losses from these forward contracts offset net foreign exchange transaction gains of $2.3 million and losses of $2.6 million during the three and six months ended June 30, 2016, respectively, and losses of $10.4 million and gains of $7.6 million during the three and six months ended June 30, 2015, respectively, which resulted from the remeasurement of the Company’s foreign currency denominated assets and liabilities. The cash settlements of these foreign exchange forward contracts are included within operating activities in the condensed consolidated statement of cash flows.
As of June 30, 2016, the Company has no ineffectiveness related to its foreign exchange cash flow hedges. Further, the Company expects to reclassify in the next twelve months an approximate $2.3 million net gain from other comprehensive income (loss) into earnings related to the Company’s outstanding cash flow hedges as of June 30, 2016 based on current foreign exchange rates.

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The following table summarizes the net unrealized gains and losses and balance sheet classification of outstanding derivatives recorded in the condensed consolidated balance sheets:

 	 	June 30, 2016	   	December 31, 2015	 	
 	 	Foreign
Exchange	 	Foreign
Exchange	 	 	 	Foreign
Exchange	 	Foreign
Exchange	 	 	 	
 	 	Forward	 	Cash Flow	 	 	 	Forward	 	Cash Flow	 	 	 	
Balance Sheet Classification	    	Contracts	   	Hedges	    	Total	 	Contracts	   	Hedges	    	Total	 	
Asset Derivatives:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts receivable, net of allowance	 	$	
1,432	 	$	
2,449	    	$	
3,881	 	$	
4,592	    	$	
4,958	    	$	
9,550	 	
Deferred charges and other assets	 	 	 —	 	 	
1,137	 	 	
1,137	 	 	 —	 	 	 —	 	 	 —	 	
Total asset derivatives	 	$	
1,432	 	$	
3,586	 	$	
5,018	 	$	
4,592	 	$	
4,958	 	$	
9,550	 	
Liability Derivatives:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts payable	    	$	
999	    	$	
164	    	$	
1,163	 	$	
194	    	$	 —	    	$	
194	 	
Other noncurrent obligations	 	 	 —	 	 	 —	 	 	 —	 	 	 —	 	 	 —	 	 	 —	 	
Total liability derivatives	 	$	
999	 	$	
164	 	$	
1,163	 	$	
194	 	$	 —	 	$	
194	 	
Forward contracts are entered into with a limited number of counterparties, each of which allows for net settlement of all contracts through a single payment in a single currency in the event of a default on or termination of any one contract. As such, in accordance with the Company’s accounting policy, we record these foreign exchange forward contracts on a net basis by counterparty within the condensed consolidated balance sheet. Information regarding the gross amounts of the Company’s derivative instruments and the amounts offset in the condensed consolidated balance sheets is as follows:

 	 	Gross Amounts	 	Gross Amounts	 	Net Amounts	 	
 	 	Recognized in the	 	Offset in the	 	Presented in the	 	
 	    	Balance Sheet	    	Balance Sheet	    	Balance Sheet	 	
Balance at June 30, 2016	 	 	 	 	 	 	 	 	 	 	
Derivative assets	 	$	
6,816	 	$	
(1,798)	 	$	
5,018	 	
Derivative liabilities	 	 	
2,961	 	 	
(1,798)	 	 	
1,163	 	
 	 	 	 	 	 	 	 	 	 	 	
Balance at December 31, 2015	 	 	 	 	 	 	 	 	 	 	
Derivative assets	 	$	
10,044	 	$	
(494)	 	$	
9,550	 	
Derivative liabilities	 	 	
688	 	 	
(494)	 	 	
194	 	
 
Refer to Notes 8 and 17 of the condensed consolidated financial statements for further information regarding the fair value of the Company’s derivative instruments and the related changes in accumulated other comprehensive income .
 
NOTE 8—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.

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The following table summarizes the basis used to measure certain assets and liabilities at fair value on a recurring basis in the condensed consolidated balance sheets as of June 30, 2016 and December 31, 2015.

 	 	June 30, 2016	 	
 	 	Quoted Prices in	 	Significant	 	Significant	 	 	 	 	
 	 	Active Markets for	 	Other Observable	 	Unobservable	 	 	 	 	
 	 	Identical Items	 	Inputs	 	Inputs	 	 	 	 	
Assets (Liabilities) at Fair Value	    	(Level 1)	    	(Level 2)	    	(Level 3)	    	Total	 	
Foreign exchange forward contracts—Assets	    	$	 —	    	$	
1,432	    	$	 —	    	$	
1,432	 	
Foreign exchange forward contracts—(Liabilities)	 	 	 —	 	 	
(999)	 	 	 —	 	 	
(999)	 	
Foreign exchange cash flow hedges—Assets	 	 	 —	 	 	
3,586	 	 	 —	 	 	
3,586	 	
Foreign exchange cash flow hedges—(Liabilities)	 	 	 —	 	 	
(164)	 	 	 —	 	 	
(164)	 	
Total fair value	 	$	 —	 	$	
3,855	 	$	 —	 	$	
3,855	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	December 31, 2015	 	
 	 	Quoted Prices in	 	Significant	 	Significant	 	 	 	 	
 	 	Active Markets for	 	Other Observable	 	Unobservable	 	 	 	 	
 	 	Identical Items	 	Inputs	 	Inputs	 	 	 	 	
Assets (Liabilities) at Fair Value	    	(Level 1)	    	(Level 2)	    	(Level 3)	    	Total	 	
Foreign exchange forward contracts—Assets	 	$	 —	    	$	
4,592	    	$	 —	    	$	
4,592	 	
Foreign exchange forward contracts—(Liabilities)	 	 	 —	 	 	
(194)	 	 	 —	 	 	
(194)	 	
Foreign exchange cash flow hedges—Assets	    	 	 —	    	 	
4,958	 	 	 —	 	 	
4,958	 	
Total fair value	 	$	 —	 	$	
9,356	 	$	 —	 	$	
9,356	 	
The Company uses an income approach to value its derivative instruments, utilizing discounted cash flow techniques, considering the terms of the contract and observable market information available as of the reporting date. Significant inputs to the valuation for foreign exchange forward contracts and foreign exchange cash flow hedges are obtained from broker quotations or from listed or over-the-counter market data, and are classified as Level 2 in the fair value hierarchy.
Fair Value of Debt Instruments
The following table presents the estimated fair value of the Company’s outstanding debt not carried at fair value as of June 30, 2016 and December 31, 2015, respectively:

 	 	 	 	 	 	 	 	
 	    	As of	    	As of	 	
 	    	June 30, 2016	    	December 31, 2015	 	
2022 Senior Notes	 	 	 	 	 	 	 	
USD Notes	 	 	
301,500	 	 	
296,250	 	
Euro Notes	 	 	
420,914	 	 	
410,054	 	
2021 Term Loan B	 	 	
493,456	 	 	
491,401	 	
Total fair value	 	$	
1,215,870	 	$	
1,197,705	 	
The fair value of the Company’s Term Loan B, USD Notes, and Euro Notes (each Level 2 securities) is determined using over-the-counter market quotes and benchmark yields received from independent vendors.
There were no other significant financial instruments outstanding as of June 30, 2016 and December 31, 2015.

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NOTE 9—PROVISION FOR INCOME TAXES

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	Six Months Ended	 	 	
 	 	June 30, 	 	June 30, 	 	 	
 	    	2016	    	2015	    	2016	    	2015	 	 	
Effective income tax rate	 	 	
23.0	%  	 	
90.9	%  	 	
22.6	%  	 	
39.8	%	 	
Provision for income taxes for the three and six months ended June 30, 2016 were $28.6 million, resulting in an effective tax rate of 23.0%, and $50.5 million, resulting in an effective tax rate of 22.6%, respectively. Provision for income taxes for the three and six months ended June 30, 2015 were $7.5 million, resulting in an effective tax rate of 90.9%, and $25.4 million, resulting in an effective tax rate of 39.8%, respectively.
The effective income tax rate for the three and six months ended June 30, 2016 was impacted by losses generated primarily within our holding companies incorporated in Luxembourg and our primary operating company incorporated in Brazil, which were not anticipated to provide a tax benefit to the Company in the future. For the three and six months ended June 30, 2016, these losses totaled approximately $29.0 million and $41.7 million, respectively. Included in these losses was an impairment charge of $12.9 million for the estimated loss on sale of Trinseo Brazil. Refer to Note 15 for further information.
The effective income tax rate for the three and six months ended June 30, 2015 was impacted by losses generated primarily within our holding companies incorporated in Luxembourg, which were not anticipated to provide a tax benefit to the Company in the future. For the three and six months ended June 30, 2015, these losses totaled approximately $41.2 million and $58.8 million, respectively. Included in these losses were payments made during the three months ended June 30, 2015 of $18.1 million related to a portion of the fees associated with the call premium paid to retire the Company’s 2019 Senior Notes and $4.3 million related to the write-off of the related unamortized deferred financing fees. Refer to Note 6 for further information.
 
NOTE 10—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. As of June 30, 2016 and December 31, 2015, the Company had no accrued obligations for environmental remediation and restoration costs. Pursuant to the terms of the sales and purchase agreement for the Styron business, 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 investigation, monitoring or 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; and Terneuzen, The Netherlands. 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 condensed 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 5 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 consolidated financial statements included in the Annual Report.

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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.
 
NOTE 11—PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
The components of net periodic benefit costs for all significant plans were as follows:

 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	Six Months Ended	 	
 	 	June 30, 	 	June 30, 	 	
 	    	2016	    	2015	    	2016	    	2015	 	
Defined Benefit Pension Plans	    	 	 	 	 	 	 	 	 	 	 	 	 	
Service cost	 	$	
4,211	 	$	
4,075	    	$	
8,282	 	$	
8,376	 	
Interest cost	 	 	
1,408	 	 	
1,287	 	 	
2,768	 	 	
2,647	 	
Expected return on plan assets	 	 	
(499)	 	 	
(399)	 	 	
(982)	 	 	
(820)	 	
Amortization of prior service credit	 	 	
(493)	 	 	
(402)	 	 	
(971)	 	 	
(825)	 	
Amortization of net loss	 	 	
1,073	 	 	
1,308	 	 	
2,111	 	 	
2,689	 	
Net periodic benefit cost	 	$	
5,700	 	$	
5,869	 	$	
11,208	 	$	
12,067	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	Six Months Ended	 	
 	 	June 30, 	 	June 30, 	 	
 	    	2016	    	2015	    	2016	    	2015	 	
Other Postretirement Plans	    	 	 	 	 	 	 	 	 	 	 	 	 	
Service cost	 	$	
65	 	$	
86	    	$	
128	 	$	
174	 	
Interest cost	 	 	
129	 	 	
133	 	 	
250	 	 	
273	 	
Amortization of prior service cost	 	 	
26	 	 	
26	 	 	
52	 	 	
52	 	
Amortization of net gain	 	 	
(43)	 	 	 —	 	 	
(86)	 	 	 —	 	
Net periodic benefit cost	 	$	
177	 	$	
245	 	$	
344	 	$	
499	 	
 
As of June 30, 2016 and December 31, 2015, the Company’s benefit obligations included primarily in “Other noncurrent obligations” in the condensed consolidated balance sheets were $181.3 million and $172.5 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 $2.4 million and $5.3 million during the three and six months ended June 30, 2016. The Company expects to make additional cash contributions, including benefit payments to unfunded plans, of approximately $11.0 million to its defined benefit plans for the remainder of 2016.
Supplemental Employee Retirement Plan
The Company established a non-qualified supplemental employee retirement plan in 2010.  As of December 31, 2015, benefit obligations under this plan were $13.7 million, noting $1.6 million of net loss included in AOCI, of which $1.0 million was expected to be amortized from AOCI into net periodic benefit cost in 2016.  Lastly, as of December 31, 2015, the estimated future benefit payments under this plan were $13.9 million, expected to be paid in 2017.
During the six months ended June 30, 2016, this retirement plan was amended to, among other things, extend the employment period covered by the plan, resulting in an increase to the benefit obligation under this plan of $1.3 million and a corresponding actuarial loss recorded to AOCI.  The amounts expected to be amortized from AOCI into net periodic benefit cost for 2016 remains approximately $1.0 million.  As a result of this amendment, the estimated future

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benefit payments under this plan were $15.3 million as of June 30, 2016, and are expected to be paid in 2018.
NOTE 12—STOCK-BASED COMPENSATION
Restricted Stock Awards issued by the Parent
On June 17, 2010, Bain Capital Everest Manager Holding SCA (“the Parent”), an affiliate of Bain Capital, 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 Trinseo S.A. 2014 Omnibus Incentive Plan (“2014 Omnibus Plan”) during 2014, discussed further below, restricted stock awards are no longer issued by the Parent on behalf of the Company.
  Time-based Restricted Stock Awards
For the six month period ended June 30, 2016, there were no grants of time-based restricted stock awards. Total compensation expense for time-based restricted stock awards was $0.4 million and $0.9 million for the three months ended June 30, 2016 and 2015, respectively, and $0.8 million and $2.1 million for the six months ended June 30, 2016 and 2015, respectively. As of June 30, 2016, there was $0.8 million of total unrecognized compensation cost related to time-based restricted stock awards, which is expected to be recognized over a weighted-average period of 1.3 years.
Modified Time-based Restricted Stock Awards
For the six month period ended June 30, 2016, there were no grants of modified time-based restricted stock awards. Total compensation expense recognized for modified time-based restricted stock awards was $0.7 million and $0.9 million for the three months ended June 30, 2016 and 2015, respectively, and $1.5 million and $1.8 million for the six months ended June 30, 2016 and 2015, respectively. As of June 30, 2016, there was $3.0 million of total unrecognized compensation cost related to the modified time-based restricted stock awards, which is expected to be recognized over a weighted-average period of 1.1 years.
2014 Omnibus Incentive Plan
In connection with the IPO, the Company’s board of directors approved the 2014 Omnibus Plan, adopted on May 28, 2014, under which the maximum number of ordinary shares that may be delivered upon satisfaction of awards granted under such plan is 4.5 million shares. Since that time, the board of directors of the Company has approved equity award grants for certain executives and employees, comprised of restricted share units (or RSUs) and options to purchase shares (“option awards”).
Restricted Share Units (RSUs)
The RSUs granted to executives and employees vest in full on the third anniversary of the date of grant, generally subject to the employee remaining continuously employed by the Company on the vesting date. RSUs granted to directors of the Company vest in full on the first anniversary of the date of grant.  Upon a termination of employment due to the employee’s death or retirement or a termination of employment by the Company without cause in connection with a restructuring or redundancy or due to the employee’s disability prior to the vesting date, the RSUs will vest in full or in part, depending on the type of termination. In the event employment is terminated for cause, all unvested RSUs will be forfeited. Dividends and dividend equivalents will not accumulate on unvested RSUs. Compensation costs for the RSUs are measured at the grant date based on the fair value of the award and are recognized ratably as expense over the applicable vesting term.
The fair value of RSUs is equal to the fair market value of the Company’s ordinary shares based on the closing price on the date of grant. During the three and six months ended June 30, 2016, the Company granted 21,446 and 340,551 RSUs, respectively, at a weighted-average grant date fair value per unit of $47.45 and $28.26, respectively. Total compensation expense recognized for all outstanding RSUs was $1.4 million and $2.5 million for the three and six months ended June 30, 2016, respectively, and $0.5 million and $0.7 million for the three and six months ended June 30, 2015, respectively. As of June 30, 2016, there was $12.4 million of total unrecognized compensation cost related to outstanding RSUs, which is expected to be recognized over a weighted-average period of 2.3 years.
Option Awards
The option awards, which contain an exercise term of nine years from the date of grant, vest in three equal annual installments beginning on the first anniversary of the date of grant, generally subject to the employee remaining continuously employed on the applicable vesting date. Upon a termination of employment due to the employee’s death

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or retirement or a termination of employment by the Company without cause in connection with a restructuring or redundancy or due to the employee’s disability prior to a vesting date, the options will vest in full or will continue to vest on the original vesting schedule, depending on the type of termination. In the event employment is terminated for cause, all vested and unvested options will be forfeited. Compensation cost for the option awards is measured at the grant date based on the fair value of the award and is recognized as expense over the appropriate service period utilizing graded vesting.
The fair value for option awards is computed using the Black-Scholes pricing model, whose inputs and assumptions are determined as of the date of grant. Determining the fair value of the option awards requires considerable judgment, including estimating the expected term of stock options and the expected volatility of the price of the Company’s ordinary shares. During the three and six months ended June 30, 2016, the Company granted 27,404 and 568,981 option awards, respectively, at a weighted-average grant date fair value per option award of $14.16 and $10.10, respectively.
Since the Company’s equity interests were privately held prior to the IPO in June 2014, there is limited publicly traded history of the Company’s ordinary shares. Until such time that the Company has enough publicly traded history of its ordinary shares to determine expected volatility based solely on its ordinary shares, estimated volatility of options granted will be based on a combination of our historical volatility and similar companies’ stock that are publicly traded. The expected term of options represents the period of time that options granted are expected to be outstanding. For the options granted during the three and six months ended June 30, 2016, the simplified method was used to calculate the expected term of options, given the Company’s limited historical exercise data. The risk-free interest rate for the periods within the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The dividend yield is estimated based on historical and expected dividend activity.
The following are the weighted-average assumptions used within the Black-Scholes pricing model for options granted during the six months ended June 30, 2016:

 	 	Six Months Ended	 	
 	 	June 30, 	 	
 	    	2016	 	
Expected term (in years)	 	
5.50	 	
Expected volatility	 	
40.00	%  	
Risk-free interest rate	 	
1.42	%  	
Dividend yield	 	
0.60	%  	
Total compensation expense for the option awards was $0.8 million and $4.1 million for the three and six months ended June 30, 2016, respectively, and $1.2 million and $1.4 million for the three and six months ended June 30, 2015, respectively. As of June 30, 2016, there was $2.8 million of total unrecognized compensation cost related to the option awards, which is expected to be recognized over a weighted-average period of 1.4 years .
Adoption of Accounting Standards Update
As discussed in Note 2, effective April 1, 2016, the Company adopted new accounting guidance issued by the FASB that simplifies several aspects of accounting for share-based payments.  Among other things , as part of this adoption, the Company made an accounting policy election to recognize forfeitures as incurred, rather than estimating the forfeitures in advance.  The impact of this change was applied utilizing a modified retrospective approach, with an adjustment of $0.9 million recorded during the three months ended June 30, 2016 to decrease opening retained earnings and increase opening additional paid-in-capital.  All other impacts of this adoption were not material to the Company’s financial position and results of operations.
 
NOTE 13—RELATED PARTY TRANSACTIONS
In connection with the Acquisition, the Company entered into a ten year initial term advisory agreement with Bain Capital Partners, LLC and Portfolio Company Advisors Limited (the “Advisory Agreement”) wherein Bain Capital Partners, LLC and Portfolio Company Advisors Limited provides management and consulting services and financial and other advisory services to the Company. The Advisory Agreement terminated upon consummation of the Company’s IPO in June 2014 .   Bain Capital will continue to provide an immaterial level of ad hoc advisory services for the Company going forward. In conjunction with the foregoing, we incurred Bain Capital Partners, LLC and Portfolio Company

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Advisors Limited fees (including out-of-pocket expenses) of zero for the three and six months ended June 30, 2016, respectively, and $0.1 million and $0.2 million for the three and six months ended June 30, 2015, respectively.
In March 2016, the Company announced that the Parent agreed to sell 10,600,000 ordinary shares pursuant to the Company’s shelf registration statement filed with the SEC. In May 2016, the Parent agreed to sell an additional 8,000,000 ordinary shares (see Note 18 for further details). In connection with these offerings, and under the terms of the Acquisition, the Company incurred advisory, accounting, legal and printing expenses on behalf of the Parent of $0.3 million and $2.2 million during the three and six months ended June 30, 2016, respectively. These expenses were included within “Selling, general and administrative expenses” on the condensed consolidated statement of operations.
 
NOTE 14—SEGMENTS
The Company operates under two divisions: Performance Materials and Basic Plastics & Feedstocks. The Performance Materials division includes the following reporting segments: Synthetic Rubber, Latex, and Performance Plastics. The Basic Plastics & Feedstocks division represents a separate segment for financial reporting purposes.
The Latex segment produces 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 Performance Plastics segment produces highly engineered compounds and blends for automotive end markets, as well as consumer electronics, medical, electrical and lighting, collectively consumer essential markets, or CEM. The Basic Plastics & Feedstocks segment includes styrenic polymers, polycarbonate, or PC, and styrene monomer, and also includes the results of the Company’s two 50%-owned joint ventures, Americas Styrenics and Sumika Styron Polycarbonate.

 	 	Performance Materials	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	Synthetic	 	Performance	 	Basic Plastics	 	Corporate	 	 	 	 	
Three Months Ended	    	Latex	    	Rubber	    	Plastics	    	& Feedstocks	    	Unallocated	    	Total	 	
June 30, 2016	    	 	 	    	 	 	    	 	 	    	 	 	    	 	 	    	 	 	 	
Sales to external customers	 	$	
232,471	 	$	
111,391	 	$	
183,891	 	$	
441,941	 	$	 —	 	$	
969,694	 	
Equity in earnings (losses) of unconsolidated affiliates	 	 	 —	 	 	 —	 	 	 —	 	 	
38,602	 	 	 —	 	 	
38,602	 	
EBITDA (1)	 	 	
16,929	 	 	
30,216	 	 	
22,273	 	 	
121,007	 	 	 	 	 	 	 	
Investment in unconsolidated affiliates	 	 	 —	 	 	 —	 	 	 —	 	 	
190,314	 	 	 —	 	 	
190,314	 	
Depreciation and amortization	 	 	
5,881	 	 	
8,892	 	 	
1,589	 	 	
6,701	 	 	
1,790	 	 	
24,853	 	
June 30, 2015	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales to external customers	 	$	
247,512	 	$	
115,370	 	$	
185,304	 	$	
480,487	 	$	 —	 	$	
1,028,673	 	
Equity in earnings (losses) of unconsolidated affiliates	 	 	 —	 	 	 —	 	 	 —	 	 	
40,841	 	 	 —	 	 	
40,841	 	
EBITDA (1)	 	 	
14,904	 	 	
18,461	 	 	
21,256	 	 	
122,155	 	 	 	 	 	 	 	
Investment in unconsolidated affiliates	 	 	 —	 	 	 —	 	 	 —	 	 	
200,206	 	 	 —	 	 	
200,206	 	
Depreciation and amortization	 	 	
6,196	 	 	
7,378	 	 	
1,373	 	 	
6,015	 	 	
765	 	 	
21,727	 	

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 	 	Performance Materials	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	Synthetic	 	Performance	 	Basic Plastics	 	Corporate	 	 	 	 	
Six Months Ended	 	Latex	 	Rubber	 	Plastics	 	& Feedstocks	 	Unallocated	 	Total	 	
June 30, 2016	    	 	 	    	 	 	    	 	 	    	 	 	    	 	 	    	 	 	 	
Sales to external customers	 	$	
441,952	 	$	
213,588	 	$	
352,520	 	$	
855,718	 	$	 —	 	$	
1,863,778	 	
Equity in earnings (losses) of unconsolidated affiliates	 	 	 —	 	 	 —	 	 	 —	 	 	
73,628	 	 	 —	 	 	
73,628	 	
EBITDA (1)	 	 	
35,033	 	 	
53,295	 	 	
52,265	 	 	
217,611	 	 	 	 	 	 	 	
Investment in unconsolidated affiliates	 	 	 —	 	 	 —	 	 	 —	 	 	
190,314	 	 	 —	 	 	
190,314	 	
Depreciation and amortization	 	 	
12,161	 	 	
16,935	 	 	
3,133	 	 	
13,151	 	 	
2,593	 	 	
47,973	 	
June 30, 2015	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales to external customers	 	$	
485,768	 	$	
244,774	 	$	
382,249	 	$	
934,147	 	$	 —	 	$	
2,046,938	 	
Equity in earnings (losses) of unconsolidated affiliates	 	 	 —	 	 	 —	 	 	 —	 	 	
77,548	 	 	 —	 	 	
77,548	 	
EBITDA (1)	 	 	
36,352	 	 	
44,632	 	 	
46,344	 	 	
181,145	 	 	 	 	 	 	 	
Investment in unconsolidated affiliates	 	 	 —	 	 	 —	 	 	 —	 	 	
200,206	 	 	 —	 	 	
200,206	 	
Depreciation and amortization	 	 	
12,566	 	 	
15,169	 	 	
2,786	 	 	
12,244	 	 	
1,516	 	 	
44,281	 	

	(1)		Reconciliation of EBITDA to net income (loss) is as follows:	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	Six Months Ended	 	
 	 	June 30, 	 	June 30, 	 	
 	    	2016	    	2015	    	2016	    	2015	 	
Total segment EBITDA	 	$	
190,425	 	$	
176,776	 	$	
358,204	 	$	
308,473	 	
Corporate unallocated	 	 	
(22,354)	 	 	
(121,193)	 	 	
(49,470)	 	 	
(145,876)	 	
Less: Interest expense, net	 	 	
18,814	 	 	
25,600	 	 	
37,710	 	 	
54,456	 	
Less: Provision for income taxes	 	 	
28,600	 	 	
7,500	 	 	
50,500	 	 	
25,400	 	
Less: Depreciation and amortization	 	 	
24,853	 	 	
21,727	 	 	
47,973	 	 	
44,281	 	
Net income	 	$	
95,804	 	$	
756	 	$	
172,551	 	$	
38,460	 	
Corporate unallocated includes corporate overhead costs and certain other income and expenses, as well as loss on extinguishment of long-term debt.
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 analytical 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.
 
NOTE 15—DIVESTITURES
Divestiture of Brazil Business
During the second quarter of 2016, the Company signed a definitive agreement to sell Trinseo do Brasil Comercio de Produtos Quimicos Ltda. (“Trinseo Brazil”), its primary operating entity in Brazil which includes both a latex and automotive business. Under the agreement of sale, which is expected to close no later than the fourth quarter of 2016, Trinseo Brazil will be sold to a single counterparty, for a selling price that is subject to certain contingent consideration payments, which could be paid by the buyer over a 5-year period subsequent to the closing date, based on the results of the Trinseo Brazil latex business during that time.

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As a result of this agreement, during the three and six months ended June 30, 2016, the Company recorded an impairment charge for the estimated loss on sale of approximately $12.9 million within “Other expense, net” in the condensed consolidated statement of operations.  This charge primarily relates to the unrecoverable net book value of property, plant and equipment along with certain working capital balances and has been allocated as $8.6 million, $4.0 million, and $0.3 million to the Performance Plastics segment, Latex segment, and Corporate, respectively. This loss on sale has been recorded as an estimate based on available information and is subject to change through the completion of the sale.
In addition, as of June 30, 2016, the Company recorded all assets and liabilities associated with Trinseo Brazil as held-for-sale within “Other current assets” and “Accrued expenses and other current liabilities,” respectively, in the condensed consolidated balance sheet. The key components of the assets, adjusted for the above impairment charges, and liabilities classified as held-for-sale at June 30, 2016 consisted of the following:

 	 	June 30, 	 	
 	    	2016	 	
Assets	 	 	 	 	
Accounts receivable, net of allowance for doubtful accounts	 	$	
7,311	 	
Inventories	 	 	
5,237	 	
Goodwill	 	 	
418	 	
Deferred charges and other assets	 	 	
26	 	
Total assets held-for-sale	 	$	
12,992	 	
 	 	 	 	 	
Liabilities	 	 	 	 	
Accounts payable	 	$	
4,765	 	
Income taxes payable	 	 	
288	 	
Accrued expenses and other current liabilities	 	 	
2,005	 	
Other non-current obligations	 	 	
2,662	 	
Total liabilities held-for-sale	 	$	
9,720	 	
 
The results of operations associated with the latex and automotive businesses of Trinseo Brazil were not classified as discontinued operations as the decision to divest these businesses does not represent a strategic shift that has, or will have, a major effect on the Company’s financial position or results of operations.
EPS Divestiture
In June 2013, the Company’s board of directors approved the sale of its expandable polystyrene (“EPS”) business within the Company’s Basic Plastics & Feedstocks segment, under a sale and purchase agreement which was signed in July 2013 and closed on September 30, 2013.
Under the terms of the sale and purchase agreement, should the divested EPS business record EBITDA (as defined therein) greater than zero for fiscal year 2014, the Company would receive an incremental payment of €0.5 million. The EBITDA threshold was met for fiscal year 2014 and the Company received the €0.5 million payment (approximately $0.6 million based upon the applicable foreign exchange rate in the period the payment was received) during the first quarter of 2015, which is reflected within cash flows used in investing activities in the condensed consolidated statement of cash flows for the six months ended June 30, 2015.
 
NOTE 16—RESTRUCTURING
Divestiture of Brazil Business
As discussed in Note 15, during the second quarter of 2016, the Company signed a definitive agreement to sell Trinseo Brazil.  While the majority of the Company’s current operations in Brazil will be transferred to the buyer, certain corporate functions not included in the sale will be eliminated by the Company prior to the completion of the sale, resulting in the exit of all direct operations in Brazil.
As a result, for the three and six months ended June 30, 2016, the Company recorded restructuring charges of $0.6 million related to employee termination benefit charges, which are included within “Selling, general, and administrative expenses” in the condensed consolidated statements of operations and were allocated entirely to Corporate.  As no

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amounts related to these charges have been paid as of June 30, 2016, the entire balance of these charges is recorded within “Accrued expenses and other current liabilities” in the condensed consolidated balance sheet.
Allyn’s Point Plant Shutdown
In September 2015, the Company approved the plan to close its Allyn’s Point latex manufacturing facility in Gales Ferry, Connecticut. This restructuring plan was a strategic business decision to improve the results of the overall Latex segment due to continuing declines in the coated paper industry in North America. Production at the facility ceased at the end of 2015, followed by decommissioning activities which began in 2016.
The Company recorded restructuring charges of zero and $0.5 million for the three and six months ended June 30, 2016, respectively, relating to the accelerated depreciation of the related assets at the Allyn’s Point facility, and $0.5 million and $1.2 million, respectively, of employee termination benefit and decommissioning charges, which are included within “Selling, general and administrative expenses” in the condensed consolidated statements of operations and were allocated entirely to the Latex segment.     No charges were incurred during the three and six months ended June 30, 2015. Employee termination benefit charges are recorded within “Accrued expenses and other current liabilities” in the condensed consolidated balance sheet, the balances for which are displayed in the below table .  

 	    	Balance at	    	 	 	    	 	 	    	Balance at	 	
 	    	December 31, 2015	    	Expenses 	    	Deductions (1)	    	June 30, 2016	  	
Employee termination benefit charges	 	$	
434	 	$	
363	 	$	
(135)	 	$	
662	 	
Other (2)	 	 	 —	 	 	
839	 	 	
(839)	 	 	 —	 	
Total	 	$	
434	 	$	
1,202	 	$	
(974)	 	$	
662	 	

	(1)		Includes payments made against the existing accrual.	
	(2)		Includes decommissioning charges incurred, primarily related to labor and third party service costs.	
 
The Company does not expect to incur additional employee termination benefit charges related to this restructuring, with the majority of the benefits expected to be paid by December 31, 2016.  The Company also expects to incur additional decommissioning costs associated with this plant shutdown in 2016, the cost of which will be expensed as incurred, within the Latex segment.
Restructuring in Polycarbonate
During the second quarter of 2014, the Company announced a restructuring within its Basic Plastics & Feedstocks segment to exit the commodity market for PC in North America and to terminate existing arrangements with Dow regarding manufacturing services for the Company at Dow’s Freeport, Texas facility (the “Freeport facility”). Production at the Freeport facility ceased as of September 30, 2014, and decommissioning and demolition was completed in the first quarter of 2015.
For the three and six months ended June 30, 2015, the Company recorded restructuring charges of zero and $0.5 million, respectively, related to the reimbursement of decommissioning and demolition costs incurred by Dow. These charges were included in “Selling, general and administrative expenses” in the condensed consolidated statements of operations, and were allocated entirely to the Basic Plastics & Feedstocks segment. There were no remaining amounts accrued in the condensed consolidated balance sheet as of December 31, 2015.

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NOTE 17—ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The components of accumulated other comprehensive income (AOCI), net of income taxes, consisted of:

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	    	Currency	    	Pension & Other	    	 	Foreign Exchange	 	 	 	 	 	
 	 	Translation	 	Postretirement Benefit	 	 	Cash Flow	 	 	 	 	 	
Three Months Ended  June 30, 2016 and 2015	    	Adjustments	    	Plans, Net	    	 	Hedges, Net	    	  	Total	 	
Balance as of March 31, 2016	 	$	
(95,697)	 	$	
(46,426)	 	$	
(1,856)	 	 	$	
(143,979)	 	
Other comprehensive income (loss)	 	 	
(11,005)	 	 	 —	 	 	
5,294	 	 	 	
(5,711)	 	
Amounts reclassified from AOCI to net income (1)	 	 	 —	 	 	
539	 	 	
735	 	 	 	
1,274	 	
Balance as of June 30, 2016	 	$	
(106,702)	 	$	
(45,887)	 	$	
4,173	 	 	$	
(148,416)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance as of March 31, 2015	 	$	
(131,910)	 	$	
(56,625)	 	$	
1,035	 	 	$	
(187,500)	 	
Other comprehensive income (loss)	 	 	
35,241	 	 	 —	 	 	
(1,370)	 	 	 	
33,871	 	
Amounts reclassified from AOCI to net income (1)	 	 	 —	 	 	
791	 	 	
(70)	 	 	 	
721	 	
Balance as of June 30, 2015	 	$	
(96,669)	 	$	
(55,834)	 	$	
(405)	 	 	$	
(152,908)	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	    	Currency	    	Pension & Other	    	 	Foreign Exchange	 	 	 	 	 	
 	 	Translation	 	Postretirement Benefit	 	 	Cash Flow	 	 	 	 	 	
Six Months Ended  June 30, 2016 and 2015	    	Adjustments	    	Plans, Net	    	 	Hedges, Net	    	 	Total	 	
Balance at December 31, 2015	 	$	
(109,120)	 	$	
(46,166)	 	$	
5,569	 	 	$	
(149,717)	 	
Other comprehensive income (loss)	 	 	
2,418	 	 	
(800)	 	 	
(1,026)	 	 	 	
592	 	
Amounts reclassified from AOCI to net income (1)	 	 	 —	 	 	
1,079	 	 	
(370)	 	 	 	
709	 	
Balance at June 30, 2016	 	$	
(106,702)	 	$	
(45,887)	 	$	
4,173	 	 	$	
(148,416)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at December 31, 2014	 	$	
(17,755)	 	$	
(57,462)	 	$	 —	 	 	$	
(75,217)	 	
Other comprehensive income (loss)	 	 	
(78,914)	 	 	 —	 	 	
(335)	 	 	 	
(79,249)	 	
Amounts reclassified from AOCI to net income (1)	 	 	 —	 	 	
1,628	 	 	
(70)	 	 	 	
1,558	 	
Balance at June 30, 2015	 	$	
(96,669)	 	$	
(55,834)	 	$	
(405)	 	 	$	
(152,908)	 	

	(1)		The following is a summary of amounts reclassified from AOCI to net income for the three and six months ended June 30, 2016 and 2015, respectively:	

 	 	Amount Reclassified from AOCI	 	Amount Reclassified from AOCI	 	 	 	
AOCI Components	 	Three Months Ended  June 30, 	 	Six Months Ended  June 30, 	 	Statement of Operations	 	
 	   	2016	   	2015	   	2016	   	2015	   	Classification	 	
Cash flow hedging items	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Foreign exchange cash flow hedges	 	$	
735	 	$	
(76)	 	$	
(370)	 	$	
(76)	 	Cost of sales	 	
Total before tax	 	 	
735	 	 	
(76)	 	 	
(370)	 	 	
(76)	 	 	 	
Tax effect	 	 	 —	 	 	
6	 	 	 —	 	 	
6	 	Provision for income taxes	 	
Total, net of tax	 	$	
735	 	$	
(70)	 	$	
(370)	 	$	
(70)	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amortization of pension and other postretirement benefit plan items	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Prior service credit	 	$	
(467)	 	$	
(376)	 	$	
(920)	 	$	
(773)	 	(a)	 	
Net actuarial loss	 	 	
1,265	 	 	
1,512	 	 	
2,519	 	 	
3,097	 	(a)	 	
Total before tax	 	 	
798	 	 	
1,136	 	 	
1,599	 	 	
2,324	 	 	 	
Tax effect	 	 	
(259)	 	 	
(345)	 	 	
(520)	 	 	
(696)	 	Provision for income taxes	 	
Total, net of tax	 	$	
539	 	$	
791	 	$	
1,079	 	$	
1,628	 	 	 	

	(a)		These AOCI components are included in the computation of net periodic benefit costs (see Note 11).	

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NOTE 18—SHAREHOLDERS’ EQUITY
Secondary Offerings and Tender Offer
In March 2016, the Company announced that the Parent agreed to sell 10,600,000 of the Company’s ordinary shares pursuant to the Company’s shelf registration statement filed with the SEC. Goldman, Sachs & Co. acted as the sole bookrunning manager for the offering (the “Underwriter”). The Underwriter purchased these shares from the Parent at a price of $35.63 per share. In May 2016, the Underwriter purchased an additional 8,000,000 of the Company’s ordinary shares from the Parent at a price of $42.90. No ordinary shares were sold by the Company as a result of these transactions.
Concurrently with the completion of the offering in March 2016, the Company agreed to repurchase from the Underwriter 1,600,000 of the ordinary shares that were sold by the Parent in the offering at the same $35.63 price per share paid by the Underwriter to the Parent, resulting in an aggregate purchase price of $57.0 million.  These repurchased shares have been recorded at cost within “Treasury shares” in the condensed consolidated balance sheet as of June 30, 2016.
Additionally, because a repurchase transaction was completed as part of the offering, in order to satisfy certain requirements of Luxembourg law, promptly following the completion of the offering, the Company commenced a tender offer to purchase up to an additional 1,165,000 shares from its shareholders (other than the Parent) at the same price per share that it paid to the Underwriter for the shares repurchased as part of this offering. The tender offer expired on April 25, 2016, with 38,702 ordinary shares repurchased by the Company for an aggregate purchase price of $1.4 million.  
Share Repurchases and Repayment of Equity
During the second quarter of 2016, the Company purchased an additional 752,437 ordinary shares from its shareholders through a combination of open market transactions for an aggregate purchase price of $36.0 million. These repurchased shares have been recorded at cost within “Treasury shares” in the condensed consolidated balance sheet as of June 30, 2016.
In June 2016, pursuant the authority granted to it by its shareholders, the Company’s board of directors declared a repayment of equity of $0.30 per ordinary share payable in cash on July 20, 2016 to shareholders of record as of the close of business on July 6, 2016.  The total amount payable of $13.9 million was recorded within “Accrued expenses and other current liabilities” on the Company’s condensed consolidated balance sheet as of June 30, 2016.
 
NOTE 19—EARNINGS PER SHARE
Basic earnings per ordinary share (“basic EPS”) is computed by dividing net income available to ordinary shareholders by the weighted average number of the Company’s ordinary shares outstanding for the applicable period. Diluted earnings per ordinary share (“diluted EPS”) is calculated using net income available to ordinary shareholders divided by diluted weighted-average ordinary shares outstanding during each period, which includes unvested RSUs and stock option awards. Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential ordinary shares would have an anti-dilutive effect.

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The following table presents basic EPS and diluted EPS for the three and six months ended June 30, 2016 and 2015, respectively.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	Six Months Ended	 	
 	 	June 30, 	 	June 30, 	 	
(in thousands, except per share data)	    	2016	    	2015	    	2016	    	2015	 	
Earnings:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	$	
95,804	 	$	
756	 	$	
172,551	 	$	
38,460	 	
Shares:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted-average ordinary shares outstanding	 	 	
46,952	 	 	
48,771	 	 	
47,803	 	 	
48,770	 	
Dilutive effect of RSUs and option awards*	 	 	
905	 	 	
136	 	 	
751	 	 	
126	 	
Diluted weighted-average ordinary shares outstanding	 	 	
47,857	 	 	
48,907	 	 	
48,554	 	 	
48,896	 	
Income per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income per share—basic	 	$	
2.04	 	$	
0.02	 	$	
3.61	 	$	
0.79	 	
Income per share—diluted	 	$	
2.00	 	$	
0.02	 	$	
3.55	 	$	
0.79	 	

* Refer to Note 12 for discussion of RSUs and option awards granted to certain Company directors and employees.

 

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Item 2. Management’s Discussio  n and Analysis of Financial Condition and Results of Operations
2016 Year-to-Date Highlights
The second quarter of 2016 resulted in continued strong performance for Trinseo, noting net income of $96 million, Adjusted EBITDA of $182 million, and Adjusted EBITDA excluding inventory revaluation of $169 million.  We’ve experienced similar results on a year-to-date basis, noting net income of $173 million, Adjusted EBITDA of $326 million, and Adjusted EBITDA excluding inventory revaluation of $322 million. Refer to “Other Important Performance Measures” below for further discussion of our use of non-GAAP measures in evaluating our performance.
Other highlights for the year are described below.
Secondary Offerings and Tender Offer
In March 2016, the Company announced that the Parent agreed to sell 10,600,000 ordinary shares pursuant to the Company’s shelf registration statement filed with the SEC. Goldman, Sachs & Co. acted as the sole bookrunning manager for the offering (the “Underwriter”). The Underwriter purchased the shares from the Parent at a price of $35.63 per share. In May 2016, the Underwriter purchased an additional 8,000,000 of the Company’s ordinary shares from the Parent at a price of $42.90.
Concurrently with the completion of the offering in March 2016, the Company agreed to repurchase from the Underwriter 1,600,000 of the ordinary shares that were sold by the Parent in the offering at the same $35.63 price per share paid by the Underwriter to the Parent, resulting in an aggregate purchase price of $57.0 million.  Additionally, because a repurchase transaction was completed as part of the offering, in order to satisfy certain requirements of Luxembourg law, the Company commenced a tender offer which resulted in the repurchase of 38,702 ordinary shares for an aggregate purchase price of $1.4 million.
Share Repurchases and Repayment of Equity
During the second quarter of 2016, the Company purchased an additional 752,437 ordinary shares from its shareholders through a combination of open market transactions for an aggregate purchase price of $36.0 million. In June 2016, the Company’s board of directors authorized additional repurchases of up to $100.0 million of the Company’s ordinary shares through periodic open market transactions.
In June 2016, the Company’s board of directors declared a repayment of equity of $0.30 per ordinary share payable in cash on July 20, 2016 to shareholders of record as of the close of business on July 6, 2016.
Appointment of Chief Financial Officer
In May 2016, the Company announced the appointment of Barry Niziolek as Executive Vice President and Chief Financial Officer of Trinseo, effective June 13, 2016.
Divestiture of Brazil Businesses
During the second quarter of 2016, the Company signed a definitive agreement to sell its primary operating entity in Brazil, which includes both a latex and automotive business. The sale is expected to close no later than the fourth quarter of 2016 .  As a result, during the second quarter of 2016, the Company recorded an impairment charge for the estimated loss on sale of approximately $12.9 million as well as $0.6 million of restructuring charges.  Refer to Notes 15 and 16 in the condensed consolidated financial statements for further information.  W e do not expect this divestiture to have a material impact on the Company’s ongoing financial position or results of operations.

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Results of Operations
Results of Operations for the Three and Six Months Ended June 30, 2016 and 2015
The tables below set forth our historical results of operations, and these results as a percentage of net sales for the periods indicated:

 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	Six Months Ended 	 	
 	 	June 30, 	 	June 30, 	 	
(in millions)	    	2016	    	2015	    	2016	    	2015	  	
Net sales	 	$	
969.7	    	$	
1,028.7	    	$	
1,863.8	    	$	
2,046.9	 	
Cost of sales	 	 	
800.0	 	 	
886.5	 	 	
1,554.4	 	 	
1,801.7	 	
Gross profit	 	 	
169.7	 	 	
142.2	 	 	
309.4	 	 	
245.2	 	
Selling, general and administrative expenses	 	 	
52.2	 	 	
50.7	 	 	
106.7	 	 	
102.4	 	
Equity in earnings of unconsolidated affiliates	 	 	
38.6	 	 	
40.8	 	 	
73.6	 	 	
77.5	 	
Operating income	 	 	
156.1	 	 	
132.3	 	 	
276.3	 	 	
220.3	 	
Interest expense, net	 	 	
18.8	 	 	
25.6	 	 	
37.7	 	 	
54.5	 	
Loss on extinguishment of long-term debt	 	 	 —	 	 	
95.2	 	 	 —	 	 	
95.2	 	
Other expense, net	 	 	
12.9	 	 	
3.2	 	 	
15.5	 	 	
6.7	 	
Income before income taxes	 	 	
124.4	 	 	
8.3	 	 	
223.1	 	 	
63.9	 	
Provision for income taxes	 	 	
28.6	 	 	
7.5	 	 	
50.5	 	 	
25.4	 	
Net income	 	$	
95.8	 	$	
0.8	 	$	
172.6	 	$	
38.5	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	Six Months Ended 	 	
 	 	June 30, 	 	June 30, 	 	
 	    	2016	    	2015	    	2016	    	2015	 	
Net sales	 	 	
100.0	%  	 	
100.0	%  	 	
100.0	%  	 	
100.0	%	
Cost of sales	 	 	
82.5	%  	 	
86.2	%  	 	
83.4	%  	 	
88.0	%	
Gross profit	 	 	
17.5	%  	 	
13.8	%  	 	
16.6	%  	 	
12.0	%	
Selling, general and administrative expenses	 	 	
5.4	%  	 	
4.9	%  	 	
5.7	%  	 	
5.0	%	
Equity in earnings of unconsolidated affiliates	 	 	
4.0	%  	 	
4.0	%  	 	
3.9	%  	 	
3.8	%	
Operating income	 	 	
16.1	%  	 	
12.9	%  	 	
14.8	%  	 	
10.8	%	
Interest expense, net	 	 	
1.9	%  	 	
2.5	%  	 	
2.0	%  	 	
2.7	%	
Loss on extinguishment of long-term debt	 	 	 —	%  	 	
9.3	%  	 	 —	%  	 	
4.7	%	
Other expense, net	 	 	
1.3	%  	 	
0.3	%  	 	
0.8	%  	 	
0.3	%	
Income before income taxes	 	 	
12.9	%  	 	
0.8	%  	 	
12.0	%  	 	
3.1	%	
Provision for income taxes	 	 	
2.9	%  	 	
0.7	%  	 	
2.7	%  	 	
1.2	%	
Net income	 	 	
10.0	%  	 	
0.1	%  	 	
9.3	%  	 	
1.9	%	
 
Three Months Ended June 30, 2016 Compared to the Three Months Ended June 30, 2015
Net Sales
Net sales for the three months ended June 30, 2016 decreased by $59.0 million, or 5.7%, to $969.7 million from $1,028.7 million for the three months ended June 30, 2015. Of the 5.7% decrease, 8.3% was due to lower selling prices primarily due to the pass through of lower raw material costs, including lower styrene and butadiene costs to our customers in Latex and Synthetic Rubber. Partially offsetting this decrease in selling prices was a slight increase of 0.7% due to sales volume as well as an increase of 1.9% due to a favorable currency impact across our segments as the euro strengthened in comparison to the U.S. dollar.

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Cost of Sales
Cost of sales for the three months ended June 30, 2016 decreased by $86.5 million, or 9.8%, to $800.0 million from $886.5 million for the three months ended June 30, 2015. Of the 9.8% decrease, 9.1% was attributable to lower prices for raw materials, primarily butadiene and styrene monomer, while an additional 1.5% of the decrease was due to slightly lower fixed costs from prior year plant turnaround activity.  Partially offsetting this decrease was an increase of 1.8% due to an unfavorable currency impact across our segments as the euro strengthened in comparison to the U.S. dollar.
Gross Profit
Gross profit for the three months ended June 30, 2016 increased by $27.5 million, or 19.3%, to $169.7 million from $142.2 million for the three months ended June 30, 2015. The increase was primarily attributable to higher margins in polycarbonate, or PC, as well as in our Latex and Performance Plastics segments , as well as a favorable currency impact as the euro strengthened in comparison to the U.S. dollar .  
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses for the three months ended June 30, 2016 increased by $1.5 million, or 3.0%, to $52.2 million from $50.7 million for the three months ended June 30, 2015 . The slight increase in SG&A expenses was primarily related to an increase in restructuring charges of $1.0 million as a result of our Allyn’s Point plant closure and our decision to divest our operations in Brazil.  Refer to Note 16 in the condensed consolidated financial statements for further information.
Equity in Earnings of Unconsolidated Affiliates
Equity in earnings of unconsolidated affiliates for the three months ended June 30, 2016 was $38.6 million compared to equity in earnings of $40.8 million for the three months ended June 30, 2015. This decrease was primarily attributable to a slight decrease in the equity earnings from Americas Styrenics for the period, due to lower margin from the timing of raw material purchases.  Sumika Styron Polycarbonate noted equity earnings of $0.9 million for the period, compared to $0.2 million in the prior year, noting improved PC market conditions.  
Interest Expense, Net
Interest expense, net for the three months ended June 30, 2016 was $18.8 million compared to $25.6 million for the three months ended June 30, 2015. This decrease in interest expense was primarily attributable to the impact of the debt refinancing executed in May 2015, which reduced applicable interest rates.  Refer to Note 6 in the condensed consolidated financial statements for further information.
Loss on Extinguishment of Long-Term Debt
Loss on extinguishment of long-term debt was zero for the three months ended June 30, 2016, compared to $95.2 million for the three months ended June 30, 2015, related to the debt refinancing in May 2015. This amount was comprised of a $68.6 million call premium paid to retire the Company’s 2019 Senior Notes and a $25.9 million write-off of unamortized deferred financing fees related to these notes, as well as the write-off of $0.7 million of unamortized deferred financing fees related to the termination of the Company’s 2018 Revolving Facility.
Other Expense, net
Other expense, net for the three months ended June 30, 2016 was $12.9 million, driven by an impairment charge for the estimated loss on sale of its latex and automotive businesses in Brazil of approximately $12.9 million, as well as other expenses of $0.2 million. Refer to Note 15 in the condensed consolidated financial statements for further information.  These losses were slightly offset by net foreign exchange transaction gains of approximately $0.2 million. Included in this net gain of $0.2 million were foreign exchange transaction gains of $2.3 million, primarily driven by the remeasurement of our euro denominated payables due to the relative changes in rates between the U.S. dollar and the euro during the quarter, offset by $2.1 million in losses from our foreign exchange forward contracts.

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Other expense, net for the three months ended June 30, 2015 was $3.2 million, which consisted primarily of net foreign exchange transaction losses of approximately $3.1 million and other expenses of $0.1 million. Included in the net foreign exchange losses of $3.1 million were foreign exchange transaction losses of $10.4 million, primarily driven by the remeasurement of our euro denominated payables due to the relative changes in rates between the U.S. dollar and the euro during the quarter, offset by $7.3 million in gains from our foreign exchange forward contracts.
Provision for Income Taxes
Provision for income taxes for the three months ended June 30, 2016 was $28.6 million, resulting in an effective tax rate of 23.0%.  Provision for income taxes for the three months ended June 30, 2015 was $7.5 million, resulting in an effective tax rate of 90.9%.  
The increase in provision for income taxes was primarily driven by the $116.1 million increase in income before income taxes, from $8.3 million for the three months ended June 30, 2015 to $124.4 million for the three months ended June 30, 2016.
This increase in the provision for income taxes was partially offset by a net reduction of losses generated within companies which are not anticipated to provide a tax benefit to the Company in the future.  These losses are primarily generated within our holding companies incorporated in Luxembourg and our primary operating company incorporated in Brazil.  For the three months ended June 30, 2016 these losses totaled approximately $29.0 million and included an impairment charge of $12.9 million for the estimated loss on sale of Trinseo Brazil.  Refer to Note 15 in the condensed consolidated financial statements for further information.
For the three months ended June 30, 2015 these losses totaled approximately $41.2 million and included payments made in our Luxembourg entities of $18.1 million related to a portion of the fees associated with the call premium paid to retire the Company’s 2019 Senior Notes and $4.3 million related to the write off of the related unamortized deferred financing fees.  Refer to Note 6 in the condensed consolidated financial statements for further information.
Six Months Ended June 30, 2016 Compared to the Six Months Ended June 30, 2015
Net Sales
Net sales for the six months ended June 30, 2016 decreased by $183.1 million, or 8.9%, to $1,863.8 million from $2,046.9 million for the six months ended June 30, 2015. Of the 8.9% decrease, 6.5% was due to lower selling prices primarily due to the pass through of lower raw material costs, including lower styrene and butadiene costs to our customers in Latex and Synthetic Rubber. Also driving this reduction in net sales was a decrease of 1.7% due to sales volume, primarily within both the polystyrene and Performance Plastics markets in Asia, and a decrease of 0.7% due to an unfavorable currency impact across our segments, as the euro weakened in comparison to the U.S. dollar on a year-to-date basis.
Cost of Sales
Cost of sales for the six months ended June 30, 2016 decreased by $247.3 million, or 13.7%, to $1,554.4 million from $1,801.7 million for the six months ended June 30, 2015. Of the 13.7% decrease, 10.3% was attributable to lower prices for raw materials, primarily butadiene and styrene monomer, while an additional 1.9% of the decrease was due to lower sales volume primarily within both the polystyrene and Performance Plastics markets in Asia.  Also contributing to the decrease was a 0.9% impact from the reduction in fixed costs due to prior year plant turnaround activity and a 0.7% decrease due to a favorable currency impact across our segments, as the euro weakened in comparison to the U.S. dollar on a year-to-date basis.
Gross Profit
Gross profit for the six months ended June 30, 2016 increased by $64.2 million, or 26.2%, to $309.4 million from $245.2 million for the six months ended June 30, 2015. The increase was primarily attributable to higher margins in our Basic Plastics & Feedstocks, Latex, and Performance Plastics segments .  Partially offsetting this increase was an unfavorable volume impact driven by lower sales to both the polystyrene and Performance Plastics markets in Asia as well as an unfavorable currency impact as the euro weakened in comparison to the U.S. dollar on a year-to-date basis .  

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Selling, General and Administrative Expenses
SG&A expenses for the six months ended June 30, 2016 increased by $4.3 million, or 4.2%, to $106.7 million from $102.4 million for the six months ended June 30, 2015 . The increase in SG&A expenses was primarily related to an increase in stock-based compensation expense of $2.6 million as well as an increase in restructuring charges of $1.4 million primarily as a result of our Allyn’s Point plant closure and our decision to divest our operations in Brazil.  Refer to Note 16 in the condensed consolidated financial statements for further information.
Equity in Earnings of Unconsolidated Affiliates
Equity in earnings of unconsolidated affiliates for the six months ended June 30, 2016 was $73.6 million compared to equity in earnings of $77.5 million for the six months ended June 30, 2015. This decrease was primarily attributable the equity earnings from Americas Styrenics, which decreased to $70.6 million from $75.8 million, driven primarily by the impact to gross profit caused by the planned turnaround at their St. James, Louisiana styrene facility during the first quarter of 2016.  Sumika Styron Polycarbonate noted equity earnings of $3.0 million for the period, compared to $1.7 million in the prior year, noting improved PC market conditions.
Interest Expense, Net
Interest expense, net for the six months ended June 30, 2016 was $37.7 million compared to $54.5 million for the six months ended June 30, 2015. This decrease in interest expense was primarily attributable to the impact of the debt refinancing executed in May 2015, which reduced applicable interest rates.  Refer to Note 6 in the condensed consolidated financial statements for further information.
Loss on Extinguishment of Long-Term Debt
Loss on extinguishment of long-term debt was zero for the six months ended June 30, 2016, compared to $95.2 million for the six months ended June 30, 2015, related to the debt refinancing in May 2015. This amount was comprised of a $68.6 million call premium paid to retire the Company’s 2019 Senior Notes and a $25.9 million write-off of unamortized deferred financing fees related to these notes, as well as the write-off of $0.7 million of unamortized deferred financing fees related to the termination of the Company’s 2018 Revolving Facility.
Other Expense, net
Other expense, net for the six months ended June 30, 2016 was $15.5 million, driven by an impairment charge for the estimated loss on sale of its latex and automotive businesses in Brazil of approximately $12.9 million, as well as other expenses of $1.0 million. Refer to Note 15 in the condensed consolidated financial statements for further information.  Adding to these losses were net foreign exchange transaction losses of $1.6 million.  Included in these net losses of $1.6 million were foreign exchange transaction losses of $2.6 million, primarily driven by the remeasurement of our euro denominated payables due to the relative changes in rates between the U.S. dollar and the euro during the period, offset by $1.0 million in gains from our foreign exchange forward contracts.
Other expense, net for the six months ended June 30, 2015 was $6.7 million, which consisted primarily of net foreign exchange transaction losses of approximately $6.1 million and other expenses of $0.6 million. Included in the net foreign exchange losses of $6.1 million were foreign exchange transaction gains of $7.6 million, primarily driven by the remeasurement of our euro denominated payables due to the relative changes in rates between the U.S. dollar and the euro during the period, more than offset by $13.7 million in losses from our foreign exchange forward contracts.
Provision for Income Taxes
Provision for income taxes for the six months ended June 30, 2016 was $50.5 million, resulting in an effective tax rate of 22.6%.  Provision for income taxes for the six months ended June 30, 2015 was $25.4 million, resulting in an effective tax rate of 39.8%.  
The increase in provision for income taxes was primarily driven by the $159.2 million increase in income before income taxes, from $63.9 million for the six months ended June 30, 2015 to $223.1 million for the six months ended June 30, 2016.

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This increase in the provision for income taxes was partially offset by a net reduction of losses generated within companies which are not anticipated to provide a tax benefit to the Company in the future.  These losses are primarily generated within our holding companies incorporated in Luxembourg and our primary operating company incorporated in Brazil.  For the six months ended June 30, 2016 these losses totaled approximately $41.7 million and included an impairment charge of $12.9 million for the estimated loss on sale of Trinseo Brazil.  Refer to Note 15 in the condensed consolidated financial statements for further information.
For the six months ended June 30, 2015 these losses totaled approximately $58.8 million and included payments made in our Luxembourg entities of $18.1 million related to a portion of the fees associated with the call premium paid to retire the Company’s 2019 Senior Notes and $4.3 million related to the write off of the related unamortized deferred financing fees.  Refer to Note 6 in the condensed consolidated financial statements for further information.

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Selected Segment Information
The following tables present net sales and EBITDA by segment and as a percentage of total net sales and net sales by segment, respectively, for the following periods:

 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	Six Months Ended 	 	
 	 	June 30, 	 	June 30, 	 	
(in millions)	    	2016	    	2015	    	2016	    	2015	 	
Net sales (1)	 	 	 	 	 	 	 	 	 	 	 	 	 	
Latex segment	 	$	
232.5	 	$	
247.5	 	$	
442.0	 	$	
485.8	 	
Synthetic Rubber segment	 	 	
111.4	 	 	
115.4	 	 	
213.6	 	 	
244.8	 	
Performance Plastics segment	 	 	
183.9	 	 	
185.3	 	 	
352.5	 	 	
382.2	 	
Basic Plastics & Feedstocks segment	 	 	
441.9	 	 	
480.5	 	 	
855.7	 	 	
934.1	 	
Corporate unallocated (2)	 	 	 —	 	 	 —	 	 	 —	 	 	 —	 	
Total	 	$	
969.7	 	$	
1,028.7	 	$	
1,863.8	 	$	
2,046.9	 	
EBITDA (3)	 	 	 	 	 	 	 	 	 	 	 	 	 	
Latex segment	 	$	
16.9	 	$	
14.9	 	$	
35.0	 	$	
36.4	 	
Synthetic Rubber segment	 	 	
30.2	 	 	
18.5	 	 	
53.3	 	 	
44.6	 	
Performance Plastics segment	 	 	
22.3	 	 	
21.3	 	 	
52.3	 	 	
46.3	 	
Basic Plastics & Feedstocks segment	 	 	
121.0	 	 	
122.2	 	 	
217.6	 	 	
181.1	 	
Corporate unallocated (2)	 	 	
(22.3)	 	 	
(121.3)	 	 	
(49.5)	 	 	
(145.8)	 	
Total	 	$	
168.1	 	$	
55.6	 	$	
308.7	 	$	
162.6	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	Three Months Ended	 	 	Six Months Ended 	 	
 	 	 	June 30, 	 	 	June 30, 	 	
 	    	 	2016	    	 	2015	    	 	2016	    	 	2015	 	
Net sales (1)	 	 	 	 	 	 	 	 	 	 	 	 	 	
Latex segment	 	 	
24.0	%  	 	
24.1	%  	 	
23.7	%  	 	
23.7	%  	
Synthetic Rubber segment	 	 	
11.5	%  	 	
11.2	%  	 	
11.5	%  	 	
12.0	%  	
Performance Plastics segment	 	 	
19.0	%  	 	
18.0	%  	 	
18.9	%  	 	
18.7	%  	
Basic Plastics & Feedstocks segment	 	 	
45.5	%  	 	
46.7	%  	 	
45.9	%  	 	
45.6	%  	
Corporate unallocated (2)	 	 	 —	%  	 	 —	%  	 	 —	%  	 	 —	%  	
Total	 	 	
100.0	%  	 	
100.0	%  	 	
100.0	%  	 	
100.0	%  	
EBITDA (3)	 	 	 	 	 	 	 	 	 	 	 	 	 	
Latex segment	 	 	
7.3	%  	 	
6.0	%  	 	
7.9	%  	 	
7.5	%  	
Synthetic Rubber segment	 	 	
27.1	%  	 	
16.0	%  	 	
25.0	%  	 	
18.2	%  	
Performance Plastics segment	 	 	
12.1	%  	 	
11.5	%  	 	
14.8	%  	 	
12.1	%  	
Basic Plastics & Feedstocks segment	 	 	
27.4	%  	 	
25.4	%  	 	
25.4	%  	 	
19.4	%  	
Corporate unallocated (2)	 	 	
(2.3)	%  	 	
(11.8)	%  	 	
(2.7)	%  	 	
(7.1)	%  	
Total	 	 	
17.3	%  	 	
5.4	%  	 	
16.6	%  	 	
7.9	%  	

	(1)		Inter-segment sales have been eliminated.	
	(2)		Corporate unallocated includes corporate overhead costs, loss on extinguishment of long-term debt, and certain other income and expenses. Percentages for corporate unallocated are based on total sales.	
	(3)		EBITDA is a non-GAAP financial measure that we refer to in making operating decisions because we believe it provides meaningful supplemental information regarding our operational performance. We present EBITDA because we believe that it is useful for investors to analyze disclosures of our operating results on the same basis as those used by our management. We believe the use of EBITDA as a metric assists our board of directors, management and investors in comparing our operating performance on a consistent basis because it removes the impact of our capital structure (such as interest expense), asset base (such as depreciation and amortization) and tax structure. See a reconciliation of net income to EBITDA below:	

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 	 	Three Months Ended	 	Six Months Ended	 	
 	 	June 30, 	 	June 30, 	 	
(in millions)	    	2016	    	2015	    	2016	    	2015	  	
Net income	 	$	
95.8	 	$	
0.8	 	$	
172.6	 	$	
38.5	 	
Interest expense, net	 	 	
18.8	 	 	
25.6	 	 	
37.7	 	 	
54.5	 	
Provision for income taxes	 	 	
28.6	 	 	
7.5	 	 	
50.5	 	 	
25.4	 	
Depreciation and amortization	 	 	
24.9	 	 	
21.7	 	 	
47.9	 	 	
44.2	 	
EBITDA	 	$	
168.1	 	$	
55.6	 	$	
308.7	 	$	
162.6	 	
 
There are limitations to using financial measures such as EBITDA. Other companies in our industry may define EBITDA differently than we do. 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 our performance. We compensate for these limitations by providing reconciliations of our EBITDA results to our net income, which is determined in accordance with GAAP.
Latex Segment
We are a global leader in styrene-butadiene latex, or SB latex, holding a strong market position across the geographies and applications in which we compete, including the #1 position in SB latex in Europe and the #2 position in North America. We produce SB latex primarily for coated paper used in advertising and magazines, packaging board coatings, carpet and artificial turf backings, as well as a number of performance latex applications. For the six months ended June 30, 2016, approximately 43% of our Latex segment’s net sales were generated in Europe, approximately 27% were generated in the United States, and the majority of the remaining sales were generated in Asia.
Three Months Ended June 30, 2016 Compared to the Three Months Ended June 30, 2015
Net sales for the three months ended June 30, 2016 decreased by $15.0 million, or 6.1%, to $232.5 million from $247.5 million for the three months ended June 30, 2015. Of the 6.1% decrease in net sales, 6.8% was due to lower selling prices primarily due to the pass through of lower butadiene and styrene costs to our customers and 0.6% was driven by decreased sales volume in Europe and North America, partially offset by higher sales volume to the Asia paper and carpet markets. These decreases were partially offset by an increase of 1.3% due to a favorable currency impact as the euro strengthened in comparison to the U.S. dollar.
EBITDA for the three months ended June 30, 2016 increased by $2.0 million, or 13.4%, to $16.9 million from $14.9 million for the three months ended June 30, 2015. Driving this increase were improvements in margin of approximately $6.8 million driven by price increases in North America as well as unfavorable price lag in the prior year.  This increase was partially offset by an impairment charge of $4.0 million recorded during 2016 on the estimated loss on sale of the Company’s latex business in Brazil as well as increased restructuring charges of $0.6 million compared to prior year related to our Allyn’s Point plant closure.  Refer to Notes 15 and 16, respectively, in the condensed consolidated financial statements for further information.
Six Months Ended June 30, 2016 Compared to the Six Months Ended June 30, 2015
Net sales for the six months ended June 30, 2016 decreased by $43.8 million, or 9.0%, to $442.0 million from $485.8 million for the six months ended June 30, 2015. Of the 9.0% decrease in net sales, 7.2% was due to lower selling prices, primarily due to the pass through of lower butadiene and styrene costs to our customers, and 1.3% was due to lower sales volume in Europe and North America, partially offset by higher sales volume to the Asia paper and carpet markets.  In addition, 0.5% of the decrease was driven by an unfavorable currency impact as the euro weakened in comparison to the U.S. dollar on a year-to-date basis.
EBITDA for the six months ended June 30, 2016 decreased by $1.4 million, or 3.8%, to $35.0 million from $36.4 million for the six months ended June 30, 2015. Driving this decrease was an impairment charge of $4.0 million recorded during 2016 on the estimated loss on sale of the Company’s latex business in Brazil as well as increased restructuring charges of $1.2 million compared to prior year related to our Allyn’s Point plant closure.  Refer to Notes 15 and 16, respectively, in the condensed consolidated financial statements for further information.  Partially offsetting these decreases were margin improvements of $5.3 million driven by price increases in North America.

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Synthetic Rubber Segment
We are a significant producer of styrene-butadiene and polybutadiene-based rubber products and we have a leading European market position in solution styrene-butadiene rubber, or SSBR. While substantially all of our sales were generated in Europe for the six months ended June 30, 2016, approximately 23% of these net sales were exported to Asia, 7% to Latin America and 9% to North America.
We have a broad synthetic rubber technology and product portfolio, focusing on specialty products, such as SSBR, lithium polybutadiene rubber, or Li-PBR, and neodymium polybutadiene rubber, or Nd-PBR, while also producing core products, such as emulsion styrene-butadiene rubber, or ESBR. Our synthetic rubber products are extensively used in tires, with approximately 83% of our net sales from this segment in 2015 attributable to the tire market. We estimate that three quarters of these sales relate to replacement tires. We have strong relationships with many of the top global tire manufacturers and believe we have remained a supplier of choice as a result of our broad rubber portfolio and ability to offer technologically differentiated product and product customization capabilities. Other applications for our synthetic rubber products include polymer modification and technical rubber goods.
Three Months Ended June 30, 2016 Compared to the Three Months Ended June 30, 2015
Net sales for the three months ended June 30, 2016 decreased by $4.0 million, or 3.5%, to $111.4 million from $115.4 million for the three months ended June 30, 2015. Of the 3.5% decrease in net sales, 4.1% was due to lower selling prices, primarily resulting from the pass through of lower butadiene and styrene costs to customers, and 2.3% was due to decreased sales volume, particularly in nickel polybutadiene rubber, or Ni-PBR.  These decreases were partially offset by an increase of 3.0% due to a favorable currency impact as the euro strengthened in comparison to the U.S. dollar.
EBITDA for the three months ended June 30, 2016 increased by $11.7 million, or 63.2%, to $30.2 million from $18.5 million for the three months ended June 30, 2015. This increase from prior year was primarily driven by a 50.6% improvement in fixed costs, as the prior year included an inventory draw and higher maintenance costs due to a planned turnaround. Also driving this increase was an 8.2% benefit driven by higher margins, mainly due to favorable inventory timing, and a 3.8% benefit due to a favorable currency impact as the euro strengthened in comparison to the U.S. dollar.
Six Months Ended June 30, 2016 Compared to the Six Months Ended June 30, 2015
Net sales for the six months ended June 30, 2016 decreased by $31.2 million, or 12.7%, to $213.6 million from $244.8 million for the six months ended June 30, 2015. Of the 12.7% decrease in net sales, 6.7% was due to lower selling prices, primarily resulting from the pass through of lower butadiene and styrene costs to customers, and 5.0% was due to decreased sales volume, particularly in Ni-PBR. In addition, 1.1% of the decrease was driven by an unfavorable currency impact as the euro weakened in comparison to the U.S. dollar on a year-to-date basis.
EBITDA for the six months ended June 30, 2016 increased by $8.7 million, or 19.5%, to $53.3 million from $44.6 million for the six months ended June 30, 2015. This increase from prior year was primarily driven by an increase of 22.4% due to improved fixed costs, as the prior year included an inventory draw and higher maintenance costs due to a planned turnaround, as well as an increase of 6.6% driven by improved margins. These increases were partially offset by a decrease of 7.9% due to decreased sales volumes compared to the prior year, particularly in Ni-PBR.
Performance Plastics Segment
We are a producer of highly engineered compounds and blends for automotive end markets, as well as consumer electronics, medical, and electrical lighting, which we collectively call consumer essential markets, or CEM. Our strategy in this segment focuses on developing differentiated compounds and blends in line with key industry trends, such as light-weighting and improved aesthetics in automotive, increased recycled material content and a push toward LED lighting in CEM.  Our history of innovation has contributed to long-standing relationships with customers who are recognized leaders in their respective end-markets. We have established a strong market presence in the global automotive and electronics sector, targeting both component suppliers and final product manufacturers. Our Performance Plastics segment also compounds and blends our PC and mass acrylonitrile-butadiene-styrene, or mABS, plastics into differentiated products for customers within these sectors, as well as into compounds of polypropylene. We have also

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developed compounds containing post-consumer recycle polymers to respond to what we believe is a growing need for some customers to include recycled content in their products.
We believe growth in this segment is driven by a number of factors, including consumer preference for lighter weight and impact-resistant products and the development of new consumer electronics, increases in LED lighting applications and continuing growth in medical device applications. Additionally, we believe growth is bolstered by sustainability trends, such as the substitution of lighter-weight plastics for metal in automobiles, as well as more energy efficient, glazing solutions.
In automotive end applications, we aim to maintain and develop sustainable, long-standing relationships with industry leaders, taking advantage of our production capacity located across four continents to drive original equipment manufacturer, or OEM, platform design wins. In 2015, we experienced growth in sales related to the automotive market, with a 2% increase in sales volume outside of Latin America, which experienced declines due to lower consumer confidence and higher interest rates. We continue to focus on our strategic plans to grow this segment through both current technologies and expanded offerings for car exteriors and semi-structural applications.
Three Months Ended June 30, 2016 Compared to the Three Months Ended June 30, 2015
Net sales for the three months ended June 30, 2016 decreased by $1.4 million, or 0.8%, to $183.9 million from $185.3 million for the three months ended June 30, 2015. Of the 0.8% decrease in net sales, 3.2% was due to lower selling prices primarily related to the pass through of lower raw material costs to our customers.  This was offset by a 1.1% increase due to increased sales volume, particularly within the automotive market, which was partially offset by lower sales to the Asia Performance Plastics market.  Also impacting net sales was a 1.4% increase due to a favorable currency impact as the euro strengthened in comparison to the U.S. dollar.
EBITDA for the three months ended June 30, 2016 increased by $1.0 million, or 4.7%, to $22.3 million from $21.3 million for the three months ended June 30, 2015. Of this 4.7% increase, 34.4% was due to higher margins in automotive and an unfavorable price lag impact in the prior year, and 2.6% was due to increased sales volume.  These increases were partially offset by an impairment charge of $8.6 million recorded during 2016 on the estimated loss on sale of the Company’s automotive business in Brazil.  Refer to Note 15 in the condensed consolidated financial statements for further information.
Six Months Ended June 30, 2016 Compared to the Six Months Ended June 30, 2015
Net sales for the six months ended June 30, 2016 decreased by $29.7 million, or 7.8%, to $352.5 million from $382.2 million for the six months ended June 30, 2015. Of the 7.8% decrease in net sales, 5.2% was due to lower selling prices, primarily related to the pass through of lower raw material costs to our customers, and 2.1% was due to decreased sales volume, driven by lower sales to the consumer electronics market in Asia.  In addition, 0.5% of the decrease was driven by an unfavorable currency impact as the euro strengthened in comparison to the U.S. dollar on a year-to-date basis.
EBITDA for the six months ended June 30, 2016 increased by $6.0 million, or 13.0%, to $52.3 million from $46.3 million for the six months ended June 30, 2015. Of the 13.0% increase, 28.3% was due to higher margins, including unfavorable inventory timing and price lag impacts in the prior year, and 7.5% was due to improved fixed costs. These increases were partially offset by a 3.9% decrease driven by lower sales volume, primarily caused by lower sales to the consumer electronics market in Asia, which were partially offset by higher sales to the automotive market.  Also offsetting this overall increase was an impairment charge of $8.6 million recorded during 2016 on the estimated loss on sale of the Company’s automotive business in Brazil.  Refer to Note 15 in the condensed consolidated financial statements for further information.
Basic Plastics & Feedstocks Segment
Basic Plastics & Feedstocks consists of styrenic polymers, including polystyrene, acrylonitrile-butadiene-styrene, or ABS, and styrene-acrylonitrile, or SAN, products, as well as PC and styrene monomer, which includes our internal productions and sourcing of styrene.  This segment also includes the results of our two joint ventures, Americas Styrenics and Sumika Styron Polycarbonate. We do not anticipate investing in strategic growth initiatives in this

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segment in the near term. Rather, our strategy for this segment is focused on operational enhancements, margin improvement, and cash generation.
We are a leading producer of polystyrene and mABS, where we focus our efforts on differentiated applications such as the liners and encasements of appliances and consumer electronics including smartphones and tablets.  Within these applications, we have worked collaboratively with customers to develop more advanced grades of plastics such as our HIPS and mABS products.  For example, we work with appliance manufacturers around the world to develop improved environmental stress crack resistant products and with our construction sheet customers on smooth ABS.  These products offer superior properties, such as rigidity, insulation and colorability, and, in some cases, an improved environmental footprint compared to general purpose polystyrene or emulsion ABS.  Our Basic Plastics & Feedstocks segment also serves the packaging and construction end-markets, where we have launched a new general purpose polystyrene product for improved performance in foam insulation applications.
PC has high levels of clarity, impact resistance and temperature resistance. PC can be used in its neat form (prior to any compounding or blending) for markets such as construction sheet, optical media and LED lighting.  Additionally, PC can be compounded or blended with other polymers, such as ABS, which imparts specific performance attributes tailored to the product’s end-use.  A significant portion of our PC is consumed in our Performance Plastics segment for the manufacture of our compounds and blends products. We continue to drive improvements in profitability of PC as a result of savings from our restructuring activities, as well as from improvements in industry supply and demand.
Three Months Ended June 30, 2016 Compared to the Three Months Ended June 30, 2015
Net sales for the three months ended June 30, 2016 decreased by $38.6 million, or 8.0%, to $441.9 million from $480.5 million for the three months ended June 30, 2015. Of the 8.0% decrease in net sales, 12.1% was driven by decreases in selling prices due to the pass through of lower styrene costs to customers, partially offset by an increase of 2.0% driven by higher volumes and an increase of 2.1% due to a favorable currency impact as the euro strengthened in comparison to the U.S. dollar.
EBITDA for the three months ended June 30, 2016 decreased by $1.2 million, or 1.0%, to $121.0 million from $122.2 million for the three months ended June 30, 2015. Of this 1.0% decrease, 1.8% was due to a decrease in the equity earnings from our two joint ventures, while 4.3% was due to lower margin, which was driven by unfavorable inventory timing. Partially offsetting these decreases was a 3.0% increase driven by reduced fixed costs and a 1.8% favorable currency impact as the euro strengthened in comparison to the U.S. dollar.
Six Months Ended June 30, 2016 Compared to the Six Months Ended June 30, 2015
Net sales for the six months ended June 30, 2016 decreased by $78.4 million, or 8.4%, to $855.7 million from $934.1 million for the six months ended June 30, 2015. Of the 8.4% decrease in net sales, 6.7% was driven by decreases in selling prices, due to the pass through of lower styrene costs to customers, and 0.8% was due to decreases in sales volume, due to decreases in Asia polystyrene sales.  In addition, 0.8% of the decrease was driven by an unfavorable currency impact as the euro weakened in comparison to the U.S. dollar on a year-to-date basis.
EBITDA for the six months ended June 30, 2016 increased by $36.5 million, or 20.2%, to $217.6 million from $181.1 million for the six months ended June 30, 2015. This EBITDA increase was due primarily to higher margins in styrene, styrenic polymers, and PC. In addition, 2.9% of the increase was driven by reduced fixed costs, primarily due to prior year charges of $0.5 million related to our PC restructuring efforts.  Refer to Note 16 in the condensed consolidated financial statements for further details. These increases were partially offset by a 2.2% decrease due to lower equity earnings from our two joint ventures and a 0.9% decrease due to an unfavorable currency impact as the euro weakened in comparison to the U.S. dollar on a year-to-date basis.

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Other Important Performance Measures
We believe that the presentation of Adjusted EBITDA and Adjusted EBITDA excluding inventory revaluation provides investors with a useful analytical indicator of our performance and of our ability to service our indebtedness.
We define Adjusted EBITDA as income (loss) from continuing operations before interest expense, net; income tax provision; depreciation and amortization expense; loss on extinguishment of long-term debt; asset impairment charges; gains or losses on the dispositions of businesses and assets; restructuring and other items. We describe these other costs in more detail below.
We present Adjusted EBITDA excluding inventory revaluation in order to facilitate the comparability of results by investors from period to period by adjusting cost of sales to reflect the cost of raw material during the period, which is often referred to as the replacement cost method of inventory valuation. We believe this measure minimizes the impact of raw material purchase price volatility in evaluating our performance. Our approach to calculating inventory revaluation is intended to represent the difference between the results under the FIFO and the replacement cost methods. However, our calculation could differ from the replacement cost method if the monthly raw material standards are different from the actual raw material prices during the month and production and purchase volumes differ from sales volumes during the month. These factors could have a significant impact on the inventory revaluation calculation.
There are limitations to using financial measures such as Adjusted EBITDA and Adjusted EBITDA excluding inventory revaluation. These performance measures are not intended to represent cash flow from operations as defined by GAAP and should not be used as alternatives to net income (loss) as indicators of operating performance or to cash flow as measures of liquidity. Other companies in our industry may define Adjusted EBITDA and Adjusted EBITDA excluding inventory revaluation differently than we do. As a result, it may be difficult to use these or similarly-named financial measures that other companies may use, to compare the performance of those companies to our performance. We compensate for these limitations by providing reconciliations of these performance measures to our net income (loss), which is determined in accordance with GAAP.
Adjusted EBITDA and Adjusted EBITDA excluding inventory revaluation are calculated as follows for the three and six months ended June 30, 2016 and 2015, respectively:

 	 	Three Months Ended	 	Six Months Ended	 	
 	 	June 30, 	 	June 30, 	 	
(in millions)	    	2016	    	2015	    	2016	    	2015	  	
Net income	 	$	
95.8	    	$	
0.8	    	$	
172.6	    	$	
38.5	 	
Interest expense, net	 	 	
18.8	 	 	
25.6	 	 	
37.7	 	 	
54.5	 	
Provision for income taxes	 	 	
28.6	 	 	
7.5	 	 	
50.5	 	 	
25.4	 	
Depreciation and amortization	 	 	
24.9	 	 	
21.7	 	 	
47.9	 	 	
44.2	 	
EBITDA (a)	 	$	
168.1	 	$	
55.6	 	$	
308.7	 	$	
162.6	 	
Loss on extinguishment of long-term debt	 	 	 —	 	 	
95.2	 	 	 —	 	 	
95.2	 	
Net loss on disposition of businesses and assets (b)	 	 	
12.9	 	 	 —	 	 	
12.9	 	 	 —	 	
Restructuring and other charges (c)	 	 	
1.1	 	 	
(0.1)	 	 	
1.8	 	 	
0.4	 	
Other items (d)	 	 	
0.3	 	 	
0.6	 	 	
2.2	 	 	
1.9	 	
Adjusted EBITDA	 	$	
182.4	 	$	
151.3	 	$	
325.6	 	$	
260.1	 	
Inventory revaluation	 	 	
(12.9)	 	 	
(29.4)	 	 	
(3.2)	 	 	
12.8	 	
Adjusted EBITDA excluding inventory revaluation (e)	 	$	
169.5	 	$	
121.9	 	$	
322.4	 	$	
272.9	 	

	(a)		We refer to EBITDA in making operating decisions because we believe it provides meaningful supplemental information regarding our operational performance. Other companies in our industry may define EBITDA differently than we do. 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 our performance. We compensate for these limitations by providing reconciliations of our EBITDA results to our net income (loss), which is determined in accordance with GAAP. See “—Selected Segment Information” for further detail.	

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	(b)		During the three and six months ended June 30, 2016, the Company recorded an impairment charge for the estimated loss on sale of its primary operating entity in Brazil, which includes both latex and automotive businesses, of approximately $12.9 million. Refer to Note 15 in the condensed consolidated financial statements for further information.	
	(c)		Restructuring and other charges for the three and six months ended June 30, 2016 relate to employee termination benefit and decommissioning charges incurred in connection with the Allyn’s Point shutdown within our latex business, as well as employment termination benefit charges related to the expected elimination of certain corporate functions prior to the sale of our latex and automotive businesses in Brazil. Restructuring and other charges for the six months ended June 30, 2015 relate primarily to the PC restructuring within our Basic Plastics & Feedstocks segment, for the reimbursement of decommissioning and demolition charges to Dow in connection with the shutdown of their Freeport, Texas facility.	
Note that the accelerated depreciation charges incurred as part of the Allyn’s Point shutdown announced in September 2015 are included within the “Depreciation and amortization” caption above, and therefore are not included as a separate adjustment within this caption. Refer to Note 16 in the condensed consolidated financial statements for further information.
	(d)		Other items for the three and six months ended June 30, 2016 relate to fees incurred in conjunction with the Company’s secondary offerings completed during these periods. Refer to Note 13 in the condensed consolidated financial statements for further discussion. Other items for the three and six months ended June 30, 2015 represent costs related to the process of changing our corporate name from Styron to Trinseo.   	
	(e)		See the discussion above this table for a description of Adjusted EBITDA excluding inventory revaluation.	
Liquidity and Capital Resources
Cash Flows
The table below summarizes our primary sources and uses of cash for the six months ended June 30, 2016 and 2015, respectively. We have derived the summarized cash flow information from our unaudited financial statements.

 	 	 	 	 	 	 	 	
 	 	Six Months Ended	 	
 	 	June 30, 	 	
(in millions)	    	2016	    	2015	 	
Net cash provided by (used in):	 	 	 	    	 	 	 	
Operating activities	 	$	
179.7	 	$	
74.7	 	
Investing activities	 	 	
(48.2)	 	 	
(40.7)	 	
Financing activities	 	 	
(97.0)	 	 	
(20.6)	 	
Effect of exchange rates on cash	 	 	
(0.5)	 	 	
(3.1)	 	
Net change in cash and cash equivalents	 	$	
34.0	 	$	
10.3	 	
 
Operating Activities
Net cash provided by operating activities during the six months ended June 30, 2016 totaled $179.7 million, driven by earnings for the period. Also driving cash flow from operating activities for the period was $60.0 million in dividends from our 50%-owned joint venture, Americas Styrenics.
Net cash used in operating assets and liabilities for the six months ended June 30, 2016 totaled $68.0 million, the most significant drivers of which were increases in accounts receivable of $53.0 million and inventories of $16.7 million, respectively. The increase in accounts receivable is primarily due to higher net sales during the second quarter of 2016, compared to the fourth quarter of 2015, primarily driven by increasing raw material prices as well as volume increases.  The increase in inventory is primarily due to increasing raw material prices.
Net cash provided by operating activities during the six months ended June 30, 2015 totaled $74.7 million, driven by earnings for the period. Also driving cash from operating activities for the period was $45.0 million in dividends from our 50%-owned joint venture, Americas Styrenics.  These increases were noted despite several significant decreases to

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operating cash flows, which included $81.7 million in interest payments made on our 2019 Senior Notes prior to their May 2015 retirement as well as a $68.6 million call premium paid to retire those notes.  Refer to Note 6 in the condensed consolidated financial statements for further details. Net cash provided by operating assets and liabilities for the six months ended June 30, 2015 totaled $5.7 million, the most significant components of which were decreases in inventories of $45.9 million and increases in income taxes payable of $17.8 million, offset by an increase in accounts receivable of $40.4 million. Inventory decreased due to higher volume sold during the second quarter of 2015 when compared to the fourth quarter of 2014, as well as decreases in raw materials prices. Increase in income taxes payable is driven primarily by the Company’s significant improvement in earnings before taxes compared to the prior year, particularly in our 50%-owned joint venture, Americas Styrenics. The increase in accounts receivable is primarily due to timing of customer payments.
Investing Activities
Net cash used in investing activities for the six months ended June 30, 2016 totaled $48.2 million, driven by capital expenditures of $53.2 million during the period, a significant portion of which related to our project to upgrade our legacy ERP environment to the latest version of SAP.  Partially offsetting these capital expenditures were dividends received from Sumika Styron Polycarbonate during the period, $4.8 million of which were classified as investing activities on the condensed consolidated statement of cash flows, with the remaining $1.4 million classified as operating activities.
Net cash used in investing activities for the six months ended June 30, 2015 totaled $40.7 million, consisting primarily of capital expenditures of $41.4 million during the period, net of proceeds received from a government subsidy of $2.2 million related to our capital expansion project at our rubber facility in Schkopau, Germany.
Financing Activities
Net cash used in financing activities during the six months ended June 30, 2016 totaled $97.0 million. This activity was primarily driven by $94.4 million of payments related to the repurchase of ordinary shares during the period (see Note 18 to the condensed consolidated financial statements) as well as $2.5 million of principal payments related to our 2021 Term Loan B.
Net cash used in financing activities during the six months ended June 30, 2015 totaled $20.6 million. The most significant activity during the period related to the May 2015 debt refinancing, which included net proceeds of $1,215.4 million from the issuance of our 2021 Term Loan B and our 2022 Senior Notes, offset by the retirement of our existing 2019 Senior Notes totaling $1,192.5 million and deferred financing fees paid in conjunction with the refinancing of $27.7 million. Also during the period, we had net repayments of short-term borrowings of $15.8 million, which largely consisted of borrowings under our short-term revolving credit facility through our subsidiary in China.  We also noted borrowings from and repayments of our Accounts Receivable Securitization Facility of $25.0 million, respectively, during the period.
Capital Resources and Liquidity
We require cash principally for day-to-day operations, to finance capital investments and other initiatives, to purchase materials, to service our outstanding indebtedness, and to fund repayments of equity to our shareholders, should the Company continue to declare them.  Our sources of liquidity include cash on hand, cash flow from operations and amounts available under the Senior Credit Facility and the Accounts Receivable Securitization Facility.
As of June 30, 2016 and December 31, 2015, we had $1,212.2 million and $1,207.8 million, respectively, in outstanding indebtedness and $928.8 million and $839.8 million, respectively, in working capital.  We believe, based on our current level of operations, that these sources of liquidity will be sufficient to fund our operations, capital expenditures and debt service for at least the next twelve months.
In addition, as of June 30, 2016 and December 31, 2015, we had $97.7 million and $73.7 million of foreign cash and cash equivalents on our balance sheet, respectively, all of which is readily convertible into other foreign currencies, including the U.S. dollar. Our intention is not to permanently reinvest our foreign cash and cash equivalents. Accordingly, we record deferred income tax liabilities related to the unremitted earnings of our subsidiaries.

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As is typical, our indebtedness could affect our ability to raise additional capital, limit our ability to react to changes in the economy or our industry, and expose us to interest rate risk. Management reacts strategically to mitigate these risks and monitor compliance with debt covenants in order to limit potential material impacts to our financial condition and flexibility.
The following table outlines our outstanding indebtedness as of June 30, 2016 and December 31, 2015 and the associated interest expense, including amortization of deferred financing fees, and effective interest rates for such borrowings as of June 30, 2016 and December 31, 2015. Note that the effective interest rates below exclude the impact of deferred financing fee amortization.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	As of and for the Six Months Ended	 	As of and for the Year Ended	 	
 	 	June 30, 2016	 	December 31, 2015	 	
 	 	 	 	 	Effective	 	 	 	 	 	 	 	Effective	 	 	 	 	
 	 	 	 	 	Interest	 	Interest	 	 	 	 	Interest	 	Interest	 	
(dollars in millions)	    	Balance	    	Rate	    	Expense	    	Balance	    	Rate	    	Expense	 	
2018 Senior Secured Credit Facility	    	 	    	    	    	    	 	    	    	 	    	    	    	    	 	    	 	
2018 Revolving Facility	 	$	 —	 	 —	 	$	 —	 	$	—	 	—	 	$	
1.6	 	
Senior Credit Facility	    	 	 	    	 	    	 	 	    	 	    	    	    	    	 	    	 	
2021 Term Loan B	 	 	
494.0	 	
4.3	%  	 	
11.6	 	 	
496.4	 	
4.3	%  	 	
15.4	 	
2020 Revolving Facility	 	 	 —	 	 —	 	 	
1.6	 	 	 —	 	 —	 	 	
2.3	 	
2019 Senior Notes	 	 	 —	 	 —	 	 	 —	 	 	 —	 	
8.8	%  	 	
40.4	 	
2022 Senior Notes	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
USD Notes	 	 	
300.0	 	
6.8	%  	 	
10.5	 	 	
300.0	 	
6.8	%  	 	
13.8	 	
Euro Notes	 	 	
416.4	 	
6.4	%  	 	
13.8	 	 	
409.5	 	
6.4	%  	 	
17.9	 	
Accounts Receivable Securitization Facility	 	 	 —	 	 —	 	 	
2.0	 	 	 —	 	
2.7	%  	 	
4.1	 	
Other indebtedness*	 	 	
1.8	 	
4.8	%  	 	 —	 	 	
1.9	 	
2.5	%  	 	
0.1	 	
Total	 	$	
1,212.2	 	 	 	$	
39.5	 	$	
1,207.8	 	 	 	$	
95.6	 	

* For the six months ended June 30, 2016, interest expense on “Other indebtedness” was less than $0.1 million.
Our Senior Credit Facility includes the 2020 Revolving Facility, which matures in May 2020, and has a borrowing capacity of $325.0 million. As of June 30, 2016, the Company had no outstanding borrowings, and had $308.9 million (net of $16.1 million outstanding letters of credit) of funds available for borrowings under the 2020 Revolving Facility.  Further, we note that, as of June 30, 2016, the Borrowers are required to pay a quarterly commitment fee in respect of any unused commitments under the 2020 Revolving Facility equal to 0.375% per annum.
We also continue to maintain our Accounts Receivable Securitization Facility set to mature in May 2019, under which our borrowing capacity is $200.0 million.  As of June 30, 2016, there were no amounts outstanding under the Accounts Receivable Securitization Facility, with approximately $129.7 million of funds available for borrowing under this facility, based on the pool of eligible accounts receivable.
Our other borrowing arrangements include our $500.0 million 2021 Term Loan B (maturing in November 2021), which requires scheduled quarterly payments in amounts equal to 0.25% of the original principal, and our 2022 Senior Notes (maturing in May 2022), whose U.S. dollar equivalent outstanding amount as of June 30, 2016 totaled $716.4 million.
The Senior Credit Facility and Indenture contain certain customary affirmative, negative and financial covenants. As of June 30, 2016, the Company was in compliance with all of these debt covenant requirements.  Refer to the Annual Report for further information on the details of these covenant requirements.
Our ability to raise additional financing and our borrowing costs may be impacted by short- and long-term debt ratings assigned by independent rating agencies, which are based, in significant part, on our performance as measured by certain credit metrics such as interest coverage and leverage ratios.

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We and our subsidiaries, affiliates or significant direct or indirect shareholders may from time to time seek to retire or purchase our outstanding debt through cash purchases in the open market, privately negotiated transactions, exchange transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Trinseo Materials Operating S.C.A. and Trinseo Materials Finance, Inc. (the “Issuers” of our 2022 Senior Notes and “Borrowers” under our Senior Credit Facility) are dependent upon the cash generation and receipt of distributions and dividends or other payments from our subsidiaries and joint ventures in order to satisfy their debt obligations.  There are no known significant restrictions by third parties on the ability of subsidiaries of the Company to disburse or dividend funds to the Issuers and the Borrowers in order to satisfy these obligations.  However, as the Company’s subsidiaries are located in a variety of jurisdictions, the Company can give no assurances that its subsidiaries will not face transfer restrictions in the future due to regulatory or other reasons beyond our control.
As noted above, during the six months ended June 30, 2016, the Company continued to generate strong cash flows from operations.  However, we can make no assurances that, in the future, our business will generate sufficient cash flow from operations or that future borrowings will be available to us under the Senior Credit Facility in an amount sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs. In addition, our current indebtedness may limit our ability to procure additional financing in the future. As of June 30, 2016 and December 31, 2015, we were in compliance with all the covenants and default provisions under our debt agreements.
The Senior Credit Facility and Indenture also limit the ability of the Borrowers and Issuers, respectively, to pay dividends or make other distributions to Trinseo S.A., which could then be used to make distributions to shareholders.  As noted in Note 18 to the condensed consolidated financial statements, as of June 30, 2016, Trinseo S.A. had declared a repayment of equity to shareholders of $0.30 per ordinary share.  This declaration was well within the available capacity under the terms of the restrictive covenants contained in the Senior Credit Facility and Indenture.  Further, significant additional capacity continues to be available under the terms of these covenants to support expected future repayments of equity to shareholders, should the Company continue to declare them.
We believe that funds provided by operations, our existing cash and cash equivalent balances, borrowings available under our 2020 Revolving Facility and borrowings available under our Accounts Receivable Securitization Facility will be adequate to meet planned operating and capital expenditures for at least the next 12 months under current operating conditions. However, if we were to undertake any significant acquisitions or investments, it may be necessary for us to obtain additional debt or equity financings. We may not be able to obtain such financing on reasonable terms, or at all.
Contractual Obligations and Commercial Commitments
Other than the impact of the amendment to our supplemental employee retirement plan, which increased our projected benefit obligation under this plan by $1.3 million and extended the expected estimate of future benefit payments to 2018 (discussed in Note 11 to the condensed consolidated financial statements), there have been no material revisions outside the ordinary course of business to our contractual obligations as described within “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations and Commercial Commitments” within our Annual Report.
Critical Accounting Policies and Estimates
Our unaudited interim condensed consolidated financial statements are based on the selection and application of significant accounting policies. The preparation of unaudited interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and revenues and expenses at the date of and during the reporting period. Actual results could differ from those estimates. However, we are not currently aware of any reasonably likely events or circumstances that would result in materially different results.
We describe our significant accounting policies in Note 2, Basis of Presentation and Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in our Annual Report, while we discuss our critical accounting policies and estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within our Annual Report.
There have been no material revisions to the critical accounting policies as filed in our Annual Report.

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Off-balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Recent Accounting Pronouncements
We describe the impact of recent accounting pronouncements in Note 2 to our condensed consolidated financial statements, included elsewhere within this Quarterly Report.
Item 3. Quantitative and Qualitativ  e Disclosures about Market Risk
As discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within our Annual Report, we are exposed to changes in interest rates and foreign currency exchange rates as well as changes in the prices of certain commodities that we use in production. There have been no material changes in our exposure to market risks from the information provided within our Annual Report.
Item 4. Controls and Procedures   
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining internal controls designed to provide reasonable assurance that information required to be disclosed by us in our reports that we file or submit under the Exchange Act (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, with the participation of our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2016.  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this Quarterly Report were effective to provide the reasonable level of assurance described above.
Changes in Internal Control over Financial Reporting
In 2015, the Company began a two-year project to upgrade our legacy ERP environment to an updated version of SAP through a phased implementation approach. During the second quarter of 2016, we completed the migration of our North America operations, with implementation in our Asia Pacific and European operations expected to be completed by the end of 2016. In connection with this implementation, we have updated the processes that constitute our internal control over financial reporting, as necessary, to accommodate related changes to our business processes.
The Company believes we have maintained appropriate internal controls during our initial phased implementation period and will continue to evaluate, test and monitor our internal controls over financial reporting for effectiveness as processes and procedures in each of these impacted areas and regions evolve.
There have been no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION   
Item 1. Legal Proceeding  s  
From time to time we 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, waste disposal practices, release of chemicals into the environment and other matters that may arise in the ordinary course of our business. We currently believe that there is no litigation pending that is likely to have a material adverse effect on our business. Regardless of the outcome, legal proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

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Item 1A. Risk Factors   
Our business faces various risks. Certain important factors may have a material adverse effect on our business prospects, financial condition and results of operations, and you should carefully consider them. Accordingly, in evaluating our business, we encourage you to consider the risk factors related to our ordinary shares as well those risk factors related to our business and industry which have been previously disclosed in Item 1A of our Annual Report for the year ended December 31, 2015. The information presented below provides an update to, and should be read in conjunction with, the risk factors and information disclosed in our Annual Report. We encourage you to consider these risks, in their entirety, in addition to other information contained in or incorporated by reference into this Quarterly Report and our other public filings with the SEC. Other events that we do not currently anticipate or that we currently deem immaterial may also affect our business, prospects, financial condition and results of operations.
Adverse events affecting the health of the European Union economy, along with potential weakening of consumer confidence, may have a negative effect on regional and global economic conditions, financial markets and our business.
In 2015, 60% of our net sales were deliveries to Europe, 5% of which were to customers in the United Kingdom. Adverse events affecting European economies, including sovereign debt and economic crises in certain European Union member states, a refugee crisis, terrorist attacks, and the June 2016 United Kingdom referendum to withdraw from the European Union (“Brexit”), could have a negative impact on the health of the European economy. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and on the stability of global financial markets. During any period of heightened market volatility and uncertainty, consumer confidence may decline which could lead to a decline in demand for our products.  Additionally, during periods of uncertain asset valuations, currency exchange rates may experience increased market volatility.  We estimate that a 1% weakening of the euro would result in a corresponding $1 million decrease in our annual EBITDA for 2016.  Additionally, we estimate that a 1% weakening of the British pound would result in a corresponding $400,000 decrease in our annual EBITDA for 2016.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds   
(a) Recent sales of unregistered securities
None.
(b) Use of Proceeds from registered securities
None.
(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table contains information regarding purchases of our ordinary shares made during the quarter ended June 30, 2016 by or on behalf of the Company or any “affiliated purchaser,” as defined by Rule 10b-18(a)(3) of the Securities Exchange Act of 1934:

    Issuer Purchases of Equity Securities	
Period	 	Total number of shares purchased	 	Average price
paid per share	 	Total number of shares purchased as part of publicly announced plans or programs	 	Approximate dollar value of shares that may yet be purchased under the plans or programs	
April 1 - April 30, 2016	 	
38,702	 	$	
35.63	 	
38,702	 	$	 -	(1)	
May 1 - May 31, 2016	 	
319,821	 	$	
47.13	 	
319,821	 	$	
20,926,836	(2)	
June 1 - June 30, 2016	 	
432,616	 	$	
48.31	 	
432,616	 	$	
100,000,000	(3)	
Total	 	
791,139	 	$	
47.22	 	
791,139	 	 	 	 	

	(1)		The general meeting of our shareholders on May 30, 2014 authorized the repurchase of up to 10% of the Company’s issued share capital at a price per share of not less $0.01 and not more than $1,000. This authorization ends on May 30, 2019 or on the date of its renewal by a subsequent general meeting of	

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shareholders. Under this authorization, the board of directors approved repurchases by the Company in an amount not to exceed $125 million in aggregate. On March 21, 2016, the Company announced its intent to repurchase of 1,600,000 of its ordinary shares concurrent with and subject to the completion of a secondary offering of its ordinary shares by the Parent. On March 24, 2016, the Parent sold an aggregate of 10,600,000 of our ordinary shares in a registered, underwritten public offering to Goldman, Sachs & Co. (the “Underwriter”), from whom the Company repurchased 1,600,000 ordinary shares at a price of $35.63 per share.	
In order to satisfy certain requirements of Luxembourg law, promptly following the completion of the offering, the Company commenced a tender offer on March 28, 2016 to offer to purchase up to an additional 1,165,000 shares from its shareholders other than the Parent at the same price per share that it paid to the Underwriter for the shares repurchased as part of the secondary offering. The tender offer expired on April 25, 2016 with 38,702 ordinary shares repurchased by the Company. At the conclusion of the tender offer, the Company’s $125 million repurchase program also concluded.
	(2)		On May 5, 2016, the Company announced that its board of directors authorized the Company to repurchase, subject to market and other conditions, up to $36 million of its ordinary shares through the date of the Company’s 2016 annual general meeting of shareholders on June 21, 2016. At the conclusion of this program, the Company had expended the entire $36 million authorized by the board of directors.	
	(3)		The general meeting of our shareholders on June 21, 2016 authorized the Company to repurchase up to 4.5 million ordinary shares at a price per share of not less $1.00 and not more than $1,000. This authorization ends on June 21, 2018 or on the date of its renewal by a subsequent general meeting of shareholders. No further offers to repurchase will be made under the Company’s existing 2014 share repurchase authorization. On June 22, 2016 the Company announced that the board of directors had authorized the Company to repurchase, subject to market and other conditions, up to $100 million of its ordinary shares under the 2016 share repurchase authorization.	
Item 3. Defaults Upon Senior Securities 
None.
Item 4. Mine Safety Disclosures 
Not applicable.
Item 5. Other Information 
None.
Item 6. Exhibits 
See Exhibit Index.

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SIGNATURES 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, duly authorized.
Date: August 3, 2016
 
 	TRINSEO S.A.	
 	 	 	
 	By:	/s/ Christopher D. Pappas	
 	Name:	Christopher D. Pappas	
 	Title:	President, Chief Executive Officer	
 	 	(Principal Executive Officer)	
 	 	 	
 	By:	/s/ Barry Niziolek	
 	Name:	Barry Niziolek	
 	Title:	Executive Vice President, Chief Financial Officer	
 	 	(Principal Financial Officer)	

 

 

Table of Contents
EXHIBIT INDEX 
 
v	 	 	
Exhibit
No.	Description	 	
3.1	Amended and Restated Articles of Association of Trinseo S.A. (incorporated herein by reference to Exhibit 3.1 to the Annual Report filed on Form 10-K, File No. 001-36473, filed March 10, 2015)	
 	 	
4.1	Form of Specimen Share Certificate of Trinseo S.A. (incorporated herein by reference to Exhibit 4.1 to Amendment No. 3 to the Registration Statement filed on Form S-1, File No. 333-194561, filed May 16, 2014)	
 	 	
4.2	Indenture among Trinseo Materials Operating S.C.A., Trinseo Materials Finance, Inc. and The Bank of New York Mellon, as Trustee, dated as of May 5, 2015 (incorporated herein by reference to Exhibit 4.1 to the Current Report filed on Form 8-K, File No. 001-36473, filed May 11, 2015)	
 	 	
10.1	Employment Agreement between Trinseo LLC and Barry Niziolek, dated May 20, 2016 (incorporated herein by reference to Exhibit 10.1 to the Current Report filed on Form 8-K, File No. 001-36473, filed May 23, 2016)	
 	 	
31.1†	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	
 	 	
31.2†	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	
 	 	
32.1†	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	
 	 	
32.2†	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	

101.INS†	XBRL Instance Document	
 	 	
101.SCH†	XBRL Taxonomy Extension Schema Document	

101.CAL†	XBRL Taxonomy Extension Calculation Linkbase Document	
 	 	
101.DEF†	XBRL Taxonomy Extension Definition Linkbase Document	

101.LAB†	XBRL Taxonomy Extension Label Linkbase Document	
 	 	
101.PRE†	XBRL Taxonomy Extension Presentation Linkbase Document	

†     Filed herewith.

 

Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Christopher D. Pappas, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Trinseo S.A.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: August 3, 2016

 	By:	/s/ Christopher D. Pappas	
 	Name:	Christopher D. Pappas	
 	Title:	Chief Executive Officer	

Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Barry Niziolek, certify that:
	1.		I have reviewed this quarterly report on Form 10-Q of Trinseo S.A.;	
	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
	4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
	(b)		Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	
	5.		The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	
	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	
Date: August 3, 2016

 	By:	/s/ Barry Niziolek	
 	Name:	Barry Niziolek	
 	Title:	Chief Financial Officer	

 
Exhibit 32.1
Certification of CEO Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the quarterly report of Trinseo S.A. (the “Company”) on Form 10-Q for the period ended June 30, 2016 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, the undersigned, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
(1) The Report fully complies with the requirements of Section 13a or Section 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 3, 2016

 	 	 	
 	By:	/s/ Christopher D. Pappas	
 	Name:	Christopher D. Pappas	
 	Title:	Chief Executive Officer	

 
Exhibit 32.2
Certification of CFO Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the quarterly report of Trinseo S.A. (the “Company”) on Form 10-Q for the period ended June 30, 2016 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, the undersigned, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
	(1)		The Report fully complies with the requirements of Section 13a or Section 15(d) of the Securities Exchange Act of 1934; and	
	(2)		The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	
Date: August 3, 2016

 	 	 	
 	By:	/s/ Barry Niziolek	
 	Name:	Barry Niziolek	
 	Title:	Chief Financial Officer